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You allocation, right, we've been obsessed about GPUs and AI accelerated cards, but you need to have an equivalent, if not greater number of CPU in the design of the server. And that's an area that into on amb have done well to some market share where videas trying to dominate the whole system. And clearly two big moves our size moves almost carrot for an analyst upgrade, but Intel in particular soaring high at the moment.
Yeah, wants to watch big points contributors, and let's just flip gears a little bit and talk about, well, where's one out on some of their investments of late hedge fund investors, Well, they haven't had it this good since the aftermath of the financial crisis. Data compiled by industry tracker Hedge Fund Research showing them back in twenty twenty five, the industry posted its best year since two thousand and nine. Gains are about top point six percent on average, but
some scrowing much higher than that. Bloomberg hedge fund reporter Hemma Palmer joins us now, and we like to think about the way in which they've all embraced AI and the quant funds doing well. But who really shone in twenty five and why Yes?
So you know, it's such an interesting year because funds across strategies, across sizes generally did very, very well. And when you look at the big winners, you're looking at some of the tech focus firms.
If you look a.
Whale Walk, they did quite well. If you look at light Street, they got over their high watermark from the really difficult twenty two to twenty three period. You're seeing some of the best returns over at Bridgewater. If we look at Macro MAI percents exactly excellent numbers. So kind of across strategies, you're seeing winners across pretty much every strategy. D E Shaw over twenty percent and the multi strat strategy. So pretty interesting and good news for investors and hedge funds.
Yeah, Hammer, when I was growing up in the Bloomberg school of hedge funds ten years ago on the TV desk, that's what hedge funds do, make cash out of chaos.
Isn't that the whole point? Is there anything unique in this bucket of data that we've got about what they're doing different diferently AI playing a role talent stepping up and delivering big performance.
Yes, So what makes the year interesting is the volatility that we're seeing is the kind that goes in and out pretty frequently and provides great times to get in on different types of trading opportunities. So AI has been a great lifter for a lot of the tech focused funds. But if you look, for example, at Viking Global, which Viking doesn't do as much tech and AI as say other funds like other Tiger cubs CO two for example,
they didn't do as well. They were only up about eight point six percent, putting them lower in the pack of tech funds. Tiger Global, which we typically think of as a tech investor, they did well in their long book, but their short positions eight into those gains, putting them also lower in the pack more than seven percent gains. So you know, everyone made money, but the real question is who made the double digita games?
And you see would.
Likes to read good return from a lot of those sort of popular names.
Bloomberg's Tamma Palmer with the hedge fund breakdown, Thank you very much now. JP Morgan kicked off a week of big bank earnings today. One area of focus the impact AI could have on spending at those banks. CEO Jamie Diamond insisting the bank will be spending on AI to drive efficiencies but also keep up with competitors. There was a surprise in the expenses number for JP Morgan of the year, nine billion, above what the streets saw, and they wanted to know if AI was to blame. Let's
bring in Alexandra and miss Visita. She's co CEO and co founder of Evident, a platform that benchmarks and tracks AI adoption across the financial services sector.
Was really interesting earnings call.
Often it's with Jamie Diamond, but this was Wells Fargo's Mike Mayo basically saying like, hey, those expenses seem very high, and you've been talking up AI a lot of JP Morgan. Is that directly correlated? And Jamie Diamond's point was kind of like, we will be spending, it's just not as much as you think we have to because everyone is. Is JP Morgan ahead in this AI implementation race in the banks?
Yeah, well, thank you, thank you.
Yeah.
It was interesting to see the discussions today, but sort of stepping back and overall, as you know, we map the biggest banks in North America and Europe on their AI deployment, and JP Morgan is very much leading.
They're out number one.
Three and a half years in a row, so they are leading on AI deployment.
They are leading on.
Deploying and embedding AI throughout the bank. They do also spend a lot on tech and a growing proportion of that is on AI precisely to be able to take over time some of.
These costs out.
A lot of the deployment we do see is in those are in those internal processes and to create the efficiency gains but also someone revenue uplift.
Alexandra, A lot of this question is about when those efficiency gains come, Have they come, Are they coming in twenty six or is it more still longer term from your perspective.
Yeah, I mean it's interesting right because we're three years into the GENAI journey and that was a journey with that started with a lot of excitement and testing and now use cases moving into production. But there seems to be a real sort of shift in the tectonic plates now where it's looking at fully embedding it across the banks and every across the bank in every function and line of business, and with that you need to have
platform architecture that's built for scale. And what we are definitely seeing is some return on investment coming through on the efficiency side, so automation of KYC processes and you know, going into the asset management side, the investment banking and so on and so forth, so really across the entirety of the bank. So it's still early days in terms of the actual sort of return and the ROI. I still think that there's some years to it will take
with us to really fully come through. And then we've also got a gentic Ai use cases coming, you know and going into production, and that's where I believe we're
going to see the real impact. But it is going to take another three to four years for Argentic and fully autonomous Urgentic use cases to be fully embedded and to see that you know, really fundamental and sizable ROI that we know is coming, but it is going to take a couple of years for the gen AI to fully come through and maybe three to four years for gentic Ai impact to fully come through.
It was interesting that basically that question about AI from Mike Mayo was at the tail end of the call. Before that there was Myriada questions for Jamie Diamond around the Apple onboarding with the credit cards there, but are also talking more broadly about their investment banking this and indeed credit cards by Alexandra and push us forward. We've got a whole host of other earnings coming thick and fast. Where will they be talking about AI most abundantly?
Well, so you know, it's it's a time with a lot of things going on, so AI might not be front and centered this time. It has been over the years some of the questions that have been asked in the earning schools. There's a lot of shareholder pressure to understand where the bank is. We've definitely seen a shift in terms of banks being much more clear that it is a high priority, that it is part of the
senior leadership team and the CEOs. Are you fully understanding that it has to be embedded across the bank and has.
To be core.
So I expect that there will continue to be not only in the earning scores, but as we've seen throughout the year and investment days and investor days and and you know, press releases when partnerships and so on are getting produced by the banks. The discussion on AI is.
An ongoing one and throughout the.
Year, but we've got some earning scores coming through from the big banks, you know. Goldmesas has also made a big announcement late last year about their one GS three point three point zero program, which is really about fully transforming the bank end to end, top down, bottom up for fully embedding AI. So it's going to be really exciting to see what numbers might be associated with that the leading banks are going to be talking about ROI. I believe there has been a lot of talk with
numbers associated with within the last year. I think that these numbers are probably tip of the iceberg, and we're going to see these being updated and upgraded in twenty twenty.
Six, Alesandra, we just have thirty seconds.
But how competitive is JP Morgan in attracting and paying top talent in AI?
Very Yeah, it's very good at getting top talent. It is a place that is known for putting AI first. Jamie Diamond was very clear about that all the way back in twenty seventeen where he said we're going to be an AI first enterprise. They are able to attract
top talent. They're in competition with the tech sector. Everyone's looking for that top talent that really do the difficult systems wethink everyone's thinking about the shark tanking taking talent from tech companies that can rethink the processes end to end and completely change the system. Remember, the technology here is just ten percent of the problem. Ninety percent of the problem lies in the sort of rethinking of the processes entirely. You almost have to build a digital twin.
We think the process and put it back in. That talent is what JP Morgan can attract.
Thanks was a visit A always great to catch up with you, co CEO, co founder of Evident. We thank you coming up and bringing room mags exclusive conversation with a bid CFO Henry Hay on the US China race from New York for San Francisco. It's a room ed Tech. Defense Secretary Pete Hegseth lamented the defense industry's risk averse culture and praised Enol Musk during a visit to the
SpaceX Star based launch site that was last night. Hexath announced plans to integrate Musk's Groqui platform into the Defense departments system and to make the US military a quote AI first war fighting force. Take a listen we need to.
Be blind here.
We can no longer afford to wait a decade for our legacy prime contractors to deliver the next perfect system, only to find that it's delivered years behind schedule and cost ten times what it should. Winning requires a new playbook. Elon wrote it with his algorithm, question every requirement, delete the dumb ones, and accelerate like hell.
No care of people saying why is Hegseth at SpaceX or SpaceX has four billion dollars in government contracts alone just for development, but one of few carriers, Falcon nine Falcon he that's authorized to take Pentagon's sensitive satellites to orbit.
It's also interesting timing regarding GROC, right. I mean, already Google AI is integrated with the Defense Department, but to add GROC at this moment when there has been a lot of concern about what it has been producing in terms of imagery, and they're like a notable step forward in that respect, in that relationship and deepening.
At least a.
Week ago, the President put on true social that he wanted to cap salaries of defense companies who weren't performing for their CEOs. Today we have news that the government is taking a significant stake in a top five defense contractor EL three Harris.
What do we need to know?
Yeah, and the idea that they're going to be spinning off an IPO of the unit, the missile solutions business they're going to and REL three Horris is going to train control in the missile solutions business. But second half of twenty twenty six they're looking at spinning it off. And we understand the Department of Defense is set to invest one billion dollars in convertible preferred security. I mean it's lifted the shares up two percent up to six percent at one point end.
Meanwhile, in Asia, by do CFO Henry Hir spoke with Bloomberg Steven Angle about that company's AI spending of over fourteen billion dollars listen to listen.
To view.
In the November earning call last year, we actually disclosed one numbers. Since earning came out back in twenty twenty three, we have invested over one hundred billion R and B in terms of AI investment, which is a huge investment just on the web site.
On the end, we do see a great return on that.
For example, right now, our cloud revenue increasing about twenty eight percent on a wildlire basis in Q three for the AI cloud. And also we are seeing over kind of two hundred percent growth.
On the AI search transformation.
So for example, last year we only have three percent of the contents are generating for the AI for traditional search, but right now this number is increasing about eighteen percent, and we're seeing kind of three digits increasing on the traditional search to the AI news search. And also for the robot taxi, as I mentioned, it's actually delivered over a quarter million drives every week and we're seeing that
number is on accelerated at gross pass. So I think the investment, we are seeing the good trends of the Montadasia and the company on the return, how do.
You see the difference between how AI is evolving in China versus you know what we've all been following very closely in the MAGS seven and what's happening Open AI and others in the United States. Essentially, there are concerns about this allocation of capital and not getting the kinds of return, so there could be potentially a bubble China. There bubble concerns as well, but there's a bifurcated AI space in China as well the big boys like you
and Tencent and Bite Dance in Ali Baba. And then there are new up and comers that are hitting the market in Hong Kong like Mini Max and others, those lms that are starting to make a dent. But you guys have the capital base. Is there a bubble forming as well in the investment in China because of the over investment.
I want to call it two tails of the city. Usually, I think if you want to decompose the drivers, I think there are four things, right, the data model, computing power.
As well as applications.
Right, So I think if you analyze these four different things, US China does have a lot of different contexts.
Right.
For example, right now in the US as a lot of investment on infrastructures. But today if you look at electricity, cable network in China's already being built in the past few years. So if you really want to compare on IOI or IRO or on infrastructure, site that's in China
does have certain advantage on that. And also in the past ten years of the mobile internet age in China, there's a huge accumulation of data and data become important for today's influences because a few years ago everyone is competing for foundation model, right, So true question.
I think in my view, any company.
Have a close loop or full stack of the computing power, data and ownership of application user cases will be sustainable on AI.
I do CFO Henry Hay there talking a full stack. We're going to talk about alphabet next. Coming up, Dan Ives and Webbush joining us to talk about that deal, the impact of Apple choosing Google's AI to power Serri. That's next. This is bluebg Tech new research out today on Apple's plan to use Google's AI to power Serie voice assistant and much more from meg Intelligence, writing that the deal highlights the cost advantages of Google's tens of
chips of arrivals. Analysts also welcome confirmation in the news which Blomberg reported late last year. Remember now, when Bush reaffirmed its three hundred fifty dollars price target. It's the highest on the street for Apple after the deal the price to welcome Dan Ives, manager director senior equity analyst at Webush who has that number. So let's talk about the benefits for Apple first, Why the reinformation of three hundred and fifty? Why is this good? For them in Apple Intelligence.
Look, they've had an invisible AI strategy. I mean, if you go back to the last wwdc's you felt, like Michael J. Fox back to the future, there was really nothing there talking about AI. Finally, this is a huge step forward and it's not going to happen internally. Had to happen from Google Gemini. Looking, it comes down to like,
if they never win the adjsuit, this doesn't happen. So it speaks to just brick by brick, they're finally building it, and I think this is going to be instrumental to the valuation for Apple this year.
If you look at the statement that was put out, it was very much for the time being, this is going to be embedded in Apple foundation models. The idea is that they pull away, they are able to get a grip on their own foundational models and indeed Siri becoming actually useful. Do you think they will distance themselves from Google over time?
Look, I think there's a better chance in me playing NFL playoffs than Apple doing something internally. At this point. The reality is this is also a game of a high stakes poker negotiation that's going on too. In terms of a broader deal with Google that I think they're ultimately going to have to do. I think this will be exclusive, and because my view is that there's gonna be some sort of subscription service freemium, you also need a platform for developers. And it comes down to, like
the AI revolution, like Apple's watching from the sidelines. From the stands, they need to get into the game. And that's why we talked about seventy five hundred dollars per share, that this adds to the story as they execute on the consumer AI revolution. Finally, going through Koupertino.
Dan, you you had advocated on more than one occasion that Apple bi perplexity. With this confirmation of Gemini being the underpinning of Sirie, is such a transaction still necessary to your mind?
Yeah, and Ed it's a great point. But a lot of that was based on as the dog suit was going on with Google. There was a sort of period there where Apple needed to do something. Now, obviously perplexity came and went they're clearly not going to do that. But once Google won the dog suit, that was sort of I green light lights on and now it's sort of good time for big tech. And I think that speaks why Apple did this deal. And look, you look at Google Gemini, what they've done, you go back a
year ago, it's phenomenal. And I think Apple is making that bet. It's gonna be a much different twenty twenty six and twenty twenty five relative to Apple when it comes.
To AI again.
Charriage just made the point that Apple was very careful in the statement to explain which parts of series functionality would be underpinned by by Gemini. The other way looking at is to say, have they still got a lot of work to do to make serious sort of all encompassing AI assistant.
I mean, look, it's a it's an Everest like our pill battle, because the reality is they've lost so many developers, they've lost so much talent. You've seen a odd changing look and you know it as well as anyone like the DNA of Cooper Tino. Why that is supposed to come internally, and I think Cook recognized look riding on the wall. It speaks to my point that like Cook is not going to leave his CEO and leave this sort of in transition, he has to get the AI
strategy sorted out. It's going to be a work in progress, but two point four billion iOS vices, one point five billion iPhones. It's my view that the consumer AI revolution ultimately comes through Cooper Tino, and this is a first step in that direction. We'll obviously see more about it in the spring, and of course more WWDC.
Some might say it's incredibly savvy to be AI liked to not have to make all the investments in the data centers, to be able to say, look, privacy first, we're going to lean much more on EDGAI. Is that actually going to be a winning formula for Apple in the future and as models and sophistication develops.
Yeah.
Look, but also Apple is in a much different situation because of the unrivaled install base, because of where they play in the consumer That's why, like from a CAPEX perspective, they're not Microsoft, Google, you know many other big tech plays. But I think they finally hit the point Ruber met
the road. They need to do something. They're going to have to incrementally spend, but they're basically going to rely on Google as a partner because you cannot have the Fourth Industrial Revolution, biggest tech transition in the last forty years, come and go and they don't monetize. And I think that's something that they recognize front and center, and it's key to the stock. I mean realistically, like a year
from now stocks three fifty or lower from here. It's all based on AI and them monetizing it.
Dan, I'm spanishing director at Webbush. We have the street high price target three fifty on Apple. So that does it for this edition of Bloomberg Tech Era and one edition it was it.
Was I mean, we started when that's the techn that's told us about how this really shows Alphabet's prowess. Then we finished on how it's Apple's future. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple and who, Spotify and I have listen Blomberg. Bloomberg Tech is a live from Coast to coast with Caroline Hide in New York and ever Low in sentrances.
Go this is Bloomberg Tech coming up, Meta and esslor Luxorika cub double production capacity for AI powered smart glasses by the end of this year based on growing demand.
Plus, Microsoft seeks to quell consumer anxiety of a power price impact of data centers, pledging to pay utility rates that will cover the company's costs we discuss.
And Clana CEO Sebastian Schomakowski weighs in on President Trump's call for a ten percent interest rate cap on credit cards for the year.
First, we turn our attention to the markets that despite that coler inflation prints CPI coming in with two point six percent. We're looking at markets under pressure at naturally erasing yesterday's games. We're off by two percent on the
Nasdaq one hundred. These aren't massive moves when we are still seeing some risk aversion amid the geopolitical turmil and whether or not we do indeed get any sort of fed pause with seems as though the rate cut has been put to the back burner by the markets at the moment.
Ed a lot of meta news this morning.
The latest from Bloomberg is that talks with Esselo Luxodica are around doubling capacity for RayBan Metas to twenty to out million units from ten million units current in stall capacity.
If demand's good.
They're talking about maybe, according to our sources, thirty million units in the year now. That drove shares of essel Or Luxotica up in Paris. Meta to the downside. With other news, the confirmation of recent reporting that they're going to be trimming headcount from the metaverse Carrow. Then there's the Microsoft piece of news. Microsoft has a five point plan to basically take responsibility for the cost of electricity
associated with data centers. The main one is to cover its costs, but other parts of that are pieces of transparency with the communities where those data centers might impact pricing. And we've done so much reporting that here at Bloomberg. Let's get out to Bloomberg's Tech an industrial policy reporter Maggie Easton, who's in DC. You were there at the Microsoft presentation. What do they have to say and what are those five points in the plan?
Yes, so Brad Smith of Microsoft was in Washington this morning talking about this five point plan. So I think the largest piece of this is, of course, the electricity costs.
So they've said that.
They're going to work with these local power utilities to ensure that Microsoft is paying for any increase in costs that they're responsible for. Now, of course, the caveat there is they're not ensuring bills won't go up due to.
Inflation or other causes.
But what they're.
Saying in accordance with what President Trump asked for yesterday is that if the cost is due to Microsoft coming in with the data center, they're going to ensure that they're paying for that.
Yeah, President Trump, and as Truy's social saying that they don't want consumers to pick up the tab. Where else is the tab potentially going to fall because this isn't just all about electricity prices. There's other resources that are likely to be stretched, definitely.
So another thing that Microsoft was talking about just this morning is the local tax space. So historically, when these data center projects come in, Microsoft and other hyperscalers have received some sort of local incentive, and Microsoft is now saying they're moving away from that and they want to make sure that they're increasing the tax space in these local communities.
To support the schools.
And yeah, just making sure that they're not accepting local incentives in some cases, even though they are still open to state and federal incentives.
Maggie's and with the latest from that Microsoft event, we so appreciate it. Now let's turn to the business side of the equation. That's the tangles with our ceocio of lafentangle their investments and look, when you're thinking about the exposure, you have to Microsoft and these data send to build outs. More broadly, how much they need to factor in the voter, the consumer right now.
Well, I think it's super smart for them to get ahead of this. I'm sure they let the president announce it first, but Microsoft has always and good at anticipating under Nadella. And I think being a good citizen in the community is important.
But it's not the first time we've heard resistance.
Tesla got a lot of pushback when they moved to Texas. They took over a city, you know, they bought people's homes.
It was It was disruptive, and I think we're seeing the same thing.
I would argue to a lesser extent with data centers, but importantly, you know, this is what happens.
In the transformative economy.
We saw it also with the clean energy push windmills, you know, solar panels.
People don't like that in their backyard.
So the fact that they're getting ahead of it, having a good will tour, taking on some of the costs, helping the community, I think that's very important.
It's interesting that it comes the day after Meta went all in with metacompute, hiring new talent. Thinking about the way in which they're going to navigate the need for compute from a sober perspective, from a need perspective. But Nancy, how much do you think that we are seeing companies dive in on this opportunity? Enough for all we in some sort of bubble territory and it can thinks about the buildout I don't think.
We are in bubble Caroline.
I mean, if you just look at technology stocks in general in nineteen ninety nine, it was something between seventy and ninety percent lived above the two hundred day moving average. And I know you're asking about the build out stocks as well, but in this environment, we're at sixty two percent, which is below the S and P and certainly below bubble territory.
So there's still a lot of skepticism.
We own a lot of the nuclear names, the build out names, and we think there's I mean, the backlogs are incredible, so I don't think that we're in a bubble in that regard.
Yeah, the big story that we're tracking, Nancy, is meta and before I give the details, I just transparency, as you know, as important to the program. You have a very very small meta position. But it's fair to say you've been bearish or Meta and in particular Mark Zrockerberg relative to the other tech companies that you're focused on.
But they're cutting jobs a portion of the Metaverse team and then shifting the focus to data center, but also to the Raybam metaglasses right, which is the modus Operandivo, which many now interact with Meta's voice based AI.
Your thoughts on.
That, well, I think it's the sooner.
Zuckerberg gets Metaverse out of the vocabulary in the headlines, the better off it is for the company. So I think it's a good move overall. I am not probably the target market for the glasses. Maybe I'm wrong about that. I used to say, why would anyone want a camera in their cell phone? So that was about thirty years ago, so I could be wrong about that. But I do think they've obviously identified a market. The demand is there,
that's where they should be focused. I never really understood the pivot to the Metaverse, and that was, frankly one of the reasons we exited the stock because it seemed highly distracting.
And I couldn't you know, the commercial value was not clear.
So I think he's doing the right things, and he should he should pull the band aid off and be done with it, because the metaverse, I don't think is the future of the company.
The details which Bloomberg reported are that Esselo Luxotica, who make the rayvan metters, have installed capacity of ten million units and they're in talks to double that twenty million units and if the demand is there this year, thirty million units. But again it's these things. These are just
normal glasses or these things. You know, as an investor that wants to leverage what's coming out of AI development, do you have a clearer sense now of how more widespread human beings actually use an either voice based or text based AI assistant.
Yeah, it's hard to measure ed.
You know, one of the things that we don't capture in GDP is free stuff, and for a lot of consumers, AI is free if you're using Google. So what we're looking at is the commercial cases. I think the adaption is much quicker than most people understand. I think we'll start to hear about that in earnings. You know, I've
hung my hat on productivity growth. We got it again last quarter at four point nine percent, which was above GDP at four point three So we are seeing improvements in productivity, which will allow a sort of tepid job market to still be I think a disinflationary force, but also will not put further stress on the consumer. Remember too, nobody's talking about the fact that new job applications, new business, sorry,
applications have skyrocketed. So if I'm a coder that's now out of business and I start a company that has exponential value, it's different than when we gutted the industrial belt of the Midwest. So I'm really optimistic on what these gadgets. And the announcement from Apple with Google, I think that's super important.
It validates Google as the leader.
Google's one of our twelve best ideas, so we've owned it for a long time. We added it to our value portfolio in August of twenty twenty four. It was a value stock if you remember, and now it's probably the leader in AI.
I like that you go there because we've got a new four trillion dollar player to add to the pack that is Alphabet Nancy. But I love the way that you push us forward to six best ideas. For example, the twenty twenty six Walmart among them, they're entering the NASZAC and of course they're going all in on AI. What are some of the other key bets you're making. We're looking at them now.
Oh, thanks for bringing that up, Caroline. So Walmart's been a winner so far. AMD is another one of our members, CrowdStrike. We think AI tailwinds are going to drive growth in that company even and the Signal acquisition was important. Tesla's in that group. Brother Dr Horton. We made a bet on Housing, which has worked so far this year because we thought the administration would jump in. And then Quanta, which is building out the grid and has an involvement
in data centers. So we like all those names for this year. Last year's portfolio was up about twenty three percent, even with Service now in the portfolio, which was down twenty seven percent.
So Nancy Tegler Lafetanglo Investments going through the news of the day with us.
Thank you very much.
Now coming up, the Trump administration is sent to near a trade deal with Taiwan, a move that could boost its US chips production.
More on that next, This is Bloomberg Tech.
The Trump administration, well, it's said to be close to a trade deal with Taiwan, move that could lower tariff on goods and expand to t SMC's plan investments in chip production by here in the United States. It's all according to sources here are The latest is Bloomberg Senior Tech editor Mike Sheppard, who can fill in the dots because this is part of a geopolitical puzzle that we continue to try and solve.
What really is in Carol, Let's start with some of those dots and what the deal taking shape looks like. And it is an important copyright to put in there
that it is not yet a done deal. But what we know so far is that tariffs and goods from Taiwan to the US would drop to fifteen percent from the current twenty percent level, and that would put the shipments from Taiwan on par with goods from South Korea and Japan, which are similar trading partners in areas of things like electronics, which are of such close interest to US. What we would also see importantly as an increase in
investment by TSMC on US soil. TSMC would agree to build four additional manufacturing plants in Arizona sometime by the twenty thirties, and that would come on top of this six manufacturing plants and two advanced packaging facilities that they have already agreed to build. And this is significant because
TSMC is such a focus for the US. It's the world's leading maker of AI chips, the world's leading chip maker overall when you think about it, with all the work it does for AMD and Nvidia in producing those AI chips. But it's also been a focus of geopolitics because of the risk of China that is looming over the Taiwan Strait and it's threatened to take the island back by force if needed.
So we have details of a US Taiwan trade deal, but you're exactly right, shep. You also have what the US is doing with Venezuela and then a US interaction or threat with Iran. Different countries, but it actually comes right back to America's relationship with China.
And it really does. In a trade deal with Taiwan would risk antagonizing China and upsetting the very delicate trade trups that took months to reach. That was the one that reopened the spigot of rare Earth's minerals and rare roots magnets to the US and to other trading partners
around the world. Those are such key components and inputs for consumer electronics, for military hardware, and for the auto industry, and the threat of a shutoff had really upset the global economy and really threatened to hurt supply chains around the world. Now you add in the US moving to take over the oil supply in Venezuela, you add in the threat of US intervention in Iran, the threat of tariffs on Iranian goods against countries that are taking in
those Iranian goods. That really is something, especially considering how Iran is a top buyer of Iranian and Venezuela and oil. Would certainly strain relations with Beijing at a crucial moment.
Ed Bloombergs Mike Shephard, who leads our coverage at the intersection of politics and technology in DC, Thank you very much, Carrie. Plenty more news headlines out there today, and.
There's a time for talking tech and on that intersection. First up, President Trump is calling on Elo Musk's Starling to help restore communications in Iran as protests continue and a nationwide internet shutdown enters its fifth day. Nwaronian authorities have declared starlink terminals illegal for the military, actively jamming signals and pursuing users. Plus, Malaysia is taking legal action against Enlo Musk's x and Xai, accusing them of failing
to protect users now. The move comes days after the country banned grock of as sexually explicit content, including AI generated images of women and children. Meanwhile, sk Heinez says it plans to spend twelve point nine billion dollars to build an advanced chip packaging facility amid rising amount AI and high performance semiconductors.
Now.
The South Korean company is set to begin construction in April and aims to finish by twenty twenty seven.
Okay, coming up, we're going to speak with klan a CEO Sebastian Schimiolkowski. As President Trump calls for a proposed ten percent interest rate cat on credit cards for one year.
That's next. This is Blueberg Tech.
President Trump's proposed one year ten percent cap on credit card interest rates has sparked pushback from the financial industry, but Klana's CEO says the plan could level the playing field. In a post on x, Sebastian Schimikowski defended by now pay Later Lending, saying it delivers lower losses and zero interest credit compared with traditional cards, He joins us. Now, thank you for your times passion. It's great to have
you back on Bloomberg Tech. Let's just start simply with your general reaction on the proposal a ten percent one year cap on credit card interest.
Please.
Yeah, well, look, I think the President is right. You know, the Americans are being ripped off. I mean one hundred and sixty billion dollars in INTERSHA interest charges last year, thirty one billion in fees. That is not a financial service industry. It's an extraction machine. So we've seen in the Europe that putting interchange regulation and interest rate caps in place work work really well.
Right, especially in Klana has a credit card. That credit card has an APR of twenty nine percent outside of the purchases that are made in pay for plans will buy now, pay later plans. So you do have a credit card that is at the levels the president's talking about, right, are you going to reduce the APR therefore, based on what the President has directed or proposed.
Absolutely.
And the thing is, obviously we need to follow regulation as everyone else. But the truth is, if you look at Clana's business model, those rates are very uncommon, and the majority of our business is built around the buy now, pay later model, which actually charges only immerchant fees and offers interest free credit for consumers, and that is in huge demand in the US. I mean, I think it's
it's quite interesting. If you look at fed's own data, it shows that credit card rewards redistribute fifteen billion dollars annually from the poor to the wealthy, and that high fycle consumers gained two hundred dollars a year. Subrank consumers
lose fifty five dollars. That isn't financial product, it's a regressive tax with airline miles, right, So I think that this is something that's starting to become apparent in the US, and I think that all regulation that makes it for better competition, but more fairer competition is good.
Why have that credit card at all with that sort of level of interest rate, then, Sebastian, most people are using your other offerings.
Well, we you know, that's exactly the challenge for us, right, We're competing with an industry that, basically, by charging so high interest rates, is offering very attractive reward systems and so forth, and so we obviously need to adopt to the market, and we're you know, we're adopting offerings to
that market as well. But what we have seen is that we also have a debit card that offers premium benefits, and so we have afore our products and the majority of our products our interest free and much more of egg favorable with the customer, more you know, appreciated by the customer.
Sorry.
What's interesting is you reference the Fed Zone data when you're looking at some of the other areas of data. I'm looking at the World Bank, Fed Bank of Illinois. There's academics in Oregon or Arkansas who have looked into if you cut down interest rate levels, the argument goes, you cut off access to finance, writ large, you get
loan sharks doing better. So Astian, how much do you think people would turn instead to buy now, pay later if they can't have that sort of credit card availability, if it was shut down because they didn't have thirty percent levels anymore.
Well, the thing is right if you I mean, if you look at our average outstanding balance for US, it's about one hundred dollars, while on a credit card is five three hundred. And the whole credit card was constructed in a way that it's trying to get you to revolve every month. That's what all of your spending is on credit, and then it's trying to get you to revolve at that thirty percent interest. We don't offer a revolving We do installment based because it's safer and better for the consumer.
So the point is that if you have a whole.
Industry built on the idea of maximizing out depth, that's also where the majority of that revenue flows from. And what we've proven is that if you offer credit that is more affordable, that's better for the consumer. Losses are actually significantly lower as well. Our charge of rate is
zero point four percent. You know banks are four point two, so this is quite obviously their devastation is maybe they're worried about isn't for the consumers They need those high interest rates to be able to lend that kind of money if they're having those kind of losses. So our experiences that no, if you're willing to be an affordable lender, there is a huge market opportunity there, and consumers show
appreciation for that model. So that doesn't have to lend, you know, it doesn't have to mean that you can't offer credit to everyone, but at some point of time, when you start moving above the thirty percent interest, question is should anyone borrow at that rate? And I'm not sure the answer.
Is yes, Sebastian.
Who you speak speaking to within the Trump administration, if anyone at all, who do you hope to speak to to understand the plan from this point? From the administration's perspective.
Well, we're as curious as everyone else on how the implementation of this is going to do due to generally speaking, those caps have been implemented on state level in the US right, so we're reading eagerly to find out how exactly this is going to go about. But again, I think that our experience from Europe is that interchange regulation as well as inter rased caps are actually a quite quite effective way and feels like a fairer way for the American population.
Paige Smith, who covers you, guys, our colleague and the newsroom, made a really interesting point yesterday, which is how many people actually know what the APR and their credit card is? Could you reflect on any data that's crossed your desk this morning on inquiries that you've had, has the reaction from the consumer to this been. I had no idea I was paying thirty percent on a credit card.
Well, I think that's the whole construct of the product, right, I mean, they're attracting you with high rewards, they're attracting you with low interest rate, and then it changes over time. The point is in the US, there was a McKinsey study in twenty fifteen and identified a group of Americans called the self aware of voids that are about twenty percent of the population. Those are people that have been tricked by the credit cards. They found themselves in more
depth than they wanted, but they paid it back. Their annual household income is twenty percent long higher than the low income households. Actually, and this is the group that's using Klana primarily. This is a group that is again self aware of voids. I sorry to recommend something else, but I would actually go and go to Netflix and what credit cards explain and you see all the tricks that banks have applied to trick people to borrow more than they need to smash.
Briefly, your global perspective, where in Europe have they put caps on and how has it worked?
Briefly, So it's different across different different jurisdictions, but basically Germany as among the lowest cap France has caps, So the German cap, if I remember correct, is around fourteen fifteen percent. In France it's a cross to eighteen nineteen is. So those are caps that are quite effective. There's also other things that people do. It's real time pooling of loan to kind of look at your total exposure to
all banks. So there's a number of I would argue, pretty effective ways to help people avoid the most negative type of borrowing.
Sebastian. Great to have you back on the show. Thank you, Bastian. Shimi and Kowski, co founder CEO of Klana, coming up and talk a bit more about banks but their earnings what it means for that AI adoption as a bluebg Tech.
Welcome back to Bloomberg Tech.
There are two big movies in the markets this morning, and it's in the chip space. To take a look at Intel, which is now trading at its highest level since January twenty twenty four, highest level in about two years, and AMD also up five percent, both on the same analyst update. Keybank basically pointing out that in the data center context, both are sold out of their CPU