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.
This is Blomberg Technology, and we get straight to our top story. President Trump taking aim and Apple yet again, threatening a twenty five percent tariff on the iPhone maker if they don't produce the devices in the United States for US consumers. Shares as you see, down yet another two point seven percent. We're dropping below that three trillion
dollar market capitalization, and we're bringing the analysis Blombergs. Mike Shepherd joins us we have seen Tim Cook in the line of fire from Donald Trump for at least the week.
Now, how does he respond, Mike, This is.
A tough one for him, Caro, because the President's dander really is up here. Last week he singled him out during an appearance with reporters while he was traveling to the Middle East, and he noted Cook's absence during a forum with other CEOs in Riab where he called out
Tim Cook. Tim Cook, do I see? And he said, I don't think Tim is here, And then later he pointed to Apple's intention to move some of its China based iPhone production for the US to India to avert what would be higher costs related to tariffs on goods coming from China. Trump wants to see something different, though. He wants that production not to go to India but to the US. He would like to see domestic production
move here. And whatever Tim Cook has been promising the President, with whom in the past he's had a good relationship, clearly wasn't enough. And remember Tim Cook did meet with Trump at mar A Lago after the election, and he attended the inauguration too. He had a visible spot along with other tech leaders in the capital rot Tuanda on that day, January twentieth.
And we're not seeing for Tim.
Cook the results that he might have hoped for in this relationship with the President.
The signals have been their Mike, as you mentioned, the little problem with Tim Cook that Trump spoke of last week being that of shifting manufacturing from China to India, and then the ft with a report showing that that India manufacturing focus had been being doubled down on in the last week. More broadly, to speak to the relationship therefore that we see of Tim Cook with the US and investing him because already he had promised five hundred billion dollars.
He had promised five hundred billion dollars and it was not insignificant, and he had talked about moving some iPhone related chip production here and other efforts here, including training and other works, but it wasn't enough. Trump is really about the symbolism. He wants the iconic products, including the iPhone, but others as well made here in the US. But one of the problems is, of course, the workforce. We
don't have the workforce, and then the cost. Do we have the workforce that is prepared to do the kind of high tech, high skill assembly of these phones that you see on mass in China and in India and in Vietnam. We really don't. And Tim Cook has made this point over and over again, as have other chief executives when they talk about the challenge of bringing production here to the US. So is a difficult moment for Tim Cook and trying to figure out this relationship with the US.
The cost.
There are estimates all over the place about how much more an iPhone would cost if it were produced here, from beginning to end. One analyst out this morning saying as high as thirty five hundred dollars per unit. That may be high, but it gives you an idea of just how much more of a cost there may be for moving production here, which Caro, it's important to note, would take years to reroute all those supply lines, find that land, et cetera.
Well, said Mike Sheppard.
We appreciate it, of course, that being Dan ives a Webburshoe called about a thirty five hundred price tag, and indeed he called it a fairy tale. And it's calling this an absurd directive coming from the president. Let's get more analysis with Gil Luria Da Davison managing director joining us. Now you have a buy rating on Apple, a two hundred and fifty dollars price target. Does any of that change if they indeed have to bring production hitting the United States?
It does not. This is really just a matter of timeframes. Yes, if we needed to make an iPhone right now in the US, it would be very expensive. But can we do this in five years? If Apple was to commit to bringing production on iPhones to the US in five years and invested its considerable resources into doing that, it wouldn't be that much more expensive. And that's what the
President is looking for. And I'm surprised that Apple is at a point where they're negotiat eating this badly that the President has to go out publicly and threaten them. You've seen other technology CEOs do a much better job of giving the President what he wants and moving forward and making those commitments. And I'm surprised that Apple is continuing to be humbled. Let's not forget this has been
a humbling week for Apple. Yes, at Google Io, we've seen that that Google is way ahead on AI on Android. Then there was the embarrassing announcement from Open Ai and Johnny Ive. Apple needs to do a better job of negotiating because if it does commit to a long term path, it could make iPhones in the US at a competitive price. It doesn't have to do it today.
How Gil, at the moment, we're hearing that we don't have the skill set in the United States. We don't have the ecosystem of supply chain here. It has taken decades to build it up in China, It's taken years to build up in India. What do they have to go about sorting here in the United States?
Three to five year timeframe.
Yeah, that's exactly right. It is a skills issue. But if you give them five years, we can hire internationally, we can develop the skill Here. Apple is sitting on fifty billion dollars of cash and it produces one hundred billion dollars of cash every year. That is, that is enough to accomplish great things. And if the great thing Apple needs to accomplish right now is to develop that skill set domestically, then it should be focusing its own resources on that.
Again, Gil jumping in there.
The opportunity cost of diverting that cash away from R and D. Boy, they have to catch up in terms of Generator AI and integrating it there, but instead having to focus on production here in the United States? Is that not an opportunity cost? That does indeed drag down the price target it needs for the stock.
It is a headwind and that's the head whend they're dealing with this year. That's why the stock is down so much, is that they've been caught in this cross us fire and they didn't need to again. All they needed to do is make some early commitments, start down a path, and then this path either it leads them to a successful outcome or they have a fallback of saying, okay, let's just absorb the twenty five percent tariff from India.
That's why when people say it'll cost thirty five hundred dollars to make an iPhone in the US, that's not a real thing. The only possibility year is that they're going to say, okay, even in a five year time frame, it's going to cost us so much to make an iPhone that will absorb the twenty five percent tariff from India and absorb it through higher prices, slightly lower margin, and push it down to vendors. So this is really just a matter of them doing a better job negotiating
moving forward. But yes, absolutely this is a drag on the stock. It has been this year, and until they find a path forward and get out of the headlines, it'll continue away on the stock.
So, Gil, if you're saying it's not a real thing, estimate what an iPhone made in America would cost. Are you anticipating that they do stomach a twenty five percent tariff coming on just continue into import or are you anticipating that they do go about a three to five year investment plan in the US When look the term of President Trump is in five years.
I think they need to proceed on both pasts again this year. They can't make iPhones in the US now this year, not in the next three years, so they are going to have to try to negotiate that tariff down or absorb it in the short term, which is what they're doing, and then proceed on both paths, because to your point, this administration isn't going to be in power forever and they're going to have to find out
over time how what it is going to cost. I think that we're also minimiz I think that I've heard some comments minimizing the changes to manufacturing in the US. Manufacturing is going to change dramatically over the next few years in the US for a variety of reasons, because labor has become more expensive in China and Taiwan, because robotics are getting that much better. So in a five year timeframe they may be able to accomplish these goals.
They have to pursue that now they don't have a choice. But at the same time they need to use that as leverage to go back to the administrator and say, hey, give us five years to do this. Let's take off that twenty five percent on India because we are making a firm commitment to the five year timeframe and that'll buy them the time to find a good resolution that is possible, and mister Cook is a skillful enough negotiator that he needs to be able to accomplish that.
But how frustrating do you think it is for investors, for yourself or indeed Tim Cook, to just think about the inefficiencies that have to be built into the business model now. Even if they do bring over a component building here in the US, it's not going to be an easy task and they're likely to have to still assemble in China and India for the time being.
Well, it's a reality. I think sometimes other countries and some CEOs are a little bit in denial over the fact that President Trump got seventy seven million votes and believes he has a mandate to make these very profound changes to the global order, including changing the way the global supply chain works. This is not going to change
in the next three years. This is something that all these companies and by the way, these countries have to acknowledge and move forward with, and we as analysts and investors have to adapt to it. We can't go back in time and change the outcome of the US elections. This is the administration, this is its policy, and we have to adapt as investors, which means that Apple is going to have a choppy year for sure, and other companies that try to negotiate badly are going to have
choppy years. That's why we favor companies that have handled this better. Microsoft, Amazon I've handled this a lot better. Their business is more resilient to this, and they should be better able to get through the rest of this year and the rest of this administration.
All lies on the political navigation of Tim Coke.
Next, Gil Luria.
Great to have you Da Davidson coming up, renowned computer scientist in Ai developed and row and he's going to be joining us to talk about his new VC fund. But also this talent, the skill issue that we're just talking about with Gil Luria, can that be brought here to the United States.
Let's just take a quick.
Check on the market's ahead of that though, because the Nazak is under pressure as we dial up tariff anxiety.
Nazak off by more than percent.
We see this semiconductor index also off by two percent, and video gets sold for Apple in the line of fire. This is bluebog technology. The big news today it is Apple shares trading low as investors react to President Trump's threat of a twenty five percent tariff on the company if it doesn't bring more iPhone production to the United States. But doing that requires skills many American workers currently do
not have. We're pleased to welcome to the show Andrew and his world renowned computer scientist, thought leader and also the co founder of online education company called Serah, and is also announcing his second fund targeting AI startups. Andrew, it is wonderful to have your voice on the show. And before we get into really the AI talent that you've been building, I just want to get your take on the labor skills that are currently needed in the
US for this manufacturing pivot. If we were to bring iPhone manufacturing to the United States, could we do it in a near ative time frame?
It will take years to develop the talent based needed to bring a lot of advanced manufacturing back to the United States. I think there's a certain largely to making sure that advanced manufacturing is under the control of the US and our allies, and that's important, not just US
but also I trusted Ollies. Several years ago, I actually visited Wisconsin where the first Trump administration and fox Con might be put fed into Wiscon Valley, which is an attempt to move semiconductor, sorry, move display manufacturing panel display manufacturing to the United States in Wisconsin, and frankly it was a great effort, but it really struggled to gain traction because it's very difficult to find the talent in Wisconsin or the US more broadly, with the advanced manufacturing skills,
manufacturing today is often a high skill requiring knowing about robotics, knowing about software. It's not just people assembling little things with their hands anymore. And we've got a lot of work to do to grow that talent in the US.
Where could we bring in from and where have you seen that skill set among allies that can be broad in because in many ways it's feeling as though we're not bringing in.
Talent from abroad at this moment either.
I think that in the case of manufacturing talent, curly China has a lot of it. I think Taiwan interestingly also has a lot of manufacturing talent. So I feel like and obviously also Japan. I think some parts of career as well, especial when it comes to semiconductors. But so many of our allies do have skilled manufacturing talent. But how to work with them to import some of those skills to the US is I think something still
to be figured out. And then on the other sid of the spectrum they alluded to, I think one of the best things that US could do to ensure American competitiveness in AI and other advanced technology fields is to frankly support our universities and support high skill immigration.
How have you been considering the cuts to science funding in particular? Is that impacting your sector? The sector you want to invest more in with your second fund.
So AFUNS Adventure Studio. We work with many entrepreneurs to build companies and I feel like over the last many decades, America led the world in science and technology, and this is an eraror when we have strong institutions like the National Science Foundation and the NAH the funded open research. One thing that I think not many people fully understand is when say, the National Science Foundation funds and researcher the writer research paper there's published a free anyone in
the Internet can can read it. Yes, it holds their adversaries. Yes, it helps the whole world. But the country it helps the most is America because when an American researcher on American assault publishes a paper, that diffusion of knowledge is fastest within America. And yes, other countries, including our adversaries, can benefit from it too, but that openness of research helps
the country that does it the most. And so I think America's ability to attract amazing international I always once an international student myself on an F one visa, and I came to the US study and it ended up saying and hopefully making some positive contributions to this country. I think welcoming school immigration would be a they would be an important piece of insurance American competitiveness.
Well, let's talk about your positive contribution when it comes to raising one hundred and ninety million dollars second fund to invest in ai talent and startups and sort of co found them in many ways. What sector is you looking at and are they US built companies alone?
We are building the majority of countries we built are in the US, but we are also working with businesses in Japan and Taiwan. Career and so on, Afan's Adventure studio. So what I decided was unlikely traditional VC. You know, I don't want to be competing for or chasing deal flow, so we exclusively work of entrepreneurs to co found companies. What that means is my team is alongside the entrepreneurial We're writing code and customers debating what features to build.
And because my team is fortunate to be close to the AI technology, a less of local across many different industry sectors, recruit great AI talent and apply our technical expertise to all sorts of different sectors where AI can be applied.
Well come back as that portfolio continues to grow.
Andrew has been a joy speaking with you.
Congratulations on the new fund and thank you for sharing your expertise and drawing. Of course, managing general partner at the AI Fund, It's also founder of Deep Learning AI and.
Of course co founder of Coursera.
Sticking with artificial intelligence and forropic well, it's rolling out two new versions of its claud AI software, including a longer laid.
Update to the high end model.
This is as a startup really advised to stay ahead of a crowded market. Mike Kreiger joined ed a little earlier Andthropic's chief product officer, Our really.
You know constraint for the slaunch was we wanted to be available to you know, as many people as want it on the launch day itself as well, and so it'll be generally available. It'll be in claud dot ai for our more end users. It'll also be available in the API for usage on day one, and then as people scale up their usage, you know, there's often you know, capacity and rate limit conversations that we need to have
just because the models aren't really in demand. But in terms of being generally available.
It's day one coming up tech IPOs and we're back. We'll discuss a Bream and ch equity Zen. This is reuly Meg technology. Now as the broader market sells off shares of Mountain of Hinge Health, both trading higher after making their public debuts just yesterday. Their success is giving hope to other tech startups that have been waiting to go public in some cases for many years.
Let's talk about it all.
Briann lynches with US head of market Insights at equity Zen and one of the largest pre IPO platforms for private shares. It's in the secondary market and brand. Look, are we seeing the creaking open? Is it companies that have to come to the market or are we going to start to see companies that just want to come in this environment?
Thanks for having me now. If you had asked me a few weeks ago if we would be seeing positive IPO activity right now, I would have said no. But these few companies that have bit the bullet and decided to go out Eutro last week, Hinge Health, and mount In yesterday are performing well in are outperforming the market. So I think, you know, we're not in a market
environment where we'll see the floodgates open up. But for companies that need to go public for liquidity or other reasons, or feel like they have a really compelling story, they might just be brave and decide to despite you know, the volatility there is.
What are the story necessities. It's interesting that core we've now really outperforming. We're at priced despite the initial volatility. So we've got an AI focus, you've got release services and consumer focus businesses. Thus far, does it have to be there or could we even go into broader hardware and deep tech?
I think we can go broader into a hardware detech. There's other names that are on our radars. Rebra Swan who has filed and you know, has been on the IPO pipeline for some time now. But what's interesting is the companies we've seen recently. You have a fintech, you have a health tech, you have an ad tech company, so very different companies, but there are some similarities. These are older companies that are over a decade plus years old, so there's a lot of investors and early employees who've
been reading a very long time for liquidity. Surprisingly, when you look at the two from yesterday, these are unprofitable companies as well, so it's a little bit surprising to see how well they've then received given that they're not yet profitable. They're almost there, but it seems like maybe that's not a requirement now for public market investors when you're achieving thirty five plus percent growth rates and hundreds
of millions of dollars in revenue. So I think there's a similar story well we're seeing across some of these sectors. And another thing to notice, these have been down round IPOs, you know, the to yesterday both raising in their IPO at valuations below their last round of private funding, and especially for a lot of these companies that last raise in twenty twenty one, twenty twenty two, I think that's
going to be a reality in the market. So just some commonalities and things that we may expect to see as others enter the market.
Bran, Let's talk though about some of the pressures that can be taken off by the secondary market, because liquidity for employees that have been there a long time, liquidity for the venture that's back them for a long time, and it's actually getting far easier in the secondary market right absolutely.
And what we've seen is the VC ecosystem as a whole is at this really interesting inflection point where it used to be raise capital from LPs, deploy that into early stage startups, have exits around the ten year time horizon return capital, rinse, repeat, rinse repeat. That crucial exit at the ten year timeline piece is not happening, and
that's really driving more secondary activity. Precursor Ventures gave a stat a few weeks ago that they expect seventy five to eighty percent of distributions to LPs to be from secondaries over the next five years, and that's a huge number and it really speaks to the liquidity crunch that we're seeing in the venture market, and secondaries are certainly becoming a larger avenue.
To address that briefly, though, we've seen an interesting tech focus from vcs where they convert to be able to buy more of the secondary market, maybe even some of the public market too.
Yeah.
Absolutely, so, we've seen this trend of more vcs registering as Ria's light Speed is the most recent example of a VC firm that's done that, and that really allows them more flexibility to invest more than twenty percent of
their portfolio into both public companies and secondaries. And while we've talked a lot about, you know, the secondary need on the cell side, there's also a secondary need on the buy side where these AI companies they have just so much capital available to them, it's hard for most investors to get access to a funding round or get the allocation that they're looking for in you know, the latest AI startup, So they're also coming to the secondary market to either build or establish investments.
Brian Lynch, great to catch up with you, thank you, head of Market inside It at Quityzen. Meanwhile, we check bick back on the big story of the day, Apple shares lower well, we see a twenty five percent tariff that they don't move more US manufacturing for the iPhone.
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