From Mahard where Innovation, Money and power Collie in Silicon Vallet Nbon.
This is Bloomberg Technology with Caroline Hyde and Ed Lovelove.
I'm scarlettfu in for Caroline Hide at Bloomberg's world headquarters in New York, and.
I'm Alex Franka in for Ed Ludlow in San Francisco. This is Bloomberg Technology coming up.
In video's blowout forecast sparks a two hundred and sixty billion dollar AI rally. We'll break down the results in how to trade the red hot technology.
And as a catastrophic US default. Looms will speak to one tech industry veteran who joined CEOs in signing an open letter to the President and Congress over their extreme concerns on the matter.
Plus a one point eight billion dollar deal in a three D printing space. We'll discuss why Stratusists is acquiring desk Metal.
With its CEO. All that and a lot.
More coming up, But first we want to get your check on the markets. Here at midday on this Thursday, and you have the S and P five hundred moving higher by half of one percent, all thanks to technology. Look at the Philadelphia Semiconductor Index hired by almost six percent thanks to video is better than expected sales forecast. Alex will get into that a little bit later, but it's not as if all chip makers are rising. You actually have weakness in Intel and analog devices as well.
There's a lot of anks to over the debt ceiling and how little progress seems to be there seems to be right now as we get closer to June.
First, you can see the yield on the two.
You're moving up by seven basis points to four point four or five percent. This is actually the tenth straight day that yields have been moving up, reflecting a persistent decline in demand for that security. Fitch actually put the US on credit watch for a possible downgrade, even as it says it does expect some kind of deal at the last minute. Markets are also pricing in increase odds that the Federal Reserve will possibly raise interest rates at
one of its next two meetings. Data is showing inflation remains fairly sticky, and in fact, the GDP report showed a faster rate of growth than what had been previously estimated. So with the US dollar strength thing, let's change up the boards here. What you'll see is that commodities are lower, especially those price in US dollars like New York crud WTI off by four percent at the moment, snapping a
three day advance. Saudi Arabia this week saying that people shorting the oil market should watch out, although that was follow up by Russia saying that it's unlikely OPEK and its partners, including Russia, will be cutting production in the near term. Gold future is also down by nine tens of one percent. I bring this up only because I was reading somewhere Alex that one analyst said institutional messters, when they are looking for someplace to hide out, they
hide out in gold. When individual mesters are looking for somewhere to hide out, they go to bitcoin. Right now, neither of these safe havens is catching a bid, but it's an interesting explanation of gold versus coin, Alex.
I'll get to some of those safe havens Scarlet, but first I want to bring you to some of the red. On the day Snowflake is taking its biggest plunge in over a year, it reported disappointing sales outlook for the current quarter. That software company is known for charging customers on a pay as you go model, but it told investors that the uncertain economic conditions have clients slowing down on using their products.
Now let's move into some of that grain.
Dish is surging the most in six months on a Wall Street Journal report that it's in talks to sell its new mobile phone service through Amazon.
Now.
Dish already uses Amazon's cloud to run core elements of the FIG network it's developing, but this move would give the company access to Amazon's millions of customers. Now into some of our bigger movers of the day, Microsoft is trading at a sixteen month high. Investors are really on the hunt for the next AI trade.
We've been talking about.
Save Haven's and this company has been out front on that AI trade. It's not new news that Microsoft has been out front in AI. It's the biggest stakeholder in open AI and brand and is already bringing artificial intelligence to its cloud offerings and its software. What is giving it a little bit of a lift today is perhaps a bit of the halo effect from the top stock I'm watching today, which I will take us to. Now, let's go to Nvidia. I told you everyone's looking for
the next AI trade. This is why in Video's up a whopping twenty seven percent at record high levels and flirting with that big sticker one trillion dollar valuation. The chip maker reported a revenue forecast that surprised even the most bullish of analysts on sales of its processors used in you guessed it AI technology, It sells to customers like Microsoft, like Alphabet and others. Analysts at Susquehanna even called this the greatest beat of all time of any.
Earnings report they've seen.
This stock also could be benefiting from that safe haven effect we've seen in tech stocks lately. We'll dig in to that shortly, but first I want to get more on in Vidia and that AI demand that's been booming. So let's bring in Bloomberg's Ian King and big report out of in Vidia yesterday. Lots of excitement on the forecast. Dig into the numbers here for.
Us, Yeah, I mean the embarrassed Wall Street. The prediction of eleven billion, which would be their biggest quarter ever for the current period, fifty three percent higher than where the average expectation was, and the numbers on the quarter were similarly a lot stronger. Even the poultry long forgotten nobody cares about PC businesses looking better for them as well.
It really just you know, wildly surprised everybody on the upside and gave investors exactly what they were looking for, which is like, show me the company that's actually making money out of this AI thing.
Yeah, it seems like it's hitting on all cylinders. Ian how is it when you zoom out a little bit here, that in video always seems to be on the front lines of whatever the new hot thing in tech is. I remember super high in video games in videos there, Bitcoin mining in videos there, and now AI in videos there.
Yeah, I mean it's you know, to hear it on a fundamental level from their CEO, we're talking about what he calls a shift in computing to accelerated computing. That's the idea that instead of using a type of chip that kind of does everything quite well, which would be an Intel CPU, you're using a chip for a very specific purpose that's really good at doing things in a very simple things relatively, but in a very parallelized way.
So it's going to give a huge rush to say training AI software or actually taking that software and doing the implementation of it, recognizing you know, cats in videos or what you're saying to your Alexa speaker and making that much more efficient and much better now.
And I don't want to damper on the day for in Video they're having a big one.
But this does make me wonder when.
You think about the hyperscalers that it sells to. When you think about folks like Meta, a lot of those companies are known for wanting to vertically integrate their entire infrastructure stack. How long are invidious processors kind of the bell of the ball. At what point do you see some of the customers actually pushing into creating their own silicon.
I mean you nailed it. I mean you wrote about it recently. This is absolutely the question that's hanging over them, and in Video has two answers to that. One is we're going to run faster than they can because we've got a head start on this. We're good at it. And the second answer to this is if AI is only the preserve of Microsoft, of Meta, of Amazon Notable US, then that's not good enough. It needs to be a type of technology that every company that doesn't have these
these abilities can just walk into. So what they've been doing is making devices, is making cloud services, and their own software that would help pharmaceutical companies, robots companies, automotive companies get into this. So they're kind of trying to hedge their bets there and stay ahead of the game.
Yeah, they've done a great job as seeing ahead of the game.
You know, we've been talking about how Wall Street strategists like Michael Hartnet of Bank of America have talked about how there is this mini bubble in AI and a bubble technology. Is there any acknowledgment of this in San Francisco, ground zero of all this technology that perhaps things are getting a bit frothy.
Well, if you look at the the inbox of any journalist, it's going to be full of pitches with the words AI in it. So what does that tell you? I mean, we've been through this before, obviously, but no, I think, you know, in Vidia is a real good case in point, and the way the market has reacted is also a good case in point. Not every chip stock is up today. Intel is down right, and some of the others aren't sling out. So I think there's a little bit more sobriety,
at least in my sector. In terms of other areas, who knows, there's a lot of talk.
Yeah, well in videos delivering and it is profitable compared to some of the companies in past moments of excesses.
Ian Hiking. Thank you so much.
Ian, with his decades of experience covering semiconductors.
In Asia and the US.
Let's get more on the markets and bring in Mona Mahajan. She is Edward Jones's senior investment strategist. Mona, I know that you were listening to us talk to Ian just now. I'm curious with the S and P five hundred six tens of one percent, clearly powered by Nvidia in these big tech names, but the now losing ground by four tenths of one percent because it doesn't have that AI exposure. Is this overall a strong stock market or a fragile stock market given how narrow the winners are.
Yeah, it's a great question.
Stcarlett, and look this year the SMP broadly is up about seven percent plus, but it has been very narrow leadership. In fact, only three sectors are outperforming the broader market. Those are of course, technology, comm services, and consumer discretionary. So those growth parts of the market, quality growth parts of the market. Some of those sectors are up twenty percent plus, so back in bull market territory. And meanwhile, the cyclical and more defensive parts of the market are lagging.
So you know, as long term investors, we would certainly like to see a broader participation in a market rally that to us is a more healthy sign that the economy of the underlying fundamentals and the market broadly has.
More room to run.
Now, this narrow leadership not only driven by a few sectors and a few names. We're also seeing valuation expansion creep back into the marketplace as well.
Keep in mind earnings.
Although earnings growth this past quarter did exceed expectations, we're still looking at negative earnings growth and really now three back to back negative earnings quarters, So valuation is expanding.
Breath has been narrow.
But what we will say broadly is that some of the reasons that investors have gotten back into the market they do have this alternative sitting in cash and cash like instruments, is because some of these technology players have provided a compelling reason to get involved.
Let me broaden out our conversation a little bit here, because obviously the excitement over Nvidia and any company that has ties to AI is papering over some weak spots in the overall market and the economy. Fitch, for instance, put US on watch for a possible downgrade of its credit rating. Does it matter that it's Fitch versus SMP or Moody's, or is any one of the three big ratings companies downgrading the US potentially enough for investors to
have to sell. I'm just trying to get ahead of what we could see if the worst happens.
Yeah, you know, it's an interesting question. And look, I think our base case continues to be that the US does not default on its debt, and in fact, both sides of Congress come together in a negotiated resolution.
We've seen some historic precedent for that.
In fact, seventy eight times has Congress come together to raise the debt ceiling since nineteen sixty. Twenty of those times have been since twenty eleven, and six of those have been in using extraordinary measures. So there is precedent for this, and we do think that will be the most likely path forward. But in the meanwhile, we will certainly get consternation, and the Fitch warning is certainly one
signal of that. We would say, if you know, in that tail risk scenario that the US does default, any of the rating agency downgrades will be meaningful, and not only that we will have broader impacts and equity bond markets, but also things like payments to you know, key areas of the economy, social, secure, medicare, defense, etc. So there are real meaningful impacts of not only the downgrade but the default itself.
But we're still hopeful.
That, you know, as we approach the X state, really both sides can come together, and both sides will probably have to concede to some extent, but we'll get that negotiated resolution.
Mana, if we do have that, as you say, kind of outside case of default. Even if we don't, some economists are saying that this whole back and forth could push us into something of a mild recession. If that does happen, here, where do you rotate your investments?
Is it back to cash? What are you looking at?
If that is kind of the scenario we see over the next twelve eighteen months.
Yeah, you know, look, I think certainly the mild recession scenario is one that is now somewhat baked into markets. In fact, if you look at the Bloomberg Consensus estimate's Q three and Q four two back to back quarters. They are looking for negative or calling for negative GDP. It's minor negative point five percent, but still sub zero GDP for two quarters, and that is now probably the most well advertised mild recession on the horizon.
If we do get more.
Meaningful volatility around the debt ceiling, that could create just feedback loops around the consumer pulls back. There's hesitation to invest, even in safe haven assets, and that does have an impact and a ripple effect through equity and bond markets.
We'd say, in that scenario, you certainly want to be more defensive, and in that scenario defensive probably still means areas of the market like staples, health care utilities, but also still overweight some of those cash and cash like instruments. So that kind of bar belle between the equity and
the bond market on the defense side. Now, as we do, you know, if that does not occur, and as we do get through a resolution and the economy goes through a mild recession and looks towards recovery, that's when really we think about a more broadening participation. As we talked about earlier, that recovery playbook should include leadership from areas like small cap stocks like international em equities, and also of course longer duration bonds and cyclical parts of the market.
So not just tech leading the way.
We do think as we look towards the back half of the year and towards potential recovery, we'll have a more sustainable, broader leadership in the market as well.
I have to ask one last one on tech. We did see during the pandemic era era, the tech, particularly big tech was really gaining, particularly on digital advertising strength e commerce.
But when that kind of time.
Period ended, investors turned back to the fundamentals. Cost structure was in play, fundamentals of these companies were in play. Is there a risk here for these big tech names that are really getting a lot of love these days from the equity markets that if we have a quarter of maybe shakeier fundamentals, that you could see a big sell off in that sector in particular.
Yeah, you know, look, there's certainly a case to be made, an a credible case that we're getting into overbought territories and a pullback and period of consolidation we think probably would be normal healthy in some cases, given the excess
moves that we've seen. That being said, you know, in an era of low growth, the low economic growth, investors do tend to gravitate towards higher growth parts of the market, especially those with defenseable business models, strong free cash flow, and those that are returning value to shareholders through buybacks. So there is you know, perhaps a little bit of consolidation volatility ahead, but the long term picture we think looks a little bit more balanced and still healthy for technology.
Mona Mahazan, thank you for taking us through today and in the future.
That's Mona Mahazan and Edward Jones.
I appreciate you joining us all right.
In the three D printing world, Stratasists agree to acquire Desktop Metal. It is an all stock deal that'll create a leading company in the industry at about one point eight billion dollars. Joining us now is yav zeif STRATUSUS CEO, Yov thank you so much for joining us. Your company recently rejected a takeover offer from rival. I know Dimension, yet here you are getting ready to buy just top Metal. Why does this particular combination make sense.
Because it will reshape the industry, the three D printing industry or auditive manufacturing for years is failing to deliver what manufacturing really needs. But with the combination, we'll create the scale to deliver.
And with that scale, are there certain clients or certain slices of industry that you think you can really sell into now that you're pulling in this additional functionality with this acquisition.
Definitely, we are leading in the aerospace and automotive markets, and we're also leading in dental and medical, but we didn't have the metal paths we are focusing on polymer Now together there we are setting to the same customer through the same channels, a much bigger portfolio, broader portfolio, and will be very profitable to leverage our scale.
Yeah, if you say profitability, talk to us day one. What is the financial impact on Stratasis from bringing this company in the fold? Are we talking in immediate revenue boost? Is there a margin accretion? Kind of talk us through the financial side of this acquisition.
Great question. We are the only profitable strategies.
Is the only profitable business in the three D printing arena? Desktop Metal announced that there will be profitable by the end of the year. When we combine us together, we'll be the first above one billion dollar company in this industry, this is huge. In twenty twenty five will sell one point one billion with even the imagin of ten to twelve percent. This is something that does not exist today in editing manufacturing because we are not mature enough yet.
And I appreciate your pointing out that you are profitable and you're a leader in that space. Three D printing seems to be a pretty fragmented space right now. Give us a sense of who wants you combine with desktop, you'll be able to better compete with. Now, even beyond the three D printing ecosystem.
We will be better equipped to comp with the entire you know, second tiered for fifth because we are number one, and the main reason is the broadest portfolio, unmixed material portfolio, material and software is key in our industry and those are also the one that generate the profit. So when we are coming to customers, we have two huge advantages.
One is that we are selling in whatever it needs, not we have what we have because we are covering the whole technological space, so we are not selling what he needs.
We sell what he needs.
The second thing is that we have a full solution, including the material and the software, so the customer does.
Not need to look outside our platforms.
Another advantage you could have or you could tap into is the shareholders of desktop Desktop Metal went public in twenty twenty through respect and one of it's biggest shareholders is Alphabet with about a three percent stake in the company. Do you anticipate working more closely with Alphabet as a result of this transaction.
No doubt that we can benefit and cooperate with the great shareholder base of desktop Metal. It's a group of people that believe in innovation. Desktop Metal is bringing the innovation to the table, but we are bringing the establishment, the go to market, the infrastructure to make this innovation a real product, the deliver values to the best mankey customers in the world.
You say you look at them for help on innovation and bring in that innovative spirit.
What specifically are we talking about.
When you think about the alphabets of the world and how they can kind of lend some of that innovative spirit to you as well.
The stop Meta located in Boston.
They are highly linked to MIT and that tells the entire story. It's so hard to find talent in our industry and the ability to have great links in the academia, great shareholder that are interested.
In breakthrough technologies. I think it's a great way to stick forward.
Well, thanks for walking us through this acquisition today. Stratasi's CEO, yov Ziff, appreciate you joining us. More coming up, Microsoft is pushing back. It's formally filing to appeal the UK decision to block its mega merger with Activision Blizzard.
More on that next.
This is Bloomberg and keeping our eyes on shares of Splunk. The software company reported first quarter revenue that beat expectations and gave a second quarter forecast that's ahead of the CONCESSUS consensus estimates. The shares are coming down on the days they were up this morning, now write about unchanged.
We'll continue watching throughout the show. This is Bloomberg. It's time now for talking tech.
First Up Grabs co founder is stepping down from her operational roles at the company by year's end. She helps start the Singapore based ride handling and food delivery company more than a decade ago, and currently leads its technology
and corporate strategy teams. Tan will also give up her seat on the board, though she will remain an advisor to the company and Microsoft president Brad Smith says the US should make a new agency to regulate artificial intelligence and the licensing requirements necessary to operate those AI tools. Smith outlined the company's policy regarding AI and echoed sentiments from OpenAI Sam Altman, saying that government oversight quote will
ensure that humans remain in control of the technology. And In other Microsoft news, the company has formally filed its appeal against the UK's Competition and Markets Authority after the Anti Trust agency blocks its sixty nine billion dollars deal to buy Activision Blizzard. The CMA says it stands by its decision, arguing it would enable Microsoft to set the terms of the gaming market and sticking with video games, look at shares of Nintendo over the last few weeks.
It took just three days for the latest installment in the Legend of Zelda franchise to some more than ten million copies worldwide. Four million of those were in the America's where the new game became Nintendo's fastest selling game ever.
From New York and San Francisco. This is Bloomberg.
Welcome back to Bloomberg Technology. I'm Alex Brankan San Francisco, and I'm Scarlett Foo in New York. Let's get a check on the markets.
Right now, because the NASAC is flying high at the moment thanks to Nvidia's blowout sales forecast on the back of demand for its AI chips. And you look at the New York Fang Index, in which in Nvidia has the biggest waiting a thirteen percent waiting. It's flying even higher of more than three percent. And of course let's look at Nvidia itself gaining.
More than twenty five percent.
And in fact, there's a great story on the Bloomberg that betting against Nvidia have suffered massive losses. We're talking about a two point three billion dollar paper loss just today alone because of its big, big spike higher. Now, on the downside, you have the ETF that tracks shorter duration treasuries. We're talking one to three hour maturities. It is down for an eighth straight day, the longest losing
streak in nineteen years, believe it or not. When there's a sell off in bonds, yields go up, reflecting the increased payouts that investors demand to buy the securities. And that's where I want to go next, because of course, the debt sealing drama dominates even as the market overall is hired. Today. Take a look at this next chart. It is a snapshot of the US government's checking account. This is the amount it has on hand to pay its bills, whether it's paying interest on its debt or
sending out Social Security checks. As of Tuesday afternoon, it had about seventy six billion dollars. That move higher in mid April, which you can see that little blip in the last part of the chart was a result of people and companies paying their taxes. Treasury Secretary Janet Yellen has identified June first as a date the government may run out of money to honors obligations.
According to economists of Goldmen.
Sex, this cash level that we're looking at here will drop below thirty billion by June eighth or June knife. That is seen as the bare minimum for meeting federal obligations that come do alex.
And While as the negotiations in Washington over the US debt limit persists, the risk of defaulting for that first time is growing. That's why more than one hundred and forty CEOs and Wall Street executives have been sounding the alarm bells and a letter to the President and congressional leaders.
The group rights quote, high.
Inflation has created stresses in our financial system, including several recent bank failures. Much worse will occur if the nation default on our debt obligations. We strongly urge that in a cord be reached quickly so that the country can invert this potentially disast devastating scenario. Joining us now with more insight is Charles Phillips, managing partner and co founder of Recognized Partners. He's also one of the many that
signed that letter. Now, Charles, that letter was set May sixteenth. It's been a few days since the and we've had a headlines cross like Speaker Kevin McCarthy saying today, quote, I don't know if we'll have a deal today. He also said yesterday they need seventy two hours. They're going to take the seventy two hours to review and pass any bill that.
Does come through.
How has the urgency changed since you and your fellow CEOs and leaders wrote that letter just a little over a week ago.
Well, there's a reason the markets are starting to react. You can see the credit default swats forager of changing and there's plenty of indicators out there, so it's gotten more urgent. It just so happens. And recognize we own a bunch of technology colpanies who had our annual meeting this week, so all of our companies were in, all of our investors were in. And normally you talk about technology changes, evaluation, operational improvements, and now we have to
talk about this. We just went through a banking crisis, wondering, you know, kind of cost of credit. We had some SVV problems in FRB. We've solved those, and now we have to deal with this. Will your cost of capital be hire in six months? And three months and a month? That did you know about? So the planning aspect of this is we can have a gun people and so the uncertainty is the thing that people don't like dealing with right now.
So that's interesting that you've been having these meetings and it keeps coming up. How are some of the leaders and the executives planning around this or through this?
Well, fortunately we don't use a lot of leverage in our portfolio. We have some companies, but it certainly made us think differently about it. Don't count on that because we don't know what the cost is going to be. We may have to use more equity, but not everybody has that leeway to do that, so it means perhaps fewer deals get done, or you get done at a different price. The second thing is we rely on certain state and local government budgets, so we have companies that
sell into that market. With the slugs windows closed, they can't fund the infrastructure spending that they normally rely on. We need those state and local governments to be spending because we have companies that rely on those contracts. So it has implications that ripples down to the state and local level as well.
That's really interesting and something that perhaps a lot of lawmakers in Washington may not be immediately aware of. In your current role, you're obviously around entrepreneurs all the time, learning about new technologies from them, in turn helping them think through strategies, recruiting, connecting with customers. What do you think Congress and the White House as well don't fully understand about how their actions reverberate in the private sector.
I think they don't understand that the US brand around the world accrues to each one of our companies that we're viewed as understanding business, very innovative, but coming from an economy that's rock solid, that is risk free treasuries, so that we have fiscal discipline and so we all
kind of benefit from that brand. When you start to question that a bit, well, okay, you know, different from US, you get a certain patino around that, and that people believe that we know what we're doing because we're from the US, and so the brand aspect of that, I think people just don't quite understand that it hurts all over the companies.
Charles, That reputational risk is really interesting. I'm curious with you as an investor yourself at recognize, does that reputational risk of these kind of chaotic conversations of the banking crisis that's gone on with some of the important funders of places like the tech sector like SVB, does that reputational risk post some challenges for you as you're looking for your growth investments going forward.
Sure, so we're competing with other investors around the world, and so we want to look like we have an edge. Part of it is we have an operational background. Part of it is we're from the US, and part of it is we have a lower cost to capital win. So any one of those things that starts to break down, you look not as strong as you would otherwise, and you don't want people asking the question in the room what's going on over there? And so I just think
the implications for the job market in general. If we can't pay our bills, social Security or whether it's our military or whatever, these things start to break down, it just looks like chaos everybody. And I think people thought that this couldn't really happen. You know, maybe they're playing a game of chicken, but they always work it out. But now you never know because things have gotten so
PARTI sand it could actually happen. So that's what's different now, as people say, this could be a real thing that happens.
So then do you start looking geographically to regions outside the US where the companies aren't sitting in a room and having to cope with uncertainty or a kind of a pause in really innovative strategies because there's too much chaos potentially looming for the economy here.
In the US.
Well, we've always been global, so we have companies in Ukraine, do in Latin America, all over the world, and so but relative to where we could be investing. Does it make perhaps the US look a little less attractive than it would otherwise, Sure, but that's like any global investor, So that's the everything. Capital can flow anywhere these days.
You served on President Obama's Economic Recovery Board. You also served on the board of the New York Fed, so you've seen the fallout from political intransigence and also I've been in rooms with policymakers to discuss the economy. How do you think the twenty twenty three debt ceilings standoff differs from what we've seen in the past or is this just business as usual?
To some extent, this.
One seems more severe. It was shorter back then in twenty eleven, but we still have lost two point four trigg in a market cap, a big and three and extra interest cause so it still had implications this could go on longer because the size of it is so much larger, and so we had certain faith back them that people had to work it out. They didn't want alimal getting to happen. We're not sure that right now, so it makes it seem worse than it is.
Charles, Thank you for breaking down down those private sector implications. Of US for US thanks to Charles Phillips, managing partner and co founder of Recognized Partners.
Still coming up.
The impact of generative AI on retail.
We'll discuss all that and more with.
The CEO of Buy Now, Pay Later platform klarnap next. Speaking of buy Now, Pay Later, we're also watching shares of best vive first quarter profits top estimates, and the company reiterated its annual target. Best Buy CEO of views this year as the bottom for the decline in tech demand.
This is Bloomberg.
Let's now take a look at the future of retail, which could be more personalized and tech focused in the context of the generative AI revolution. At least that's a projection laid out in Clarna's new Future of Retail report. Clarna CEO Sebastian Shimantowski joins us now for more on this.
Sebastian, you are.
Looking ahead to how people are going to be opening their pocketbooks. How will AI really start to show itself in terms of where people are spending in retail?
Right?
I think first of all, was like, I mean I tried this my first in November. When it got you know, stopped trending on Twitter or whatever, and I was like, what's this thing? And I got to tell you that it was magic to me, like I felt like when I opened Internet the first time twenty years ago. So I think it's you know, super impressive. We I know instantly got in touch with Sam and I said, look, I want clon out to be your favorite guinea pig. We're at open AI. Like you know, you throw it
at as, we'll try it will learn. And I think that's the way to deal with these things. When you see a dramatic shift like this, you just want to learn, iterate and understand it. And I even coded myself on the lank chain the other day, so I feel quite cold. Never done that before. As one of my biggest regrets, I never became an engineer. With that said, look, I think what's very clear here is that the tool is
out there. The applications that are really changing things and not yet, but they're going to come in the next six to twelve months. We are going to see better shopping experiences, you know, shopping assistance providing you a you know, a higher conversion rate for the retailers, you know, assisting
consumers to find better prices, better offers, et cetera. So I'm expecting to see an explosion of new tools and services coming in the next twelve months, which will you know, utilize these technology to provide a much richer and more accurate experience for consumers.
So super super interesting to follow.
And also there seems to be, as the study shows of ours, a huge, you know, big opening among consumers. They're willing to try and test these things, and they also believe that it can make a difference for them.
When I think about kind of the evolution of retail, we had kind of the mall start to bring things together on a regional.
Basis or a town based basis.
Then we had online shopping where you could buy anything from anywhere. Then the e commerce players showed up. But that's kind of evolved to this world where you almost have too much choice, right if you log onto any of the e commerce platforms, it's almost hard to narrow it down if you don't know exactly what you're looking for.
So is that kind of a problem that you expect some of those early applications might be a really kind of low hanging fruit one to solve when it comes to bringing AI in perhaps to help folks discover things based on their own preferences a little bit more easily.
I think you totally spot on look.
I mean, remember, like when you were living in a like I did, in a small city of two hundred thousan people. It's growing up there, there was one department store and they had very nicely curated everything we needed to buy for us. So everything was there. We didn't need to look elsewhere. And nowadays you're like, you know, overwashed with all this stuff. But I think in general you should think about retail as three things. You think
about the products and the brand themselves. You think about the curation, and then you think about, you know, the technology and the logistics to bring the product to the consumer at the time they wanted and at the right
price and so forth. Right, And I think on the curation side, Internet has gone crazy, right We've seen everything from Instagram shopping, you know, shoppable valuables, you know Instagram people trying to affect you to like, or influencers recommending products, but also obviously the retailers and you know, the brands themselves trying to curate. I think the curation, to your point, is one of the areas there is a huge opportunity to offer better creation.
We launched search in the US.
I mean, there's been nobody launching search in the US against Amazon for the last fifteen years, and we see in tremendous traction to reinvent product search just like these these things. Right, So, how do you both intent driven discovery where you're looking for the exact right product but right price, you know, et cetera, But also the kind of inspirational That's definitely an area where I.
Think and curation is so critical. I want it to be personal to be right.
You take is a good example of that in China, you know it's nowadays it's used to be eighty percent search, twenty percent was recommendations by AI. Currently eighty percent of what people buy on TMOL et cetera are recommendations by AI that are specific to means an individual and not search anymore. So that just shows you like what this technology can mean as.
A shift, yeah, and certainly making things more efficient in the process. Google CEO wrote in and not ed recently that building AI responsibly is the only race that matters as opposed to building up your AI chops, and he also brought up regulation there too. What are you seeing as some of the potential problems or pitfalls or areas that might be concerning that would result from the use or integration of AI in.
Shopping, for instance, in your world?
Well, I think as also since we're a payments company, obviously fraud is a big, big cluss, right, and we can see that this is going to have implications on fraud protection. I think, what you know, there's a lot I think on a societal level as a society, and I actually I respect that a lot. When I speak to people tech leads, I am very happy to hear them not only promote the amazing opportunities that this presents, but also kind of highlight the risks and that we
treat this in a mindful way. But that's more from a society perspective. If I think more of my business, I think there's one critical thing that could actually make a huge difference from politicians in some markets in Europe. Sweden is a good example where based currently we have an electronic identification that is available to everyone.
Everyone has it on the phone.
That means there is no fraud, there is no problems with people pretending to be somebody else. There's much less fraud than in many other markets that we see. It's a simple thing a digital pathport and digital identification. And I think another law that we should expect to see is if I interact with something, I want to know if it's a computer or human. I think you have
the responsibility to be very very transparent about that. So I think those are two very simple things that could actually mitigate some of the early risks and changes that for to your point, AI will come, We'll.
Bring There are people who are out there who might say that Karna is pivoting towards AI and a commitment to AI as regulation comes forth. On by now pay later in Australia, for instance, potentially in the UK as well, how would you respond to that?
We'll get it.
But I think the buy now, pay later is a fantastic credit product for consumers because you know, everyone should watch Sorry to make some marketing here for somebody else here, but you should watch credit Cards Explain on Netflix and you'll get a twenty five minute quick summary of all the bad practices of all the stuff the banks have been doing with credit cards, how they really try you to build up the biggest balance to revolve on it
on the longest period of time. I mean, the average balance in the US right now stands it's five three hundred dollars compared to one hundred fifty dollars for our binapay later products. So I think that like it's interest free, it's fixed installments. We don't push a credit limit in your face to try to make you believe that you can spend more than you have. I mean, we're trying
to build a responsible credit card. Like, no, it's still credit, so obviously all you know, credit has risks in itself and needs to be offered in a responsible way. But as a credit form, it is superior to the credit at the credit cards, and it's actually also better for us in an uncertain economical environment because we underwrite every transaction.
That's why we're seeing forty percent below credit card industry standard losses because when we shift our underwriting, it takes me two months and half of my balance sheet is underwriting on the new methodology. So I can really adjuct quickly change to an economical environment like this one, while you know, banks will wait two years before they see the shift in their balance sheet due to the changes in underwriting.
Sebashian and I want to ask one more quick one on ai because we've been talking about that the race is on.
The race is probably also on for talent.
I know you jumped in really quickly to work with open Ai, but what does hiring like look like internally at Karna? Where are you finding kind of the individuals who can make sure that that type of technology can be seamlessly tested and integrated into what you're rolling out for consumers?
You know what?
I think it's obviously an important question, and obviously, you know, data scientists and so forth are in higher demand.
I wouldn't say.
That's the case, but I also want to get again how much this is just about, you know, curiosity and encouraging people within your culture to innovate and.
To try and to test.
I you know, one way that I measure right now clonas ai involvement is I look, we offer all of our employees a chat city before powered open Ai account, and we're just looking at how many are actually using it. And I think right now we're at about one thousand, five hundred among five thousand employees. I want to get to five thousand. I want each one of them to
experiment and learn how to utilize this technology. I mean it took years for people to really discover the power of Google twenty years ago and how much that could save you time and make you more efficient and more productive. So like I think also like one shouldn't underestimate, just like encouraging and.
Inspiring people in timely to adult to eat different pride.
So it's about experimenting and engaging right now before we can draw any big conclusions.
Really appreciate your joining us.
Sebastian Simia Kowski, the CEO of Clarina, joining us from Stockholm at the moment. Florida Governor Ron DeSantis' live event on Twitter was more by technical glitches with servers struggling to handle the demand, and led to his announcement being hosted on venture capitalist David Sax's account instead.
Sax was moderating, that was insane.
Sorry, we are actually doing this from David Taxis Twitter account because it looks like doing it from mine basically broke the Twitter system.
Joining us now to break down the launch of dis this his presidential run on Twitter is Bloomberg's Sarah Fryer, Sarah, how much of this technical train wreck can you tie back directly to Elon Musk's staff firings and various cost cuts.
Well, they don't have a lot of the people that they used to have who were working on this kind of infrastructure stability. They got rid of use of a data center that they had in Zacramento, which increased the stress on their systems, and they've been making product changes. So those factors plus the fact that they didn't really prepare for this moment. It seems like they didn't stress test their systems or this wouldn't have happened.
Now.
I was tuning in yesterday and Elon muss said, hopefully this can be a platform with people of divergent political views to exchange those views. I have to ask, though, in the course of that conversation, did they put diverse political views on display.
With this Ron DeSantis announcement?
Oh?
Absolutely not. It was questions by people who were favorable to that campaign, and listen, this could blow back on Musk and Twitter's business because historically social media executives have not tried to align themselves with a particular party. They've tried to be neutral because what they're trying to do is have the widest possible user base and the widest possible set of advertisers who want to spend money reaching
those users. And if Twitter positions itself as you know, we are more friendly to one political party over the other, then I do think that some advertisers will shy away from that.
But I did.
See the new CEO, Linda Yakarino in the room.
She was there. She was there, and so were you. She could fix it. Maybe we'll see.
Thank you Sarah for wrapping that up for us. Thanks to Bloomberg.
Sarah Friar and.
David Sacks will be joining Bloomberg TV in thirty minutes to talk about this more. That does it for this edition of Bloomberg Technology. Don't forget to check out the b Tech podcast. You can find it on the terminal as well as online on Apple, Spotify. iHeart and this is Bloomberg.
He doesn't decide it when you don't. The hype w