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Microsoft and open Ai have agreed to drop exclusivity rights on AI models, opening the doors for rivals to make new deals. Plus China blocks metas two billion dollar deal for AI startup Manners and a surprise move that unwinds a controversial deal. And Elon Musk and Sam Altman head to court with the Tesla CEO alleging that the open Ai founder abandoned its founding mission. Let's get to our top story of the day, and this is an interesting one.
Microsoft shares are now basically flat, but when youws hit that they had ended their exclusivity packs with open Ai to stop was down four percent in pre market. Amazon shares shot off on the logic it would benefit all of that has been undone. It is a complicated story. Bloombergs Brody Ford joins us on set in San Francisco. The bits that are new are there are changes in the structure of the agreement between Microsoft and open Ai.
Let's start there.
What do we need to know what can open Ai now do that it couldn't do twenty four hours ago.
So the big headline of what has changed is that the OAI models for a long time were exclusive on Microsoft Azure, and that was really kind of the last bit of exclusivity in this storied partnership that helped us share in the AI era that now is kind of going away. And so this is meaningful for open ai because they're in a world where compute is constrained. They need as much as they can get, and they want to be able to distribute their products onto all the major platforms.
Microsoft still gets access to the models through twenty thirty two, it's just open Ai can sell them and make them available in other places. So you and I were talking before the show, who benefits or Amazon in the first instance where it shares jump in pre market. Now I think they're lower again. But that's the idea. This is hot on the heels of a deal between open Ai and AWS, which I think was in January, maybe February.
Yeah, in recent months, you know, OAI and AWS have been working together to distribute on that platform, which is still the leading cloud infrastructure platform. Microsoft reportedly was not super happy about that.
We have to.
Imagine the changes today are downstream of those discussions, or at least discussions like that. And what Microsoft gets in a return here is that they're no longer paying a revenue share.
Yeah.
Effectively they're saying, look, you can go and hang out with other people, but I'm not going to pay you to do it.
So this is really interesting and again complicated. Basically, Microsoft was paying open ai a revenue share from revenues where it used open ais technology in some form, right. But the bit that's hard to understand is open ai is still a customer of Microsoft. They basically pay them for various reasons. Open ai pays Microsoft, and at the same time, Microsoft is the biggest investor in open ai.
Explain me it's.
Right, because it all stems from that original partnership with Microsoft and OI were for a long time folks saw as OI was almost a part of Microsoft. Right, So Microsoft gets access to these OI models everybody else has to pay for, but they just get to access them for free at least for the next couple of years.
Bloemos Brodie Ford again two red headlines from the report. Markets have behaved very strange, and we'll get more on that later in the program. That's turned to matter. China has blocked the social media giant's two billion dollar acquisition of AI startup Mannus. The country's National Development and Reform Commission ordered the cancelation of the deal, stating it was prohibiting the foreign investment in accordance with laws and regulations.
Without further elaborating here with more, Bloombergs Executive editor for Asia Tech Peter Elstrom, again another complicated story. Let's start with the what we need to know. This is a body in China unwinding at what we thought was a done deal.
Yeah, this was a surprise, as you alluded to earlier. The NDRC jumped in today. It was only a one sentence announcement that they made. They didn't name Meta. They just said that this foreign deal with Manus had to be undone.
So what the.
DRC is doing here is they're trying to reverse a deal that was announced in December. The reason is that Manus's founders originally started the company when they were in mainland China. They decided to move to Singapore in the middle of last year. They declared themselves a Singapore company. They did set up shop there legally, and so when they cut the deal with Meta, Meta and Manus agreed to the deal and they did not get explicit regulatory
approval from Beijing. But there were people inside of China who were saying that this was essentially losing critical AI technology to our biggest geopolitical rival in the United States, in Meta in particular, So they wanted some sort of pressure put to this, and we wrote a story last week about how regulars now are pressing other AI companies not to take money from US investors in particular. Now it's not clear whether China is going to be able
to force Meta to undo this deal. These two companies have been operating together quite closely already. Metayee Manus employees have gone into the Meta offices. The executives are cooperating. All the investors in Manus have already gotten paid, They have their checks at this point, so it's not clear how they can underwin this.
There's a technicality that Manis would say it was headquartered in Singapore, but it shows that China has reach if there's an origin within country. The political dimension is that President Trump in just a few weeks time will visit Jijing Pay and speak was Jijing Pay relationship as a negotiation has had chips semikindizers at the heart of it. What about software? What about AI and what we expect to be a negotiation there.
Yeah, as you allude to, the technology transfer between the two countries has been a very significant deal. China would like more access to Nvidia chips in particular that are used to train some of these more advanced models. At the same time, Beijing has decided that they do need to develop their own semiconductor industry. It's not clear how big of a strategic priority this deal is going to be for the Trump administration. We've reached out to them
for comment on this. They haven't weighed in so far. It's not clear that that's that big of a deal. Meta of course, is kind of playing catch up against Alphabit and Microsoft, as you were alluding to earlier Open Ai, so it's not one of the leading players in AI right now. But this deal was designed to get them back into the race. So we'll see whether Washington picks up the ball here and decides to make this a priority in those negotiations. Would be a bit of a surprise.
Metas said in its own statement that they did the deal in compliance for applicable laws and that they expect a resolution.
But didn't say any more than that.
Bloomberg's Peter Elstrom, who leads our coverage of Asia tech, thank you very much saying with AI models and another story out of China, China's deep Seek is aggressively rolling out low cost plans for its newly released flagship model, intensifying competition in the country's AI sector. The company's offering developers a seventy five percent discount on its deep Seat V four pro model and as cut fees for input
cachet hits to one tenth of previous pricing. The moves expected to heighten competitive pressures across the industry and could reignize a price driven race to the bottom. Here is another story that broke this morning. Shares of Qualcomm are now down one percent. They had jumped fourteen percent in the pre market. The company initially surged eight percent of the open after a closely watched industry analyst suggested the chip maker was working with Open.
AI on a smartphone.
Here with the details, Bloomberg's equities reporter Rhyan VLASLCA this was about an analyst who posted a report on x and the market reacted, what are the details?
Hey, good morning, thanks for having me.
So this is a very closely followed and highly respected analyst, and it really excited investors because Qualcomm right now is going through pretty uncertain times. It has been pretty strongly pressured this year the shares in large part because of the rise in memory prices, prices from memory related chips, which is having a negative impact on consumer electronics, especially its handset chips. So it's facing that kind of weaker backdrop.
And at the same time, this has been a longer term story, but Apple is developing more of its own modem chips in house, developing more of its own internal hardware. That has been a major problem for Qualcomm, which used to count Apple as a major, major customer. So the prospect that they would get a new big customer in the form of open AI, a new market, a new smartphone market, is obviously very exciting for investors. But I guess it's maybe a little bit too far out there.
It's too hard to price what this would really mean as far as revenue or anything else like that goes. So we did see the stop the stock pulled back after a pretty pronounced initial game.
We're sharing that right now, qual comes down eight tens of a percent. The analyst we're talking about is Ming chi Quo of TF International Securities, And you know, the basics of it are. We know open Ai is planning some kind of device. We don't know much more than that. We know from January they were trying to establish us supply chain. Qualcom is the biggest maker of smartphone processes. What else is there to discuss, Ryan, I mean, that's the extent of our knowledge at this point.
Right exactly.
And the report did say that mass production will begin in twenty twenty eight, so again two years out. How do you begin to price something like that or factor it into a share price very hard to do, especially with so few details out there. We did reach out to all the companies involved, so far we haven't heard back, so a lot of the stuff remains sort of speculative. But like I said, right now, people are very focused on the memory situation and how Qualcom is going to
navigate that. It does report as results I believe wednesday afternoon, so that's going to be a very closely watched report this week. You know, less in focus and some of the other megacaps, but certainly a notable one to come out, and I think maybe people are hoping that we'll get a little bit more clarity on the situation.
Then Lumo's rhym Vesavaca, thank you very much. Now coming out, we're going to speak with Tim Alcuriy, UBS analysts and global cohead of AI. You just had the trio top stories. Well, this is a guy who can react to all three of them.
That's next. This is Bloomberg Tech.
Okay, three big technology stories driving markets. The first, Microsoft is down seven tens for percent. It has ended and broken its exclusivity packs with open Ai, Meta has had its deal with manas Ai and agentic ai platform blocked by regulators in China. That stock is up six tents one percent. And then the one that I don't think any of us really saw coming. Qualcom is now down about a percentage point eight tens of percent in the
pre market. It was up fourteen percent in the open It was up eight percent all on an analyst report that it is working with open ai as the silicon provider on a future device, and that is all we know. Tim Hercury Ubs semi and Semi. Caab Anlyst, also UBS's global co head of AI is with us and I'm extremely grateful to have you on a daylight today, Tim. The basics of what we know is that there are talks right between open Ai Qualcom Media Tech was also
named Qualcom is the biggest maker of smartphone processors. And the stock went sick and then quickly fell away. Your interpretation of the headlines, Yeah, look.
I mean we haven't commented on this deal in particular, but you know what I would say is that, you know, Quacom has had a server, you know, effort now for a while, and it makes sense that they're going to be a player in an agetic world and and and you know certainly, you know, certainly they have a big effort, and and you know, the thing I would say about open Ai would be open ai tends to do a lot of deals with a lot of different companies, and so I typically put a little bit of a discount
factor on, you know, any deal they could signed with open Ai, because they're doing deals with you know, virtually everybody.
Tim.
When I think about my use of an AI tool, I spend a lot of time at my desk Obviously I access that any given tool through a browser on desktop, but most of the time it's on this thing, right, the smartphone is the form factor by which I engage with AI in my daily life. In your research, is that the direction of travel that you see?
Yeah, I mean we do. We think that you know, engagement with AI is going to be across of multitude of different platforms and a multitude of different devices, including you know, smartphones obviously, so you know, Qualcom.
Is going to have a play here.
Quacomm is has a you know, a very very strong edge franchise, and they will.
Be a player.
I think the issue with Qualcom, of course, is that seventy percent of the operating profit today comes from phones, and and you had mentioned in the you Know show previously the the you know situation with Apple, and we've talked about that where once Apple doesn't need their motive anymore, I don't think Apple is going to pay them a license either, and so there's there's more angles to this
Apple story. So I think you're going to have to get through this period before we can then look ahead to Qualcomm being a player in a gentic world.
I just want to update our audience on Bloomberg Tech that Intel went to the market for the investment investment grade bond market this morning. They want some help financing what they're building out in Ireland. But it was an astonishing news week for Intel last week as well. Where do you see Intel in its evolution in its turnaround? Under Litboutan.
Yeah, you know, we've been talking for some time now about being more optimistic about their foundry business and about how they're turning around manufacturing. And I think that there's a lot of different customers that are potentially very interested in doing a deal with Intel on the foundry side, and I think you're going to hear more about that this fall. You know, we've talked about many, many different customers. So I think they are turning things around from a
manufacturing point of view. They have a lot of you know, very good packaging IP to offer to these customers. I think the issue is their product roadmap. That that's kind of where I've been really stuck for now. I think because of the gentic the server CPU market's growing so much that that's what people are getting excited about from a stock point of view. So I would just you know, my caution really is on the product side, I think
that they're turning things around. I think in foundry, the you know, turnaround will come a little faster than it comes on the product business.
Tim we ended Friday show with the Philadelphia Semiconductor Index or socks up for an eighteenth straight day eighteen sessions, its longest winning streak on record. We're giving some of that back this morning. A nineteenth day would have been interesting, I'm sure, but Intel was a big part of that story. What else was driving investor sentiment around semiconductors that put us on that historic streak. Yeah.
Look, I think there's been a resurgence in the realization that the analog sector, for one, is not I was pretty bullish on that sector into earnings, uh you know t I came out and gave you know, pretty good guidance. I think that customers are seeing the you know, capacity constraints get closer and closer to them, you know, customers in the industrial world, and so I think that customers pretty much across the board are beginning to think that they are going to have to start to build some
inventories to protect against all of this. And that was one of the things that fueled this you know, rally last week was when you know, t I came out and basically guided you know, gave pretty good guidance and pretty good commentary, and I think you're going to hear more of that, So that was a big driver. I think also, you know, I've been builtished on semiicap equipment. I think you know you're going to hear more of that this week from you KLA and from some others, uh,
you know, upping guidance there. There's just just so much capacity that has to get built out over the next three years. So you know, I think it's a myriad of things driving the sector right now.
We we didn't even have time to talk about terrified and whether you're and the team are modeling that in as well, but we will now next time. Tim i Caurier of UBS, really great to have you on the program.
Thank you. Now.
Coming up, it's a huge week for tech earnings and two of the biggest names are slashing jobs. AI spending is surging, headcount is shrinking. What's really going on we'll discuss that next. This is Bloomberg Tech and Wednesday, two of the biggest names in tech step up to report earnings. Meta and Microsoft, and they do it under a cloud
of contradiction. Just days ago, both companies signal cuts that could touch as many as twenty three thousand rolls, combined meta planning to slash about ten percent of its workforce. Microsoft offering buyouts on a scale it's never attempted before.
At the same time, both are.
Spending at record levels, pouring billions into AI data centers and chasing the next wave of growth. Here discussed attention Sarah Franklin ladders see the platform just sees massive flow of data right It's an HR platform and analytics platform that sees the world through numbers. And that's why I love having you on the program. I just outlined the story two of the biggest companies in this country, in the world cutting levels that we've not seen, but spending
a lot. Is that the trade off that companies are managing right now.
We're seeing this across the board. It's a trend in tech ed and it is really important right now that we look at people and their performance and not just what they're doing with tokens or what they're doing with AI. It's very interesting right now how you see leaders that are investing in severance and not necessarily the skills. It's a transformation in tech and we need to have leaders with the courage to take people from here to there.
You know, job cuts and roles being eliminated is not pleasant, right, you know, And if anyone from Meta or Microsoft is watching, you know, reach out tell us what your experience has been. You said on performance is so interesting. So what the managers are measuring this in revenue per employee or output per employee to make that decision.
You see a lot you see revenue per employee. You also see token maxing as a trend.
Right they stay in age?
Yeah, yes, right, but ask yourselves like, would you look at the person at your company that sends the most email as the most productive. It's a new thing that we can use to measure. It's not necessarily the correlation to performance. And what we need to do is help people get from where we are today to where we're going to with AI.
You know a lot of people would look at the overall size of a Microsoft or a Meta and say, you know, well, ten thousand roles or eight thousand roles is or isn't a lot to anyone's point of view, from the payroll perspective. Does cutting that level really free up capital? Does it take the pressure off the finance teams?
It doesn't really relieve the pressure. And it also deeply impacts culture. Whether it's one person or a thousand people or ten thousand, it is a human and people care about what happens to other humans.
So there's a real.
Cost on the spreadsheet. There's also a real cultural cost to what it means to lay off people.
I always try and look deeper, what's the underlying story. I remember when you and I were talking kind of more immediately after the pandemic, the idea was to undo pandemic era exuberance and hiring. Now it's you know, it's about the AI era, right and freeing up for capex. But what those two things have in common is when you see waves of layoffs to that level that really experienced people in there, sometimes they go and found companies of their own.
Yeah.
No, it's what we're seeing right now is a big transformation in tech, and it's not just for the companies. It's also for the people with the careers. They've spent years, decades even working on refining their craft and what it means to be told to change overnight. It's like me telling you be in Europe in an hour unless you know how to teleport, not possible, but you can get there in a day. And so everybody's looking right now, how do I transform? How do I evolve with AI?
And it's something that's the responsibility of leaders and also people to take it into theirselves to learn as well.
I also want to make the distinction Meta is doing cuts, Microsoft is doing what I used to call in the UK voluntary redundancies, but buyouts here in America.
Is there is there.
Something to learn from that distinction or it's just a different means to the same end.
It's still an investment in severance and not in the skills in your people. And that's the big difference. And so the more that we can invest in how we train people, how we get them from point A to point B, the better that we will all be, because it's a short term gain on the spreadsheet, but a long term loss in the knowledge that you have in the workforce.
Sarah Franklin, the lattis, it's great to have you back on Bloomberg Tech and we are just at the start of what is a big week in earnings. Now coming up Elon Musk and Sam Oltman, and we'll face off in an Oakland court this week in a battle that could determine the future of open ai.
This is going to be a big one and we're going to look at it right now.
This is a market that's being driven by newsflow. It's kind of a situation where there have been so many headlines through the morning, everyone needed a moment to make sense of it. I would linger for a second on the Philadelphia Semiconductor Index or socks. We just talked about it with Tim akuriy from UBS on Friday. We ended the show by saying that that index was up for an eighteenth straight day, a record. We're giving some of
that back. We're off by two percent. Also, what we used to say was our risk asset of choice Bitcoin, It's seventy six six hundred US dollars for token. Also, I guess we're saying this is a risk off environment. That's what the world looks like. We're only halfway through the program. It is halftime and this is Bloomberg Tech. Welcome back to Bloomberg Tech. Our top story open ai
has broken free from its exclusivity packs with Microsoft. Microsoft's down four tenths of a percent when this story broke, two red headlines on the terminal. Microsoft fell four percent and then it came back. Everyone's assessing what this means. But basically open ai is free to distribute and sell its models with other cloud providers, and that is the reaction from Bloomberg Intelligence. A lot of focus on Amazon
and AWS. Our colleague Anna Ragrana Bi he kind of leads the coverage for Hyperscalers, is saying that this amended partnership is going to be a net positive enter prize AI adoption, but more broadly for AWS, something he's been writing about all year. And of course open ai did that deal. Amazon jumps in the pre market. It's now kind of given up some of the menum Let's sad to another open ai story. One of the biggest feuds in tech heads to court today. Elon Musk claims open
ai abandon its founding mission as a nonprofit. He's suing the company, two of its co founders, Sam Altman and Greg Brockman, and Microsoft. Musk is seeking up to one hundred and thirty four billion dollars in damages that he says should go to open AI's charitable arm. If he wins, let's bring in Bloomberg's AI editor Seth Figereman. We should note that there was a developing story at the end of last week when Musk actually dropped a number of the claims that he was making. So let's start there.
We go to court today this jury selection. What are the claims that Musk is sticking with.
Yeah, I mean, this is a years long saga that's really culminating in the court case this week. And at the heart of it, Elon is alleging that Altman and other leaders that Operanie effectively tried to enrich themselves by pursuing a for profit push at Obanie, which was originally founded by Musk, Alman and a group of others as a nonprofit research organization. And he's claiming that he has effectually been defrauded as part of that, and he is asking for or up to one hundred and thirty four
billion dollars in damages. But in some ways, even more crucially than the amount of money he's asking for are some of the remedies for that, which range from seeking to have Altman pushed out as CEO and his other official positions at the company and also trying to unwind the for profit conversion that was completed early last year.
We were just showing some of those that the dudes testify. It's a pretty blockbuster list. And who's who, right, Sam Altman is going to testify Elon Musk himself, Miramradi formerly open aicto now of Thinking Machines, Microsoft CEO Sati and Nadella. There is some historical beef here which you should explain the relationship between Musk and Altman plays out on social media. Musk, of course, is also the founder and leader of a rival frontier lab XAI.
That's right, yeah, I mean these were two close colleagues for a time who were instrumental on the founding of Opening I more than a decade ago. Elion in some ways as very much the benefactor of the organization in its early days. Sam has previously said that he considered as Elon must to be a hero of his. But there was a falling out within the first few years of the company's launch, seemingly in OPENINGE Eye is telling of it, because Elon Musk wanted more control, He wanted
it to operate as part of Tesla. He seemed to want to be CEO of the organization himself. Altman and others refrained from that and must ended up believing Opennie around twenty eighteen. Since then, there's been a lot of name calling on both sides, with Musk in particular loving
to call Sam Alman scam Altman, among other things. Elon has also taken steps to undercut the organization, not just through launching a rival company, but making a hostile big as some might recall, to try to basically take over the nonprofit that controls Openiey. This core case should be understood in that larger fight.
Bloomberg, Seth Magun, thank you very much.
Let's talk through the legal claims that the jury will be asked to weigh in more detail with Dorothy Lund, professor of law at Columbia Law School, where she specializes in corporate ownership, governance, securities regulation. Let's start with the legal claims in the case. I mean, technically speaking, what is it that Elon Musk is suing for and based on what and hoping to achieve what?
Yeah, So, at this point there are only two claims that remain a lot of others have been dropped or dismissed and So the first is that Altman in open ai violated a promise to Musk that open ai would have a permanent charitable mission to develop safe open source AI technology for the public good and not private gain, and this was violated when in twenty nineteen open ai created a.
For profit affiliate. So that's the first allegation.
In the second is that it's really related, is that Altman and open eye received undeserved benefits such as Musk's investment, because of these broken promises.
Professor Lund, does it matter that this is a jury trial?
You know, this is a jury trial, Yes, but the jury in this case is only being used as an advisory to Judge Gondalas Rogers, so she actually doesn't have to follow their opinion, although it will certainly give her some cover if she does. And so today, you know, we're starting jury selection and it's a really interesting process. And the law here, you know, it doesn't require that jurors have never heard.
Of Elon Musk or they've never used open ai.
But instead, you know, the goal will be defined people that can put aside what they've heard they know about these people, and to decide.
The case only on the evidence presented. In court.
But you know, these are two very infamous figures, right, Musk and Altman. Musk has been aggressively moving companies to Texas and out of California.
It's been leaning hard into MAGA politics.
Altman isn't as well known, but he's had some recent episodes suggesting he faces some real personality challenges as well, you know, the recent multiv cocktail attack on his house. You know, I think in general there's just growing uneasy and skepticism about whether AI is going to visit its dystopia in future on all of US and Employment Data Center,
environmental effects, power consumption. So you know, I think here it's going to be these The jury's views may be colored on these specific views on each of these individuals and also AI generally.
Well.
Mister Altman is well known to regular viewers of this program, but just in case, he's the CEO of Open AI, which is regarded probably as the most consequential AI lab at this moment in time. But therein lies an interesting point elon Musk also at the helm of XAI, which is now owned by SpaceX, a company in which he is CEO. Does that matter going into the case that he leads a rival company to the one that Sam Altman now leads.
Absolutely, I mean, you know, it's very easy to view this suit cynically because Musk is operating his own rival AI company, and he's he's tried to partner with or take over open Ai multiple times he's been spurned. So I think absolutely there's a reason to be suspect about his motives here, and even the judge in this case has called this out, you know, in some pre trial motions.
You can in fact.
See in his IPO letter for SpaceX that you know, they disclose that Grock is going to benefit if this suit is successful. So I think at the end of the day, the judge and jury are going to have to determine whether Musk is disingenuously using this lawsuit to niqu app open ai and create more room for his own for profit initiatives to thrive with less competition. And this is essentially what open ai is, you know, put pointing to in this litigation.
So if we just have two minutes left here, but the central issue is the nonprofits origin of open ai, and within the world of AI, of course we have public benefit corporation structures as well. Is there a chance that this case sets precedent for the legal structure of companies that operate that way.
Yeah, So, I mean, you know, there's a lot to say about this structure.
You know.
One of the arguments that Musk has made is that, you know, if we're not careful here, this is going to cause other nonprofits to.
Follow the same path as open Ai.
They're going to make promises and then fall behind on them, and whereas the other nonprofits kind of go and go this way.
You know, I think this is ultimately a weak argument for one.
Open ai is not your typical startup, right, This is a very unique company in business.
It's had a very unique sort of governance history.
Each of its iterations has looked really different in interesting ways that we could spend far more than two minutes on. And you know, the other thing I think is important to note in this conversation is that something that's true of corporate law is that it's enabling. It allows businesses to change their forms based on their unique business needs.
Right, and so you know, over time.
You know, the argument that open ai has made is that we started off as a nonprofit, but this is a really capital and tons of business and we just needed more money in order to continue to pursue our mission and develop this technology.
And this is why we made these changes.
And this is all sort of consistent with our initial goals and the promises that were made upfront.
And so again I think.
That this is this is something you would expect from organizations, that they change their business form over time, and you wouldn't necessarily want to deter that either.
Dorothy Lund, professor at Columbia Law School. Again, the Open AI must trial jury selection starts today in Oakland, Thank you very much. Coming up, we're going to speak with Under Secretary of State for Economic Affairs Jacob Helberg about strengthening the US tech supply chain. Big focus on chips and silicon. This is Bloomberg Tech.
We were the jip capital of the world, and now you know Intel.
And now they're coming back. All the jip companies are coming back.
Let's get back to one of our top stories today.
China has blocked Meta's two billion dollar acquisition of AI startup Manus, effectively unwinding a deal that we thought was done. It's a clear move by Beijing to keep advanced AI technology from flowing to the US. Just weeks before the expected Trump Gee meeting. Joining us on the show today under Secretary of State for Economic Affairs Jacob Helberg, who's been shaping the US strategy on exactly this kind of thing, economic and technology competition.
This is about state craft.
You know, we are going to talk a lot about silicon you know that's been a big focus for you. But this moved by China and one of its regulatory bodies to block this deal. How do you interpret that as a strategy and state craft on China's side.
Well, it's great to be here and great to be with the Bloomberg team. So I think this is just the latest example of how China's economic diplomacy branded itself to the rest of the world as being all about connectivity, and in fact it's really been about coercion and practice. What we have done at the State Department is built an economic security coalition with fourteen countries called Paksliga. In January, I gave a speech at HUDD and that really laid
out the blueprint. And last week we announced a forward deployed industrial base with our partner, or our oldest ally in Asia, the Philippines, which really is the beginning of the build and we're incredibly excited to get to hit the ground running.
When we talk about China and from a policy standpoint, in this program, we talk about Belton Road the initiative.
How is pack Silica different.
Why is the strategy through pack Silica a better form of state craft.
Yeah, so we are obviously building this effort with the benefit of having been able to study what China has done through the Belton Road Initiative for the past twenty five years. And the easiest way to understand the Belton Road Initiative is it was China's attempt to build government owned roads and government operated bridges and railways with state owned enterprises. The Chinese government has done this entirely in house.
We have a totally different model. We believe America's superpower is the power of its private companies and its ability to build products that delight and enchant billions of users around the world, and so we decided to partner with the private sector to really roll out platforms. The Forward Deployed Industrial Base is our first major rollout that will be a platform for American companies in partnership with a
strong sovereign partner in the Philippines. And ultimately the framework that we adopted is a framework where both the US and the Philippines have skin in the game and share in the upside of success. And it's that kind of positive sum approach that we hope to bring to all of our partnerships.
Just discuss the Philippines a little bit more.
Is a case study beyond its geographic position on the map. Why is that an important partner? I guess if you looked at it through an economic lens, or through a.
Trade lens or a supply chain lens, well, we're very excited to partner with the Philippines because it's our oldest ally in Asia, is a defense treaty. Ally, it's also a kind that has very rich manufacturing capabilities, and so ultimately that kindness.
Is the potential, the forward looking bit, the forward looking bit.
But they already today have a very deep manufacturing sector. And so the values alignment, combined with the complementary industrial capabilities, we thought, provide the Philippines with a very compelling value proposition as a first test bed for the forward deployed industrial base as well as for American companies and for Filipino workers. So we're thrilled to be partnering with them, and we think American companies will be very excited to go there.
Under Secretary, this is the first opportunity we've had to speak I think since CES in January actually, but of course in between, we've had the conflict in Iran, the war in Iran, and we spend a lot of time on this program talking about the impact to chip supply chains because of helium, for example, key stabilizer in the chip manufacturing process.
Has that had an impact in the world.
That you were doing, you know, some of those golf partners a key to what you're trying to do.
Well, let me just say that we, obviously, you know, have made a very conscious decision to really double down on our partnerships with the Golf we have. We work with them incredibly closely.
I hosted the us.
U AAI working group in Washington with my colleagues from the Office of Science and Technology at the White House as well as the Commerce Department. Ultimately, one of the big takeaways from an economic diplomacy standpoint of the Iran crisis is really just the importance of de risking single points of failure. Right now, we have a concentration risk across our supply chains, whether it's logistics, whether it's actuators,
whether it's rare earth magnets that remains unacceptably high. And ultimately, that really is the genesis of what pack silica is meant to address.
When the President meets Swushijingping, what's on the table a point of negotiation or interest both sides may well change. We spend a lot of time with you and other colleagues and government talking about the idea of whether China should or should not have access to leading edge chips.
But there's a software component to this as well. If we take the Mannus case study, do you expect the President to bring that up and use the competence of Chinese AI companies on the software side as a point of discussion or we just focused on chips.
I expect the President to.
Really walk into that room with maximum leverage and decision space. His national security strategy made abundantly clear that America will secure the inputs it vitally needs for its supply chains, and ultimately President Trump has reshaped American economic diplomacy the way only.
An executive could.
And it is really thanks to his leadership that this historic arrangement and partnership with the Philippines was made passable.
Jacob Helberg, us Undersecretary of State for Economic Affairs, back on Bloomberg Tech and what has been an astonishing start to twenty twenty six now coming up. It's a sixteen trillion dollar test for the tech market this week. Those are the names at the heart of it. This is Bloomberg Tech. Time for talking tech. First start Meta is
reaching for the stars to fuel its AI ambitions. The tech giant reserved up to one gigawa of power from startup Overview Energy, which plans to beam solar rays from orbit back to Earth.
Meta said it.
Hopes to secure uninterrupted energy for its massive data centers by twenty thirty plus. A former Tokyo Electron engineer has been sentenced to ten years in jail for stealing TSMC's proprietary data. Taiwan is on high alert for technology leaks. The hefty prison term for the former engineer reflects the
government's efforts to guard its world class semiconductor industry. Former Deepmine researcher and AlphaGo mastermind David Silver has raised one point one billion dollars for his new startup ineffable intelligence at a five point one billion dollar valuation. With backing from Sequoia, Nvidia, and Google, the Silver's moving beyond large language models to focus on reinforcement learning and robotics. Okay, it's a sixteen trillion dollar tests for the market rally.
With the Magnificent Seven projected to grow profits by nineteen percent, the stakes could not be higher. Bluembe'skarmen Rhinikey joins us to break down it is a make or break week for the S and P five hundred, the mag seven. We can frame it in any aggregate you like, but we have big earnings Wednesday.
We have big earnings Thursday. What are you watching for?
Yeah, it's really going to be a flurry of excitement. Especially Wednesday after the bell we get four of the biggest hyper scalers reporting, that's Alphabet, Microsoft, Amazon and Meta Platforms. These companies are the biggest in the S and P
five hundred. They've helped drive a lot of this rallied that's gone back to record highs that we've seen in April, and so these earnings are so important for the entire market and really what investors are going to be looking for is this balance between high capital expenditures on artificial intelligence infrastructure going forward and the return on that investment. So the group that we're getting this week, they're expected to spend more than six hundred and forty billion in
twenty twenty six on capital expenditures. That's up from more than four hundred billion this year. So this is a huge jump in the amount of money these companies are spending, and investors are going to be watching for what the return on that investment is.
We've become accustomed to watching the capital expenditures numbers, it's been several quarters now. But if we put that to one side, what else is it that investors are looking for? A guess across the forum Wednesday.
Yeah, So there are a few line items that are going to be really important. One is cash flow, free cash flow, and there are some interesting facts to kind of dive into here. So for Amazon, for example, free clash flow is expected to be negative this quarter and potentially the widest sense twenty twenty two when what was happening then is that the company was investing a lot in warehouses to meet sort of demand that had been fueled by the pandemic. So that's something investors are going
to be watching really closely. Meta's first quarter free cash flow is also expected to be the smallest in nearly four years. And then on the flip side with some of the other companies, including Amazon and Alphabet cloud sales, so how those cloud businesses are doing is going to be extremely important. Investors really want to see growth here. It's you know, proof for you know, the AI trend going forward.
We didn't get to Apple, but that's on Thursday, so I'm giving us a breather. We can do it later in the week. But that was a great summary of what's to come. Calmen, Rhinicky, thank you, and that does it for this edition of Blueberg Tech. So many news headlines that were driving tech markets this morning. Recap on the podcast. You know where to find it on the Bloomberg terminal as well as online on Apple, Spotify and iHeart this is Bloomberg.