From the heart where innovation, money and power Collie in Silicon Vallet and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Scarlett who in for Caroline Hide at Bloomberg World headquarters in New York, and.
I'm Alex Burnka in for Ed Ludlow in San Francisco. This is Bloomberg Technology.
Coming up an escalation in the US China tensions as China bans microns chips on cybersecurity risks.
Will bring you all the details, plus a.
Record find for Meta, the social media giant ordered to pay one point three billion dollars to the EU after regulators said it failed to protect personal information. We'll break that decision down and forward.
Stepping up its electric vehicle output after reaching a series of deals to buy lithium from projects in Canada to We're going to be hearing from the CEO later this hour, but first we want to give you a check on markets and where things stand at midday here in New York.
It's very much weight and.
See game when it comes to the broader equity market, both on the debt selling negotiations and what the Federal Reserve decides to do with interest rates. Negotiating teams, by the way, are back on at the table today in Washington, d C. However, we do see the Nazak one hundred leading the way. Tech stocks continue to be the outperformers here,
even as chip makers are under pressure. We'll get to that a little bit later on the Nazak one hundred, by the way, at a thirteen month high, and excel UF, which is the ETF that tracks financial stocks, up by a third of one percent, thanks very much. In focus today with JP morgan Chase holding its investor day and
also helping to boost sentiment is pack West. The Beverly Hills based lender is not a holding in this ETF, but it is taking steps to boost its liquidity by selling two point six billion dollars of real estate loans at a discount and the two year yield ticking up to four point three to three percent. There's no ECO data today, so expect a lot of movement based on incremental movement, hopefully progress in those debt sealing discussions. Let's switch it up here and take a look at commodities.
Crude oil has now flipped to the upside, up by four tenths of one percent, even as copper is down by one point three percent. Still a lot of concerns over what's going on in China. That post COVID rebound has not been as strong as many people had hoped, and the lack of fresh stimulus measures in China is certainly holding back some of the medals.
And I wanted to point.
Out the Hanksaying Index closing up by more than one percent after Joe Biden, the President said that he expects US China relations to improve very shortly.
Details on that coming up.
And finally, Greek stocks getting a big, big day here. They made a new ten year high after national elections. It looks like the incumbent Prime Minister is in position to get another four year term, which is certainly a good thing for all his investment friendly policies. That investors are keeping a very close eye on alex What about you?
What are you watching? I'm watching the top tech.
Mover today, Scarlett first with Meta Investors are really taking that one point three billion dollar fine in Stride coming over from the EU. Perhaps that's because the company has actually in the past threatened to leave if there's not a resolution on the EU's kind of push for them not to send userdata over overseas to the US. I'm also looking at Albermarle. Now, this is a company that
just inked a lithium partnership with Ford. Ford has a fifty billion dollar electric vehicle plan and for Albemarle to be in the mix. Investors are liking a little bit of that now. In terms of what's going on in the cybersecurity space, there is.
Kind of our top name of the day, Micron.
China's cybersecurity regulator said it found relatively serious cybersecurity risks when it comes to the company's chips. Whether this is political banter or there are actual risks. We're going to break all that down in the show, but for now,
investors drove the stock down around five percent. It's pairents some of those laws, but we'll get into the details here, Suit Scarlett, all right, and let's stay on that right now, because we're going to go now to San Francisco and bring in Ian King, who's covered semiconductors in Asia and now on the West Coast. So Ian, with his decades of experience, is certainly the best person to speak on this.
Ian, as Alex was setting up for us. It's curious this ban on Micron products. What kind of history does Micron have with China specifically? Is there a notable significant history between the two.
Yeah, I mean there are a number of incidents. The big thing to point out is that Micron, unlike it's South Korean competitors Sam Song and s Khaynix, doesn't have a production plant in China. Those guys do, which obviously makes them a little bit closer to Beijing's heart in terms of what that country wants to do with domesticating
its own chip industry. And the other sort of negative thing that's happened for Micron in the past is Micron went caught with a Taiwanese company arguing that that company with stealing its IP to give to China. So there's there's some real kind of tension there in the past.
Now Ian Micron obviously caught in the middle of this political banter.
If your Qualcom, if you're Broadcom.
If you're Intel, should you be worried that your next And if not, why is Micron the target of Beijing's ire at the moment?
I mean, the way to think about this is China needs Qualcomm, China needs Intel. China needs Broadcom, it doesn't need Micron. The chips that Micron makes, the DRAM and the non flash memory chips are basically exactly the same as the ones that Samsung makes, as the ones at sk Henex makes, So literally you can drop them into a piece of electronics, pull one out, put one in. You can't do that with other products from those companies you mentioned. So that's what's going on here.
That's incredible context here because Micron's memory chips are kind of commoditized. They're pretty standard components as opposed to say, in videos graphics chips. How much of this is trying to buying time or giving its own domestic industry some time to bloom.
I mean, if that's the plan, we're talking a decade two decades before they'll have equivalent capabilities. What this is being seen as more of Scarlett is really Beijing has just really had to take it on the chin. We've seen all of these actions by the US government against Chinese technology companies, and really Beijing has had nothing to fight back with apart from Micron. It can take a swing at them.
Ian King, our in house semiconductor expert, Thank you. I want to now bring in the Washington angle on this. We have Bloomberg's Haley Lines. Kayley, as we see this kind of back and forth between Beijing and DC, what do you think is next here or does dec have a response to this.
Micron move from China.
Yeah, well, we've already heard from the Commerce Department on this, saying that Beijing's conclusion here that micro imposes a cybersecurity national security threat has no basis in fact, and that this action, along with some other recent action that Beijing has taken, is inconsistent with China's assertions that it's opening up its markets and is committed to a transparent regulatory framework.
So that's the US response. Of course, China, for its part in releasing this conclusion from this review, says it wasn't political, that it is about national security, but it does kind of have this sense of escalating a fight between the world's two largest economies when it comes to this technology. Because we have to keep in mind the US has already taken plenty of action on its own.
It's blacklisted certain Chinese technology firms, and of course late last year also introduced a pretty sweeping restriction on selling advanced semiconductor manufacturing equipement to China.
You know, it's ironic that this is happening right as President Joe Biden is in Asia attending the G seven summit and making comments about how he sees he has China relations actually improving very shortly. Give us some context for when he made those comments and what he might be referring to.
Well, that was him speaking before he left the G seven seven in Japan, your right, Scarlett or Ambrey Horden, was asking him about China. Also the question around sanctions to facilitate a meeting between Defense Secretary Lloyd Austin and his counterpart, which that we understand is under review by
the administration, still something potentially in the works. But he did say referring to the Chinese spy balloon incident that captured all of our attention earlier this year, calling it silly, saying that he does expect relations between the US and China too thaw in the near term. It poses a very interesting contrast between the tone of the President's remarks over the weekend versus then just hours later later China making this move against a US company.
Now, Kaylee, this isn't the only big conversation happening in DC. It is start of the week. Where are we next on the debt ceiling debate? What do we expect today on this Monday.
Well, at five point thirty pm, there is going to be a meeting between President Biden and House Speaker Kevin McCarthy. So that's really what we're all looking forward to.
Now.
Those two did speak on the phone yesterday when the President Biden was on Air one on his.
Way back to the US.
It seemed that their tone coming out of that phone call was one of more optimism. But really this is going to be about real progress being made.
We understand that.
The two sides are still really far far apart in the negotiations, as their different parties have been working over the weekend, working again at the Capitol this morning on this But the issue of spending cuts, spending caps, stricter work requirements for entitlements, permitting reform, all still on the table, all still needing to be ironed out into an ultimate compromise. Because even once we get a deal between Speaker McCarthy
and President Biden, it still needs to work. It's the way through both chambers of Congress to make it back to the President's desk for him to sign off on it. And we're just ten days out now from June first, which Treasury Secretary Jenneyellen reiterated over the weekend could be the earliest possible X State.
Yeah, Cluck is sticking. Kelly, Thank you so much. Kelly Lines joining us from Washington.
It's time now for talking tech.
First up, Uber, the ride sharing company, is placing its head of diversity on leave after complaints of insensitivity.
CEO Dara Kashrashahi asked.
Bo Young Lee to take a leave of absence after workers complained that an employee event she moderated called Don't Call Me Karen was insensitive to people of color. And turmoil in the cyber insurance market. Global insurers are racing to figure out how to avoid covering government sponsored cyber
attacks and catastrophic hacks. Ransomware attacks increased by eighty seven percent in twenty twenty two from the year prior, with global cyber premiums expected to exceed twenty three billion dollars by twenty twenty five.
Plus.
Instagram ran into some technical difficulties on Sunday night. Tens of thousands of users reported that they could not access the app and what was the second widespread disruption in just over two months. Down detectors now reporting that the problem lasted for about an hour and the app is back up and running.
Now, Scarlett, all right, well we're going.
To stick with Instagram because his parent company Meta now faces a record one point three billion dollar fine in the EU. So we want to bring in Alex Webb of Bloomberg Quick Take, who covers all things tech, to give us some more context here.
Alex, this is.
Something that was not a total surprise, but the amount is certainly a surprise.
Yes, it is a record fine for Facebook. The question is whether ultimately they will end up paying it. There sort pertains to the so called US EU privacy Shield. This was the agreement that previously let companies transfer data from Europe to the US without any major questions asked. Then all of a sudden there were concerns that actually US intelligence agencies might have access to this data, so
they scrapped the privacy shield. Facebook has, according to this decision, at any rate, failed to prevent data from being shipped over to the US. There is, however, a new privacy shield. Talks about it are in the offering that could be agreed upon by the end of the Northern Hemisphere summer.
Now alex The investors, though, are not necessarily seeing this as about thing. Perhaps that's because the company in the past has threatened to actually pull out of the EU. How are you taking this stock reaction that the shares are up about two percent on the news even though this is a record fine for Meta.
Well, Often in these sort of cases, when a fine is sold out, stocks do tend to pop because investors have clarity. They know how much this is likely to cost the company if it does end up costing them anything at all. That clarity therefore results in a stock price gain. Often then, don't forget you know, Facebook has met as oodles of money, has very healthy free cash flow, even before the savings program that they've been putting into place.
They've reported twenty eight billion of revenue in the first quarter. So one point three billion, you know, while clearly painful, is not going to bankrupt the company.
Yeah.
Absolutely, And we've seen how those tech companies with their free cash flow have been regarded as safe havens for investors in this turbulent time in the markets. One thing that I did notice in the reporting is that metal was given time to suspend any future transfer of data. Does that mean that there is a way out for the company where perhaps a fine could be whittled down.
No, it means that if they don't do it by that date, then there could be there's the risk of further punishment. The real act. One of the really interesting piece of reporting on this About a year ago, Motherboard managed to get hold of an internal document from Facebook which likened data to a pot of ink that is thrown into a swimming pool. That the ink is in the pool, Now, how do you gather that ink back up? The internal Facebook document heavily implied that that was essentially impossible.
That's the real challenge they face right now. Perhaps over the course of the past year since this reporting was published, they have found a way of putting the ink back in the pot, but it is a real challenge and will be interested to see how or if they do it.
Alex, this is meta cotton and crosshairs. This beats out the record fine that was previously applied to Amazon. Are there other companies in the EU that should be looking at this as kind of a warning sign? Who should be actually looking at where their ink is spread throughout their organizations.
I think that the EU has been very slow on GDPR, on the general Data Protection regulation, and they are that clearly picking the big most egregious victims first. It's still five years, so first, it's a very long timeline. It is a warning shot to other people to say, you know, sort your stuff out. I'm sure there are plenty of
other companies who have done this. Facebook also sits on one of the biggest pools of consumer data in the world, so it's unsurprising therefore that they are gone for first. I wouldn't like to name names on who else might be in the firing line, but I'm sure there is a very long list of people who could be vulnerable to this well.
Bloomberg's Alex Webb thanks for joining and some clarity on that situation. Rory Harvey, executive vice president of General Motors, spoke exclusively to Bloomberg's Matt Miller about its new line of evs, including an electric Chevrolet Varado.
Take a listen.
We have our Altium platform, and the Altium platform actually gives us the ability to be able to configure battery packs in many different formats in terms of the amount of modules that are in there, so dependent upon the capabilities of the vehicle, dependent upon the prices of the vehicle, dependent upon what functionality we want from the vehicle, then we can figure those atium battery packs in a way that fits the customer needs. So there's a huge decree
of commonality within autium. But it also provides us with ultimate flexibility.
Is altm able to scale from you know, a thirty thousand dollars vehicle all the way up to one hundred and fifty thousand dollars vehicle.
It certainly is. That's one of the great things about otium as a product.
That's that's very impressive. Now, having said that, more people who are ordering your vehicles are paying closer to the upper end. I saw that of the Silverado HD orders, which is a work truck. Let's be fair, right, eighty four percent or for AT four and Denali trims. In fact more than fifty percent or for Denali and Denali Ultimate trims.
So they're paying top dollar for these trucks.
Yeah, no, I mean, and I think that's again it's just credibility in terms of the desirability of the product portfolio. If you looked at the general Motors product portfolio today, I think it's outstanding. And if you looked at it in terms of what customers are looking at to buy to meet their needs. As an example, they're paying a premium. So again it just shows the desirability of our vehicles and the fact that we've got vehicles that are attractive to our customers.
You have a small electric vehicle in the bolt that addresses that issue. How are your EV sales as a percentage of the total what do you expect for example, Rory in twenty twenty three and twenty twenty four.
Yeah, that one's really interesting because, as you know, Matt, the adoption rates continue to change. If you looked at the data for April, I think it was the highest penetration of evs in the industry as an example. So we adjust our production capabilities in line with could demand. So I guess I'm not going to give a definitive number, but suffice to say that you know it's increasing all
of the time. And if you looked at the second half of the year, certainly if you take the Cadillac Lyric as an example, we know that we started off deliberately so with relatively low volumes and we're building significantly in half two, so it's going to take an ever greater proportion of general motor sales.
Rory, let me finally ask you about the chip situation. Are you all cut up in terms of the supply chain? Can you get all the chips that you need to produce in the size that you want to.
I would say work in progress. I would say it's significantly better than where it was historically. I would say that we are not in a position that we could declare that it's all totally behind us, but I would say that it's much more stable, and I would say that it's going to continue to improve going forward. So a much better position overall.
And you can watch Ry Harvey's full interview with Bloomberg on the Terminal. Now, Matt Miller has been pretty busy because he also sat down with Ford CEO Jim Farley about that company ramping up its EV production, which includes striking a number of deals to buy lithium for batteries. Matt joins us now from Ford's production plant in Michigan. Matt, I thought you were going to wear a hard hat. I didn't realize you're outside in front of cars. But of course you are tell us a little bit about
the Ford Lithium partnership that it made public today. How critical is this partnership to meeting Ford's edy goals.
Yeah, it's very important because you know, last year Ford sold at least in the US, I think about sixty one sixty two thousand electric vehicles in total. In twenty twenty six, they want to sell two millions, so they've got to ramp up substantially, and the most difficult part of that, according to Jim Farley, is scaling up battery production.
In order to build those batteries, they need a lot of chemicals and minerals like lithium, they need nickel, they need cobalt, and getting those things isn't particularly easy, especially since eighty percent of that refining process currently sits in China. So Ford has made a number of deals three on lithium with the biggest lithium producers in the world to get that refining done in North America and in South America,
so in Canada and Mexico and in Chile. That's really key to keeping costs down, and that's really the biggest part of the vehicle. So they're going to be building their next generation electric vehicles in Tennessee as well as around the rest of North American plants that they already have production in. But getting these chemicals, getting these minerals is really important.
And Matt, that sounds expensive.
Are those costs being passed along to consumers?
What's the pricing strategy look like for Ford's evs as they roll them out?
Yeah, so it is very expensive. And right now they have a negative one hundred percent margin and change right they're losing three billion dollars this year on about three billion dollars in revenue. They hope to change that dramatically. So by twenty twenty six, remember is less than three years away, they want to have an eight percent margin on their entire electric vehicle fleet, so that would be a massive change, a ten percent margin on the internal combustion engine fleet.
And they need.
Those big margins which they already make on you know, the big trucks and the very expensive gas cars they sell, like the Mustang or the Bronco that you see behind me. They need those profits to invest into this battery electric vehicle business before it starts making its own money.
Yeah, it's own virtuous circle. Matt, thank you. So much.
Matt Miller, of course, joining us right now from outside Ford's production plant. Welcome back to Bloomberg Technology. I'm Scarlettfoo in.
New York, and I'm Alex Brinkan San Francisco.
All right, let's get you.
A check on the market gets at midday here in New York, another day of muted price action when it comes to equities and the major indexes, the SMP moving up marshaling by one tenth of one percent. Clearly, investors are waiting for any kind of progress on debt selling negotiations,
as well as responding to commentary from FED officials. Two FED Regional Bank presidents Neil Kashkari and James Buller giving some hawkish commentary talking about how a pause is not necessarily the thing that's going to come up next, perhaps a rat hike might be in order in the coming future, and also how inflation is still something the FED is keeping its eye on. Nevertheless, you continue to see those
big cap tech stocks piling on gains. We have the NAZAQ one hundred already at a thirteen month high, gaining another two tenths of one percent.
Apple among the big gainers.
Here and XLF the ETF that tracks financial stocks in focus today as JP Morgan Chase holds its Investor Day and PacWest makes some moves to shortest liquidity, the two year yield inching up by six basis points these days, that kind of is an inching up at four point three to two percent. We know that Treasury Secretary Janet Yellen has said that the chances the US can pay all its bills by mid June, when the next round
of tax receipts come in, are quite low. And we do know that President Joe Biden and Kevin McCarthy, the Speaker of the House, are scheduled to resume meeting at five thirty pm Eastern time today after the market's closed. So there's a lot of wait and see until we get to that point. Now, taking a look at one individual name, it's Micron, and the stock is in retreat today, falling as much as five percent from Friday's close to
an eleven month high. But today it is coming down a little bit because, like so many other tech socks, Micron has had a banner twenty twenty three. So far, the memory chip maker had gained as much as thirty seven percent after giving indication that the industry has worked its way through most of the over supply of chips. But what happened today is that China said Micron's products fail to pass a cybersecurity review, and that's led to a decision to ban Micron products.
Other US chip makers.
Are falling in sympathy, while we've seen some Korean chip makers like Kinix and sk gain as a result alex.
Now, increasingly leaders of AI companies are asking Congress to establish safeguards to mitigate threats their technology poses, like open Ai, CEO and many others. But what kinds of threats does AI pose to society exactly? We'll bring in Sarakraft's, director of the Technology Institute over at Cornell, a non resident senior fellow at the Brookings Institute who recently wrote that large language models quote may disrupt far more than just
the economy. They also appear poised to challenge democracy too. Let's bring Sarah in for a deeper dive. Sarah, tell me challenges to democracy?
What do you mean by that?
Yeah? Thanks, It's great to be here. So one other things.
So, I've been working with language models now for several years, and the concern I had was that if looking at twenty sixteen, there were bad actors that were trying to insinuate themselves in the democratic process. What happens now when these language models enter in and make it really easy to generate a lot of content, credible content, really quickly.
So we wanted to map that terrain, and so we did an experiment and randomly sent AI generated texts and human generated texts to members of Congress the state legislatures around the country. And we saw that members of Congress cannot tell the difference. And anyone who's worked with CHAGBT can see just how plausible.
Sounding this content is.
And so I think it's important for us to understand the threat and by way of mitigating that threat.
And I think that's what we were trying to uncover with this research.
Sarah.
When I think of where misinformation tiply lives, that's on social media. So I have to ask AI companies. Folks like Sam Altman are going to Congress saying hey, regulate us social media companies. You've kind of heard the same tune. Who do you think is actually where does the owners fall in terms of who needs to intervene here and make sure that AI misinformation and the impact on democracy doesn't get out of control, right.
I think what we've seen with technology and regulation is that off it it's very reactive at.
The federal level, and I think there are good reasons for that. This technology is moving so quickly.
And by contrast, for example, the European Union is trying to really lean into regulation, but I think there's a real risk that they are going to pass this AI Act.
And it will come into force and already be obsolete.
So I think some of the onus actually is on the firms, and open AI has done some of this by.
Making certain outputs not possible.
So anyone who's done certain types of trying to push the boundaries on outputs might see that open AI.
Doesn't actually permit those.
So I think again this is a spirit of trying to understand through the public and private partnerships, you know, government and firms, kind of what that risk is, that threat is, but also to try to think through anticipate is.
This a too early you know, to regulate or too late?
And I think we're still really trying to understand what this technology is about, and so lurching into something at the federal level might be a little premature.
So following on what you said, Sarah about the onus falling on the firms, firms are made up of people, so I wonder anytime there's a new leader in charge, or they have someone else looking over regulation or their policy side, whatever they propose could change as well.
How concerned are you about I guess.
The quality of people who are making these kinds of decisions at these big firms.
Right, And this is the question is a great question because we've been thinking about this for several years in different contexts content moderation, when Facebook was under fire for what they were permitting and not permitting. And it's a real debate about kind of outsourcing the public market space, marketplace of ideas, for example, to private firms. And again that's something that I think in Europe they're less tolerant of, and in the US I think for a good reason,
we're saying, let's let these firms innovate. But what we need to be thinking through is just what guardrails do we need in place to kind of guard against the more extreme consequences of those technologies.
It's interesting that you said that Europe is already moving ahead and perhaps whatever policy they institute might become obsolete quickly, but because they are moving ahead, do they become do they set the precedent that the USN needs to kind of follow up with.
You know, if we look at previous technologies, I don't
think that we have. The US has fallen in lockstep at all with Europe when it comes to big tech and technology, and I think one reason is if you look at where big tech resides, it's almost exclusively in the United States, and so these things do become kind of circular, which is Europe is more inclined to lean into regulation in part because it's not harming their of their firms, and the US maybe because it has not leaned into regulation, has really I think fostered an environment
of innovation, and again kind of consequently, there are fewer incentives for the US to be out in front. And I think again, you know, when we look at where there's an interesting story about Google's barred and they haven't they released it in one hundred and eighty countries, but
not in Europe. And you know, when we look at the history of big tech and legal you know, litigation, big tech American companies have not always fared well in Europe, and so I think there is some wariness of these these you know, chat GPT, which was banned by the banned by the Italian government. Other firms actually not only not following an offset, but really trying quite apprehensive of engaging in that sort of European regulatory space.
So I don't think the US will.
Go in that direction, not just because of what we're seeing already, but what we've seen with other forms of technology in the past.
Now, Sarah, you talk about the US being reactive when it comes to regulation, we haven't seen any meaningful regulation against raining and the power of big tach against reigning and social media. What actually do you think needs to happen for AI regulations to cross the line here in the United States.
Yeah, it's a great question, because you know, again everything is so reactive when we look back to the history of arms control. No, there was some indication that we should do arms control on nuclear weapons early, but really it didn't happen until after the Cuban missile crazes and
you know, where the world almost blew up. And unfortunately, I think that it takes kind of a real crisis, existential crisis like that to happen before meaningful regulation can take place, and I do think it raises this question of is are we at that point where meaningful regulation
is needed? And I would submit that, you know, we have some threats on the horizon, but because this technology is evolving so quickly, and because frankly, I don't think these existential risks have presented and are really even a hypothetical risk.
I think it is a little too early. But frankly, also we have to think about the political environment.
In Washington, which is not really conducive to doing anything meaningful on really anything, because there might be an agreement that something needs to be done, but disagreement.
On how to do it.
That seems to be the way of Washington. Sarah, I really appreciate your joining us and sharing your insight. Sarah Krepps is Professor of law and director of the Tech Policy Institute at Cornell. Now coming up, there is more on AI, this time from an investing perspective. We're going to be joined by compounds of Michael Dempsey up next.
And in the meantime, keeping an eye on shares of PayPal, which are popping today as Venmo introduces an account for teenagers who are between thirteen to seventeen years old for sending and receiving money. This feature will come with a debit card and plans to roll over to select customers starting next month. PayPal up by better than three percent, is Bloomberg.
There are many companies that are going to struggle in their transition to really deliver AI solutions at scale.
Consumers are really engaging with the AI in a way that just seems so much more real and authentic than they ever have.
I think the bigger opportunity actually lies in the enterprise.
I think AI is going to be deployed into every facet of work.
I think we're at a moment here where there is a tremendous advantage for US based companies.
I think on the application side, I think the Chinese companies potentially can do really, really well.
I think we actually need to be going faster on the regulatory front.
We are really thinking about generative AI as a tool for good.
I do think that an opportunity for perhaps pro technology policy making. And that was a compilation of what our recent VC Spotlight guests are saying about AI investments here and around the world. We're going to continue the conversation now with Michael Dempsey. He is managing partner at Compound, which is a thesis driven, research centric seed stage investment firm that's focused on emerging technologies with more than two hundred and twenty five million dollars in assets under management.
Michael, it's so good to speak with you. Thanks a lot for joining us.
I guess I want to start with just the overall state of AI, because from traditional market watcher's perspective, AI seems.
To be in a bubble.
Bank of America strategist Michael Hartnett says tech is forming a bubble, and AI in particular, isn't a baby bubble bubbill start with easy money, they end with rate hikes.
How much do you agree with that?
You know, I think in some ways I do agree with it. I think that there's a kind of vacuum of conviction and areas to spend time in on the investor side today after kind of a very crazy the past few years, and you know, things cycling in and
out of the zeitgeist, like crypto for an example. I do think that, unlike a lot of prior areas, there will be massive disruption and there is so much hard y that can hop in with a ton of different industries, and I think for the first time people can see it and feel it in a way that is very
tangible to their day to day lives. And so that creates some sort of compounding effect of the kind of zeitgeist in the moment and how big it feels, because at every dinner, at every interaction, someone is talking about AI, someone's talking about the ethics of it, et cetera.
Michael I used to cover tech deals and some of this vibe kind of throws me back to when Airbnb Uber we're doing their massive funding grounds around some consumer tech when they were still private. A lot of that was driven by folks like yourself, but also bigger investors' growth money, private equity firms piling in. Is that kind of money already moving into this market? Do you think that will fuel some of this potential for bubble that you're talking about.
It's starting to.
I think more and more people are trying to figure out what are the areas in which they can properly deploy hundreds of millions of dollars. And you've see that on the foundation model side of things. In the larger AI labs, and I think you're going to start to see it on the more application layer and middleware side
of things, and so it's it's definitely starting. We're seeing it now with the full stack kind of larger scale VC firms, some of the growth firms, and then obviously on the hedge fund side, we're seeing on public markets people are trying to figure out outside of Nvidia, what are the plays that they should be having to get exposure to things that feel quite asymmetric from an upside perspective and just incredibly large scale if it does work, which is kind of our job.
Michael.
I'm curious about your investment portfolio. How much of it centers on AI? Is it less than half more than two thirds? And when we talk about centered on AI, are these companies that started with the goal of entering and building out AI or have they pivoted to AI and expanded to AI from where they started.
Yeah.
So we've been investing in AI or mL as we used to call it, since twenty fourteen, and I think probably about sixty percent of our portfolio falls within that area now, and that's because AI moved from a very kind of vertical specific misnomer too now being a horizontal platform, and so everything from biology company is using AI to kind of do more of a search and discover instead
of a random walk in discovery too. Core companies like Runway, Mlwave, dot Ai that are doing kind of full stack building their own models, using it in very unique ways. And so I think for us, we ourselves as very AI native investors and think that most of how we like to invest is companies that either have a unique take on product as it's enabled by the bleeding edge of AI or our building and kind of pushing that bleeding edge into their core category.
Let's talk regulatory risk or appetite for regulation from some of your portfolio companies.
Which side of that debate are you falling on?
Where do you think in the US, in particular, our government should be getting in and kind of laying out the guard rails for what this industry's impact could be on consumers, on businesses and tech writ large.
Yeah, so I watched the entire hearing last week, and I think generally everyone did a really incredible job. Sam obviously is what who got the most praise for his embrace of regulation. I think he made a very strong point which I agree with which is that on the startup side and really even the mid sized company side, I don't think regulation should come into.
Play just yet.
I think there's all sorts of ethical dilemmas to discuss around how to use different types of training data, what data you can train on, how do you get opt in, etc. But I think a lot of our companies are taking an approach of making sure they're doing things responsibly and making sure that they're doing things transparently, and I think it's a little too early to be trying to put into effect things that could hamstering development, especially in the
United States, because I do think this is some form of an existential technology and we want to make sure we're continually pushing the frontier of that. And while there are certain areas like these large models and kind of frontier models that could have regulation at the compute layer, I think more and more as people start to get better at miniaturizing model doing things locally, it's going to
become really difficult. And I'm not sure on the government side we yet have an understanding or a group of people with enough understanding to properly regulate something that is so important and honestly is moving so quickly.
Our previous guest, Sarahcrafts of the Cornell Tech Policy Institute, was just saying that the owners really falls on the firms themselves to propose regulation or to try to set up their own guardrails to that end.
Is there anyone that you've.
Encountered, that you've engaged with who you believe is a leader in thinking through some of these issues that you think people need to be paying attention to.
To be honest, I think it's most of the people who are running thee these large labs, whether it's kind of people like Sam, I think Gary marcusly it's some really good points. As a professor in the hearing, I think there are people that are trying to take ethical approaches. The teament Runway cares a lot about making sure they work with creators. But I think to Sam's point, these people have day jobs that are probably the most exciting they've ever been and something they view as kind of
their life's work. So I do think it's hard. I think more and more as more people who have been at large organizations and scene regulation and other lines of technology start to really dig in to AI, we will start to have people rise naturally. But to be honest, right now, most of the people are those who have the depth of understanding of knowing how quickly this moves in the scale at which it's moving, and those people are building right now.
All right, Michael Dempsey, managing partner at Compound, thank you so much for giving us your perspective.
SpaceX launched four private astronauts and route to the International Space Station, including the first woman from Saudi Arabia to travel to space. That crew lifted off a top of Falcon nine rocket Sunday evening from the Kennedy Space Center in Florida. That mission, operated by Axiom Space, is the second of four human space flight launches that SpaceX is set to handle for the company.
Axium has plans to build its.
Own space station in the future.
Now, Apple is just a few weeks away from debuting its mixed reality headset. Bloomberg's Mark German has been following the project incredibly closely, and he joins us now for more, Mark, what do we need to know about what's coming.
We've heard about this for a minute.
Give us the top deal on this headset.
Yeah, thank you so much for having me. Yeah, it's definitely been a minute. So we're actually right now two weeks away, two weeks and five minutes away, I should say, from that headsets launch event, this is going to be Apple's first feature new product in eight years, right, since the original Apple Watch was introduced and went on sale in twenty fifteen. This is going to be a really
interesting test case for Apple, right. You know, Apple didn't necessarily create the MP three player markets, the smartphone markets, the tablet markets, but there was a sense that those areas were soon about to take off and explode.
Right.
Mixed reality is a little bit different.
Apple is really going to have to come in here and maybe define this market.
Right, Meta is there. HTC is a big player Sony, but it's super nascent.
We're talking, you know, fewer than ten million units of these devices going on sale are being sold on an annual basis right now, Right, So Apple's going to have to come in here and shake it up from the very bottom. And they're coming in with a device that's a little bit experimental. It's going to be very expensive anywhere between I'm told twenty eight hundred dollars and thirty two hundred dollars, right, It's going to have some pretty
intense technology, over a dozen censors on the outside. You'll control it with your eyes and hands. You'll use it for virtual reality, FaceTime and productivity. Very interesting to see how Apple positions it. I'm told they're going to push it towards creatives if people want to use it for
productivity as the future of the computer. I definitely think this is going to be exciting for consumers, but there's a very big risk here for the company, right I think it's either going to be a huge flop or a huge success, and for Apple, there's really nothing in between.
Quite the binary call there from our very own Mark German, thank you for joining us on Apple and their headsets. And that does it for this edition of Bloomberg Technology. Make sure to tune in tomorrow as our very own Caroline Heights is down for an exclusive interview with TikTok CEO show Chow that comes from the Qatar Economic Forum.
You won't want to.
Miss it, and don't forget to check out our podcast. You can find it on the terminal as well as online.
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