Bloomberg Audio Studios, podcasts, radio news from the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Live from New York and San Francisco. This is Bloomberg Technology. Terrify anxieties are not going away with President Trump's global levies going into effect today, including those eyewatering one hundred and four percent tarifs on China. This is both China and the EU fight back with counter tariffs on US products. We cling to gains, but we fade this rally hard quickly. We're only up about a tenth of a percent on the nasat one hundred, after we managed to sell off
yesterday as well. And it feels as though the magnificence sendmen trying to claw on Ed but no longer what you got on the micro.
I want to go to a story that Bloomberg Spencer Soaper broke in the last thirty minutes. That is, Amazon has started canceling orders of inventory on specific products made in China. I'm talking consumer electronics, household goods. It didn't do much to change the fortune of the stock. It's higher, as many Mag seven names are, But that is an interesting, real time, real term story about the impact of tariffs that are now implemented right elsewhere. There's buoyancy in some
of the MAG seven names. Apple in particular for now emphasize the for now why because at one point in yesterday's session, Apple was hired by a similar level closed down more than double that five percent. There is a function on the Bloomberg terminal ECTR. It's our trade flow map. The data is backward looking. We care about the relationship between US and China. There is a trade deficit. The US has a trade deficit with the US and China.
And later in the program, when it came to tech, it is so important to discuss that number two hundred and sixty billion in twenty twenty three. We know from prelim data it went up in twenty twenty four. And we are talking about a US reliance on Chinese computers, consumer electronics, hair dryers, electric heated blankets, and that ties into that Amazon story that spent so sober broke.
And Amazon just turned negative as you were talking about at ED. Let's just get the perspective of the global trade war heating up China the EU both retaliating against US tarifs. This is President Trump aims to bring back manufacturing in America, setting all his eyes on.
Apple jobs in advanced technologies. The President is looking at all of those, he wants them to come back home.
But iPhones specifically, is that's something that he thinks is the kind of technology that can move to the US.
Absolutely, he believes we have the labor, we have the workforce, we have the resources to do it. And as you know, Apple has invested five hundred billion dollars here in the United States. So if Apple didn't think the United States could do it, they probably wouldn't have put up that big chunk of change.
Well, as we all wait for more US made products, Amazon meanwhile canceling orders on some China made goods. So, according to sources and those Cadie Nines joins us from Washington, and at the moment, the response is a coming thick and fast, EU and China. What does the White House.
Make of it?
Well, the White House is sticking to its guns here, Caroline. President Trump, while he has indicated he wants to make a deal with China, wants China to come to him and at this point, it doesn't look like China is willing to have those conversations, as they have retaliated with this eighty four percent tariff against all US imports in exchange for one hundred and four percent levies the US
implemented as of twelve oh one am this morning. So obviously an escalation in the trade war between the two largest economies and potentially has the ability to choke off the vast majority of trade that happens between the US and China. Already we're seeing, obviously our reporting on Amazon cutting off orders of things like air conditioning units or beach shares. That is changing company behavior in terms of
where they want to source their inventory from. But it also has the potential ramification to affect whether or non American can access supply of things that don't easily have
alternative suppliers to China. At the moment, according to data from the US Trade Commission, things like laptop computers for example, PC monitors, gaming consoles, all of that has about a seventy percent or more share of imports that come from China specifically, so that is where you could start to see some gaps emerging as this depending on how long this continues, but the administration argues all of this has an aim, and that aim is to bring back American manufacturing.
As we just heard from the White House Press Secretary Caroline Levitt, but we've heard from others and the administration as well. If you recalled, just this past weekend on Sunday Morning television, the Commerce Secretary Howard Lutnik talked about the army of millions and millions of people screwing in tiny little screws and iPhones. He says, that's the kind of thing they're bringing back to America.
That aim is so interesting because for the last twenty four hours I listened to everybody on Bloomberg Television, read every story, and I think the market still thinks, what is the aim here? Is it revenue generation for our country? Bring manufact uring back. I usually would like to go to the politics. I think I'm right in saying that away from tariffs, President Trump has not yet spoken to President she at any point since he took office. Am I right?
He has spoken to President She and he actually invited him to his inauguration, but there hasn't been a conversation really since this escalation of the trade war. The initial tariffs that went into place regarding fentanyl, which first of course was ten percent and twenty percent, then the eighty four percent on top that has gone into effect as of midnight tonight, But there have not been direct high
level talks between those two leaders. That there has been communication at some lower rungs of the Chinese and US
government when it comes to trade. I guess we'll see if that phone call is scheduled, because again, the President and others in the Administration and White House have made clear he is looking to make a deal with China here, and we understand based off of our reporting and as well as what the White House is saying, that there's some seventy countries that have called into the White House to try to begin negotiations. It's just not clear at
this time that China is one of them. In the meantime, the Administration is our arguing that China fundamentally has been messing with the US on trade and has been engaging in unfair trade practices for years, and that is what they are trying to reverse, which is one of the reasons they use to justify tariffs. That it's not just about bringing back American manufacturing. They also think it's about lowering trade deficits with the US making trade fairer across the globe.
In addition to the.
Revenue raising aspect, they also argue would be a benefit
of this. The thing is, if you have tariffs of this level, like one hundred and four percent, that is likely to reduce important volumes according to most economists you would speak with, and that means less imports that you actually can tear iff, which actually could mean that you're not bringing in the kind of revenue levels you would think that you wil Bloomberg Economics estimates that if tariffs are intact as it stands now, they could bring in
about three hundred billion dollars a year because of the reduction in imports. That's half of what the White Houses argued could generate.
Blimbers K lines, we appreciate it, Thank you very much. Let's get more on the global tech markets perspective amid
what is an active trade war? A Sema Shah, Principal Asset Management Chief Global Strategists, joins us, Now, when you think about the mag seven, let's say Apple in particular is an example, right, are you preparing for that Scenariokaylee outlined, which is the onshoring of jobs in this country or is this more about pricing in modeling a fundamental change in how the world does trade effectively.
I think everything is on the table at the moment. I mean, one of the things that Cody was talking about with regards to having a lot of those other jobs that go into making the parts something to move to the US, I mean one of the clear impacts of that is the US has got much much higher wage wages than parts of Asia, So you would be looking at significant increase in cost brushes for these companies for the mag seven impact on their margins and therefore
on their earnings growth potential. So there are so many offsets of this, so it makes it quite difficult to even fathom that you could see this complete alteration and change in the way that I think the world has got accustom to thinking about trade and a product. But this is all encompassing. Of course, It's not just technology. This is about every single product that you think through.
Because of global trade, every single part will have elements of different countries about them, and shifting it back to the US is simply very inflationary.
I want to show the earnings calendar for the mag seven and those names that have asteriskness to them are still tensative right. They haven't confirmed the date. But there is a split in the market I see this morning. Many believe that we won't see a bottom in equity markets until we have earnings calls and a revision to guidance that's been given, or a complete removal of guidance. Others say that earnings and guidance is not important. All we need is a strong positive piece of political news.
Where do you stand, Seema, I think we need one or the other.
Either one would be important. I think probably the most important would be if the administration walks back from tariffs very significantly. Then you would see the market centerment improving. And I think you see markets start to write, and not a very very sharp rally, because I think some fundamental damage has been done here, but certainly a rally
in terms of earnings guidance. I think one of the things that we're waiting to see is that, look, if recession really is on the cards, we need to see a more realistic earnings outlook for companies across all sectors, including technology, and it's only once you have that realistic forecast, when you have got that forward guidance talking through what the impact of tarists and this new global environment is, only then can you start to think about where the
floor is. And then once you know where the flora is, then you can start thinking forward.
Why there are people buying if we're not sure where the floor is in the moment, why is Apple in the green for example?
Well, I think one of the things that we've been seeing for MAC seven has been really interesting for US is I mean, from an asset allocation portfolio perspective, we have been trying to move away from the tactical. It's very difficult to be tactical when there's such an uncertain environment, so you almost go back to your strategic positioning. From a strategic perspective, we still like big tech if you're
looking out over five to ten year horizon. Certainly the outlook has deteriorated even on the long term horizon, but it's still fairly important from a global or a US growth perspective. The other part of this is is that typically in this kind of environment, when there is uncertainty, when there are fears about what's going to happen, to
economic growth. You want companies which you've got the big balance sheets, the positive cash flow, the fairly large motes around them, and the Max seven dies still come into play. And you've already seen a very significant valuation rerating in the past couple of months, which means that at least the Max seven the big tech companies are a little bit head of the game in terms of having a slightly more realistic pictures attached to them.
It has to be said Apple having its worst four day sell off since the year two thousand, many saying from an RSI perspective relative strength index, it was over sold. This must be the point at which you pick up some of these shares. But seem who are the investor base right now who are willing to buy into big tech? You yourself sat in London. Are international buyers still coming in? Are we seeing it more from not only funds in the United States? For example?
I think we have seen some retail invest is studying to do their feed in them. They really believe in the brand's perspective. So I think that's where you're seeing a bit of a dip bike. But as I said, you know, I mean the other thing to consider is that whilst you do start to see if we see some positive headlines coming through which can be sustained. Again, these are the companies which have got that long term
earnings potential. So I think people have got an eye on the idea that there could be a walk back at any time. May not come, but certainly could happen at any moment. So people do still want to have exposure to these companies that can potentially ride out what would you most likely be still a challenging economic environment for the coming months.
There's this note from Bank of America out this morning that says a US bill typhoon could cost ninety nine zero percent more than it currently does. But that is a goal of this administration right bring jobs, manufacturing, jobs in tech back to the United States or to the United States for the first time. Is there any upside or sort of silver lining or bright outcome that you see with this tariff's process.
I'm not sure if there's.
Well, look I think over a long term perspective, you know, a four or five year period, then maybe yes, there could be some positive. You would have maybe a US economy which is a bit stronger, you have a manufacturing base which is more formidable, you have less reliance on external partners, so that would be the positive, but it really comes through in the longside. It's really in the short term that you start to see this additional pain coming through. So I think it's challenging to see some
really good positive news coming through. I guess the one thing is though, is that you know to that point where an iPhone could be significantly more expensive, that inflation pressure just puts upper pressure on the long end of the yeelk CUB. We're already being seen that playing out in the last couple of days, and from our perspective, that may be the pressure point from the Trump administration.
They have repeatedly talked about their focus on treasury yields, so maybe this is what necessarily pushes them back from the edge and you could see some negotiations coming through in the next.
Couple of days, or of a bio straight on the bond market. At least, yealds up about nine basis points in the ten ure. Simashah and Principal Asset Management, thanks so much for joining us.
Coming up.
Look as companies they race to adjust plans amid the trade tensions. Neither the US or China appears to be backing down. We'll have more on the impact for the tech sector. This has been their technology.
China's paid almost seven hundred billion dollars in tariffs under me, and then they say Donald Trump hasn't been tough on China.
Meanwhile, Apple's lost about seven hundred billion dollars worth of its market cap since the tariffs were imposed. Let's get more on what the one hundred and four percent tariffs on Chinese goods could mean for the tech world, and of course the eight percent counter tariff on US exports to China. Riva Gujano's with US director for Roodium Group Riva.
It's really interesting to understand how supply chains are going to be impacted by all of this, because we know that in many ways China is the assembly point for apples. Some of the products in an Apple phone are actually made in Kentucky and ship to China and then ship back to US. But ultimately, are we in a game of chicken when it comes to US China tip for tat right now?
Well, yeah, at one hundred and four percent tariffs, I'd say so. And so yeah, there are loaded assumptions on both the US and the Chinese sides over this trade war. Each side believes the others, in the weaker economic position that the other one will fold, and Beijing at this point is basically saying bring it right. They're counting on
US inventories to get shaved down. People checking their Amazon orders and seeing that they're not coming through, going to Walmart, seeing their shelves empty out, and so at that point, this is obviously going to force a conversation, but to what end. Right, there's not much fodder for real negotiation here.
You could have some sort of a reset, maybe getting back to let's say fifty four percent tariffs, but that's not much of a win here right after this scale of disruption, and already supply chains as you as you mentioned, are going to be greatly disrupted.
We've heard time and time again that the US thinks China wants to make a deal. Do you think that ultimately it does that we ever get to a better outcome in this scenario, because there are companies currently locked not knowing what to do in this scenario as to whether the tariff's a short term a long term.
Look, China would of course love a real negotiation with the US that spans into other domains as well, to say, for example, okay, if the US wants to reduce its trade deficit with China, then fine, let's talk about large scale purchases. Let's talk about importing more in video semiconductors, for example, which would in part then blow apart the
export control regime. You can see how Beijing would be angling for that now with that happen, I think that's very low likelihood because remember we're just talking about a
conflict spiral in the trade domain right now. There is a whole other layer here when it comes to the tech controls trajectory escalation on that front also, so how China is getting more creative with its own retaliatory toolkit, which is going to put multinationals in China, particularly tech companies, in a very difficult position in the months ahead.
So I want to stay on this point because for the technology industry, tariffs are one tool or policy point, and the export of technology and the controls and those exports, as you point out, were the most significant prior to last week. Do you expect both to increase? In other words, where we see further specific controls by the United States on cutting edge GPUs and other technology.
So attention span is a question right for the current US administration, We'll have to see you as BIS under commerce is starting to ramp up, is it going to have the latitude to patch up export controls? For example, there have been pending controls to expand chip controls to cover for example, in VIDEAH twenty chips in the wake
of deep Seek's big breakthrough. But there's more than that, right, there's a bigger conversation around how do you evolve economic security standards that effectively exclude China from AI infrastructure build outs globally. So there's a lot more that's coming on the tech front. And meanwhile, China's looking at a number of retaliatory tools where it's singling out US big tech companies as well.
It's REVA. How do you interpret China's responses China's actions.
In this, Yeah, so a few things, right, So when you look beyond the tip for tat on the tariffs, right, China's doing some interesting things where, for example, in it's implementing provisions for the Anti Foreign Sanctions Law, it's talking about countermeasures that include suspending IP rights for US companies in China. That's explosive. Right, if China goes down that path,
that's a very slippery slope. That's something that's going to spread alarm, not just to US companies, right, but Japanese, European everyone, once you start to break apart those norms. Moreover, you know, China has its anti monopoly arm sammer that has veto power over a number of strategic m and a around the world. There are a lot of strategic deals that are supposed to be struck as a result of these trade wars. At least that's the intent of
the administration. We still don't know, for example, what's going to happen with Intel and TSMC. Right as Intel has been struggling, do you really think that the US is going to recognize the Chinese veto over a major merger that is based on national security arguments? So we're already vearying toward this conflict of law conundrum on that front, as well as on the IP front, which again is a very slippery slope for tech companies.
With Gujon, director at Roodium Group, really great having the show.
Thank you.
President Trump's AI promises. They started strong with the announcement of a five hundred billion dollar style Gate infrastructure project back in January. Remember, but his new Liberation Day agenda looks set to undermine those earlier AI ambitions. Bluemberg Opinion columnists Daily writing, the Trump taroff agenda risks a cascading
effect that will drag down the America AI effort. The new economic order could force the American AI industry to compete on China's terms rather than harness its own strengths. Davely is with us now. And when you say compete on China terms, ultimately it's about forcing them not to have access to the most sophistic GPUs and therefore having to do more with less. We become more Deep.
Seek absolutely exactly like Deep Sea. I mean, you remember when there was the market sell off when deep Seek made its arrival because everyone thought, wow, China knows how to do this more cheaply and with less computing power and so on. But the American response, and the response that we got from the likes of Saturn Adella at Microsoft was don't worry, because our differentiate is we can do this on a bigger scale with more computing power. We can serve more people, we can do more inferencing.
You know, the powering of AI once you've you've trained it. Now if all of that gets more expensive, which these towers seems set to do, then all of a sudden that advantage doesn't go away completely, but I think it becomes just harder to deploy, and it could take longer
to deploy it as well. So I've had, you know, I've talking to a number of people who have said, maybe if you're a small startup in the space, you might be thinking maybe we could try and become more of a deep seek than you know, an open AI for example.
Well, your core point is that the ability of a Meta or an Amazon or a Microsoft to invest was built on its core businesses and that is where the uncertainty impact comes. I think at least.
Yeah, absolutely, And last earning season, all of these companies came out and said and shared their capex plans for the year, and they were huge. I think I tossed up at one point more than three hundred and fifty billion dollars that is going to be spent on data centers and you know, getting more energy and so forth.
That money, even if they keep at those levels, which I think is in question, it's not going to go as far because building these data centers just got considerably more expensive, even though the sort of core component of the semiconductor right now is the subject to a tariff, although some are speculating that it might be in the
not to some future. So yes, and all of that spending was concocted and agreed to it, you know, backed by investors on the basis that companies like Apple have the iPhone and it was a rowing business, or companies like Meta have this great advertising business that just prints money. That may not be the case anymore.
Daily a Bloomberg opinion, it's a must read today. Liberation day, Thank you very much.
This is like uncharted territory we are talking about here.
It's really tough to be a technology You have to wear a company right now.
I think the more significant area that is a factor is the Asian nations to have deeply and better supply Chaine.
Obviously, Apple is more of a because of the tariffs and what they manufacture in China. Right the rest of the MAC seven, more of the communication names. They're a little bit better space, but it's not as if anyone's in great space.
From a valuation perspective, I think the good news is we don't have a valuation problem in tech.
Mega SIN seven is something like fifty five percent of profits coming from overseas, So while they have a lot of secular AI driven growth, they also tend to have a lot of international driven growth. So we don't really see MAG seven coming back to the fore. If these tariffs stick.
Big tech has massive recash flow generation, even if we kind of discount some of the tariff issues at hand.
Right now, that's what some of Bloomberg Television's recent guests had to say about the impact of tariffs on the tech sector. And this is what markets look like right now. Way off session highs on the Nasdaq one hundred, you know, I go to the NAZDAK one hundred cause concentration of tech. But then as that Golden Dragon China index really interested US, listed ADRs of many Chinese technology companies been higher two and a half percent now lowering the session, and we're
trying to digest China's retaliative measures single names. This is what we're looking like in the green. Apple continues to push hiring. Caroline made a really important point earlier prior to this session, four straight days of declines where Apple experienced its biggest drop since the year two thousand. That's important. We should keep saying.
That, KARC.
We should. But also what's interesting in another data point that you and I saw today, the PC shipment data, it actually grew the fastest quarterly pace in four years. Has has companies stocked up inventory ahead of tariffs? Look desktops, workstations, portable computers. They rose more than nine percent, according to
market tracker Canalis. For more on how these tarifts are impacting tech supply chains, We've got the perfect guest, David Warwick, executive vice president over an overhaul a supply chain visibility and risk management company, who work for Microsoft for years overseeing their global supply chain. Have companies how long have they bought in terms of inventory because they seem to see the risk while investors didn't.
I mean, and I think everybody has known this is coming at some level, and so what they've been trying to do is they've been trying.
To prepare as best they can.
And you know, even this week, you know, in the last seven or ten days, what we've seen is an increase in rates for air cargo coming out of China, which means that you know, supply is drying up a little bit, and people are still trying to move as much product as they can before they were impacted by tariffs.
So I think that companies have tried to be smart, They've tried.
To position themselves as best they can, but I'm not sure that anybody actually saw the sheer extent of these tariffs and what it would mean.
You are currently still advising the Microsoft's the dicens. I go to the data that shows that China is basically ninety percent of all consoles coming from China to the United States, and I'm interested as what on earth Xbox executives do at this moment. Are they thinking, Okay, longer term, we shift our supply chain even further away from China, or do they just ride this out in the short term.
I think that it's a very challenging situation to be in.
I think that, you know, the advice that I'm giving a lot of companies right now is basically to hurry up and wait and making a strategic decision today could fall apart very quickly within the next week, as we've kind of seen over the last month, Caroline, you know, we saw the Mexico, Canada dispute. We saw a lot of things happening there very quickly. If you'd made a strategic decision to move everything overnight, you could have been caught on the wrong side of that.
So right now, I think that you know, it's not just the consoles.
It's not just PCs, it's across the board, And I think that companies have to be really, really thoughtful in terms of their immediate next steps versus their longer term strategies. If the tireff stick and if we have to ride out this entire storm, it's a different set of decisions that you would make if you knew that this was going to happen for you know, maybe three months and then start to taper off.
So it's a very challenging time for.
Supply chains and trying to figure out the short term versus the media term versus the long term.
David, explain to our audience how an iPhone would be built or assembled in the United States and what the price impact would be based on your experience.
That's a challenging question, Ed, I'm not sure you know, I'm not sure that I understand the full extent of the Apple supply chain. But look, you've got to understand that this is not about just moving a manufacturing plant. This is an ecosystem. The tier two suppliers, the Tier three suppliers have all built up over time around those specific factories in China.
Or in Vietnam or in India, and.
It takes time to develop that ecosystem. So what would it take. Well, you have to build a factory. Then you have to develop that ecosystem to be able to supply that factory. You have to source your raw materials, you have to source your semi finished goods, your sub assemblies.
And bring all of those in. So this isn't just flicking a switch.
And you build a new factory and everything starts up again. It takes time to build that ecosystem them and to make sure that your supply chain meains intact from a quality perspective and everything else.
That was a pretty good answer, David. To be fair, I think that sums up well. And I know Tesla in its local supply chain in Shanghai has a similar situation. What happens in four years time if there's a completely different administration in the White House and all of the tariffs get undone and the executives at the companies you advise decided to do something extreme in adjusting their supply chain here and now.
I think in the first case, I'll be a little bit bored. If at all reverses, then you know, I'm not sure what I'll be doing every day. But you know, I think that this short term versus medium term versus long term, I think that that is where we're caught in a trap right now, whereby it's very difficult to make that long term decision because to your point, a new administration could decide to go in a very different direction from a trade perspective, and so supply chains have
to be cautiously. We were taught some lessons over the last five years through COVID. We realized that our supply chains were ultimately fragile, and we had to find a better way to build some resilience into those supply chains. So we diversified a little bit. We started to move manufacturing to other countries. We started to do very sensible things. Did we do that to the level that we should
have done it? Maybe not, Maybe there was more room to actually move things aby, But I think supply chains now you know, we are problem solver. Supply chain practitioners are designed to solve problems. This is another major problem. Call it a gray swan or a black swan. It's another major problem that we have to deal with. It will force a change in terms of high supply chains. Think high supply chains are engineered over the coming years.
And ultimately you might have tried to front run by moving out of China as many have take it Apple more into India and Vietnam, and ultimately they've been tariff too. I mean, of course to a less extent when it comes to India. But longer term, then are we seeing companies willing to hit the margin when you've got a record gross margin of forty six point nine percent for Apple recently. In the short term they swallow it, David,
Is that what Dyson's and Microsoft do? They take the hit until they get long term charity.
I think in the short term, any supply chain will look at what can be done. So if you've already diversified to some level, and you've moved production to more friendlier tariff countries, you would look now to say, is there any excess capacity available? Can I move maybe from a China to a Philippines or to Malaysia to reduce some of that tariff burden.
However, you know, the longer term.
Is going to be Okay, what does a tar friendly country actually look like?
Have we actually moved the dynamics too far?
And you know, we're all hoping that this will actually roll over. We are all hoping that the president will do as he says and he is open to negotiation, and the countries are coming to the table. We've heard today, South Korea, Japan are already coming to the table.
From a supply chain.
Perspective, we're hoping that common sense will prevail and there will be a more balanced trading agreements set setup trading agreements put in place in the coming weeks and months, which will alleviate some of the current pin but it still doesn't take away from the longer term strategy nine needs to be figured on, and that's what supply chains are going to be working hard to do.
David. I'm going to make a really pointed question on many of the executives you're talking to taking it seriously that they need to build or assemble in the United States more fully, a lot.
Of executives are certainly having the discussion, they're looking at the implications of obviously the capital cost and also the timeline is involved. You know, setting up a factory in the United States to manufacture in the United States.
You don't do that overnight.
And then, as I said earlier, it's the ecosystem which is the really important part. How long will it take to actually, you know, bring all those things together.
I answered a question earlier.
On this week in a different interview where somebody said, hey, you know, for a American med products, how are going to be impacted by the new China tariffs?
And my question to that question.
Was, well, what do you mean by American made products? You're talking about chocolate in this instance, you know, where does the coca come from to make that chocolate?
It in itself is subject.
To a tariff coming into the US to manufacture in the US.
Supply chains are complicated. Supply chains are.
Very very complex elements, and so figuring these pieces out is everything that executives are doing right now to understand the impact but also to understand what can be done next.
Hair dryers, toasters all come from China as well. David Warwick from Overhaul, really great conversation. Thank you for joining US.
Care now coming up. We're going to get the VC the private market perspective. Ben Lahra is with US VC firm Lara Hippo is actually just closed a mammoth two hundred million dollars round for a new fund. Amiddle this uncertainty, how they do it? This is a broom, big technology VC firm. Lara Hippo is just closed a two hundred million dollar fund. It's ninth early stage one. This is vcs and startups faced Tarif anxiety, many opting to pause plans for IPOs. But yet the conviction is there from LPs.
Let's talk about why Nara Hippo managing partner Ben Lara joins us. Now, Ben, how did you get this over the line in this current environment?
Yeah, I think Look, one of the one of the things we're proudest of is that we, over a long period of time, have been really consistent and I think pretty disciplined. We do one thing, we do one thing well, which is true early stage investing. And so while markets rise and fall, and you know, lots of things outside of our control happened in the background, we don't tend
to get sucked into sort of hype cycles. And and I you know, it's sort of been reflected in our returns, and so we're fortunate that LPs continue to support us, and you know, we're but let's say, we're happy to have this behind us.
In this book, Ben, you know, we've discussed for many years how early stage companies and their investors are more like insulated from public markets and macro events until what happened with Silicon Valley Bank and it became about operational cash flow. Right, But you're still doing a new fund. This report's about andresen doing a very very big fund. Just talk to me about that environment more specifically at the early stage.
Yeah, And actually I think the SVB crisis was for certain funds a wake up call where you know, that was sort of coming out of a hype cycle in twenty one where money was flowing very freely. Companies were raising lots of money and chasing growth at all costs.
And I think even for us at LH, we took a moment to be very introspective and say, are we on a company by company by company bases making sure that folks are being really responsible and not falling prey to lots of late stage money chasing hot companies and
driving some not great behaviors. And right now as we sort of enter another moment of prices, I think that some of the learnings from from that last significant sort of blip have set at least our portfolio up in a way where we feel like we have arms around every company in the portfolio, where companies on a quarter by quarter basis are burning less and less are being are just taking more responsibility for building really sustainable long term businesses and falling a little bit less sort of
a victim to getting on the late stage VC, you know, sort of hamster wheel.
Well kind of companies. Where are the companies? And how much of an unlock has AI been? Because what I here's my in box all the time right now and is discussed in the zeitgeist, is you don't need to learn how to code anymore. You know, previously, if you pitched at Y Combinator or something and you didn't code or have anyone your team that was a computer science that would be dead for you. That avenue. I think that's changed, right, Yeah.
Look, I mean our goal has always been sort of to find great talent as true early stage investors. That's the key to every investment that we make, and AI is going to be an unlock in every single industry. And frankly, if you're not leaning in incredibly heavily to AI as an existing business or certainly as a sort of Denobo startup, you're missing a huge opportunity to create efficiency and move faster. And the tools that exist now in terms of you know, helping companies code and build
product faster are unbelievable. There are companies in our portfolio that are writing less than five percent of code by hand at this point and are really just prompting and managing third party AI software who are helping them with
much smaller teams, create unbelievable leverage in their business. It's really exciting, but it's also terrifying because it's moving so quickly, and you know, we're kitting ourselves if we know how this all sort of where this land and where the value falls and what is owned by the big large language models and what's going to be owned by application layer companies, and so you know, we take solace in the idea that we're going to back incredible people and
they're going to navigate through this challenging environment and we're going to be there to help keep them on the rails.
A big personal fan of ba ble Bar, I can imagine that's the sort of company that's having to think about it supply chains right now. Ben. But I go to that company because many associate you with consumer focused tech, but you are exposed to enterprise. You've got fingers in the fintech space in DeFi as well. You're across the board. But when you're looking at the consumer opportunity right now, Ben, how unnerving is that?
Yeah?
So I think that you know, we've been talking to our sort of scaled consumer companies about tariffs and what the implications of this could would should be over the last several months. I think the best and most mature businesses have been planning for this and have you know, there's there's and have some mitigations in place. But the reality is that there are companies that this is gonna punch directly in the face and and it's going to be unpleasant and they're going to need to figure out
how to manage through it. I think people are also it's just so unclear.
You know that the.
Floor moves by the hour right now, and so I think people don't want to over rotate and over respond and you know, decide that they're absolutely positively pulling out of China on a permanent basis. But it's going to be It's something that companies are going to manage through. People had to manage through COVID, and we saw the best founders handle that not easily, but survive and thrive on the backside of it. And the same is going to happen here. I really believe that the best founders fight.
Away and then you're known for investing right here in New York. Is that still a thesis?
Yeah, I mean we are huge believers in New York. I grew up in New York. We started the fund here in New York on a sort of high level bet that New York has always had unbelievable talent, but twenty years ago that talent naturally matriculated first to Wall Street, and over time that talent now wants to go work in tech. That's the biggest growth area that New York has seen over the last decade in terms of job
growth and company growth. We think it's going to continue, and we again see that sort of overlap of very early stage in New York as a competitive edge for US in a space where we have real right to win.
So we're going to keep doing that.
Ben Lara, Larryhip, it's great to have you back on the program. Appreciate it. Thank you, Caroline. Some news in talking.
Tech, Yeah, time for talking tech. First up, Google ed plans to help developers build AI assistance for a variety of tasks at its annual Cloud Computing conference in Las Vegas yesterday. The company said it would release the Agent Development Kit, which can increase dependence on and revenue for as cloud services. Plus the EU It's just presented a plan to boost its AI industry and help it compete
more aggressively with the US and China. One of the ways Europe plans to bolster regional AI developments is a commitment to build a network of AI factories and create specialized labs to improve the access of startups to high quality training data. And The Energy and Commerce Committee just approved a bipartisan bill known as Take It Down Act, which aims to curb the spread of unauthorized deep fake pornography.
Getting the bill to the President's desk could mark one of the most significant actions by Congress to respond to risks and harms posed by AI ed.
Another news story we're watching, a Meta whistleblow is set to testify before Congress, claiming that the social media giant threaten US national security as it cozied up with China. The former Meta executive alleges that the company brief members of the CCP on emerging tech, which includes AI. Metas denying those allegations. For let's bringing Bloomberg's Riley Griffin here in SF what do we need to watch for? This is going to happen very soon.
Yes, this is coming later today. In Washington, d C. We're seeing Sarah wyn Williams, the author of the best selling memoir Now Careless People, be asked to speak before lawmakers about her what she witnessed the dealings Meta in
China back through her tenure in twenty seventeen. The interesting thing about her prepared remarks, which we've gotten our hands on here at Bloomberg, is that she's going to make the case that Meta's discussions with China have actually helped it in its AI ambitions in this global race arms race that she's describing around AI.
What's interesting is Meta's response has been clear on all of this, Riley, and for example, they've said that Mark Zackerberg has been public about the company's past interest in offering services in China, and details were widely reported beginning over a decade ago. But the fact is this, says Andy Stone, we do not operate our services in China today. What will Meta's response be, particularly in this global environment of US versus China.
Meta is holding firm that it does not offer services like Facebook, Instagram and China. Sarah and Williams, however, will be contending that it continues to make a great deal of its revenue out of China. About eight billion last year in advertising revenue came from China, and so she is making the case that this is a present discussion.
While Meta calls this old news, Sarah and Williams is making this about the here and now and about this arms race and about the money that matter continues to make.
Well, we'll watch for that hearing later today. Riley Griffin, thanks for bringing it to us. Now let's stick with social media. Can't Look Away. It is a new film by Bluemberg Originals, which followed a team of lawyers battling tech giants on behalf of families. His children suffered great harm. Link to social media, and the film is based on the reporting by Our Burero's Varion Olivia Carvill, who joins us. Now the reaction, of course, is to the legal battle
that is trying to hold big tech accountable. Is it managing to in the courts right now?
We don't know yet.
There are positive signs that some of these cases are breaking through and that we might see at least one lawsuit pus section two thirty of the Communications Decency Act, which is really been that immunity blanket for big tech over the past two decades, preventing them from being held liable for user harms like what are portrayed in the film, And as it currently stands, it looks like we are going to see one of these cases go to trial
later this year. So it's kind of all eyes on the justice system right now.
Olivia Peace, could you explain what the process of making the film was like? And it's a different medium, but I guess the reporting that went into it from you.
Yeah, it's been a two and a half year journey to get here. I first approached Christen Powers, Bloomberg's deputy head of media, asking if it might be possible to shadow this law firm, and we really dove in without knowing where these cases were going to go or if any of them would eventually reach trial.
So it was a leap of.
Faith by Bloomberg and the production team at DCTV, particularly directors Met O'Neil and Perry Peltz. Documentary is a completely different medium to print, which is what I'm used to. It's like a jigsaw puzzle trying to pull together all these different scenes, and you really need to have visual segues between talking heads on camera, and that's something that you know, It's been a huge learning process for me trying to understand what it takes to bring a documentary
to the screens. And I also think that there needs to be a broader message in the film and for us with Can't Look Away, that is really the fight for corporate accountability. Can't look Away is about, you know exactly what that title implies, That there's a generation of kids who are glued to their screens and quite literally can't look away, and the lawyers and families fighting to hold those companies accountable for this situation.
Protections continue to come though Matter has brought them to Instagram, bringing them also to Facebook. Some of their other products. You've had Roblock CEO joining us recently with more parental controls. I'm interested as to the visuals that Mark Zuckerberg himself had to be confronted with. The pictures of the children have had tragic ends to consumption of social media. They're getting it, do you think or not?
Well?
I think the whole conversation around social media has shifted in recent years. We've seen it move from a question of can these platforms how mental health?
Are they really good for our kids?
And it's moved towards this is a full blown public health crisis for our children. And that's what I'm hearing now from the experts because we've seen books like Jonathan Height's Anxious Generations, Sarah wyn Williams Careless People, which we're just talking about on this show Netflix series like Adolescents, really pushing the cultural conversation towards is this a good situation for our children?
Is this what we want them to be doing?
And let's just think about the facts. Ninety five percent of kids use social media, more than a third are showing signs of addiction. And this film was chronicling the very extreme harms that some of those kids have experienced in the digital world.
It's been such a long journey of reporting and now in to the big theaters as well. Olivia Carvill, we thank you so much. That does it for this addition of let's just check in on these markets for a moment.
Ed.
We're currently seeing a whitsawing on the day, Magnificent sevens staying higher to the tune of one point three percent, but who knows how we'll close today and then as that one hundred rebounding from yesterday's sellof This is Bloomberg Technology