Global Chips Battle Intensifies, Apple Nears Deal with OpenAI

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This is Bloomberg Technology with Caroline Hyde and Ed loved.

Love and Karline Hein and Bloomberg's world headquarters in New York.

Now I'm Ed Loudlow in San Francisco. This is Bloomberg Technology coming up.

Full chip coverage ahead. We're bringing the latest headlines from in video, arm, Intel and more.

Plus, Apple nears a deal with open Ai to add chat GPT to the iPhone.

Details ahead and shares of game stock. They surge him in speculation that Roaring Kitty is back liking the stock. We discussed that and so much more throughout the sabat first Le's turn around, attention to the macro picture, some new headlines coming out from.

The New York FED.

When it comes to consumer sentiment of the direction of travel and inflation, and it's still running hot, Dave pot three percent in terms of where consumers see inflationary pressures being in about a year. That's overall in the midterm. We're still holding on too. Gains though three tens percent higher. Remember we get a CPI print on Wednesday PPI on Tuesday a lot to digest.

From the macro perspective.

Two year yield remaining higher, so boring costs coming down, yield slipping so two years money going in. Yields go lower by some two basis points. Bloomberg Dollar Index also down a little bit. Look some of the anxiety around in flesher around inflation just stiling back a little bit

And ed, I know you're going to.

Focus in on game Stop and this is more the reader cross from some of that means stock frenzy and when it means on the related names in crypto.

We're up two percent on bitcoin. What if you've got on the micro.

Stop memestock mania is back. This is a two day chart to kind of illustrate the point. GameStop was up one hundred and ten percent in the session it was halted. We're now up around sixty percent, and it's just from one social media post from Roaring Kitty aka Keith Gill aka the source of all the original interests around GameStop. You know about the movie, you know about what happened on Reddit. I think Reddit's higher, robinhood is higher. There's

Intel is up three point five percent. The Journal reporting.

It's close with the deal with Apollo for eleven billion dollars of financing for an Ireland fab.

ARM is up more than five percent.

Nike reporting that ARM is readying an AI product next year, didn't say where it got the info, but SoftBank's going to support them financially bring it to market. And then videos actually high three ten to one percent. It had been lower after the Information reported that China is instructing domestic companies to stop ordering chips from Nvidia. We have a very big segment coming up everything chips. The big take today is on chips. There are a lot of

There is a lot of discussion of China visa VI the US coming from well key leaders in US government.

We had a.

Great conversation with Janet Yellen earlier own AMERI Horder and sitting down with her for an exclusive really discussing China in particular. Janey Ellen really feeling that China is not playing by the rules on trade and sort of going on to say that maybe we will see China escalating in the so called tit for tat on trade.

Just take a lesson. Listen to what Treasures actually told us earlier.

He believes it unacceptable as I do, to be completely dependent on China in these areas, and he wants to make sure given this that China is really not playing by the rules in this sense. They have enormous subsidies in critical areas of advanced manufacturing.

There's a focus on increasing tariffs at a time where there's anxiety around inflation. How does this alter the picture of your investment landscape visus A. Janet Wi is with us RBC Bruin Dolphin, head of market Analysis, and it is a time where investors try and navigate seeming headwinds, but an ability to keep on going for the growth of AI how do you think this lands the China versus US at the moment?

Janet, good morning, hairline. Thanks for having me.

I think in terms of the tech investment side, we will still be heavily preferring the US. I mean, the DOS is a hop of innovation, and I think the regulatory pressure on China would remain, and I think the trade tension parality will hit China more than the US.

So I think from an.

Investment perspective, I think all these trade tennis, it's obviously it's not great from our price or from global growth trade and the global market and certainty point of view. But I think sticking with the US investment seems.

To be the right approach exactly. I'm trying to pass all of this together, right. I think there's a growing confidence that inflationary pressures are easing off, but a big part of that is US fiscal policy. Right, we're talking or Jalant Yellen talking about how China has some anti competitive practices, but here in the United States, if you take the chip industry, this country is also pumping billions of dollars into supporting its growth. How does that impact you as an investor?

I think the clear evidence is that.

There's a lot of investment from a sovereign perspective into a semiconductors given it is such an important strategic sector.

Janet, do we see a rate cut from the FED this year to your mind, and if so, when and in what increment?

Well, it is.

Difficult to say.

I think the bar for a rage cut is definitely higher now will await the CPI print on Wednesday, But I think the Fed, I think they have a leaning on the next move being a rage.

Cut rather than a rate hype.

So I think there's still some preference aren't eventually cutting. I think they're really each thing on doing that, but they just need the data to allow that so our viewers, that is more likely to happen in the fourth quarter. But I think the FAT can really move, you know,

I want to go back to what you just mentioned about valuations looking pretty good at these levels, and many Janet, have just been I mean holding their breath the ARM ninety times future earnings valuation that we've seen in ARM pops on the day we're going to have a much deeper dive into the chip sector in a moment with their own in king. But Janet, from an investment landscape perspective, do you have to keep on building in the AI infrastructure play or do we broaden out at this moment.

So, I think to your point about the valuation of our I can't really comment on an individual company, but obviously we know that within the sector there are a lot of players and there will be different ranges of evaluations. I've talked about it as a group because of the straw and a scroll. I think some of the major players are the valuations are reasonable, but you have to to really look into an individual case. I think in terms of the broadening of the thing, we already have

I look at evaluation of one particular means Stop today janet three thousand times future earnings is where the current price of game stop is. Are we going to see mean stock frenzy really hit us hard once again.

Well, it is hard to say. I think right now we are seeing a couple of individual stops having that reaction. I'm not sure if that's going to last. Is a lot driven by social media, but I do think that what the current situation is an indication that the risk sentiment is back. I think, you know, the positive risk sentiment is not constrained anymore by you know, this high

Right.

Risk sentiment is back, says RBC Brew and Dolphin head of market analysis, Janet Marie. Great to have you on the show. Let's continue our coverage of semiconductors is Today's Bloomberg Big Take focuses on the eighty one billion dollar investments made by the US and European Union towards the next generation of semis joining US as Bloomberg Zin and King, one of the members of the team that went through this with the big take. We have a case study

Yeah.

No, I mean Intel is actually in a slightly different situation to some of its rivals like TS and Samsong. Frankly, it needs the money way more than they do, and they can afford to be selective where they take government money, what terms they take. Intel, because of the situation it's put itself in over the last five or so years, really needs the cash from pretty much any source it can get if it's to fulfill what it's trying to do, and.

Let's talk about fulfilling what it and more broadly, the US is trying to do what globally countries and companies are trying to do. Do we get to an extent where we have too much supply in.

I mean, this is the concern at the moment. The concern really though, is focused on what's called the sort of legacy chips, the older types of production, the type of thing that Intel, TSMC and Samsong are building here

AI is a big driver of this. Let's take a look at today's big take. Specifically, the headline global chip battle intensifies with the eighty one billion dollar subsidies surge, But within that there are two different stories. There's kind of like the long term capacity on sharing story, and then there's psych everyone's knee jerk reaction to keep up with what's happening in real time.

Yeah, I mean, there's you know, everybody's focused on AI. But if we believe that this is the future of computing, if we believe that this isn't just a step function, that this is something quite dramatically different, then obviously the ability to control that has enormous implications, both in terms of economics and insecurity, and having that production close at hand is really important, and this.

Goes global, not to mention what's currently underway and reporting with ARM getting more deeply into AI and soft bank banking, that we've got so much to digest. Ianking, a brilliant deep dive comes to the big take. Go read it online on your terminal. But let's stick with what this all means in terms of competitiveness US versus China.

President Joe Biden is said, of course, to not.

Just thinking about the chip sector, but more broadly about tariffs for drupling them on than Chinese electric vehicles, for example, sharply increasing levees for other key industries.

And it's come as soon as today.

For more, let's bring in Eliza Tobin, senior director for Economy at the Special Competitive Studies Project, And Liza, we were just talking about this in the context of a frenzy of money from government to support the chip industry. But meanwhile Biden's trying to push back EV's coming to China, trying to push back solar coming to China from China to the US. Is that really got any bite to it? It seems more like bark right now.

Good morning, Caroline ed Greater be on with you. Yes, No, this is a really strong move from the Biden administration, as you noted the reporter saying that they are thinking of quadrupling the terrif right on Chinese evs. As we know, China has rocketed to become the top producer of evs in just the last few years. They struggled for a long time to build a competitive auto export industry and

Eliza, good Morning is ed in San Francisco. So, as you point out, sources say that the EV tariff would rise to one hundred and two point five percent. But based on what you just said, I don't get it. I checked, okay, and there are four China made evs that retail in this country at incredibly small volumes, Pollstar two and four, the new Lotus that's coming, and the

The Biden administration is trying to get a head of the floods. So, as you noted, right now we are insulated. American consumers are by and large not buying Chinese evs. They're not coming into our market. But I think they see the writing on the wall. German automakers are under threat. Europe is importing these things. They're going into Japan, they're

And yet, Eliza, you know, when you're thinking about special competitiveness in particular, this is the project that you focus in on. All of this is undermining, undermining ultimately the efficiency of global trade subsidies here, tariffs there, All of it will sort of it isn't a mediating what should be just the natural flow of things.

Is this what is necessary ultimately from.

Your perspective, to ensure that US does remain competitive when it comes to key industries.

There has been this national debate over efficiency versus resilience, and the lesson from COVID, from Russia's invasion of Ukraine, from these other global supply chain crises we've had in the last few years is that efficiency economic efficiency is not the only thing we need to think about as a nation, and so there's been increasing discussions of resiliency and what steps do we need to take as a nation to make sure that we continue to build emerging

Liza Tobin of the SCSP, thank you very much. So coming up on the program, French President a Manue Macron t outs billions of dollars in foreign investments from tech giants.

We're going to have those details.

Next, Karen, such global conversation. Meanwhile, let's just bos in what's happening for us doc over here? We're not seventy percent in the last couple of days on squarespace. Why it's going private Permira and all cash transaction, valuing the company in approximately six point nine billion dollars. We're going to see some vcs giving some more investment General Atlantic Acel for example.

This is bruly meg Technology.

Microsoft it plans to spend four point three billion dollars building cloud and AI infrastructure in France, announcing its latest major outlay on artificial intelligence technology. Now, Microsoft is aiming to help train a million people support two thousand, five hundred startups in France by twenty twenty seven.

Now.

Earlier this year, unveiled a partnership and a fifteen million euro investment into mistral Ai. It's a Parisian startup competing with the course the likes of open Ai. And we want to stick with France with investment in France because in manual Macron has just unveiled more than fifteen million euros in foreign investments from US tech giants like Microsoft, but also like Amazon, like IBM, like banks such as

You're right, choose France. It's a bit of a cheesy slogan. It could be the cover of an investment brochure, but it's not just PR because since he's become president this has really bit about the art of the deal Micron style.

Every year he gathers one.

Hundred and fifty one hundred and eighty international CEOs wines and dines them in Versailles and gives them the pitch of the French economy. He'll say, it's doing its job, it's doing the work. He's done the work of reforming France. And what are you going to do for France From the corporate side, which is invest and I think this is that puts it, I think a cut above Davos because there is investment. You could argue if it's expansion

Pr Yeah, Leonor, I think Mistrel put France on the map a little bit, you know, in terms of the conversation around AI development. But beyond that, we don't often go to you, you know, during the program as frequently as we do other countries, and it's at a time where France's economy is on a shakier footing.

Wow, that that cuts the here brutal, brutal. I think you touched on something which is about relative relative worth right now. Mccare came into power at a time when the UK was effectively voting itself out of European leadership with Brexit, and Angela Merkle's twilight years had begun. I think, honestly, as long as the UK is seen as a kind of Brexit tainted economy, and as long as Germany's industrial model is seen to be suffering, France will still have

It's not as pr Leonel Laurent of Bloomberg opinion from France, we appreciate it. Welcome back to Bloomberg Technology, ed Lovelow here in San Francisco.

And I'm hired back in New York.

Let's check on these markets, said, because now we're managing to hold onto our gains in the face of some inflratory pressure being shown by the New York Fed that consumer sentiment showing that still there's elevated inflratory anticipation coming from the consumer base. But on a week we have CPI and the week we have PPI, which is cautious ahead of those macro pieces of data. We're up a tenth percent on the NASAK ten yure yields just holding

Let's call it dollar a little weaker.

Is this more of a spillover effect from the means stock frenzy. Let's move it on one and shine light what's happening with good old game stock. We are so back up sixty three percent? But is Keith Gill so back? Will he return to social media? Of course he did pop a particular picture on x many feeling that perhaps Roaring Kitty is back when it comes to liking games, game stop and memestock mania seems to be back, and we'll talk about it later. I shinal light, what's happening

Yeah, let's get more on that potential Open Ai Apple agreement and bring in Bloomberg intelligence analyst Anna ra Grana. So, Anna rag As you know, Bloomberg reported quite late Friday nights that Apple and Open Ai are close on a deal to bring chat GPT to the iPhone.

You published your.

Reaction this morning and in summary you're saying it's a pretty sound strategic move outline your thesis.

Yeah, so when you think about it, you know, Apple's not been at the forefront of Generator AI, and the next WWDC or the Worldwide Developer Conference in June is really you know, aimed at AI. And if Apple's not able to showcase really cool features, then you're not going to have another round of you know, bad iPhone sales over the next twelve months. So they really need to push something out that gets consumers excited go get a

Was it also, though basically an acknowledgment as we've heard, with perhaps teaming up with Alphabet and Gemini, they just aren't going to be innovating themselves on this level.

Would they ever usurp and build.

Their own large ancuage model or is that just not where they're going to be bringing AI to bear?

See, they are spending money and I'm sure they'll have their own technology that goes into it. But as Apple has done it in the past, they'll like to partner with other companies that specialize in that area. And you know, there is no secret they have that deal with Google. When it comes to search, they use cloud resources from AWS, they use cloud resources from Google, so they don't want to do.

Everything in house.

And if this helps them they sell more iPhones next year, you know, I'm okay with them going and partnering with anybody that's out there and.

A Grana loving it.

Bloomberg Intelligence, thank you very much for shining light on your own thesis. Let's get that of Tom Forte, DA Davidson analyst, and it seems to be the marriage that the investor base wants to see.

But not on Alphabet's perspective.

Yeah, I think from Apple's perspective, investors are anxiously waiting for the company's AI strategy. So whether it's using Google or whether it's using open AI to create an advance the strategy. I think that's something that potentially you get investors excited. I just it's certain though then you may

Tom Anna Rag said that if this helps sell iPhones next year, it's a good thing. There's a much bigger discussion happening in the smartphone market about whether or not this is the year of the AI smartphone, principally focused on Android powered by a Snapdragon processor. Do you see an upgrade cycle if this deal gets done?

The answer is I think of the upgrade cycle from five G as being kind of the bell weather and the advantage there was that the carriers had invested billions of dollars to upgrade their network.

So they were very vested in getting an upgrade cycle.

To me, if you want to call it a potential AI upgrade cycle, I would put that as a distant second to the five G upgrade cycle. But right now, I think Apple could use any help when it came to sign the iPhone given the overdependence. Again, half their revenue last year came from iPhones.

I mean it is key.

They're also, of course all in on services, and I suppose that's also a key driving force here. Ultimately, Tom, there has been this handwringing, this worry that Apple is behind the curve, and that yes, they made the pivot away from the cars, but it comes too little, too late. Do you have optimism that they can steal that back, particularly for AI on device.

No, I do not, and I still actually wish that they would return to cars.

I've talked about how I'm a Model.

Three owner and I see a million opportunities for Apple to do it better.

Again, I think we have to keep it in perspective.

AI could be a tremendous boost to apples sales and profits over the long term. On a near term basis, it could have a positive impact, and I guess iPhone sixteen sales to the extent that they're able to market something interesting. But I think investors have to be realistic on the near term expectations over the next twelve to eighteen months, on Apple's ability to leverage AI, and it's just not as compelling as a lot of the other big tech companies.

Tom, there's a lot of frenemies out there. At the moment, I asked my audience on social media, is an Apple Open Ai deal for chat GBT on the iPhone good for Microsoft? Because I'm trying to make sense of all this, most respondents say good for Microsoft.

What do you think absolutely good for Microsoft?

When you think about Microsoft's involvement with open Ai, it's good for Microsoft.

So yes, I think that I like how to use the word front of me.

This is a challenge for Apple, which is does it want to leverage open ai given its relationship with Microsoft?

Does it want to leverage Google?

Does it want to entrust someone else to something that could potentially be this important being artificial intelligence. I still look at the Siri as an opportunity for Apple to do something better there.

So this is certainly a challenging situation for Apple.

Come on, sirih you can do it.

Meanmail, Tom, what about the Vision pro going on sale to more countries? We understand China, Japan, France, Germany?

Can I help at the margin?

Yes, I think the most interesting thing we learned about Vision pro in the March quarter was how they talked about at the enterprise level, which maybe makes the thirty four to ninety nine price point make more sense. But the challenge we talked about services Hardware sales were down double digits in the March quarter, and I think if you continue to have declines with hardware at some point, that's going to transit or translate lower services sales, which is another challenge for the stack.

Yeah, I misspoke.

Likely to expand to China, to Japan, to France to Germany.

Likely ed, Yeah, And I think most people say it be a bit foolish if they did not. Tom Forte, Managing director of Maximum Group. Great to have you on the programs Thanking. Now coming up on the show, our Kagos founder Bilhuang is defending himself against fraud and market manipulation charges in Manhattan. Today we go outside the courthouse. Next, this is Bloonbog Technology.

Now let's get out to a Manhattan federal court where our Keago's Capital management founder bilh Wang sand trial over his firm's twenty twenty one collapse, facing charges of fraud, of racketeering, conspiracy that could end with him behind bars for the rest of his life tried alongside the former

Yeah, he is.

Really driving home that argument to your point. Here, you do see the defense council now speaking right after the prosecution had made their opening argument, and the defense is making this case that our KAGOS was a family office.

And it was not responsible for outside money. Bill Wang was responsible for his own funds.

It also made the case there that when he made these bets, it was his own money that he lost, not investors' money on the outside, although we do know separately that the banks themselves had lost a significant amount of money through engaging in these swap agreements with Huang's firm. Now we look at the defense here and they also talk about the nature of the bets themselves. You may remember when all of this started to unravel. It was

Some of his earlier bets like Netflix.

Were hugely profitable for him back in the day, and now when he was thinking about the new bets put to work, he was making the case that content is king, like you're saying, and that's why he bets so much on Viacom, essentially through borrow money.

You know, for US prosecutors, this is a big white collar crime case. You know, it's up there in terms of the scale and the action by their offices with what happened with FTX and others. What are you expecting to happen, Shanali? How many days weeks will this go on for?

We take a number of weeks, and remember we do have just opening arguments. As we've been talking about, we could hear from witnesses ed as soon as today. One of the early witnesses, very early on in this trial, will be for example, counterparties over at ubs that was on the other end of the Billhang call when it

By Bill Huang to do so. This will get.

Quite contentious because we know that the defense plans to show that the banks acted on their own. You saw it in the opening arguments, this idea that these banks were falling over themselves to work for Bill Huang when he was at his height.

Now, remember another piece of evidence.

That we wonder about whether it will show the light of day and how it will be used is Credit Sweez's own risk profile and risk assessment of itself as it failed.

As we know, Our Chagos wasn't.

The only reason Credit Suitee had failed, but it was a massive contributing factor to those significant losses faced by Credit Swee as it was failing. So a lot of complicated questions in the course of this trial it could take weeks to play out. They're facing a number of charges here, including racketeering, securities fraud, and wire fraud. The charges alone each could face up to twenty years in prison.

Has anything changed to protect this happening again from fominly office perspective, from counterpolity perspectives.

That's the best question I think coming out of this, because this trial does have thetential to draw light again to a lot of the practices that got us here, and if you think about it, swaps rules in some form have been altered.

The SEC had taken a look at it, The.

SEC and the CFTC have fought over jurisdiction around a lot of these trades. Some of the ways that they have been changed were simply post two thousand and eight Dodd Frank rules that were changed not until recently. But to a point about family offices and disclosure that has not been changed, and that is something that regulators may take a look at once again, given what happened here and given that nothing.

Is really different for any future problems.

Dollie sloud out there. We thank you for being outside the Manhattan Court. Now let's have to go to you.

Ed.

Yeah, let's get some other news headlines in today's Talking Tech and First Soft Bank laid out plans to get more aggressive in AI and other fields after reporting a second quarter profit and surge in the value of assets, including a surge of armstock since the IPA last year plus. Jaumi aims to begin making and selling an SUV similar to Tesla's Model hy as early as twenty twenty five, embarking on a major new expansion, with production of its debut SU seven electric car set to reach about one

Kaifulee spoke with Bloomberg's David.

Ingless and Yvon Mann about that in competition from big tech companies, listen to.

This companies like Meta, Google, Microsoft are putting fifty one hundred times more resources in this, so we certainly don't take it lightly. So as we catch up with currently best model, we realize that even better models will come from Open Air and others, and we want to stay as close as we can. But we also think it's about building a great user experience, is really understanding what the users want and using that, which is China's advantage.

I feeling that.

Game Stop shares surged amid speculation on the return to social media by Keith Gill aka Roaring Kit, and it's driven a meme stock mania emblematic of what happened in twenty twenty one. That's his latest post on actually see it right there?

What does it mean?

Let's bring in Bloomberg's Bailey Lipschaltz, who, along with meme stock mania, is so back, Bailey, You're back. Roaring Kitty's back. But what does that mean?

I don't know, And it means that he's back to Twitter. He posted a video that actually had clips of the movie Wolverine. He also posted a montage that had a Ferris Bueller on his day off.

It's a lot of.

Questions and it's circulating Reddit, stock, Twits, Discord, you name it, and investors are speculating that if Roaring Kitty's back on social media, maybe that means he likes the stock again, and maybe that's a reason people should buy the stock. That's really the galaxy brain of the retail crowd at this point as it relates to GameStop.

Because yeah, just give us the context of where else this is a lit of fire, not only just GameStop, but crypto related to games and also well just heavily shortened names that are out there in the retail space.

Exactly everything that moved back in twenty twenty one costs and see you name it. Beyond, which bought the bed back and Beyond ran from the company after it went bankrupt, is rallying. Carently, it's really just kind of like a question around what the next stock could be, and it almost brings back the shades and the argument around is this retail traders or is this Wall Street? And are

Well besidesly, so is this a going to target shortstocks and any particular hedge funds in particular as we saw back in twenty twenty one, But also did the retail crowd want to be parling in using robin Hood once again because robin Hood came out sort.

Of a foe and a friend in the situation.

Yeah, a whole the bit around removing the buy button as an area I don't want.

To get into, but it does.

But it does seem like we are still seeing those animal spirits and that's really one of the questions is who's buying and who's selling. Because we saw GameStop up sixty eight percent. In the three weeks prior to the Roaring Kiddy post, we saw the busiest week from a volume perspective since April twenty twenty two, so people were buying the stock out of the money.

Call options were active in the two.

Weeks leading up to today's rally, so a lot of questions about what actually was going.

On under the surface.

I see, I see some animal spirits in you, and you're reporting in your grasp of the data. There are some animal spirits in other names, like Reddit's higher robin hood at was higher. I saw on down Detecta that e trade has been difficult for some users since the open.

So take that information.

It just explained the basics of the relationship of the trading in these names and what's happening with meme stalts more broadly.

So we're seeing really a pushback into a lot of those retail names, and that's new names like Trump Media and Reddit and old names like AMC and Costs. But we are seeing a lot of these systems being inundated with buy orders, and that really can put a strain on some of the systems to try to pair up buyers and sellers. And that's why you see a number of these trades kind of potentially fail to deliver and a number of other issues.

This is not the short.

Mania that it was in twenty twenty one when over one hundred and forty percent of game Stop was sold short. It's closer to twenty four percent. But this is creating a lot of issues for the underlying systems that are trying to match up these.

Buy and sell orders.

And that also with the volatility and with some of the swings where people were trying to put in orders at that's totally saw the stock halted eight times for volatility in the first hour because there was so much of an order and an order backlog among these retail platforms that don't have clients, that have clients that do not have access to after hours or pre market trading, so that also can create kind of this bottleneck, if you will, of buy and sell orders in that first

I'm quite heckic.

It's back, it's up and training right now, and Bailey Lipshalt's have a feeling we'll have a busy day.

We thank him on all things Meme frenzy.

Meanwhile, look, that does it for this edition of Bloomberg Technology. There's some discussions happening, and what's Opening Eyes about to announce in the next couple of minutes.

Yeah, so a big event coming up the top of the hour, And now you've got a hard choice. Tonight, you can recap the podcast Bloomberg Technology, which is a must listen, or you can watch the movie Done Money, which is basically a buyer pic of Roaring Kiddy.

Check both out.

This is Bloomberg Technology from San Francisco in New York.