Private Markets' Appetite for Tech and Tough Big Tech Layoffs in Europe

at investing in private versus public markets. Karen Fronsky's with us, head of private Equity Investing over at Fidelity, and after planning the largest round of layoffs in big tech history, Amazon and Google are now learning how difficult it is to card jobs in Europe. We'll tell you why and how do you get your news We'll speak to the CEO of Substack as a newsletter publisher. There's a continuous growth in a tough market for fundraising. But first let's

talk about money markets in the public to Maine. We're looking at the NASDAK currently up four ten percent. It was underwater earlier. We're seeing a bit of a mood shift as we entered towards the latter half of the trading day. Remember shortened trading week for many. In terms of the equity markets, the FX markets remain open tomorrow on what is known as Good Friday, we take a day off. We see the NASDAK push higher as people just start to get to grips of where the job's

data is going to be. I'm also looking at what's happening with the SOX currently up just about a tenth of a percent at the moment, ship markets managing to come away from some of their lows yesterday, the ten year yield, though still lower, seventh straight day that we're seeing broncos falling for the ten year debt. Let's look at on let's look of what's happening in crypto markets, because we're basically still holding near that all important twenty

eight thousand a level end. We just don't seem to be able to break through it as the dollar waivers on the day as we look towards that all important jobs data tomorrow. But dig in on the micro moves at the moment. Yeah, two moves that caught my eye. Alphabet parent company Google up two and a half percent. The Wall Street Journal reporting that Google is going to implement an integrate generative AI and conversational functionality into search. I think we thought that was coming, but the market.

Moving on that, and Ali Barber up three and a half percent. A report out of China overnight that Ali Barber itself is working on a chat GPT style generative AI tool. Also had really key data in the private markets, this coming from Pitchbook and the Venture Capital Association that in the first quarter of this year thirty seven billion dollars worth of venture back deals. But that's the lowest level going back thirteen quarters. I think that's fascinating, Caroline.

It's backward looking data, right, but you compare where we are in the private markets right now with how then as that one hundred has started this year the public markets, And then we think about the performance of some of those funds like Tiger, who are so sort of focused right now on the tech sector and it's helping them. Finally, I mean, when we're in a ball market for the NATZAC one hundred, it's going to help a certain number

of companies that are committed to the tech space. And let's talk about just that, Ed Chase Coleman, Tiger Global staging that come back in the first quarter is well, there has been this rallyan tech shares. Let's helped the firm recoup from last year's pretty mega record for more, Let's bring in Hemma Harmer set the scene, because what they started off twenty twenty three with half the amount of money that they did in twenty twenty one. Yes,

it's been a very difficult year for them. Last year they assets fell a ton They lost fifty six percent in their hedge funds. Last year. The long only was even worse. So their focus right now for them is how do they make back investor losses? And so the gain that we've seen in the first quarter up about seven percent, you know, not bad. They do have a ways to go, but I think investors are happy with

any recovery and any gain. They will have to make more than one hundred percent to gain in order to make investors hold again. And Hemma, what's their track record on that? Right? Tiger's been in this game a long time. They've had bad years before. Will they come back? How long is it going to take them? Yeah, So in the past, if we look at you know, one of their worst years, they were down twenty six percent back

in two thousand and eight. It took them about three years before they were able to make investors hole again. And then about in twenty sixteen, they were down again and they took them just a year to make investors whole. So that's pretty good if you look at, you know, being able to rebound, in being able to recoup those losses. I think the question is, now, you know, the fifty six percent loss from last year is far worse than both of those two previous years, So how long will

it take for them to do that again? And talk to us About Chase Coleman himself, I mean, he doesn't speak off of publicly, does very little media, but he was hosting an event and it seems as though he

was pretty bullish still on buying big tech right now. Yes, So he was speaking at a luncheon for the Boys Club in New York and he was talking about he was asked about where he sees opportunity right now, and he says that tech, you know, has been in something of a recession lately, but it looks interesting again that companies are using and incorporating more technology into their businesses, like Amazon, you know, using chat, GPT, and that he

thinks he's bullish on fangs and would suggest buying fangs. So not unsurprising for a tech focus firms big Meta for example Meta, but interesting to see, you know how he sees the vote ahead for the space that he focuses on. All right, Bloomberg's hem a Palmer, thank you with that reporting. We should point out as well that Tiger Global declined to comment on the story. Let's turn out to investing in private markets the difference of what's

going on in that space. With Karen Fronski, Fidelity Investments, head of Global Private Equity Investment, we brought you the data from what the VC landscape looks in the first three months three months of this year. You look at what's happening with the naz at one hundred and private markets. Where's your focus right now? What's your read on the macro picture? Well, we actually see the macro picture as

being something really exciting and opportunistic for Fidelity. I'll echo some of what it sounds like Chase Common was saying, which is now is a time for investors to really be opportunistic and find great investment opportunities. The reality is there are fourteen hundred unicorns globally worth about five trillion dollars. There's a lot of great businesses out there for investors to come in and asked, and unlike twenty twenty one,

we're starting to see a real rationalization in valuations. Some would argue there's still some room to go there, but when you look at the peak of the market in twenty twenty one, private market valuations were three and a half times more expensive than the Nasdaq on average, and you saw some companies raised and one hundred times arr or even higher than that. And valuations have really rationalized, so great businesses, valuations that are making a lot more sense,

and we see a lot of opportunity. Caroline, I think you and I are trying to get a real global perspective as well, not just which sectors are sort of most interesting right now, but also geographically debates about China, the Middle East where there are opportunities right. Yeah, I think that's exactly right, and perhaps one that's garnering a little bit of what should we say emotion on public forums such as Twitter. Karen, I'm interested in your perspective

of global allocation of money right now. Where are the valuations in the best? Yeah, it's a great question. The reality is, you know, I think there are great opportunities globally,

and it doesn't always come down to just valuation. Well, a lot of what we're really focused on is what's the TAM, what's the total addressable market for a business and what type of problem is that business solving and do they have a real durable competitive moat that's durable over time, And of course we want to make sure

the valuation is right and appropriate for that business. But when we look geographically, we see really large addressable markets in regions like India for example, where we've made some private investments for the last couple of years. China obviously we obviously take into account the geopolitical background of China as well, but Europe as well. So we are a global investor, both publicly but also privately, and those are a couple of the regions that we're most excited about.

It comes down to the addressable markets that account in China. Because you say you take into consideration geopolitics, how is

it affecting the way in which you allocate. Yeah, I mean the reality is, you know risk return, right, and we can't always prognosticate what governments are going to do, especially governments internationally, and so we just take a little bit more of a risk premium when thinking about allocating to regions where there might be a little bit more geopolitical risk that we can't otherwise account for, and ED we're going to have that conversation in depth a little

bit later with a QVC. But ED, what's also interesting in anything we're always talking about is, Okay, we talk about countries, what about sectors? And boy do we talk about AI a lot right now? Yeah. I think what's interesting for me, Karen in particular, is that lots of the most exciting companies are private, and they're staying private for longer. I think I'm right in saying that you invested in SpaceX for the first time back in twenty fifteen. That was a long time ago. Now, how do you

play that field where the most attractive companies are staying private? Well, listen, you know the beauty of our model at Fidelity is we can invest privately, we can obviously invest publicly, that's clearly in our DNA, and we can be opportunistic and investing in just the absolute best companies out there. I think it's not any secret that we all think the ipel market has been has been shut, has been frozen shut for over a year at this point in time.

And the private markets have such a strong depth at this point in time, not only in capital but also quality of investors. That the beauty is that all of these companies can go public when the timing is really right and when the stars align, as opposed to being forced to go public. The other reason why we do this at Fidelity is, as you mentioned, you know about the number of public companies that are out there have basically halved in the last twenty five years, and there

are a lot of companies that only exist privately. We don't have access to them publicly, and so it's really strategically important for us to start investing well ahead of their public event. You've had a lot of great exits, right I think Facebook, Uber, but less focus on SpaceX. How do you stay focused on the opportunity for them long term? Do you come back in and do later rounds for fear of missing out? Do you worry about the partners that are touted to be going into a

name by SpaceX? Saudi is a name that's been discussed. It's a really interesting mindset you have to go into in an investment like that. Yeah, you know, listen, SpaceX has continued to execute extremely well when we look at their Starlink constellation that's up there right now, the focus on Starship coming out hopefully soon. It's a company that's executed incredibly well. And no, we never invest for fear of missing out. We invest when we continue to think

there's value for our shareholders in investing more. And those are the underlying core principles that we try to stick to. We know that there are other areas than space that you're already interested in data, social, climate, tech, but also of course AI machine learning. That's what everyone is seeming to be excited about. But where in the apple location of AI are you excited about? Have you come to grips with so why the money is going to be made? It's a great question. We are still doing a lot

of work on that question specifically. You know, AI has obviously been around for decades, but needless to say, open AI and chat GPT have brought it to the forefront and it certainly captured the imaginations and the excitement of all of us. And that's a question that we're spending a lot of time and doing a lot of research on, meeting with a lot of companies to understand where does

the value accrete. Is it at the app layer, is it at the foundational layer, or is it at the infrastructure layer, or is it some combination of the three? Right You certainly don't have the final answer there yet. I don't think many people do. But it's an area where we're spending a lot of time and doing a lot of research. Karen Quickly twenty twenty two, really hard you thought about Chase Coleman Tiger. Did you have to

change strategy? In reactions twenty twenty two, You know, listen to Our strategy has always had core underpinnings of looking for or great companies with a large addressable market that are disrupting something out there in the market, phenomenal management teams. I think what's changed for everybody is the concept of growth at any cost, and not just us. Every investor is very, very focused on the ROI on every dollar spent profitability or a clear and convincing path to profitability

and really maximizing margins. But our core underlying principles have stayed the same throughout. Great to have some time in the kour and thank you Karen Fronsky, Fidelity Investments. After announcing some of the largest rounds of layoffs in their history. US big tech companies now being reminded how difficult it is to reduce headcount in Europe, largely due to labor laws in countries like France and Germany. Bloomberg, Zaggy Cantrill joins US from Germany. You were part of the reporting

team on this. What it comes down to is labor protections. Right. Why are Amazon and Alphabet in particular finding this so hard to enact? Exactly? It's incredibly challenging in several European countries to do the sort of sweeping layoffs that we've seen in Silicon Valley, where we've seen people have to pack up their boxes within weeks or months of these announcements. That's not the case in Germany, where I said, we're in France, and to look at Germany for a second.

The reason is essentially there needs to be negotiations with works councils, with employee representatives from within the company to create a negotiation and create a settlement for the amount of employees than leaving the extent of the cuts, and

also what sort of settlement they're likely to get. And in France it's perhaps even more stringent than is in Germany, and there we're seeing companies like Google offering voluntary departure schemes and they're discussing essentially how to get people to leave by essentially buying them out of their jobs to get really generous, right, can you talk us through some of the changes they make to entire senior managers to leave, Yes,

So essentially there are these discussions about giving senior managers very large packages in order to leave the company, which actually, noticeably, while not part of the same layoffs package, is also something we've heard at Meta with this idea of flattening their workforce, and that's something that Matter is proposing across

the board. But what we're seeing in France is also based on an issue in France where it's not so easy to just let people go without cause, without them doing something that means that they should be fired from their job. It's not so simple just to let people go from these roles, and so these layols will come with a huge price tag for these companies. We've heard Alphabet already indicate that these layoffs could cost up to

two point three billion dollars globally. And while they've said that in the US, the Brunt of those costs will be felt in Q one. And of course let's remember this is all about efficiency and being able to tighten the belt. While those class have felt in Q one this year in the US, that's not the case with places like France and Germany where these negotiations going Aggie. Amazon did not comment on the story. Google did and they explain to us that in some markets Romania, for example, Greece,

they won't for now be cutting jobs. This is what they had to say. We're showing on the screen right now, old school tech structure is what caught my eye. Right you have compromises around stock compensation and also bonuses. There is some clever workarounds that Google in particular and Amazon are trying to do. What are they yes, So essentially these companies are looking at finding different ways in which to provide for instance, stock options is a good example

to the departing workers. But also when you look at the broader structure around hiring in Europe, this is also a conversation around going forward, what it will look like to bring more people on board in these companies in these regions. And so, as you say, in some in some markets they're not they're not laying people off at all. That may also be a strategic point that the offices

aren't actually that big in some of those markets. It's also about being able to have enough people on hand for dealing with the huge amount of content that is in various different languages around Europe. So while going forward, there are these question marks over the costs that this

could bear for these companies. I don't think it really means that they're going to be pulling out of these markets or when it comes to hiring, they're They're likely to still be engaging with these workforces because countries like France and Germany are hugely important for Google for instance, Thanking Cantra, thanks so much staying late with us. We

appreciate it. Meanwhile, let's turn to a stop. We're watching Sam heading for as low as profit, which there's a global financial crisis, if not longer, it was due to a sharp slowdown in Technomold. Of course, it's triggering losses in its semiconductor division. Now, South Korean chipmaker reporting preliminary results for the March quarter tomorrow. It's expected to say operating profit pronominated some ninety percent. Will continue to follow

it from new York from San Francisco. This is Willimberger. All right, time for talking tech. First up Binance. In the CFTC lawsuit against Binance over sham compliance with US Derivatives regulations, three unidentified training firms have been cited as VIP clients. They've now been named Jane Street Group, Tower Research Capital, and Raddick's Trading. That's according to sources. The three US POMP firms were cited anonymously by the CFTC in its lawsuit is examples of how US clients accessed

the platform. An elicit online marketplace where users sold stolen passwords, bank account information, and other sensitive data was shut down by the US, UK, Dutch and other law enforcement agencies this week. Authorities seize the site, known as Genesis Market

as part of an effort dubbed Operation Cookie Monster. The site began in twenty eighteen and has offered access to data stolen from more than one point five million compromised computers, accounting for more than eighty million credentials that could be used to access accounts. That's according to the Department of Justice. Law enforcement arrested one hundred and nineteen people in connection

with the site. That according to the European Police Agency EUROPOLE and finally, converting the world to entirely clean energy will require ten trillion dollars worth of investment, but continuing to rely on fossil fuels were cost about fourteen trillion that according to Elon Musk, a massive build out of solar panel factories and metal refineries are required over the next twenty years to deliver renewable power generation and electricity

storage capacity, which will then be needed to power the global economy entirely with carbon free energy, Tessa said. And it's master Plan Part three, which was published today. The white paper fleshes out details a mosque's vision for a world without fossil Field's first outlined, of course, during that investor day last month. Next stay with EVS because STILLANTIS plans to manufacture an all electric version of the popular Ram truck and a factory of course in the United States.

We understand all according to its CEO and most David Welch, and please say it's here in New York. But of course the auto show that's going on, some of the summits and talk to us about the Ram. The focus basically on making sure that they can access some of the Inflation Reduction Act offers to the consumer. Yeah, thanks Caroline. So just to get in the game with the inflation reduction egg, you've got to build the vehicle in the

United States and then be on net. You've got to satisfy other requirements where the batteries are built, where the ingredients to the batteries are mined in por to get the full seventy five hundred dollars. But just to get in the room, you have to build the United States. So in that sense, I think the efflation Reduction action

was a big incentive. It was a little bit up in the air in the sense that Carlos Tavarus, who told us about this at the auto show yesterday, has complained greatly about the cost of building evs, the lack of profitability. And we thought he has a pickup truck buyant in Mexico, he could possibly build the vehicle down there and save on wages and that sort of thing. But he says it's coming to the US, which plant

exactly TVD. He said, in the next week or two, we may know that, Hey, David, in US, Let's be honest, the Lantis is playing catch up when it comes to electrification, right, that's right. The companies that have really made a big commitment here, Volkswagen, General Motors obviously test us the leader. Everybody's trying to catch them. Shantis has been a little bit more conservative with this ss Toyota. They see consumers

still buying internal combustion vehicles and huge numbers. They don't see profits and electric vehicles yet, and they're thinking they can be a fast follow Just remind us of the scope of who the competition is. I'm thinking forward, I'm thinking what even Rivian to an extent for it's a big player. Obviously, they've got the f one, fifty, Lightning and the Marquis out there. Rivian and some of the startups are they're very legitimate players. However, their volumes right

now are so small. I mean, Rivian's looking to make fifty thousand vehicles, you know. General Motors is saying they're going to sell fifty thousand just in the first half of this year, and they're just getting started one hundred thousand next year. Tessa's already pushing a million globally. So some of these startups, they have good technology and desirable vehicles, but getting to critical mass pretty tough for them all, I believe. Thanks David Welcha, Detroit, BRT. Thank you. Welcome

back to a new mood technology. I'm Canaine Hid in New York and Imed Ludlow in San Francisco, and we're about halfway through the trading day, halfway through our show. Let's check in on basically the turnaround we've had since about half past eleven an hour ago. Nazdac breaking into the green as we walk towards what is going to be a holiday shortened week, maybe a little bit more risk appetite building into the system. We're still, of course

anticipating that one important job Stata tomorrow morning. Two year yield basically flat on the day, having been on the downside the last few trading days as money sought more safety. We're seeing bitcoin again at that twenty eight thousand level. We cannot break through it. Moving on to some of the micro moves because basically, if you're going to see money moving into stocks, it's going to be AI related. On the day when you're looking at technology alphabet shares

Google up two point four percent. Interesting what we see in terms of that reporting coming from the Wall Street Journal that yes, we knew an AI chatbot was being developed over at Google, but they're likely to be starting to lace it in and maybe providing the impact within Google relatively swiftly. Ali Baba more certainty there as soon as next week will understand the unveiling perhaps of its own AI generative AI chatbot and what they have on the table in terms of China. So a lot of

this discussion is playing out on social media. Right You and I were in a news business, and I think right now we're really interested in knowing how our audience is getting their news, aside from this program Bloomberg Technology, of course. So we ask the question, do our daily poll, and here are the results, and I find them fascinating. Yeah, because social media Elon must wants Twitter to be the

go to source of news. Sixty three percent of respondents as saying social media look down at substack and newsletters twelve percent of the vote. Caroline, you know you think about what's happened this week, chamath Pali Haatier, Social Cap putting their performance note out there on substack. Yeah, more and more people deciding to go direct to their audience. I mean, let's face it, there's been a bit of a brain drain from media, people leaving to go and

do their own direct to consumer provision through newsletters. Yes, people are building them within media organizations, but also going to substack to and provide them just on a one on one basis. Yeah. I think what's interesting a well with substack is that you know it's you, yourself putting it out there on a platform, much like it is on social media. So let's talk about it because substack is actually inviting some of its contributors to become investors.

The newsletter publisher tapping more money from less wealthy investors by letting its offers and subscribers put in as little as one hundred dollars for shares in an effort to keep growing. And what is a tough market for fundraising? Delighted to say, Caroline. Substack CEO Chris Bess joins us now. Chris, is the motivation here that you need money for substack or you're thinking about audience development. The main motivation here

is we've been building this subscription network this year. We've seen it really start to take off. We've seen the power of the network kick in. We've seen people growing from as more and more people join the platform. The people who join are creating a lot of their value, and we wanted to create an opportunity for them to become investors. Caroline, I think the other thing that we're conscious of here is the reputation of the people are

that are posting through substack. Rug I mentioned Social Capital and Chamath Pali Hapatia. They made it an active choice to put their annual performance of their fund on substack rather than other methods. Yeah, Chris, clearly you're winning subscribers writers as well. What is it thirty five million actor subscribers I'm interested in. Therefore, what's the uptake? How many have said, yeah, we want to not only write for you or consume value, but invest in you two. Honestly,

we've been blown away by the response so far. I actually can't talk about it too much here. You have to go to the weef under page to look at look at what's there. But we've been very pleasantly surprised by both, you know, the sort of quantity of the response and also just the tenor up it. We've had a lot of people come out and talk about why they believe in substat why they think this thing is

important for the world. I love seeing that twelve percent graphic at the start of the thing, the twelve smartest percent. It feels like this thing is really is really going. But what about that We've been blow away the questions that are being asked of you, though, Chris, more transparency, there's always I mean, I've been there reporting on when the bond market started to open up to retail investors in the UK and everyone said, well, it's because I

can get more money more cheaply. Basically, people the investor isn't as institutionalized and therefore doesn't ask some of them

more nuanced questions. What are you saying in terms of I want to know your costs, I want to know your revenue as substack totally And you know, the fact of the matter is Substack is a private company in a very competitive market, and a lot of the writers, the people on substack are not just members of the public, but a lot of them are reporters themselves, a lot of them people that cover the industry, and so we've had to think of everything we release as becoming public.

So we've been pretty thoughtful about how we've done that. We've been stuck at releasing everything that we need to release as part of the REGCF. Other than that, you know, we've been we haven't shared a time. And the pitch that I've been making to people is really like, hey, investing in startups in general, any startup, even a great startup like substack, is a risky proposition. You can lose your whole investment. It's not a thing to do sort of lightly or with money that you don't want to

make up. I'd be giving a little bit of a kind of an anti cell for folks on that front. I want people to come if it's something that they want to be a part of, if it's something that they're seeing the benefits of and they believe in. We're not trying to make it. It's it's not an appeal. I'm not trying to be Bernie Standers here saying, you know,

please give us your money. This is an opportunity to be part of this thing if you want to, well, christ look, an investor's risk appetize is often driven by data. There is some data out there. Reportedly, you did nine million dollars of revenue in twenty twenty one. How did you do in twenty twenty two? Better? But I won't talk about it. Oh, come on, give us a sense of size of scope. You're trying to appeal to investors here, and you talked about the need to be transparent, have

public facing data. Just explain to us the health of the business. How did it grow in twenty twenty too. We've gone over the numbers about growth on the subscriber base. How did that translate to performance for the business. So we had about thirty five million active subscriptions, now we're about we're about two million Paige subscriptions and the top the top ten publishers on substat combined to make twenty five million dollars a year. Those are the Those are

the numbers we're sharing. If you could have raised through VC, Chris, would you have done Sorry I missed that. I think we go ahead. Yeah. Would you have fund raised through venture capital if it had been there last year this year? I mean, we know, I know that you're saying this is sort of this perfect way of building your momentum, getting people to come on board and invest. But if Venure Capital had been and was still awashed with cash and we hadn't had interest rates rise, would you have

raised with VC? If the money had been there, and the checks were easier to be written. I understand the way that we've been thinking about this is we have sort of tuned the business not to rely on outside capital given the state of the market. So we're in a place where we have a path to doing the mission we set out to do, kind of regardless of what's going on in the market, whether there's further outside investment,

any of those things. The way that I look at this is we can be a little bit, you know, work with the situation that exists in the market. You know, if there's opportunities to get more money on favorable terms. I think there's ways that we could use that to accelerate. But also we don't need it. I mean, this is a business that fundamentally works, and we have a path to building it with what we have. Chris, we started this segment talking about where people are going through their

news US bloom Bag technology, social media, substack. I think you're working on substack notes, which too many seems to be an attempt to offer something similar to Twitter. The way I think of this is that the I think the era of the social network as we know it

is ending. I think that a lot of the social the online media platforms, the twitters, the facebooks, the Instagrams are sort of pulling in this one direction, right The ad supported business model is kind of forcing everyone to turn into TikTok that's in that world, and I think it creates this huge opportunity in a different direction that's not about kind of like grabbing eyeballs and attention at all costs, but instead is about, you know, making things

that people deeply value, letting people connect to things they trust. So I think all of online media is basically either going to have to turn into TikTok or is going to have to turn into substack in the next little bit. And substack notes is sort of our play to bring the easy sort of sharing, the short form, the ability to recommend anything to the subscription network that is substack, and we're tremendously excited about it. South Tax CEO Chris Best,

thanks for joining us. Meanwhile, coming up, could some American investors be funding China's answer to Open AI? We'll have more on that pretty heated debate that's playing out all over the likes of Twitter with Lightship Capital partner Brian Raquin. And we're also talking about Savvy Games Group, part of the Saudi government's public investment funds. It's agreed to acquire game publishers Scope Plea for almost five billion dollars, the

company has said yesterday in a statement. California based Scope Plea, publishers free to play social games, has raised money multiple times over the years, actually often grown through acquisitions from New York, from San Franciscosi Bloomberg some breaking news. President Biden administration is going to propose the toughest ever auto emissions rules, basically to spare demand for electric vehicles. This has been something that the pressure was on, not only

from the US but geopolitically. Ed, you are our EV expert, certainly on this show, if not the entire network. Talk to us a little bit about why wissing this sudden focus on evs in particular. Yeah, the reporting here is really important. Biden is stopping short of an outright ban on production of gas powered vehicles, but toughening the mandates.

You have to remember that under the Paris Climate Agreement, the United States has to cut its greenhouse gas emissions from two thousand and five levels by fifty percent from the end of the decade. Joe Biden also has a personal goal to have fifty percent of all new cars b electric by twenty thirty, so this is him acting on We believe from sources that the announcement will come formally next Wednesday, after the long weekend, but clearly some

action here and coming from Detroit. Meanwhile, all the automakers are basically here in New York, and we've heard of all the supply coming in terms of evs. But it's difficult, this isn't it. Basically Test is already there in terms of production, but it's taken some time for some of

the legacy in to makers. Yeah, competing forces depending on who you are, Right, if you're a legacy automaker in Detroit and you're transitioning from combustion engine to what we know is those OEMs have asked the administration for more time, an extension of the requirement deadlines. Your tesla, it's the opposite. You're like, hey, we're already in the game. Here be tougher. And that's what Tesla I'm sure in the corridors of the White House has been calling for. Suddenly, some geopolitics

at play when it comes to the Binder administration. In fact, there's geopolitics at play in general when it comes to AI as well, and we're going to dig into that now because there's mostly a bit of an arms race going on, isn't there between the US and China? And it seems to be gaining a momentum as after open ais chat GPTEAM really has taken the world by storm

last year. Now venture capitalists are starting to raise some concerns that US investors, US money and venture capital could be back in China's best hopes in the field in terms of a competitor. Now the debate is playing out all over Twitter after The Information reported yesterday that institution investors from America are backing Chinese based venture firms with dollars to put into China's top AI startups. Brian Broquin's general partners over at Lightship Capital, it's one of the

vcs that's been taking part in that very debate. You're joining us now, Brian, great to have you, and so tell us you're concerned or not concerned by some of this hyperboly. I am ringing the alarm overright. AI requires the AI arms ratio, as you describe, it, requires capital. It's a very expensive endeavor. And so for the idea that a venture capital firm would take money from investors in the US send into China to build a product

that could be used against US interests makes zerial sense. Okay, demystify from that perspective therefore, whether the money should be being pulled back from privately positioned businesses. But also we were just talking about how Ali Barber, for example, is set to as soon as next week unveil its own competitor to chat GPT. I look at who the biggest shareholders are of Vali Barber and well on the American Depository received perspective, it's Goldman, there's Morgan Stanley in there.

Should they all be giving up on backing some of these public companies? I think in general there's opportunity other markets understood its capitalism. We agree with that. But there are certain technologies. For instance, Intel makes chips that can be used in North Korean missiles. No, we don't allow that in the US. This is exactly the same US capital and also US no, how shouldn't be used in creating these a actuals because how do you make an investment?

You actually have a responsibility to make sure that company is successful, and therefore you're helping to make sure the China successful. And it's interesting that certain names within the VC community were highlighted by this information piece, in particular because they have venture arms in China. One of them really spoke out on Twitter. Yeah. And the idea here is that Sequoire has come out one of their partners on Twitter. I think we'll show out on the screen

now instead, Sequoire China and Sequoire are different. The headline is misleading, Brian. Let's go back to the point. Investors have been going to China tech for a long time. This is specifically an anxiety coming around artificial intelligence, right, Why why is AI so problematic? Well, I enter both things on the different arms piece. When Sequoia is out raising money in China, saying where Sequoia where the brand? We know what we're doing. We can build the best companies.

That's why you're going to give money to either arm. So though they may be legally separate entities, it is literally one strategy to create the world's most successful companies. In this case, that's an issue. And to the second point, like why is this so dangerous? I often describe AI as like dog years, right, So it's not aging year by year. Every year's three or five or seven years, and so only a couple of years from now what they're creating could be used to create a surveillance state,

not just there but also here. Brian, you are an AIX, but you can sider yourself an AIX. But I think your prior successes include the sale of an AI company you founded. Are you worried that this is just the threat of competition from China outdoing what's happening in the United States. There's certainly that's certainly true. But the way the Chinese companies go about the AI space is different.

I remember when I started my company in Cairos, we had the number one source of attacks were from China. Number two sorts the attacks were from Russia, constantly trying to get access to the data so they could then use that in their own uses. They do not have the same approach toward the morality around these technologies that we do in the US. In fact, we've seen some issues with the morality, the ethics, the speed of development

here in the US itself as well. That open letter coming from hundreds of signatories wanting a pause on AI development here in the United States, Brian. From your perspective, therefore, is the US at risk of losing this battle versus the Chinese? And what more do you want put in place from a federal level, even I think it's a

good point there. You know, our house and our hands are our clean either in the world of AI, we can do better, we can be better, but there is a process in a system that can allow for an improved AI. We're having those conversations now with morality leading leading the goal. Oftentimes in China these are not conversations or their conversations held in back rooms. And I think that's, you know, one of the challenges. What about the reverse.

I know that we have Syphius in this country, But are you against say Saudi money or Chinese money coming in and investing in the AI field for US based startups. No, I'm completely inconsistent on this matter. I would I'm happy to take those dollars here and to use those you know, and into our framework. That said, I wouldn't want those technologies to be exported back to Saudi or back to China and used for human rights violations. From your perspective, Brian,

what stops this because in many ways. If you're seeing it from a negative perspective, US money going to China, you're already saying, Look, Pandora's box has been opened. People went out there did joint ventures with China because at that point everyone was trying to build a more global and globalized state of capitalism. How do you unwind that? Yeah, I think China's evolved over time, as has the American position. I think you're seeing both on the right and the left,

real concerns around TikTok and other platforms. The genie is out of the bottle, certainly, but in this case it's not too late to put it back in. Regulation can put us where we need to be if we have the strength to put it in place. Lightship Capital partner Brian Rocquin, thanks for joining us. Impact on jobs is real, but it doesn't have a super intelligence that will have

a mind of its own. It really just it's the next word, because that's what you're asking it to do, you dot Com ceo Rich As such, they're talking about how basically apopalyptic scenarios around AI pretty unlikely, which is just the subject of my Business Weeks piece today about how the real risk of AI development might be more

well closely into disinformation. Brobot Business Weeks, Max Chaffkin, I'm pieces say, is joining us to run through this hype around the intelligence part of artificial intelligence seems to be a little bit making it more of the hype cycle. What are the real issues? Do you think? Yeah, so it's kind of telling that the people that many of the people who are most worried about these technologies are

also the people who are selling these technologies. And you can kind of see why, because if you're trying to sell something, it's very useful to say this might be too powerful, might be too scary. Now, that's maybe a cynical way to look at it, but as this piece points out, I think the kind of conversation around AI overlooks the issue of misinformation, which I would argue and I think many others argue, is the real concern. So we're not talking about superintelligence taking over turning us all

into paper clips. We're talking about our social media, our search engines, basically all of our information consumption being flooded with garbage or stuff that kind of looks real but not real. So you think about junkie search results, junk fake stuff on social media. That's the sort of thing. Max, Caroline and I have had signatories to the petition on the show, and they don't even agree that a six month pause would work. Is there anything that they do

agree on, whether they were a signatory or not. No, I mean, I think that what's interesting about the petition is it brings together a lot of different voices, some of whom are would more express the critique that I'm expressing, and others who are expressing this apocalyptic thing. And that's one of the reasons why I'm not sure this letter has been particularly useful or will change a whole lot. That said, you know, there is a possibility of regulation.

I mean there are hints of that, you know, coming from the US government. You could imagine a situation right now where the US government is worried about takeover, but something smaller. It's got us all talking about it either way. Bloomberg Business Week's Matt Chafkin, thank you. That does it for this edition of Bloomberg Technology. Caroline, Yeah, short and week. We're off tomorrow. Go have a relaxing time. If you're not working too, don't forget to check out our podcast though.

We've got a few minutes to spare. Find it on the terminal as well as online on Apple, Spotify, and iHeart from New York. From San Francisco, this is Blomberg