Bloomberg Tech is a lie from coast to coast, with Caroline Hide in New York and Ed Lovelow in San Francisco.
Welcome to Bloomberg Tech. I'm Katie Greifeld.
Coming up on today's show.
Intel shares fall on a report that in Vidia halted tests to use Intel's.
Methods in chip making. Plus, the federal.
Judge gives the ok for the Trump administration to move ahead on a one hundred thousand dollars fee on new H one B visa applications. What that means for Silicon Valley hiring and Tesla faces more regulatory scrutiny with a new federal probe over its emergency door release. All that and more coming up. Let's take a look at these markets. It is Christmas Eve, there is no training volume to speak.
Of, but you can see the S and P five.
Hundred up slightly on this Wednesday, hier by about two tenths of a percent. The NAZAQ one hundred underperforming. Will tell you why in just a minute. The Philadelphia Semiconductor and also green but really slight gains here. Volatility continuing to drain out of these equity markets. The Vicks Trading with a thirteen handle on this Christmas Eve. Meanwhile, let's get to two specific names that are restraining what you're seeing when it comes to the big tech complex, Intel
and Invidia. Intel down about one and a half percent, in Vidia down nearly one percent. Given how big Nvidia is, that is really acting as a weight on the overall benchmarks. Here, let's bring in Bloomberg Equities reporter Ryan Blastelica for the latest on what's going on here. The headline that I'm reading on the terminal, Intel falling on a report that Invidia has halted a production test of some of its advanced chip making capacity.
Here, Ryan, what do we know so far?
Hey, good morning, Thanks for having me. So the background for this is that for several years now, Intel has really struggled against perception that it is falling behind in
chip manufacturing, especially through companies like PSMC overseas. Now, there was a lot of hope this year following an investment from Nvidia, following the government taking a stake that it would be able to better finance this ambitious turnaround program to sort of re establish its leadership position in chip manufacturing. So this report basically says and in Nvidia try to have some of the latest chip processing out of Intel, and it's pausing that.
So I don't think this will come.
As a huge surprise, because there was seen as a pretty significant gap between Intel and TSMC, you know, and the other major chip manufacturers. However, this is probably just enough of a cost for disappointment in Intel, which has really been bid up quite dramatically this year on the back of all this news that it's seen about the investments and so forth.
Right, absolutely, just to recap in Nvidia itself agreed to invest five billion dollars into Intel in September. That followed the US government announcing that it was also taking a roughly ten per state ten percent stake in the company. So there's a lot of hopes, as you say, for
a potential turnaround story here for Intel. We know that they have new CEO as well, but just give us some context here, you know, how this specific year's performance compares to the last several years of disappointment for Intel.
Yeah, So one thing I would just say is that when Nvidia announced the stake in Intel, they did make a point of saying that there wasn't any sort of agreement that it would be using the chip manufacturing here, but clearly they've been trying it out, they've been testing it, and the fact that they are pausing here it's just enough of the you know it sort of underlines how Intel has really sort of fallen behind competitors in this pretty significant area. Now, there is still a lot of
interest in building out domestic chip manufacturing. Ine building a chip here, I believe it's in Ohio, TSMC has building a chip that I think is in Arizona. There's a lot of money surrounding this that Chipsas was involving this. There's a lot of significance here, especially when it comes to issues like national security here. So this is something
people are paying a lot of attention to. And certainly if the news had been the opposite and Intel Nvidia had come out and said that it is going to be using Intel, I think that would be a pretty sick, magnificant game change for Intel as we go into twenty twenty six. The idea that is really re establishing itself in manufacturing, I think would cause a lot of people to reassess the stock in its prospects.
Absolutely and tell definitely a story to keep an eye on in twenty twenty six. Ryan, before I let you go, you had a great story out on the terminal in the past two days talking about how it's the boring bets when it comes to tech that seems to be working the best this year. Memory chips, hard disk drives come to mind. What are some of the specific names that really stood out in the tech space this year.
Well, Micron especially has been a really big gainer this year. It's memory chips, the high bandwidth memory that's a pretty significant part of overall AI infrastructure. That stock is I think roughly tripbolder. So this year it recently had results. Results were very strong, the stock moved up even more. And if you look beyond that, the companies that are you know, typically don't get a ton of interest, companies like sand Disk, Western Digital, Seagate Technology, makers of hard
disk drives, also a part of the AI infrastructure. This is something that people were saying, was it fully appreciated? Hard to make that case. Now some of these stocks have doubled, tripled. They're some of the biggest gainers on the S and P five hundred this year. And it is you know, in I kind of bet ironically and a part of the market that otherwise would be a little bit too dull for most people to be excited about.
Absolutely, Ryan really appreciate reporting this year. That is Bloomberg's Ryan blast Elica. Meanwhile, let's get a broader look at the tech markets and one investors are looking ahead to in twenty twenty six with epec Oscar desh Kaya cis quote senior market analyst. Great to have you with us. So I actually want to start where we left off with Ryan. It's really interesting that you think about what really worked in twenty twenty five. It was the so
called boring parts of the AI trade. A lot of these you know, memory disc makers, memory chip makers that is, in the likes of Micron. I wonder you know whether you expect that will be the momentum headed into twenty twenty six.
Well, it's pretty much explainable why these memory chips, boring park yourself department of the market gain more than the other exciting parts. One of the reasons for that is that because the AI chip demand was so strong that many manufacturers actually assass more capacity in producing these chips in demand, and they reduce their capacity for producing other
and more boring podcasts off the market. That's one of the reasons why what explains actually the rally that we've seen in Standings and Seagate and Western Digital and likes
into twenty twenty six. We think that not only that the boring, the most boring and undervalued pockets of the market will be an investors' radar, but we will also expect to see actually this technology and AI rarely broaden towards the non technology podcasts off the market because the AI productivity, AI cost efficiencies will also benefit to any other sector out there, including banks, healthcare industries. And I think that this is going to be the big story of twenty twenty six.
Yeah, absolutely, and we don't have much longer to it. I want to talk a little bit about, you know what didn't necessarily work when it comes to the overall AI trade in twenty twenty five, and it's something to talk about that as a monolith. But while memory chip makers seem to have a great year, you take a look at some of these software names. Adobe comes to mind, for example, and it feels like some of these companies just can't get their footing under them. Service now Salesforce
Force also examples there. I wonder, you know what you make of what's going on in that sector.
Well, these companies have come under the pressure of AI.
You would expect that making.
AI tools available to investors would boost their revenue, but it actually had the exact opposite impact effect on these companies. They have not been able to monetize and sell these AI boosted models to investors as much as they wanted. And actually the fact that other models, other AI models came to the market to challenge these companies, have also
been a big problem for these companies. We think that in terms of AI applications, the competition is going to be quite rough in twenty twenty six because there are a lot of AIMI some of them are going to be where some of them are going.
To be losers.
But it's exactly the same story for the big AI applications and the likes of AI A Dope for example, or Shutter Circle. These companies that just integrated AI applications on their products offering will have to face that competition. I think that that's going to be also waiting on the margins.
Yeah, it's a good reminder of dure that there are companies that are doing the disrupting and then there's companies that the market thinks are being disrupted right now.
But I also want to talk.
A little bit about you know, what we're seeing when it comes to Capex. That has remained one of the dominant stories when it comes to you know, every three months we get those earnings report, and we've seen it start to really get expressed in certain companies. Oracle comes to mind, both their equity and their debt. This pressure to see some sort of ROI when it comes to spending. I wonder if you see that pressure broadening out next year EPEC of course.
I mean since the last three months, since the last earning season, what we have seen is that the headline shiny headline figures were no longer impressive for investors. They wanted to dig deeper into these reports. One, how are the revenues are being accounted? And two what's happening with the debt? Is the debt too high? Or is the debt being uploaded? Was also one of the questions that
investors have been asking and have been worried about. So what investors want today is to see slowing investment until we see return on investment. The problem here with the technology is that if there isn't overspending. The risk is that this technology gets outdated by the time revenues start coming in. So we really think that spending is going to be one of the major issues and major major talking points into twenty twenty six.
And one way to go around this.
Risk is to choose companies that are able to turn this over spending into an immediate revenue opportunity, like the ones that do have data center. Is that the ones that are actually able to rent their chips out And in this context what we see is Microsoft, Amazon, Aret and Google are the three companies that could help investors reduce this risk of overspending in AI and EPEC.
I've less than a minute with you, but before I let you go, I would love to hear heading into twenty twenty six, what is your highest conviction.
Well, the highest conviction right now is rotation again from technology to non technology pockets off the market.
I think it is important to note.
That the macracinic backdrop remains positive for technology stocks as well, so we think that the reley could continue, but it might decelerate next year, and again the AI enthusiasm will probably move toward the non technology pockets off the market. Toward toward the sectors that actually do also use technology that could be boosted by a IT tools.
Absolutely, that rotation, especially from growth to value, has been fascinating to watch over the past couple of weeks.
Ipec Osker Deshkai.
Of Swiss quote great to get some time with you. Now coming up on B tech, a judge has ruled in President Trump's favor upholding one hundred thousand dollars H one B visa fees. Some of the most vulnerable companies are.
In the tech sector, but the legal fight is an over.
More on that.
Next, this is Bloomberg Well, a federal judge says that the.
Trump administration can move ahead with a one hundred thousand dollar fee on new H one V visa applications. Now that is adding pressure on US tech companies that rely on hiring foreign skilled workers. Eric laws and Larson, he covers legal affairs and politics for Bloomberg News, please to say he joins me now on set. So Eric, give
us some context here. You know, we tend to talk about tech companies when it comes to these visa fees, but just how exposed is the industry to this potential one hundred thousand dollars.
Fee minor sending from these lawsuits that have been filed and from the data we've seen is that they're pretty exposed. Notably, these companies did not file lawsuits challenging the visa. It was filed by other groups. The ruling we just got was from the Chamber of Commerce. So maybe they're waiting to see where this goes. But certainly the Trump administration and other government officials say that these companies can afford them, even though they do use them quite a bit and
they are pretty exposed. The government simply argues there are plenty of American workers who they could be paying to do the same job, just paying them more.
Yeah, I mean, you think about some of these giant tech companies with deep pockets. Talk to us about the public sector though when it comes to healthcare and education, because again we talk about tech all the time, but these sectors also rely on H one B visas exactly.
And there is another lawsuit that was filed by nineteen Democratic attorneys general. Most of the Democratic led states are part of this lawsuit, led by California, which has the most of these visas are mostly in California, and these states argue that they're suing on behalf of the public sector because of healthcare. They say that they have to look out for the healthcare industry, the residents and their states.
They say that the quality of healthcare will simply suffer because there is a shortage of these skilled healthcare workers who use these visas and won't necessarily be able to afford one hundred thousand dollars fee from these hospitals. You know, maybe the companies can afford that, but hospitals not so much.
So there's not really a carve out for them, and the hospitals could suffer according to these states that sued earlier this month, and there's a hearing in that case in February, so remains to be seen how a judgabile rule on that aspect.
Well, that's the rub, right.
You think about Amazon, Microsoft, Meta Apple, for example, if they're playing millions of dollars potentially for specific AI talent, a one hundred thousand dollar fee probably doesn't seem like that much then.
But to your point, you know, if it's.
Hospital having to pony up that fee, it's a much different conversation. Walk us through how you might expect the legal fight to take shape next, because it seems like there's a lot of different moving parts here.
Sure, So the ruling that we just got was from the lawsuit filed by the Chamber of Commerce in Federal Court in Washington. That case is essentially over unless there's an appeal. It was a summary judgment. The judge, who was an Obama appointee, by the way, just ruled flat out that the government was correct. The President had brought authority to issue this under the powers given to him
by Congress in the Immigration and Nationality Act. But these lawsuit filed by the Democratic led States, that is, like I said, there will be a hearing on their motion for an injunction against the visa in February. There isn't a hearing set on the third lawsuit, which is filed by unions, So this could take months to play out, and as with so many of the other legal challenges involving the president's policies and executive orders, it could end up at the Supreme Court, and that could be quite
some time. The big question for employers and potential visa holders is whether or not this program, this fee will stay in place during the entire legal challenge. Right now, it is, but these other lawsuits could result in different outcomes.
All right, Eric, really appreciate your reporting.
Great to see someone else in the office on Christmas Eve as well.
That is Bloomberg's Eric Larson.
Meanwhile, another story that's tying together tech and politics is that the Trump administration has imposed visa sanctions on former European Union Commissioner Theory Breton, along with four other activists who have pushed for regulations to online content moderation. Now Secretary of State Marco Rubio said in a post on x Quote, for far too long, ideologues in Europe have led organized efforts to coerce American platforms to punish American
viewpoints they oppose. We stand ready and willing to expand. This lifts this list if others do not reverse course for more. Let's go now to bloom It's Laura Davison live in Washington. So Laura, first, give us the reaction that you're seeing and hearing. Was this move necessarily a surprise?
This move was a surprise and really came as a shock to both the people who were the subject of these visa sanctions as well as to other European officials, both at the EU level, and individual countries. There's been a really a strong and forceful pushback saying that this is a move that amounts to censorship and is very inappropriate.
On the US side, this is, you know, sort of just a one prong and what has really become a multifaceted cold war between the US and the EU, particularly as it relates to tech companies and who has the power to regulate and tax them.
Yeah, and you know, we talk about, you know, this censorship potentially of American viewpoints, what specific platforms, you know, was the Trump administration holding up as an example where censorship actually did take place.
Yeah, So there's a couple different here. Largely the big social media platform so Facebook, Instagram, and in particular Elon Musk's platform has been the subject of a rather large fine earlier this year for not allowing these content moderation to feed out hate speech from the platform. So, you know,
X had to pay this fine. This has kind of become this ongoing tit for tat war of you you know, and you could almost see these visa sanctions coming from the US as a response to that fine earlier this year.
All Right, Laura really appreciate the update that is Bloomberg's Laura Davison joining us from Washington, well as Warner Brothers Discovery in Paramount Way. Their next moves media deal making is back in focus. Joining us now is Stephen wolf Perira. He is CEO and founder of Alpha, an independent AI governance intelligence firm for board directors and C suite executives. Great to have you with us, Stevens. So let's talk
about Warner Brothers. You had Larry Ellison coming out with his personal guarantee of forty billion dollars for the Paramounts guidance hostile bid. That is, do you think that that goes far enough to address some of the Warner Brothers board's concerns about financing.
So it's great to be here, Happy holidays. But this is very going to be a gift for the Ellsons because if you think about what they are doing, they are truly amassing one of the biggest and most important collection of media assets in record time. And you know whether the thirty dollars a share is going to be enough. I think they're going to have to sweeten the deal. But I think you need to look at this from a larger advantage point because if you really look at
the assets that they're starting to consolidate. It really is concerning on the one hand, exciting on the other. But when you think about Paramount combined with potentially TikTok obviously Warner Brothers Discovery, you just look at all the different pieces of this puzzle. We're really seeing the reshaping of the American media landscape right before our eyes.
Let's talk through some of the concerns here.
As you said, it's exciting, but there's also concerns.
In highest order. What would you say tops the list?
I mean, one is this really trying to understand what really is going to be the governance and implications of this when you think about the amount of data that they are now going to have to be able to train all their AI. Again, this is not just a media company. Obviously, Larry Ellison with Oracle understanding the TikTok angle, this is really connected to the dots and all these AI companies are desperate for more data to train their models.
And so when you really look at this, this is a truly incredible opportunity to consolidate data all under this massive umbrella, which is really going to be Skydance, Paramount and Oracle.
Interesting, So you're saying that Oracle, you know, if we actually see Paramount Skuiddance be able to win the Warner Brothers Discovery bidding war, that Oracle might then potentially use their content library for training for their models.
I mean, again, you have one hundred percent control over Paramount, you know, what's to say, what is the control going to look like? You know, for one of Brother's Discovery. Once it's under that umbrella, You're just going to have a lot of ability to kind of blur the lines and us really see who is going to be able to have some type of guardrails governance guidelines around all of this, And I think that that's something that shareholders
need to look into. Obviously, you want to have your furniturey responsibilities as a shareholder, but certainly the board is going to have to make some really tough decisions. I think there is a really interesting reason why the board has actually rejected the Ellisons repeatedly until they had to go public with this hostile takeover.
Yeah, it is a fascinating situation where you have the Warner Brothers board saying that we've approved, we recommend the Netflix offer. At the same time, you have Paramount basically going directly to the shareholders with this tender offer.
I mean, what do you make of it? How do you see the investor.
Base actually swaying here when it comes to what the board is saying and what Paramount is saying.
Look, the truth of the matter is you have a very deluded shareholder base. Obviously, you're going to have the large institutional investors, the Black Rocks, Vanguard, State Street, We're controlling a lot of the shareholder count. But when you really think about where investors are going to be, they're going to really vote for what's going to be the best return for them. And so I think you really are going to see Netflix really trying to have to
up the ante. They obviously have a very clean, you know kind of approach, They have a very clean deal, obviously have a better credit rating. When you think about what the levered company is going to look like, combined with Paramount as well as one of our discovery, I think it's going to be north of maybe six seven times you know det Tim at DA. So just from a capital perspective, it's going to be an extremely levered asset.
That's part of the reason why Larry Ellison is doing the personal guarantee and.
Steven, we have less than a minute here left with you. But you know, when you look into your crystal ball, how long do you think this saga will continue? How long will it take to actually get a conclusion here?
I mean, obviously they pushed out the shreword of vote down to January twenty first, and then you're going to have obviously all the regulatory you know, kind of theater that you're going to have to go through. But I feel like this is just the beginning, because this is now the reshaping of American media. And when you really understand what is happening, this is a data play, and when you really connect the dots, this is truly going to reshape the way that all the AI companies are
going to be able to have access to data. Who is controlling that? And where are the government s guardrails around it?
All?
Right? Stephen, really appreciate your time.
That is Stephen wolf Perrera.
He is the CEO and founder of Alpha. Let's take a look at these markets on this Christmas seve the S and P five hundred, A little bit of green on the screen. As I said at the top, no trading volume to speak of, but you can see we're drifting about three tenths of a percent higher. Tech not quite outperforming today at the NASAQ one hundred higher by just about two tenths of a percent. You can see the Philadelphia Semiconductor Index a little bit below that as well.
Very quiet though when it comes to volatility as measured by the VIS, you can see we are down about forty seven ball points and trading with a thirteen handle. Let's talk about why you can see the NAZAQ one hundred underd performing. A lot of that comes back to Nvidia, and it comes back to Intel. Reuter's reporting this morning that basically in Nvidia has halted a test to use
Intel's production process to make advanced chips. That is adding to pressure on Intel down about one point four percent. In Vidia shares also in the red as well. For more on this story, let's bring in Bloomberg Television Markets correspondent Normal Linda sitting to my left.
So, Nora, what do we know so.
Far about this so called eighteen A process.
Well, the fact that Nvidia is halting using Intel's eighteen A manufacturing process, it actually is concerning for a lot of investors because we know that this is critical to Intel's turnaround story, especially as it tries to scale and really compete against the likes of say TSMC. They are a global competitor, and people are really concerned right now as to whether or not Intel is really able to display the fact that it's able to keep up in this space.
And so talk to us about the Nvidia of it all and how it comes in. We know that in Vidia agreed to invest five billion dollars into Intel two September, So how are the two companies fortunes kind of aligned here.
Yeah, it's a bit of a complex relationship between Nvidia and Intel, because it's not that Intel is necessarily giving in Nvidia is not necessarily a customer of Intel. In
video actually works primarily with TSMC. But the fact that Nvidia was able to test out the eighteen A from Intel, people are really seeing this essentially as a marquee player in the mix, actually co signing this company and essentially giving more legitimacy, validity to a name that we know we've seen the US government coming in trying to back taking a ten percent stake in this company. As we're really trying to see more production in the chip space here in the United States.
And what sense do we have of why, you know, Intel and the market in general is reacting in.
This way to this news.
It seems to be some sensitivity here, even though there wasn't necessarily a contract between these two companies.
It wasn't necessarily a contract between the two companies, But this still raises doubts about the fact of Nvidia stepping away from this partnership here, especially because in video sorry excuse me, investors are looking for proof that Intel can essentially attract top tier customers. So that's what's really key
here in this moment. The Nvidia name is what's really helping to elevate Intel in this moment, and to see in Nvidia potentially stepping away from that test run of the eighteen A manufacturing process is essentially giving investors some concern.
All right, great reporting, Nora, I'll be seeing you in just about thirty minutes time. Nora and I will take you through the close this early Close today from twelve to two pm on BTV. But let's keep this conversation going right now, because twenty twenty five has been a landmark year for ETFs, with actively managed funds taking the baton to surpass passive funds for the first time. Let's bring in Sylvia Jablonski. She is CEO and CIO over at Defiance ETFs.
Sylvia, great to talk to you on this Christmas eve.
And it's certainly the case that active ETFs have been on fire for the past several years twenty two twenty five, no exception, and we're seeing a lot of activity, a lot of interest from investors in these leverage single stock ETFs which do count as actively managed products. We know that Defiance, of course is involved in that space. Talk us through you know how you see that interest evolving, if at all in twenty twenty six.
Yeah, hy Katie.
Great to be with you today and happy holidays, Merry Christmas and happy New Year. Yeah, I think you know it's it's been a stellar year for levertytfs in general, both index based and.
Single name funds.
You know, we've seen billions of dollars of assets flowing into those funds and to your point, to active funds. And so what I think has happened over the last couple of years, and you and I have talked about this a bunch, is you know, we went through this period of time where it was it was all passive, and a lot of the ideas that were coming out resembled the others. So there were a lot of me too products out there, whether it.
Was the Mattos or anything else.
And really over the last two years, we've seen a lot of innovation, and we've seen that in single name leverage stocks, and we've seen that in option and space products, so a lot of single names that pay income, for example.
And I think that, you know, you've seen huge amounts of growth in that because investors we're looking for that, right And so what I expect to happen in the next couple of years is to see that transition with new and exciting names coming out in the single name leverage space, some of the new you know, picks and shovels of AI for example, quantum names, some of the themes that are really popular and growing into the next year.
And then I think we'll see other things grow out too.
I think we'll see new thematics as some of these AI themes, quantum themes, you know, infrastructure, anything related to the advancement of tech really kind of change and grow. So investors are getting very comfortable with ETFs and expect that to continue.
And stepping back a bit, I always wonder, you know, if you're managing a stable of you know, single stock ets, you know that some will probably take off be very popular. There are certain names that retail investors in particular, just seem to gravitate to. But at the other end of the spectrum, there's some names that you know probably aren't going to garner that same interest.
Ever, And I wonder, you know, as an.
Issuer of ETFs, do you basically just hope you get a few hits when it comes to the single names and hope that that sort of subsidizes the rest of the lineup, which may or may not take off.
Well, I think as an issuer, we you know, we do a lot of due diligence on this, right. We research the names that we're interested in launching, and we kind of look and see, you know, what is their beta, what is their sort of volatility score, what kind of interest there is in social media, what kind of interest there is amongst institutional clients, what kind of interest there is just in general media press research on certain topics.
So we do a lot of work before we actually bring a product to market, so we have high conviction and everything that we're launching, as I would think most etfishuers do.
Right to your.
Point, some of them just don't hit, and you know, and that's disappointing. But the way we view this is, you know, we essentially just just move on and just try to make sure that we're capturing the right trends and the right themes that investors are looking at. And if products, you know, if some products are unprofitable, then that's a result of this moment in time and it can only change.
Right.
We've seen products that sat for two years and did nothing take off three years later.
So yeah, allanges No, it's a good point.
And I think a Bloomberg intelligence has some unofficial Lazarus list where you know, a name does nothing for a couple of years and ETF does nothing and then all of a sudden it rises from the dead, if you will. But in any case, I do wonder, you know, when
we talk about themes. Obviously AI has been a big theme when it comes to equity ETFs, but then you think about what's happening in the bond markets right now and sort of the AI debt deluge if you will, has definitely emerged as a theme when it comes to credit markets in twenty twenty five. Would you ever consider launching a fixed income thematic ETF or is that something that maybe they're just isn't a market for.
Well, I think that there could be a market for different fixed income products, and you know, I would suspect that issuers such as ourselves are doing research in the space, and you know, there could be some some opportunities there. It's you know, it's it's something that we're always looking at. And I think, you know, to your point, yes, there is you know, sort of that debt issue with AI.
There's also a concentration issue growing with AI. Right, I think a lot of the big eats are out there in the space.
But I actually think there's more to come.
You know, you saw on December twentieth, actually the Trump administration just announced that they're going to be putting a big agenda and a big priority on researching and building out six G so that the United States has leadership in that space. Right, and so that's an area that we're super excited about. Like we have a six G ETF and that hasn't been talked to me you know, to the point of like ETFs being popular.
At different times.
Five G was all the rage, and here we are now, you know, oh, we have to focus on this because of our AI build out and because of our quantum build out, and so you know, there's always different directions to grow in terms of the matt at ETF's weather fixed incomer equity based.
Well, let's talk about one ETF that did get a lot of interest of yours in twenty twenty five, and that was your quantum ETF.
The ticker there is qt um, and.
It's all a pretty steady stream of inflows all throughout the year, but especially starting in about Midsummer or so. When you think about the quantum space and the different names that populated, what is your view heading into next year.
Yeah, so the viewing quantum is you know, kind of
very much the same, and it's evolving. You know, we view this as a long term investment, and in the last year, I think the reason that we've seen so much interest and so much inflow into the space is because you've started to get these proof points of reality and commercialization, right, whether it was the bond pricing example with HSBC or you know, some of the big kind of quality balance sheet mag seven or just you know, large tech companies like IBM and Cisco and Oracle in
addition to the Max seven investing in the space and producing you know, products there and having quantum services available through clouds and Amazon and things like this. So I think as it becomes more commercial and scalable and you know, proves itself as a technology that investors are really buying into, you know, you could potentially see some performance in those names. But I do you think it's like AI, right, It's very much in its infancy. AI is maybe a toddler.
Quantum is still just learning to call right. So it's a long term buy and hold, and I think that investors understand that and they're in it for the long run.
Yeah, it is really interesting.
I feel like quantum it's just starting to get socialized right now. But as you said, I don't think it exactly.
Knows how to walk yet.
But Sylvia, I mean you make the point that this is a buy and hold investment when it comes to your lineup, and you know, you have a broad array of funds ranging from Quantum, which of course, as you say, is buy and hold, and then you have again those leverage single stock ETFs. What is the profile of the investors coming into your lineup? Is it safe to say it's broadly retail.
It's not necessarily broadly retail. There's a good mix of retail and institutional clients. What I would say is there are different risk profiles for our clients. So clients that are in the thematic products tend to be long term conservative, you know, buy and hold, looking to allocate to their portfolios for longer periods of time, whether institutional or retail.
In terms of the single name stocks.
It tends to be sophisticated. Whether it's an institution or it's a retail day trader, it's a sophisticated trader who understands that these are meant to be traded and not held, that you know, you're getting returned for a period of time, not beyond one day, and you know kind of user beware and understand how these products work over time.
And so it's just a different risk profile.
But there's a mix of both types of clients, retail and institutional, across all the product suites.
All right, Sylvia, great to get some time with you. Happy holidays. That is Sylvia Jablonski of Defiance ETPs.
Now, coming up on.
B Tech, we'll discuss the outlook for Tesla. It's sure price has been on a tear, but what challenges all wait? In twenty twenty six, Steve Wesley, founder of the Wesley Group, he joins us. Next, this is Bloomberg Tech. Well, Tesla has had quite a year. It shares have soared, its CEO secured a record pay package. It's robotaxis launched in a limited way in Austin and San Francisco. But on the horizon are challenges, among them declining sales, shrinking profits,
and moves by global regulators. Sources telling us here at Bloomberg that the company is facing a new US government probe over the door handles of its Model three sedans. Steve Wesley, he is a former Tesla board member and managing partner of the Wesley Group, joins us. Now, Steve, great to have you with us. Let's start again with these door handles. We have had a month's long investmentgation
over here at Bloomberg. We know that the NHTSA has opened an investigation in September, and I wonder what you make of how this is evolving and the reputational damage that this could inflict on Tesla.
Look, it's a serious issue, but a lot of other auto companies have had similarities, for Volkswagen General Motors.
But it's not a simple software fix.
So here's a time where Tesla's really got to be firing on all cylinders to fix this.
And I mean, from what you can tell the company's public posture, do you think that they are treating this with the appropriate degree of seriousness.
Well, we'll see, this is not a simple software fix, so they're going to have to go in re engineers and things. The cost is probably going to take a while, but it's not the first time it's happened.
It's happened with other auto companies.
But I think everybody in the sector is going to be focused in on this one. Tesla, as you know, has had some other brand challenges, so they want to come out. They're trying to position themselves and look like a testnology leader, not just an auto company. Fixing this sweep top of that priority list absolutely.
Well, let's talk about the year for Tesla more broadly, because shares are up about nineteen percent on a total return basis, we know that that has come with a lot of volatility.
You think about where we stand right now.
Sure, shares have surged in the past few months, but sales continue to be an issue. You think about the US, you think about Europe. You mentioned that Tesla wants to be positioned as a technology company here, but this feels like a pretty fundamental issue that is going to need attention.
Look, this is a huge issue in twenty twenty six is going to be a pivotal year. Share price at record highs one point six trillion dollar market cap. That's astonishing. But Tesla's latency. It's second year in a row of declining sales and shrinking profits. So the robotaxi approval it has got in Austin is great. They no longer need drivers in the cars. That still leaves them way behind Weymouth. So Tesla's really got to get into a higher gear
on regulatory approval. They've got to get into more cities faster, and they need to get revenue growth to keep that share price up.
Let's see how well they do.
Yeah, absolutely, I mean you mentioned Weaimo, and you think about the gap. Weymol obviously has that first mover advantage Tesla trying to close it here? Do you think that that is actually achievable when you think about how far out Weimo is and all the different markets it has already entered.
Well, it's going to be tough for Tessa to catch up because look, Waimo's already in six cities operational Large City, San Francisco, Los Angeles, Phoenix, Miami, Atlanta. But they've announced another sixteen cities they're going into. They'll do twelve million to fourteen million rides by the end of this year next week, but next year, I think they're looking at a number close to thirty five million. They're already making plants way international. They're doing trials now at London, Tokyo,
New York City. Waimo's got a huge lead. Tesla's got its work cutout for it to catch up. If you're positioning yourself as a technology company, they've got to get in the race and go toe to toe with Weimo and.
See if we've got just about a minute left.
We've talked about door handles, we've talked about sales, we've talked.
About the robotaxis.
What else should Tesla be focusing on in twenty twenty six.
Well, I think there's two things. The key one is their energy division is booming. And say what you want about Tesla needing new models and maybe being behind in full self driving, but every out of company in the world today is also an energy company, and Tesla provides three products. Power walls you probably see them in garages, megapacks, energy blocks for utilities. The takeaway is there's a revolution AI and data centers forcing utilities to look for new power suppliers.
Tesla's filling that void.
Their energy division will grow from ten billion and twenty twenty four, so I think about fourteen billion this year. They can provide forty percent year of a year growth. That's going to help, all right.
Steve really enjoyed this conversation. Happy Holidays. That is Steve Wesley. He is CEO of the Wesley Group. Service Now reaching an agreement to buy cybersecurity startup Armists in a cash deal valued at seven point seventy five billion dollars, marking its biggest acquisition today. I caught up with Service Now president and COO on Zaveri yesterday take.
A lesson when we saw this opportunity and seeing the way that AI adoption is going. This is a great opportunity for us to continue expanding in our security space. So today our security business has crossed billion dollars at service now and addition of Armies will allow us to now get into more new capabilities with customers are demanding from us, as well as allow us to really be differentiated as we add AI data workflow with all of it being around security and making sure that no breaches
customers have to deal with. So that's really the thinking and Armies is a very innovative company, very well regarded, great team, very good domain expertise, and the combination of US and them can really change the game in the cybersecurity space and build a cybersecurity automation abilties very fast.
It gets to this idea too. I mean you mentioned sort of the potential addition to revenue. I think they talked about a three hundred million dollar a run rate right now that they're sort of dealing with. This isn't obviously just about the additional revenue that you get specifically from Armies. I assume this is also about bringing in new clients and more importantly keeping the clients you have there.
Yeah, this is very strategic play. I mean, we are very confident of our own revenue plans, right, We don't depend on armies to deliver our fifty plus rule of fifty plus right, which is twenty plus percent as subscription revenue growth and for thirty plus percent in terms of having free cash flow margins. So we've been fifty plus the last ten years and we keep on delivering that and we're not dependent on armies to deliver on what we have been sharing with the street. So this is
much more of a strategic play. They are three hundred and forty million in revenue already growing at fifty percent. But the key thing is the technology and the IP we're bringing in together with Service now capabilities as well as a lot of the joint customers, we can go together with and really provide them a full capability around cybersecurity and help them with all the issues they're dealing with from one platform perspective.
Right.
They have OURMISS has a lot of data around all the assets company has, the physical assets. If you look at now physical AI is coming into play as well robotics and other things like that. That information combined with our service NOWS Confrigation Management database which has access around software and hardware. We can really give you full security posture management and really give you the exposure guarantee that nothing can go wrong.
And I want to talk about your dealmaking posture overall, because we're talking about armists today. But you rewind the clock to March, you struck an agreement to buy move Works for about two point eighty five billion dollars.
Should we expect to see more.
M and A from Service Now in twenty twenty six.
No, I think we have all the assets we require. I think this is an opportunity for Service Now to really get into spaces where customers are asking us to get quicker, so wrote myp ACS plus scaled capabilities will require. But I think we are very confident with all the things we have announced so far as the core things we require from our portfolio perspective and execration we need to do. We always can do continue doing what we've
been doing before around tukens and small IP purchases. But from the security perspective, I think we have what we need to become the premium security platform provider in the market today.
That was Service Now President on Itt Zavari. Now, before we go, it's time for talking tech. First up, Bitcoin missing out on the Christmas chair, currently trading around eighty seven thousand today. That comes after a brutal sell off in October, not from record highs. Token on track for its worst quarterly performance since twenty twenty two. Plus, ads could be coming to chat GBT. Open Ai is said to be working out the details.
To integrate ads into its.
AI chatbot, according to a report from The Information and Alphabet's WEAMO says it's updating software across its fleet to better handle power outages. The move comes after self driving taxis froze and costs a traffic jam during major power failure last weekend in San Francisco. Beck does it for this edition of Bloomberg Tech. Don't forget to check out our podcast This is Bloomberg