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.
I'm Caroline Hyde and I'm Jackie Devalas in Washington. This is Bloomberg Technology.
We get straight to the markets because we currently see a market that braces for possible changes.
Jackie to the tariffs on Canada and Mexico.
All of this is being suggested by Commas Secretary Howard Lutnik in a Bloomberg interview with Bloomberg Television. We are basically being bounced around by the latest headlines. We have got so much to debate when it comes to the market.
D Anidy, the earnings with CrowdStrike looking worse than the market had braced for and CrowdStrike currently trading off significantly by some eight percent, off as much as twelve percent at one point, as once again that hit to the entire global breakdown in software that we saw back in last summer. Shares still having an effect as we saw worse than expected earnings outlook for this company.
Let's stick into all of this with Bluebergs Isabelle Lee.
Because we have whiplash on our hands, whether or not it's about the latest amount announcement for semiconductor support here in the United States, whether it's whiplash ultimately, and whether we will have tariffs remain in force or not.
How does the market digest this moment.
I think that's why they're confused. Markets have been se signed between gains and losses. Before I came here, I had a script on in my head that stucks rallying because of the ISSM beat. But there now as I'm sitting here, they're actually edging lower. It's been a wild ride, and options traders really predict more volatility to come. And on Friday we have the big payrolls data that's also
going to add to volatility. We have options traders predicting a move of one point two percent in either direction, and that's pretty significant. So it's really just if you take a step back, investors are on edge. Even for us on the terminal, you have headlines after headlines. You just really don't know what to expect. Some people argue that it's too much of a data driven market, but remains to be seen Isabelle.
We're expecting some kind of guidance from Howard Lutnik later this afternoon. What subsectors within tech should we be on.
The lookout for.
There's automakers, there's also chip makers. But the thing is tyres itself isn't really bad. We have many analysts telling us that it's Tarris Priss lingering, growth spheres, press, the prospects of the FED keeping interest rates higher, plus the higher stock valuations. Then if you have all of that, you question whether the markets should be this high. But other than that, even in Asia we have Asian equities rallying.
We have German stocks really in question after that really big stimulus that they're injecting.
So all in all, we have recession probabilities rising.
We have a JP Morgan implied probability of economic downturn rising through thirty one percent on Thursday. That's up from set eighteen percent at the end of November. So now again we have a lot of investors predicting their own models of recession. But it's really just a tough market to digest.
It's a tough market global market for companies trying to sell. At the moment, I think of Tesla once again dropping lower.
We saw China weakness.
Yesterday in terms of the data, you saw it in France, and then the latest chew to drop is Germany. I mean, Elon Musk, is this his brand or is it ultimately about what's happening in terms of curtailing some of their output some of their production.
I think it could be both, because Tesla registration plummeted in Germany last month, and a part of that is Elon Musk and his politicking. But then a part of that is also just really the car makers suspending out plants. If it's model why yeah, and then they have a factor outside of Berlin and that will lose out to several projections. I feel like it's just really the perfect
storm or the perfect cocktail, everything moving together. But yes, every headline in every part of the world is really something to watch out for.
Public investors are trying to dicer in it. So a private investors is across the tape when it comes to what's happening in the public markets. But let's get back to what leaders are talking about.
In the private markets too.
We've had Bloomberg business leaders across the board at the invest conference that we're hosting today in New York City. I did today. I spoke with Iconic Capital founder Michael Anders, and we began with the changes in consumer sentiment at this moment in reaction to tariff threats and also the impact on AI.
Take to listen, But.
I think it's spending a lot of time with consumer CEOs lately. There is definitely an awareness that there's a sentiment shift. I think the consumer is beginning to start paying attention to the uncertainty in terms of, you know where tariffs are going to take us, And so I think that's a pause that people are feeling. From our standpoint, though we actually like this environment. It makes you do
the work. And I think if you're you know, got the team, you've got the rigor, you've got the discipline, you've got the focus. And going back to what I said earlier, this is a moment where picking the winners is so critically important. And so I think right now, in this AI journey we're in, it's been a long road. I mean, AI has been around for decades.
Does generative AI become more relevant at this moment where companies are worrying about predicting the future, making sure that they're profitable. Are they even more galvanized than to lean into this generative shift.
I think in the last year or two, the awareness around jen AI has gotten everybody sort of to the point where they know it's critically important. But it is such a complicated and nuanced situation we're in right now that I think people are starting to really know the need they need to pay more attention, and I think
it's less about the predictive nature of it. I think that's kind of where we've just come from, and now we've gone to where these machines are able to think, they're able to reason, and pretty soon they're going to be able to act. And I think the acting piece is what gets us very close to this agi moment where machines are all knowing.
That was my candas of Iconic Capital, and Jackie such an.
Important voice of this moment.
They have bet on the past winners, They bet on the snowflakes, on the data dogs, on the ADI ends. They're now making big bets on the likes of data breaks. But they continue to invest in this moment even though we've got this tipping point that's worried about geopolitics. They like this environment where you're having to do more work, and I think my putting money where the mouth is assured insurance technologies. They just committed more money to that particular Jennai business just yesterday.
That's right, Caroline.
Not always the covered names are a little bit underappreciated and tech but crucial sectors to keep an eye on. Now, let's go to the Bloomberg invest Conference for a conversation with KKR co CEO Joebe along with Bloomberg's Shanali Basic.
Across Mall Street, and we're going to get to some of the things underpinning those goals. But first we're going to start with a big view on where the world stands today. And as we've been talking about Joe, in the US, investors are trying to shake off that tariff hangover that exists right now. The markets have been very jittery, investors are digesting how these trade policies could be in the future. How do you view the impact from your seat?
Sure, I think it's obvious to everybody that we're in an environment right now where there's a lot of uncertainty around trade tariffs, but it's not necessarily new. Even with the first Trump administration, he was focused on tariffs and trade. Biden kept most of those tariffs in place. So I think in our business, you know, we're very long term investors, we need to be thinking about these issues over time,
not just in one administration. And what I'd say is, you know, we have teams at KKR who focus on all these areas of macro risk, whether that's currency, tariff and trade, geopolitical risk, regulatory risk in each of the different markets that we're investing in.
I think this.
Issue around supply chain security and resiliency, which relates to tariffs, is obviously front and center for all long term investors, but people are trying to parse through what this all means. The final policies are not in place, the actions of other countries and governments in reaction to what Trump may or may not do is still unknown, so it's very fluid at the moment, and I think that's obviously creating some uncertainty and volatility.
You know, it's interesting in conversation with you, you had mentioned that this was a risk that you should have seen coming in a lot of ways. So from where I'm sitting, it looks like KKR has been preparing for this in a way that many investors have kind of very obviously have not been So what have you been doing to prepare for all of this uncertainty knowing that there's even more of it ahead.
Yeah, So, I think we have over one hundred and fifty companies in our private equity portfolio around the world. Supply chain resiliency, multiple sourcing avenues for our companies has always been a part of the risk mitigation approach, and we've spent a lot of time really over the last five six seven years understanding that risk and mitigating that risk.
And when it comes to new investments, I think a big part of our job thematically is understanding the risk environment we're in and choosing those themes and sectors and opportunities that really have less exposure to terrorf risk or trade risk. So maybe a couple of examples of that is, you know, healthcare services are very domestic, whether it's in the US, Europe, or Asia. You know, that's an area where we feel like the TERRFF risk at least is
not a pronounced risk. You could look at certain services businesses. We've made a number of investments in companies like home Services, Foundation, Inspection maintenance companies in the US for an aging housing stock. You look at it services and software investments in different countries. Again, very little terrorf risk, so you're able to really zero in and target those industries and sectors where you don't think this is going to be a big problem.
When you think about the ripple effects that you might see from the terror strategy. There are a lot of concerns about inflation, sure growth. How are you thinking about the economic headwinds that the US is facing Listen, I think that's.
One of the big uncertainties out there that people are trying to figure out. Tariffs are inflationary by design, so I think if that leads to an escalated level of inflation in US economy, obviously that's going to slow GDP growth. It may put some pressure on the FED obviously in a more tough economic environment, to lower rates faster over time.
But we've always felt that the bigger trends happening in the world, whether that's energy transition, the massive investments into data, a lot of these things are in inflationary by its nature. Putting aside tariffs, so we have a higher resting heart rate for inflation globally today. Than we've had in the last decade, and you expect that to continue and potentially
even get higher inflation. Right, if these tariff and these trade wars continue, it's not an unreasonable expectation that in the near term you can see higher inflation.
Well, it doesn't that mean higher rates or do you think that the FED is going to have to lower rates into the face of that. People are starting to use the words stagflation an awful lot these days.
I think it's going to be different in different markets, and I think the FED is going to have to be very nimble in how they navigate this risk. Obviously, if the US is headed towards an economic downturn, cutting rates is probably going to be the policy response. If rates are high and we're not headed down that recession path or deceleration of growth path, then rates could actually go a little bit higher in the near term.
So let's look at this from a global perspective as well. I think one unique view you can bring from KKR is that you are very global in nature. So you see the way that the changes are happening in the tariff strategy, the way that nations are kind of separating in their relationship to each other. You see that on the ground through your portfolio companies. What are than other areas of the worlds that are maybe even more attractive to you than the United States right now?
Well, you know, I think it's not a secret. You had it up on the slide. We're big fans right now of Japan. We think that is a really really underpenetrated opportunity, especially among US investors. They really haven't figured out how to get the exposure they want in a market like Japan where they're coming out of two and a half decades of deflation. So finally positive wage growth, pricing power, inflation is very modest, but positive inflation right now,
and rates are actually increasing modestly in Japan. That's a completely different macro picture than what we've seen in Japan for the last three decades, and a really exciting time when you marry that with shareholder reform, activism, activism, corporate governance reform in that market. Outside of the United States today, Japan is the largest destination of our capital.
So it's interesting. In addition to Japan, KKR has maintained a commitment to China as well. In fact, there are big deals that are in the market that KKR may be involved with at this very moment. So a lot of other investors are very worried about China, the internal economics and the relationship that China has to the United States. Yeah, how do you view that dynamic?
Yeah, listen, I think the geopolitical tensions right now obviously are front and center for US as we think about where to invest in how to invest and in China in particular, you have to avoid those sectors that have sensitivity on both sides of the ocean, both the US government and the Chinese government. So we have not invested in some of these sensitive sectors like electric vehicles or semiconductors or AI. That's not the focus of our China
investment strategy. We're really focusing on super high quality domestic businesses that are around domestic consumption and services. So we in our portfolio today we have one of the largest or the largest Chinese pet food company, again geopolitically not sensitive. We own one of the largest pharmacy chains in China.
We own the largest white mushroom grower in China, all geared towards the domestic market, a growing middle class who wants higher quality goods and services and food, and I think that's the sweet spot of where we're focused to the market today.
That's interesting because even if you're focused on the Chinese consumer, that might be a little more insulated to let's say, the global macro challenges. There are a lot of concerns about the Chinese economy. Why are you seeing through them?
Yeah, listen, I think the overall long term trend in China is the middle class is growing, and the expectations of the middle class are really for higher quality goods and services, safer food, safer services, and that's what these companies that we're investing behind are really catering towards. No doubt, the macro growth in China has slowed from a decade ago, right, you were talking about a country growing at double digits GDP. They're targeting four to five percent growth today, right, So
there has been a slowdown. There's clearly challenges in terms of the real estate market in China, and you have to factor all that in in terms of the growth rate you're underwriting, and largely the entry multiple. You know, the Chinese stock market today is one of the most interesting value markets in the world in terms of multiples. So if you know what you're looking for the type of risk you're trying to mitigate against, you could still find some interesting opportunities.
You know, yes day I asked the question, is American exceptionalism dead? In addition to that, I ask you, is globalization of diversification play? Is it a safety trade? How do you think about it?
But we are a very very global firm, and we have a lot of different ways to participate in those opportunities.
Private equity, real estate, private credit, and infrastructure. So in really volatile periods like we're in right now, having that flexibility of capital, we could partner with companies management teams as a provider of anything from senior and from grade debt right to non investment grade debt, to structured credit solutions, structured equity solutions, growth equity capital, to buy out capital.
So you know, today it's an interesting market. When volatility spikes, that usually leads to really really interesting deployment opportunities for our firm. You need to be nimble, you need to have the local reach in all these different markets. But we're excited, quite frankly about twenty twenty five. They're going to be hiccups. There's going to be some headwinds in terms of some of these macro policies, but our ability to deploy scale capital around the world, we think is quite high.
I will still ask you, if not dead, then is American exceptionalism then overblown?
Now listen, I think this notion that the US is going to win alone has never been the case. I think the strength of the United States is really the resiliency of the economy, the strength of our capital markets to mobilize capitals to support companies in the private sector, and labor productivity. Right when you think about why the US has grown faster than Europe or faster than Japan,
it's really about labor productivity in the United States. A lot of that is technology driven and innovation driven, but a lot of that is our unique mobility of labor in this country. You think about Japan, which is going through this resurgence. You know, structurally they've done the best job of any country in terms of women participation in the workforce, people working longer in Japan. Right, They've got
real demographic challenges. They've done an excellent job around automation and robotics in their industrial base, but they're not getting the labor productivity because the mobility of labor in Japan is quite constrained, and their investment in software and tech is a fraction of what you see in the United States. Right, So the real superpower of the United States is labor productivity.
At the end of the day, I do want to spend the remaining time here switching gears talking about the future of KKR, because it's been fascinating to watch the change from an iconic private equity company to.
What you are today.
There was the full acquisition of your insurance company last year, Global Atlantic, and it's made KKR look more and more like Berkshire Hathaway. And there's one part of your business that's far less understood that I think makes you look like the most like Berkshire Hathaway, and that's your strategic holding's business. Many people don't know that KKR owns eighteen companies on your own balance sheet at KKR, what is this business going to be in maybe ten years and
why is it valuable to you? Sure?
So when you think about KKR as a business, we really have three core strategic parts of our business. Strategy asset management, I think is well understood. That's what we're known for for the last fifty years. So that's our third party private equity again real estate and infrastructure of private credit business, and that's the six hundred and fifty billion dollar business that you mentioned at the start. The second big pill of our business today is Global Atlantic.
It's one hundred percent owned insurance company in the life and annuity space, roughly one hundred and ninety billion dollars of AUM there and again playing into all of these trends around retirement savings, retirement security, and being able to offer individuals compelling products for their own long term savings. The third piece of it is a segment that we introduced last year at our investor Day, but it's been a segment we've been incubating for well over a decade
now at KKR, and that's Strategic Holdings. So what we're trying to build in Strategic Holdings is in some ways a mini Berkshire Hathaway. These are companies where we own large stakes, sometimes controlling stakes, sometimes not, but businesses that we think we could own literally forever. Businesses that have the potential to compound in mid teens over a very very long period of time. Very defensive in nature, so
we have eighteen companies in that portfolio today. We're going to continue to redeploy our free cash flow at KKR to invest in more of these types of businesses. And it's not just private equity. Over time, it's going to include certain platforms, probably in infrastructure and real assets, maybe certain build ups you know that we're going to do
in different sectors. You know, when Scott Nuttell and I my co CEO, joined KKRE back in nineteen ninety six, Berkshire Hathaway had a market cap of forty billion dollars and roughly nav balance sheet of forty billion dollars. You fast forward twenty eight years, they have a trillion dollar market cap on the back of long term compounding of
their balance sheet and their investments. Right, some version of that is what we're going to be doing with strategic holdings, but leveraging all of the skills and expertise we have in our private equity teams, our infrastructure teams around the world.
So what's an interesting parallel here If you think about Berkshire Hathaway, is it almost like Global Atlantic is your own Geico, and these future infrastructure holdings will be your BNSF and your private equity holdings would be kind of like your stock portfolio.
Yes, this imperfect anology, but directionally you are absolutely right. I think listen strategic holdings for us, you got to think about it as a way, how do we think about redeploying our free cash flow as a business back into the most attractive areas. Some of that might be in our traditional third party asset management business, right we find great ways to deploy capital across those investments, we'll deploy that capital. A lot of the capitals reinvested back
into Global Atlantic. We acquired our first controlling stake in Global Atlantic in twenty twenty and GA at that time had around seventy billion dollars at AUM. Four years later it has one hundred and ninety billion dollars at AUM. So we've supported that growth with more investment. And then this third segment of strategic holdings, obviously, which is what we're super excited about, is one where we're going to be continuing to invest a lot more of our free
cash flow as a business. So our guidance to the street today is by twenty twenty six that portfolio will be generating around three hundred and fifty plus million dollars after time dividends. For us, that's growing to seven hundred million dollars by twenty twenty eight and one point one billion dollars by twenty thirty. So it is a very very visible, recurring, growing cash flow stream at KKR.
So you essentially have a kind of a future Unicorn of sorts being built inside of KKRE. If you're going to be bringing in a billion dollars over time in this business, do you think it's built into KKR stock that assumption yet?
I think people are starting to appreciate what we're trying to build. But I think the bigger picture is when you look at our universe in the alt space five years from now, ten years from now, I think many of the public peers in the sector are going to actually take very different approaches to how do they grow
their firms. I think the approach we have was with third party asset management, insurance and strategic holdings is quite differentiated and different than the way most of our peers are trying to grow their firms today.
Now, I want to spend a little time talking about not just institutional capital and how you are deploying capital in your own balance sheet, we've been talking so much about how there has been a massive push for retail. When it comes to the world of private assets, everyone is doing it differently. You have a relationship with capital Group in order to make this available in a mutual fund form. So how available is it to invest in
private assets from where you're sitting. What's the minimum amount you would need to put into a fund to start to get access to what you're offering.
Sure, So the way to think about the bigger picture opportunity is for most of our history at KKR, we were found in nineteen seventy six. Our core client base was really large institutional investors, pension funds, insurance companies, sovereign wealth funds around the world. The individual investors who participated with us were really ultra high networth families and family offices who could allocate capital as part of their diversification
as really LPs in our funds. They were willing, they were sophisticated investors, willing to take at ten or twelve year you know, illiquidity risk, just like a pension fund would. So that's a very small percent of the households obviously in the United States, but that's how they've accessed and partnered with us historically. What's relatively new for us in the last two to three years is we've introduced a series of private wealth products for individual investors who are
credited investors. Okay, so those are investors with a net worth of call one to five million dollars. These open ended, evergreen products have semilarquidity of features, so you're not locking up your capital for ten to twelve years. You have the ability if you needed to redeem a portion of
your capital every quarter. So it's a slightly different format, but it's it's investing in exactly the same deals that our flagship funds are investing in, right So that's we're trying to deliver that same institutional quality experience, the same portfolio, the same access to deal flow, whether that's in private equity, real estate, infrastructure, of private credit, to individual accredited investors.
Right in that one to five million dollars in networth, that's around ten percent of the households in the United States in those first two buckets ultra high net worth and accredited investors, and roughly half the AOO in the individual channel. With Capital Group, we have an exciting new partnership which really addresses the next ninety percent of US households. These are mass affluent individual investors who probably wouldn't be buying our private wealth product and wouldn't be LP's in
our traditional fund. So we're creating hybrid products with Capital Group in a mutual fund format. We're starting with credit in the second quarter, where we're going to be putting a portfolio together. Where Capitol Group manages the public credit, we will manage the private credit allocation in that mutual fund and deliver a product to the mass affluent that looks very different from anything they've been able to buy before.
You know, it feels like the holy grail for this industry is making private assets available and four own plans. Yes, how soon do you think that happens? And if not that soon, what's the biggest barrier?
Well, listen, I think again, at a high level, when you think about some of the societal challenges, we have a big part of that is securing your retirement right as you retire from work.
Kr co CEO Jove along with Bloomberg Shnalie Basset from Bloomberg invest This is Bloomberg Technology.
Welcome back to Blue Meg Technology. I'm Caroline Hyde in New York and.
I'm Jackie Devalace in Washington.
Let's just talk about more of the politic king that's affecting the market right now, and we want to think about what's happening in terms of President Trump and how he touched on in his address to Congress yesterday, in particular the focus on chips, which included a call, of course, to end the bipartisan fifty two billion dollar Chipsack Take listen.
Your Chips Act is a horrible, horrible thing. We give hundreds of billions of dollars and it doesn't mean a thing. They take our money and they don't spend it. All that meant to them, we're giving them no money. All that was important to them was they didn't want to pay the tariffs, so they came in their building, and many other companies are coming.
We'd have to give them money.
We just want to protect our businesses and our people, and they will come because they won't have to pay tariffs if they build in America. So it's very amazing. You should get rid of the Chip Act once again.
Investors try to digest what this means for market capitalizations, for the potential of buying publicly traded stocks. Have a look at what the reaction has been ultimately on the chip sector. We have been moving between gains and losses. On the Socks Semiconductor Index. We're off by four tens percent. Intel drags us lower, a big recipient of course, and potential loans and grants coming from the chipsack we're off
by four point three percent. But TSMC saying that they're going to be laying the groundwork here in the United States, is that the tariff that brings us here the potential concerns there. TSMC up by one point two four percent. Brall come up by three tens of a percent. Mike Shepard joins us to really discern the devil that is in the detail here in that's just trying to understand really what this means. Would ever any grants or loans be taken away from.
A company that's already been given it.
Well, our reporting right now indicates that there will not be any clawbacks that actually take place. So if a check has been written to a company in cash, nobody is coming knocking on their door saying, hey, we want Uncle Sam's money back to put some other priority Under the new administration. But at the same time, it does raise a question about money that has been committed but
not yet dispersed. Would there be any delays in that or a possible effort by the President through Congress or through the Commerce Department, which oversees this program to either stall or maybe try to redirect the money. Now, even that is kind of a remote prospect. And when the President said that he should just have Congress get rid of the Chips Act, he turned right around and looked
at Mike Johnson. Was one of those moments during his address, and that really put the ball in essence in Congress's court more than anything else. We have seen a few changes though in this Chip's Act office, Carol, and one of them is that the dose driven cuts led by Elon Musk, they have gone through that office with the loss of as many as forty employees who would oversee deployment and disbursement of that money. So we are seeing
some disruption to the program no matter what. One difference you highlighted between TSMC and Intel was in the share price, and part of that reflects that Intel is struggling to find customers that would sustain those big new plants that the government is helping him park to build. TSMC, on the other hand, heard from both A and D and Nvidia on Monday that, Hey, we're ready to buy those chips you guys are going to be making for us.
There, Mike, where does this leave President Trump's vision for boosting domestic production, auction of these critical chips, and just broadly our competitiveness with China. This program was kind of supposed to put us in the lead, keep us there. What other levers does he have to pull?
Now, Well, we know the favorite lever of Donald Trump, and that is a word that he refers to constantly as the most beautiful word perhaps in the dictionary, and that is tariffs. And he sees that as the driver in getting TSMC to make its decision to move to the US. And he also invoked that a week ago when Apple announced a five hundred billion dollar plan to invest in the US over four years and hire as many as twenty thousand new employees here on American soil.
Trump said that the threat of tariffs had prompted Apple to make that decision, and he sees it as a way much more than subsidy programs to effectively bring companies to make their investments here, and he's also promised regulatory relief on perm for any companies that want to invest more than a billion dollars here in the US. So it is a combination of tariff threats and regulatory relief, and he talked about regulatory relief as well during his speech last night.
That's Bloomberg's Mike Shepherd, thanks so much for joining us. Let's stick in more to the impact of Trump's comments on the Chips Act and tariffs. Were joined by Liza Tobin, managing director of Garneault Global. Liza, there is a lot to digest last night, but I want to start with the potential repeal of the Chips Act.
This was really.
Supposed to cement our position in the AI competitive landscape. Does this put us at risk a falling behind?
Yes, the comments that Trump made in his speech last night were not new. He's on the record of complaining about subsidies and what's really at the heart of his concerns is not wanting to be subsidizing other countries. And so he's he, you know, in his first term, and now he's putting pressure to get our allies to reimburse us.
He really feels like it's unfair that TSMC, a Taiwanese company, has gotten subsidies, and so you've seen this ratcheting up of pressure on TSMC that resulted in one hundred billion dollar announcement that TSMC will put even more investment into the United States. The sixty five billion already announced before and the Biden administration was already the largest foreign direct investment in US history, and so by adding another one hundred billion to.
That, it really tops it chart.
So it kind of remains to be seen if that will be enough to kind of satisfy him that he's been reimbursed by Taiwan and TSMC for these subsidies. But that's really at the heart of his concerns.
How then can a.
Local player like an Intel be reimbursed? Liza, talk us through what you think the chart and the stic situation is for local players who have been promised local US money.
Yeah, that's a good way to put it, Caroline.
I mean, the stick, of course is teriffs, and I agree with your previous commentator that his favorite tool, he's kind of Swiss army knife policy tool is the tariff.
And so that was the stick that we heard about.
But there were also some kind of promising carrots sprinkled through his speech.
He talked about tax cuts.
From manufacturers to buy more equipment. That would be a positive thing. He also talked about high skilled talent. So the attention has gone to his proposed gold card idea where high net worth individuals could pay five million dollars to get a green card. But also buried in the speech was an allusion to the issue of high skilled graduates from US universities having to leave the United States and not being able to stay and get a green card.
And so it sounds like President Trump wants to change that. And that's something that many companies complain about as being the number one constraint to setting up companies and manufacturing plants in the United States is a lack of skilled workforce.
Let's talk more about that talent pipeline, because the Chips Act was not only providing money for the manufacturing of plants, but also to agencies like the National Science Foundation, which really develops a lot of these master's degree doctorate level students that eventually end up in the private sector. By yanking that funding away, what does that do to that pipeline of talent longer term.
Yeah, I think here there are a couple parts of President Trump's agenda that are working cross purposes.
On the one hand, his instincts.
Are that we need to attract the best and the brightest to the United States. But on the other hand, you have those kind of firing workers across the federal
workforce and trying to cut funding. So if that starts cutting things like federally funded R and D and other support for science, you know, there's a very strong track record of that kind of federal investment in R and D paying off over the long term economically and in terms of moonshot programs and so here, I think Trump's agenda is kind of fighting fighting within itself, and it remains to be seen how that fight will be resolved.
Liza, we bring you on time and time again to the show because you're Chinese expertise here, whether it's previously the special Competitive Studies Project, you're now of course, we've got no global think about geopolitical risk. In thirty seconds, is the new policy the new administration setting the US up better or worse versus China.
So what's interesting is China has been a bit on the back burner in President Trump's first six weeks, he's.
Not talking about China as much.
It only came up very briefly a couple of times in his speech last night, kind of in passing.
But we know that over on the other side of the.
Pacific, Beijing is opening up its National People's Congress today. Their premiere made comments kind of reinforcing their desire to annex Taiwan, and you know they're ratcheting up the pressure in the Taiwan Strait. So it's only a matter of time before China kind of forces itself back onto the front burner of Trump's agenda.
Zotobin, always great to catch up, Managing director Agano Global, thanks for joining us, coming up bringing AI to consumer applications AC sales men.
Quaso's with us talking about the.
Opportunities in that consumer space.
This has been about technology time now for VC Spotlight.
There are a growing number of opportunities for applied AI to transform your my products the consumer that's creating new openings for investors. Benquaso as a partner at ACEL joining us for more. And then when I think of your career, I think of AI and enter. But you're really leaning in here to thinking about how it's going to affect my life. What are some of the best that you've been making.
That's right.
So we recently led a seventy eight million dollar series C into an AI powered language learning app called Speak and so specifically, Speak teaches its learners how to communicate, how to have conversations through voice and audio. And this is kind of in contrast to the historical industry driven by memorization in grammar centric techniques. So we're really excited to back the leader in AI and kind of the language learning ecosystem.
Ben, where are we now when it comes to consumer technology? Because there was quite the heyday in the mid two thousands, but today, in the era of AI, the biggest checks are being written for a lot of enterprise focused companies.
What's left?
What opportunities are you seeing to really bring back that consumer space?
Yeah, Look, I think.
It's been a tough decade for consumer on the whole, but AI unlocks a whole new opportunity and we're actually seeing a little bit of a blend of both B to B application side at the house with the consumer side of the house. You know, at Excel, we're trying to back teams and products that are bringing five to ten x better user experiences to its users. And within the consumer world, that can come in the form of language learning, it can come in the form of music
and health and wellness. So yeah, I think there's a lot of opportunity and frankly, the foundation that AI provides for a lot of these application layer businesses are what's the real.
Game changer here?
What do you make of valuations right now in the market. AI seems to be an outlier still getting those huge valuations even before a company has started generating revenue. Do you think some of that will start to soften?
It's hard to predict the future. We're going to go through a lot of local maximums, local minimums. I think at Excel we're focused on what the next decade is going to drive from an enterprise value perspective, and so if we're backing the right products and the right teams who are laser focused on those missions, the valuations hopefully we'll look back on and won't feel too scared about
our entry points. But there's no doubt there's a lot of excitement here and I think you have to be disciplined on where you're placing your bets.
Ben is some of that froth coming out a speaking with Mike Anders over Iconic earlier today at Blomberg invest and he's saying, naturally, this disruption, this consumer sentiment shift, maybe that's a better environment for his company. At least it's out writing checks in because we do get rid of the froth, the fomo a little bit. I mean our valuations coming down in the private sector when we're off by twenty three percent compared to videos high a little bit earlier in the year.
Yeah, I think the tough part about looking at at public valuations is they're changing on a daily basis, and we're thinking about where these companies settle five to ten years from now. And so while yes, we'll see you know, medium shifts week to week, month to month, the truth is our underwright really has to be what can this company be at five years from now, ten years from now.
And that's a challenge, but it's not necessarily correlated to the day to day price movements in the public with markets, what.
Do you make of the humane kind of disaster there? It didn't really take off the AI pen. It was really the first intersection of generative AI and hardware. Do you guys look at those types of opportunities when you're going out and looking at how can we really bring this from a more consumer standpoint.
Yeah, Look, I think it's always easy to poke holes in somewhat failed missions Hindsight's twenty twenty. But the truth is consumer is such a big opportunity that you have to take these big swings, and so I have a lot of respect for that team. I have a lot of respect for teams that are chasing massive end markets like audio, or like fitness, or like health and wellness.
So I don't imagine they're going to be the only one. However, I also think we're going to wake up in twenty thirty five with a whole slew of new products that we use every single day, and not all of those are going to be created by the Apples and Amazons of the world.
That's been a partner at Excel, thanks so much for joining us.
It is the startup aiming to bring back extinct species like the dodo bird, like the wooly mammoth, and it says it's achieved a first step towards those goals. Colossal Biosciences has created a wily mouse. Scientists modified the mice using DNA and genomics technologies, giving the animals longer, thicker hair, and and altered metabolism. Ben Lamb, Colossal's co founder and CEO, is back on the show.
Ben, how big a step.
Is this because they look really cute but they don't know that different from other mice.
Well, I think they look significantly cuterer than I say. You know, one article actually yesterday said they are the most adorable mice that have ever been created. They did say it was an accident, which isn't true. It's been very, very targeted. And you know some people have already asked, you know, will the wooly mice increase the speedable which we get to a mammoth And the answer is no.
You know, we've been editing.
I've been on the show before and we've been editing our Asian elephant cells with mammoth aleeles now for about two and a half years. But what the wooly mouse does is it proves that our end the end process of understanding computational biology from these ancient DnaA, making the edits and then screening the embryo so that they're healthy and we produce living healthy animals works and it it also worked in one month. So we started the project
in September. In October we had our first mice and they had exactly the number of edits we targeted with one hundred percent efficiency, and the exact phenotypes are physical attributes that we're looking for, which is a validation of all the edits we're making in the mammoth.
Already this is pace.
Then what is the next step where do we get to see the next innovations for this particular mouse.
Yeah, so right now, you know, it's obviously clear that we can see the hair fluffiness or wooliness as we like to call it, in terms of the texture, the thickness, and the different ways it grows. We can also see they're slightly slightly fattern a little bit larger, so it goes into the lipid metabolism genes that we've edited from
the mammis. And then we can also see obviously the color, which is the color that mammos are when you pull them from the permafrost and clean all the promofrosts knock off of them.
But what's really.
Interesting is over the next six to twelve months, once we get approval from our ethics board and our I Code Board, we'll actually start to do behavioral tests versus wild type mice with feeding them different diets, increasing the temperature just a little bit to see how they behave in these different environments, to see if they do prefer cold tolerance, And that'll be another signal that we're on the right track with some of our mammoth edits that we're making in the Asian alpha genome.
But I asked for it last time, and I sort of returned to it at this moment of geopolitical anxiety.
A man who has built generative well, you.
Built AI companies, You've thought about defense, you've thought about space, but now is the time you're thinking about willy mammos and potentially extinct animals.
Coming back push us forward as the why again, why we're doing this?
So we're going to lose up to fifty percent of biodiversity between now and twenty fifty if we don't do anything about it. Right, we know conservation works, it just doesn't work at the speed of which we're eradicating species and changing the planet. Right, So we need new tools and technologies in that. And what's amazing about this project is it gives us an opportunity to build new tools
and technologies which can help humans, which we're monetizing. It also builds opportunity to build technologies that can help conservation, which we're giving to the world for free. We've launched our foundation last year with a fifty million dollars seat investment in it. And it also gives us an opportunity to inspire the next generation. So I'm really glad that I'm not dealing with events or some of the other
geopolitical issues. I think everyone generally agrees on both sides the aisle and all of the world that losing species is bad and we should do everything we can to protect what's here and build new technologies for conservation.
And that takes money.
And boy, if you raised it more than former and thirty five million dollars of it, then the next stage is how expensive is it?
How much more might you need to raise?
You know, where a technology startup, it's also innovating new tech achnologies for human health care and other industrial use cases. Like we spent out breaking last year, which is our plastic degradation company. We spent out form Bio, our competition biology company for human healthcare. We have another one that may or may not be coming out at the end of this year, and so we will continue to raise money as long as there's investors' interest and sentiment and they're excited about the mission.
But I think genetic.
Proofcases where we can identify genes and make one hundred percent in precision at it's using multiplex editing, making all these these editswards stack, you're made all at one time with one hundred percent efficiency. That's just not something that we see in genome engineering, right. I mean, I'd say that leading the charge in genetic multiplex engineering is probably a pretty large market long term. So we will continue to raise more capital in the years to come.
The Willie Mouse the stepping stone to the Wily Mammoth. Thanks so much for bringing us acute pictures and your expertise. Ben Lamb, co founder CEO of Colossal Biosciences. Now that does it for this edition of Bloomberg Technology.
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