Bloomberg Audio Studios, podcasts, radio news from the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Live from New York and San Francisco. This is Bloomberg Technology. The trade war between the US and China it continues, China raising its own tariffs on all US goods from eighty four percent to one hundred and twenty five percent starting tomorrow, after the US raised tariffs to one hundred and forty five percent on China. China saying your tariffs are a joke. United States, It's no joke to investors.
What an extraordinary week we have had. We are are currently up almost six percent over the course of the past five trading days ed on the NASDAP. But it really doesn't paint the picture of the extent of the whiplash that we've seen throughout that week as you pull back on tariffs towards other nations. Look at what we've done on the month, though, this context is needed sure
up on the week. On the downside, for the course of April the trading month were off five percent on the nast like one hundred dig into the details.
ED.
Yeah, I'm looking at the chip sector and across semi conductors. There's divergence in the session between fad less names, those American companies that design chips that don't make them, and those with domestic operations in the US. And buried among the headlines overnight was the Chinese regulator and industry body saying, by the way, when we think about tariffs on US goods imposed by China, this is how we'll define it you and are going to get into that throughout the
course of the show. We have to talk about Apple. I feel like Bloomberg Technology as a show was early to this discussion on Monday. Will the US build an iPhone in the future five days we're higher, but it's been so volatile and the analysis from different corners of the market is so different. I think we should get into it.
Carry we should because we've been debating time and time again. A made in America iPhone is the goal that President Trump believes could be a reality ED. But replicating China's advanced supply chain it's skilled labor in the United States will prove nigh on impossible for the tech giant and rak Rana of Blue meg Intelligence joins us, You've got a new note out just talking about the implications of
taris on the margin of Apple. But what would it do to the margin of Apple if they ever brought production for the iPhone to the United States?
Anag see, I think a lot would depend on our materials that go there, the component costs, the labor cost, and I think it'll be very hard for Apple to you know, let's say, raise the price of the phone to two x and then make it in the US. It has to be done in a way that actually keeps the cost down and at that point, I mean
keeps their margins. The reason why Apple shines compares to any of the consumer electronics companies because it has very high gross margins compared to you know, let's say somebody who just sells an Android phone in Asia, for example.
But those margins run the threats heem. Let's bring up Anaag's research that published I think about thirty minutes ago, twenty minutes ago. I'm just going to read it. Our analysis suggests a margin impact of one hundred to one hundred and seventy basis points for every ten percent tariff increase on China manufactured products. Apple could mitigate some of the impact through price increases. You've been talking about price
increases a week. The key question seems to beware and you think that will be on the services side, not on the handsets.
Because as I said, it's you know, it's very difficult to take a thousand dollars phone and double it up two thousand, but it's slightly easier to take a you know, two ninety nine dollars to ninety nine nicloud plan and let's say make it up to five or seven dollars. And also remember some of those you know, revenue streams. When it comes to the services business, especially cloud services,
they have very high incremental margins. These are products with seventy five, eighty percent or margins much much more than the product side of it. And it doesn't really pinch the consumer that much. And you know, they could praise it as it's only going to be done you know, over the next six months or the time period when the tabs are and then they can scale it back. I think from a consumer point of view, it is less, you know, it hurts them less. But again, you know, that's just one service.
I talk about.
They could be others as well, but I feel very, you know, strongly that I don't think they can raise the price of a phone up by you know, fifty sixty percent, maybe maybe slightly, maybe five percent, ten percent or so, but anything above that, you know, I think destructs demand.
Aner Rana Bloomberg Intelligence, thank you very much. They stick with Apple and the impact of tariffs on technology. Tony one trow Price, science and Tech equity portfolio manager joins us. Now Apple the number one holding a tro Price is
Science and Tech fund that Tony oversees. Tony, when I was learning about the technology industry and the markets and making my way through Bloomberg Televisions newsroom, I was always told that Apple and names like it had an entrench market position, strong balance sheet, and in crises or recession, that's where they would survive and thrive. But I think right now, you can't necessarily look back at history and precedent. How on earth are you modeling the future of this company?
Yeah, well it's a great question.
Obviously, it's historically been a kind of a balancing name. Just that whether a real kind of stock market storm, I'd say here, you know, I think that there is a lot of fear in the market and concerns amount of trade war and what deglobalization could possibly do to kind of Apple's manufacturing advantage in China. And so you know, when I take a step back, they do have diversified supply chains.
I think they are.
They do have the ability to move around, and they do produce iPhones.
In India, and when we think.
About the US, the consumption of iPhones is roughly twenty five or thirty percent, and so I expect that there's some flexibility to move some of that production to India more and therefore diversify that risk a bit. And you know, at the end of the day, I think that it is about like, you know, how much of a staple the iPhone is, and so there's price you know, kind of sensitively among the customer to actually you'll pay up.
For the iPhone. I think that actually could be bullish for the stock.
That just demonstrates more of a it's more of a staple than people appreciate. But here I do think that there is a lot of fear there and so generally, you know, historically you've been a reward for leaning into weakness.
Then in this weakness Tony. Yes, on the day Apple is trading somewhat higher. On the week it is too, but on the course of the month it's down fourteen percent.
Have you been adding to your number one holding?
Has it at any point looked attract him to get back in with more addition, I think, you know, the.
Company's still really well positioned over the long term. You look at like the ecosystem they built, the quality of the product, and then you're also an iPhone upgrade cycle coming, and you know, a placement cycle has been elongated, and if you get a new form factor, I think that could be like really attractive.
And you know, at the end of the day, like the evaluation has become more.
Attractive, especially at these levels versus where they were, you know, six and nine months ago. You know, in addition, it is one of the Max seven that hasn't been spending a ton on large language models.
So the capital intensity.
And the free cash flow quality of the company is still very, very high quality.
Go there, Tony for a moment, Because people were ringing their hands about Apple before the trade war because of a lack of urgency on AI, the implementation within Siri, this distraction that Tariff's cause does it set them back even further about upgrading the product from an AI perspective.
Well, I think that they are, you know, constantly optimizing their supply chains. Obviously it's additional work on their their plate, but I don't think that they are standing still on the AI front. I think they're besting more actually, and you see that, you know some news are them purchasing more GPUs And you know, when I when I think about the space, there's just a lot of things evolving and what we thought a year ago.
Uh has has kind of changed in a lot.
Of ways in terms of, you know, who can participate in AI and like what these large language models can cost and which one is the best. So every time, like it feels like every month, there's a new headline of who is in the lead. And so it could be prudent of Apple to kind of, you know, focus on what they're really good at, what their competitive vantage is, which is designing really high quality products that fit into
our lives, that can be incorporated elegantly. And at the end of they do own that kind of ecosystem and you know, over time, I think they can you know, drive value from that for their shareholders.
Tony, let's end this conversation on Apple with a yes or no. Does Apple manufacturer and assemble an iPhone in the United States in the future.
I think it's possible in the very kind of long term future. I think in the near term. And you look at kind of what it takes the man manufacturing iPhone. I mean, you know, there's thousands of people that are living at the factory that can be woken up, you know, anytime the hour to make a change. And so you know, I think that in the long term that could be possible with additional advancements and robotics and AI.
But I don't think it's going to be a next year kind of thing, right.
I saw a headline overnight that we think is a critical right, which is China Semiconductor Industry Association issue this emergency notice and they clarified that in the context of tariffs, they define point of origin where a semiconductor is taped out, in other words, where the electronic instruction set is formulated before it goes to the fab And if you think about the fabulous US names, many of which you have big holdings in, they use TSMC or maybe Samsung. So
the tape out happens in those countries as well. How much insulation do you think that gives them from the heavy China tariffs on US products.
Yeah, well, I think that if you take a step back, right, like the two countries have been trying to disentangle them each other from major kind of supply chains and you know, areas of where if you could substitute a domestic product that would be preferred.
And that's nothing new over the past few years.
And I think that you know, this kind of the latest piece of news is further kind of a step in that direction, where you know, it doesn't make sense to.
Hurt yourself by kind of terrifying.
The only source that you have, and so like in terms of stuff made in TSMC, like both countries need that, so it makes a little bit less sense to put a high tariff on that when it's when it's sole source. So that's kind of my perspective. That's a continuation of industrial policy that kind of kind of makes sense.
Let's talk about the others though, that are exposed now. I'm interested as to whether you have holdings in those that are manufacturing in the United States or looking to even more with the cost money coming from federal government wanting them made in the US, and what that does to the business model if they ship to Asia to China specifically, Tony, do you have to get out of intels and Texas instruments?
Well, I think that over the long term, it's more about the technology and the differentiation and what you can the value add that you can. So if you have leadership products, I think that's still number one, you know, I think number two. I think that divers sized supply chains, like serving the local industry that it's based out of or the region is probably going to be a good thing.
And so at the end of the day, I think it's those two things, like some flexibility manufacturing, but like the main thing is the product, leadership and the seculor trend that a company is kind of, you know, kind of positioned to capitalize on.
Tony, like all technology investors, you have had to digest and understand communication from policymakers. How would you rate and rank what you've heard from the President, Treasury, Secretary best and others.
Well, I'm a tech investor, so you know, geopolitics is above my pay grade obviously, but you know, at the end of the day, I think that the US leap administration and the leaders that we have acted, you know, they will do what's best for the country for companies here in the US. So I think that we need
to trust them and they do. You know, I think they are trend trying their best, and you know, at the end of the day, I think that they will protect American interest and what's most important is keeping US technology at the forefront. And you know, that's that's what's what I look for as an investor.
Tony one, thank you so much of trow price.
So important to have the investor take today and after one long week Chinese social media and giant bite dance, it saw its revenue jump twenty nine percent last year. It was driven by the global expansion of you guessed at.
TikTok.
International sales grew thirty nine billion dollars, contributing about a quarter of the company's revenue.
It's all according to people.
Briefed on the numbers, now that as the Chinese business slowed. Now, of course, tensions between Washington and Beijing expect to impact both the global economy possible sale of TikTok in the United States.
We've got to get to it.
All.
Mitchell Green, founder, managing partner of lead Edge Capital, longtime investor in names like Byte Dances with us. Mitchell, have you been adding to Byte Dance. What do you make of where we stand in terms of TikTok in the United States?
Yeah, and hey, Carolyn, thanks so much for having me on. What do I think we can talk about that for a while. The company continues to see you very well. As we've said past, in the grand scheme of things, you know, uncertainty kills deals. I wish I could tell you exactly where things stand in this negotiation between the White House, White Dance, the Chinese government.
Discussions are on tariffs.
Look, we've always had frankly questions on the on the US TikTok uh. You know, again, as I've mentioned in the past, we model out TikTok usa to be worth zero. I suspect something will come of it. I don't know if it's in a month from now, three months, or now from six months or now.
We shall see.
It is obviously a very valuable business that a lot of constituents want to figure out, not only board members and shareholders and the CEO of Bite Dance, but we now have this giant taraph war going on between the US and China, So.
It's all going to get dragged into it and play out together.
Mitchell, you've been on the secondary market picking up Byte Dance in recent months. Would you want exposure to us TikTok if it was indeed extricated out of bite ants and had US ownership.
Absolutely, And we have also not bought any Byte Dance shares this year. There's been some there's been some changes with Sippius.
A lot of people don't know about this publicly known that Syphius came out and put some.
Restrictions on what kinds of companies you could buy globally related t if the AI model speed was fast enough or not. It's a questionable area if White Dance falls into this or not. But in order to just stay conservative and be on the right side, you know, we have not bought anymore of the last several months.
We do on it.
What I like, What would I like to own TikTok Usa? Absolutely, if you know, if they're allowed existing investors, and again about sixty percent of investors in the company are non Chinese investors. If we could add to our position, obviously it depends on price.
You know, we could be quite interested, Mitchell.
Starting Monday night into Tuesday morning, I started getting phone calls that there was quite a lot of activity on the secondary's market for byte dance valuation range two eighty to three hundred and twenty billion, depending on the offer lot size.
Right.
But to your point, what I was told is a lot of that activity was from Asia, right, China, maybe Singapore. But it followed the President on Sunday night. You may have seen the clip on Air Force one saying that if it weren't for tariffs that he'd put in place, they had a deal. How do you interpret that trading? You know, if the outlook for the deal is poor, but you see private market investors in Asia trying to get more of a foothold.
Oh, the Chinese business is doing phenomenally well, which is absolutely incredible, given I don't think the Chinese economy is like rowing right now, and I don't know if it's far apart, but I mean it's just it's been unique. And you can look at some of the other ecomerce businesses across China and so, actually, how are the performances in right answers doing in China is strong. I wouldn't read into I have no clue if the deal is almost done or close to done or whatever.
I have. When it comes to politics.
I tend to just listen and not really make opinions and I don't really know.
Yeah, well, we'll see it again again. There's a handful of people that need to be involved. Chi President of the United States had.
The CEO bite dance, and I can't say any of them are good friends of mine.
So if they do telephone you, you let us know.
I'll let you know if she calls me die.
There is a there is a technology conversation here right. I go back to when I was at CEES and at GtC very recently, and Jensen Wong's point the CEO of and Video that basically more than fifty percent of all the computer scientists in the world working on artificial intelligence are doing so in China or they are from China. What kind of future is there to sort of work with that country on technology and founding new companies.
I strongly believe whether it's technology transfer, technology exports, imports.
Like the trade trade is global, we all need to figure out how to work together. China plus the us working together is a good thing.
I am a strong believer in like the education system in China, the entrepreneurship in China as well as in the United States as well. But again, like for instance, we I've talked about this another I think I'm Bloomberg and other sessions.
Chinese regulate social media.
You know, in the United States, kids go on TikTok and post ridiculous videos about all kinds of stupid stuff. In China, they learn about science and math on TikTok. I think maybe we should ask should we be regulating this stuff more?
Should we be.
Repeeling some of these laws that don't hold social media companies accountable by the.
Way that gets does in China? And so I think there are things that we should be learning at. And some of those things that are happening in China and applying to the United.
States interesting tat Mitchell and I want to go there because you have exposure, not just to China. We bring you on because you've been so long in the names like Ali Baba, you're an aunt, you're in byte Dance, long term investor, understanding that economy. We look at the rest of your old portfolio. You know, well, us exposure
too uber bumble, you know, Europe with Spotify. How difficult is it to remain committed to China right now when Sophius is changing up the rules, When you are unable to commit capital and the way you'd like to, it's complicated.
And again, most of our business is actually North America and Western Europe. You know, we have a team of eighteen associates that are twenty two to twenty four years old that you know, speak about nine thousand companies a year, and we all you know, we might speak to ten to twenty companies and all across Stasia. So what we've done in China is a very handful of some of the largest businesses over there where they could effectively be there.
They are a to be public companies, it just happened to be private. We tend to like to be contrarian, you know.
And it was funny a year ago, nine months ago, nobody liked wanted to invest anything in China. Yet then you saw stocks like Ali Baba go from once, you know, from sixty seventy dollars a share, it's like one hundred and thirty hundred and twenty. Now people were liking China again because they saw Chi and Jack ma. I think it's some conference together and I don't know where all about this today. Maybe it's back at one hundred a share.
So this stuff is so volatile, but we find that you buy China when the rest of the world hates it, you can tend to make lots of money. But again, most of the stuff we invest in is right back in in the United States and right now. Look, I think in the terriff situation, I can have an opinion of it today, it'll probably change.
In a week, a month, and six months.
But uncertainty is what actually slows down the economy, right And you know, our portfolio has made the high high margin software companies that don't have direct you know, inputs coming overseas and things being chipped in.
With that being said, if.
You sell airline software, are you sell software manufacturing companies? And those companies are nervous about what's going to happen in their businesses. They might start to pull back on spending and the whole thing kind of like unravels on itself.
And if there's cuts to R and D in healthcare research and you're in a name like Benchling, which is all about community of scientists. I'm really interested in Mitchell ultimately how difficult this environment is when some of the companies that we thought were going to go public now can't or don't want to. How is that impacting the way in which you raise the next fund for example?
Yeah, so we were so, we were very We don't.
Talk about performance on obviously and pull me or anything like that, but you know, we believe that investor funds that took advantage of getting the quidity and what's called DPI. It's so much money you've given back on a net basis to your investors over the last few years, in the last five years, is really going to matter for funds as they go forward graating money.
We are we are going to everybody.
Thought two thousand and six, twenty twenty five is going to be the year of the IPO. There was maybe this giant IPO. Aa, Well that's dead, Like that's not happening now.
Again. I think these companies could go public.
It's just the question of what valuation will could they and will they then go public?
And you know, your guess is as good as mine.
But I think this liquidity drought is going to continue, and I think as a result of liquidity drought, you're going to have a lot of endowments and foundations and other big institutional investors that are networks that are over allocated to private equity, venture capital, growth equity, real estate, private equity, everything that are going that are.
Going to unlock the secondary market. And the secondary market has already been busy.
It is about to if this continues, call it six months, nine months, and twelve months, you are about to see a huge amount of institutions that are going to be massively over allocated to private equity, that are going to need to turn to the secondary markets and sell things that for us will create a great opportunity. Did you want to be buying from sellers that are forced to sell?
Mitchell Green, lead Edge Capital. Thank you really appreciated conversation, Caroline.
What you got a's time.
For talking tech head and first up, Logitech It withdrew its full year twenty twenty six outlook due to quote continuing uncertainties of the tariff environment.
Now Vonda Bell analysts.
Say this is a sensible move, but the company's margins will certainly be challenged, and you saw the impact on the shares plus Tesla, it stopped taking orders in China for its model ES Sedans its model Export utility vehicles, both of which are imported from the United States. That's after the country has raised tariffs on one another. Of course, this could be a setback to the company's already shaky
position in the Chinese market. Meanwhile, Ali Baba co founder Jack Maer He's worn that AI shouldn't replace humans, but work instead to meet their every need. The Chinese billionaire who wants like an AI to love here hogued that the technology should protect livelihoods and make lives better.
Okay, coming up analog devices, Texas instruments, big declines. We take it deep dive into two a city's top semiconductor pigs. The timing of that call very different from where the stocks are heading right now. This has been bo Technology.
Welcome back to Bloomberg Technology and Caroline hid in New York and.
I'm Ed Ludlow in San Francisco. San Francisco's mayor, Daniel Lurie, is pledging an economic and tech revival, aiming to restore the city's status as a global innovation hub. I sat down with the mayor to discuss his growth strategy in the face of tariffs.
First, we're the most beautiful city in the world. Second, the horse power is here, the intellectual horsepower is here. We have great universities, including UCSF around here, and young people want to be in.
Urban environments.
They want to be in San Francisco.
That's been proven truth throughout history, and we're going to prove that again. We have great arts and culture institutions. We were just named the culinary capital of the country, so we have so much to be proud of. And we know that workers want to be here. Our CEOs who were talking to they know that their employees want to be in San Francisco. No offense to my friends down in the Peninsula, but people live in San Francisco
and we want them to work here. And we do have to get competitive, but it starts with safe and clean streets. Our property crime rates have dropped thirty five percent, Our violent crime has dropped fifteen percent. Car break ins in February the lowest in twenty two years. This is a safe American city and we want everybody coming back to work here, to play here, and to live here.
Mis very how is the White House and is tariffs Paulus going to impact your ability to do what you've just outlined, bring more of the technology industry to the city.
Well, listen, we are all and you all are reporting on it minute by minute. The uncertainty is impacting everybody around the globe, and so we have to plan for that here at city Hall. We're working with our department heads. We have a big budget deficit. We inherited one of
the largest deficits in our city's history. So we're working day and night to make sure that we tighten our belts, we deliver core services to our taxpayers and to our residents, making sure that we focus on public safety, focus on the behavioral health crisis and the drug crisis that is causing people to feel the disorder on our streets. But that is all starting to improve. And so we can only control what we can control here in San Francisco,
and that's our fifteen point nine billion dollar budget. We have a one point one billion dollar budget deficit. Over the next two years, we're going to get that under control. We're going to fix our structure or budget deficit, and I'm telling you we're then going to be off to the races.
Data bricks knows it.
They just secured an office space one hundred and fifty thousand square feet open AI just open new headquarters by Chase Center. We are on the cusp of lift off here in San Francisco, and we want everybody to come be a part of it.
So that was my conversation with San Francisco Meytor, Daniel Lurie, and Caro. Like the pitch to the technology industry seems to be San Francisco is beautiful and it's full of nerds, and that's not really a policy platform. But if you think about how the history of Silicon Valley's works, right, there are many tech people here in the city, and what do they do each day?
Right?
Where are all the big tech companies that they.
Go to work at.
They're not an SF they reverse commute out to the valley. But also what I wonder about is when we've got an economic quandary coming from the United States, when advertising dollars might be pulled back, when we've already got a meta for example, that has been laying off people, how does that affect in NEEF economy going forward. We'll have to debate that a little bit more in terms of what's happening over in San Francisco.
But we also want a little bit more in.
Context about what the global tech policies look like in this current context. That meta has to navigate, that alphabet has to navigate, that these SF giants have to navigate. Liza Tobins with US Managin director at are not Global, and Liza, I'm so interested in just your take right now and where we stand in this so called tit for tat that today China's leader came out and said, it's a joke. We're going to stop raising to meet you. But we stand at one hundred more than one one
hundred and twenty five percent tariff on US goods. The US has one hundred and forty five percent tariff on Chinese goods.
Where do we go from here?
Yeah, So, of course, about a week and a half ago, President Trump declared a trade war on the entire world, and then over the last couple of days it seems to have kind of slipped into an isolate China strategy. Clearly the president is torn between his deal making and his decoupling instincts. He's hoping for a phone call with
Chi Jinping. But what we've learned really over the last twenty years of US China relations is that US trade negotiators are always disappointed with what Paiging brings to the table.
And I'm seeing things play out this week that remind me of when I was in the White House in twenty twenty, and that, of course was when President Trump got his Phase one trade deal with the Chinese, and then a couple months later he started getting seriously disappointed and blaming Sheijinping for COVID, which of course tanked the global economy and he felt ruined his electoral prospects, and so in some of the President's comments just a few days ago in a speech, he's talking about she He's
hoping for a phone call, but he's referring back to COVID and saying, you know, I like Sheijinping, we get along great, but COVID.
That was a bridge too far.
That's what the president's saying. So he seems to be remembering the disappointment and the anger from twenty twenty, and he seems to be shifting from deal making to decoupling.
We go to you because of your depth of expertise, when you've worked with the CIA, when you've been in the US Indo Pacific Command analysis for them as well, Liza, not to mention what you've done over at the when you're sc CP SCSP, I should call it, of course, and I'm interested, Lisa therefore on where you go from, who has the upper hand, where the TikTok's involved in this negotiation. Just take us forward as to what plays
out next. If we are seeing a US president getting more and more triggered by what happened in twenty twenty, right.
So I think we could potentially see some kind of a deal. Clearly, the President still would like a deal, perhaps involving some tariff concessions, maybe americanizing TikTok, although he's already conceded that aging will retain the algorithm, which is really the brain that controls TikTok and controls Americans media diet. So we may or may not see that. But I want to remind your audience not to over index on the strategic importance of a deal, because we've always been
disappointed by how China actually implements that deal. So I think if folks are looking for some kind of grand bargain that really makes some goes beyond symbolism and short term measures and really addresses the fundamental imbalances of Chinese economy, this massive trade surplus, unfair trade practices. They're going to be disappointed by that. So markets will react and go up and down on news or rumors of a potential deal, But a true grand bargain is really off the table.
I think, Liza, I'd like to hold you to account on two points that you've made, or at least debate them. One isolate China as an accidental strategy. And then the data that you just flag the deficit between the United States and China. So this is the ECTR function on the Bloomberg terminal. It's twenty twenty three data showing the deficit with China two hundred and sixty billion dollars. But I think I'm right in saying prelim data showed the
deficit growing in twenty twenty four. Materially, when we think about technology, what we're talking about is a country that dominates the manufacturing of most of the world's consumer electronics and other things. So forget numbers and tariffs and markets and trade. Do you see the White House ever resulting this policy in more of that stuff happening in America.
The President certainly wants to, and he and his advisors that are constantly talking about reindustrialization. I mean, the problem is the devils in the details here, and it does it's unclear if President Trump really understands the details and the extreme intricacies of these supply chains and what it actually takes to reindustrialize. And of course there's big structural challenge is like do we have the workforce for this.
The administration talks about manufacturing jobs coming back. Well, that's great, but actually we have a shortage of skilled manufacturing workforce, and advanced manufacturing is now a knowledge industry. This is a highly skilled profession. It's more like software coding and applying AI to the factory floor. And it's not yet clear to me if that kind of advanced manufacturing is front and center on the administration's agenda.
It's very much right.
Now a teriffs first, tax cuts, the regulation and energy and those may be a great start, but they also need to be kind of leaning into these more structural.
Issues suddenly if they want to make iPhones in the United States. Pizeitoven, managing director of Ghano Global, was great to have you join us. Thank you now Federal is a bank of New York President John Williams. He expects slow economic growth, high unemployment, and a pickup in inflation, all of this due to the US tarris policy and reduced immigration. Take listen to what he had to say just moments ago.
Well uncertainly about the economic outlook reflects many factors. Effects of tariffs and trade policy and the economy are certainly at the top of the list. For example, my business in financial market contacts highlight that this has made it more difficult to plan for investments and for hiring.
Let's get right back to financial markets. It's Friday, at the end of a long week. Basically flat on the Nasdaq one hundred, but up more than five percent over the course of the week. Basically flat on the Philadelphia Semiconductor Index, down to tens percent, but up more than
seven percent on the course of the week. And Cara, if you allow me to there was a really important headline overnight that I think our audience needs to understand, and it came from China's semiconductor industry body, basically citing customs regulators that how are they going to define the point of origin of a semiconductor right think about global
supply chains. And in the market right now you see names like in video higher and Vidia doesn't manufacture its own chips, names like Intel and Texas instruments that do significantly lower. Here's what they said. The point of origin for a chip in deciding whether to apply tariffs or not will be the point it is taped out. And what that means is when an American company, for example, is done designing its chip in San Diego or here in the Bay Area, it then needs to send the
designs to a contract manufacturer. We're talking TSMC and Korean names like Samsung, but that happens locally, and so they're saying, that's how we decide where your chip comes from. You tell me the big story that we've learned in the last two years about all these American chip makers. What are they actually not?
Well, they're not makers of chips, but some of them are trying to be. Some of them trying to be contract makers of chips. Intel, for one, which is actually expanding its presence of making chips in the United States.
What does that mean in terms of business model?
You've just got to take out China from the equation and on the flip side. Of course, domestic chip makers in China rallied hard. You saw the CSI three hundred index up more than thirty percent on the day. This had real tailwinds for Chinese local players and of cause pressure on some of the local makers here in the United States.
Said yeah, And the one thing I would say is that it all comes back to the end market. What does China do. It makes most electronics high end or low end, And so that's why I've tracking this so closely. But you're exactly right. But in some of the names you've just mentioned, analysts are paying attention for other reasons.
They certainly are.
Let's get to one of those analysts calls because likes of Aanamon Devices or Texas Instruments, as you say, pressure today. But City named actually those two companies, and it's top semiconductive picks amid tar of pressures and recession fears. Like City manager director and semiconductor analyst Chris Stanley writing, high end analog companies such as ADI and TXN have outperformed during downturns. We would expect the same to occur in
a recession, with ADI performing best given higher margins. Nimas rym Vstella can can break down some of the moves on Semi got a fair few downgrades in terms of price targets today as well on Semi meant to feel more of headwind versus some of these players.
According to City, absolutely, I think people are still really struggling to kind of figure out what this environment is going to be like for different chip makers, depending on their in market, depending on their manufacturing systems, their supply chains. It's all very uncertain, very up in the air at the moment. So beyond the naming TI on one of its top picks, City also said it was taken out the lawnmower. Those are exact words, cutting estimates by twenty
percent on average across the board for chip makers. That just speaks to how much uncertainty there is when it comes to this sector at this point in time.
They the firm City had this estimate a while ago that the socks the index would drop twenty percent if there were to be a recession, and I think I'm right in saying that they now assume a recession is a firm there's a lot happening in the market. You also wrote about the takes out point of origin story yourself this morning, just go back to explain some of the moves of the market in the here and now.
Yeah, so absolutely, like you were saying before, companies like TI, Intel, Global Foundries, Microchip, all these have sort of domestic manufacturing plants for their products, and these are the stocks that are really falling today. Other ones that do most of their manufacturing are Broad Taiwan, Simi, Vidia, AMD, Qualcom, BROCM all those names. They're probably higher in the morning. It's
obviously a very volatile situation. There's a lot of cross currents going on right now, but certainly we are seeing Texas instruments in particular weaker today, Intel particularly weaker today, whereas companies like Nvidia are higher.
Let's go to Nvidia for a moment, because for an analyst over at City has actually been downgrading in video as well. Their key concern is that these hyperscalers, meta alphabet you name them, are going to actually start to curtail they're spending on AI data centers.
How much of an overhang is that for names.
Like whether you're a fablus or fab kind of a chip maker.
Well, for Nvidia in particular, I had to go and look but I think forty percent or so of their revenue comes from just four companies, which is Microsoft, Meta, Alphabet, and Amazon. So to the extent those companies pull back, and I'll say Alphabet a couple of days ago it had a bigger cloud conference and it did affirm its CAPEX plans. Microsoft, you know, it affirmed its own plans earlier this year. So right now, it seems like maybe for the next twelve months, all those spending plants are
pretty intact. But if we get to twelve months from now, and maybe especially if we're not seeing a huge ROI on all this AI spending, especially if the cost picture has changed dramatically due to tariffs, if the whole picture has just changed because of weaker economic growth, all these other kind of factors, it would not be super surprising under those circumstances if these companies started pulling back on their CAPEX, especially as it retains to their AI infrastructure,
which is at this point a lot of Nvidia products, and what that means for them in terms of their growth, in terms of their profitability. While just given its customer concentration, that would be a pretty dramatic hit a company like it in video.
Blimbo's Ryan vlastatica terrific, Thank you very much.
A single shipyard in China now produces more ships every year than all of the American shipyards combined. Think of that, and it was a business that we used to dominate.
President Trump.
There now one startup looking to manufacture ships in the United States.
It's blue Water Autonomy, preparing.
To build large vessels able to travel between San Francisco and Hawaii without a captain or a crew. Rdan Hamilton as the CEO co founder of blue Water. Rather, you're coming out of stell fourteen million dollars in the bank. You've got vcs that batch your prior really successful companies. You were in warehouse automation prior to this. How much is the time now to be making automated ships? Suddenly far more prevalent when we've got us China tensions.
The time is definitely now. If we hear the current administration, they're talking about shipbuilding, shipbuilding and shipbuilding, and we're designing and building autonomous ships. And when you make them autonomous, you can remove the bridge, the birthing, the galley, the showers, so you can make them a lot smaller. And because they're smaller, you don't have to build them at the
big navy shipyards. So we should continue to build the big warships, the guided missile destroyers, the aircraft carriers, the submarines as quickly as possible. But our ship can be built at all these mid tier shipyards that have capacity today.
Why is now the right time from a technology perspective as well, what is going into making automation far more easy or certainly not easy, but far more able to enact ry now?
Well, this is a hard problem.
This is not easy because for designing ships that can operate across the open ocean, and the last thing our Navy needs is for these ships to be dead in the water of the mill the ocean, and the ocean is extreme. You're thinking about extreme temperatures and salt water. In fact, ships get hit by lightning, and so we need to build a very It happens as we did research for this and we talked to the chief engineers on some of the sort of workboats that operate around.
The United States.
They said, yeah, last week my ship got hit by lightning and a fried all the electronics. And so there's a ton of challenges to do this. But we feel we have the team to do this because we've been at some of the most successful robotic companies in the United States, and two of my co founders include myself. We were also in the Navy.
Ryland. The big picture is to modernize the maritime industry, but this is a Navy application. As you just point out, American dynamism, this big emphasis on the private sector's relationship with the military industrial complex. What is it you actually want the president to do to allow for you to make this a success.
So we want to move fast, and we'll move as fast as the Navy wants us to move. And so we definitely want the president to continue to focus on shipbuilding and innovation, especially around autonomous systems. And there are autonomous systems that are in the air, that are on the surface, and that are underwater. Our focus is on these autonomous ships that can operate on the surface of the water and have high endurance and range, the range that you need for the Pacific Ocean.
Anderill picked Ohio for its skilled labor and for its history and aviation. For example, where is your Ohio? Where do you think you need to build these ships?
So we'll have more to announce later this year. But we've definitely been looking for the perfect place to go build these ships, and there are a lot of really good options, whether it's on the East coast or the West coast or sort of in the Gulf, and so we'll make an announcement later this year.
You were early leader in Amazon Robotics. When you are building six river systems. How good is US at manufacturing? Now?
Can we bring back what we want to bring that?
Yeah, so the US is actually really good at advanced manufacturing. So early in my career I was at Amazon Robotics when there are a couple thousand robots.
In the field.
They're now over a million robots in Amazon warehouses throughout the world. That is amazing what that company has done over the last ten years. So when it comes to complex systems where you need to take sort of commercial off the shelf components and put them together and then write the software on top, we're amazing at that.
Rylan Hamilinson, CEO, co founder of blue Water Autonomy, you have to come back when you announce the location rights. That's how it works. That does it for this distion of Bloomberg Technology. What a week? This is what markets look like Caroline. I mean, it's kind of odd in a way to give a snapshot of a session in the moment and now's that one hundred higher by modestly right pressure on US listed shares of Chinese names. Take it away, what are you seeing.
What's extraordinary is we had a week where we're actually more than five percent higher, but what a volatile five days. The bond market has seen extraordinary moves, and then over the course of the month that now's back, it's lower ed.
Happy weekend everyone, This is Bloomberg.
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