October 17, 2025 • 42 mins
Bloomberg Tech's Caroline Hyde discusses the growing China-US trade tensions as President Donald Trump gets set to meet China's Xi Jinping. Plus, billions of dollars in the crypto markets disappear as altcoins fall. And, Apple gets into touch with plans to revamp its MacBook lineup with touch displays.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Carolline Hide in New York
and EVA though in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:23):
President Trump says they're threatened one hundred and forty five
percent taris with China are not viable. Will this soothes
trade relations between the two world's biggest economies. Plus billions
of dollars in crypto market value banished as old cooin's plunged.
We'll dive deeper into some of the riskier parts of
the tech markets, and Apple plans a revamped MacBook Pro
with a touch display in late twenty twenty six or early.
Speaker 2 (00:45):
Twenty twenty seven. But first we check in on these
markets then.
Speaker 3 (00:49):
Have been whipsawed this week, and we shine like what's
happened with the NaSTA one hundred that throughout some of
those trade tensions. Despite the anxiety around credit in the
banking sector, we remain higher at one point six percent.
We really have earnings on top for some of the
key players take TSMC, take ASML. But let's return now,
of course, to what's been happening in the world of
crypto as well, we have seen some pressure on that
(01:10):
particular part of the market, the riskier edges, look at
some of the contum stocks, look at some of the
more risky leverage ETFs more of fine more than eight
percent when it comes to bitcoin. So has not managed
to revive from that tummult that we experienced over the
course of the weekend and leverage getting flushed out returned
to all of these parts of the market. But so
as we talk the macro context here, because President Trump
(01:30):
says indeed that the threatened high tariffs with China are
not viable, as tensions between the world's two largest economies
intensify ahead of an expected face to face meeting with
Chinese counterpart Shaging Ping. Here's what he said on Fox Business.
Speaker 2 (01:45):
It's not sustainable, but that's what the number is. It's
probably naty and I could stand, but they forced me
to do that.
Speaker 4 (01:57):
I think we're going.
Speaker 2 (01:58):
To be fine with China, but we have to have
a fair deal. It's got to be fair.
Speaker 3 (02:03):
It's southing markets also long term impact. Bloom Vaccina Tech
editor Mike Sheppard joins us now.
Speaker 2 (02:08):
To break it down.
Speaker 3 (02:09):
Look, we'd worried that that meeting between she and Trump
wouldn't be on It looks as though, tantalizingly, it might be.
Speaker 1 (02:17):
Yes.
Speaker 5 (02:18):
He is indicating Caro that this meeting will take place.
Of course, we still don't have the details on when
or exactly where, although it is expected to take place
during the APEX summit that both leaders are scheduled to
attend at the end of the month, which is really
about ten or twelve days away, so they don't have
a lot of time to lock that in and then
(02:38):
also do some of the key legwork ahead of time,
and that's grown only more complex with all of the
back and forth over some really sticky trade issues that
we've seen more recently, and this all was thrown into
doubt by last week's move by China to impose curbs
on exports of rare earth elements, which are critical across
the economy and everything from autos to consumer electronics to
(03:01):
defense equipment, and that was something that really set off
US officials. We saw Treasury Secretary Scott Besson's really visceral
reaction earlier this week, and the US has since moved
to rally allies against China's move, recognizing that this would
have global implications and that it would affect far more
(03:22):
than just the US economy. So it'll be interesting to
see how this all plays out in those lower level negotiations.
But for now, the President is saying the quiet part
out loud, acknowledging Caro that there will be some severe
economic follow if those very high tariffs actually take effect.
Speaker 3 (03:38):
I'm looking at certain tech names that are exposed to
China and they have been rallying, whether or not it's
just a risk one attitude into the weekend, or whether
it is on the back of these comments. But what
are you watching for in the tech sector more broadly
mic as to how they weather this ongoing instability uncertainty.
Speaker 5 (03:55):
Well, part of the question really is going to be
the degree of investment that will flow to China and
whether there is any sort of chill elsewhere as well.
As a result, one of the key questions in the
US China relationship has been not only the Chinese export
curves on rare earths, but the US export restrictions on
events technology. That includes the AI chips from Nvidia and
(04:18):
AMD that you and I've talked about so much in
this space, but also the semiconductor manufacturing equipment from the
likes of ASML and Tokyo Electron that is so critical
to making those chips that are powering the AI revolution.
That gear has been restricted by US measures over the
past couple of years, and one of the reasons Beijing
is trying to use this leverage right now at this
(04:40):
moment on rare earths, a market and a sector that
it really dominates. It has this control over that supply chain.
It wants the US to relent a little bit in
this area so that it can gain back some access
to those critical materials itself, the AI chips and the
semiconductor equipment, manufacturing equipment needed to make them.
Speaker 3 (05:01):
Cto Palenter telling us that exact thing this time last
week on our Defense Tech special Mike Shephard, It's great
to have you on the show. Thanks for the context.
Let's go out to Mike Dixon now for the market
impact of US Chine and trade tensions. Here's the head
of Research and Qunitive Strategies over Horizon Investments. You've got
ten billion dollars in assets under management, all told, Mike,
and I'm interested as to how you weather the ongoing
(05:23):
headline risk that we see about US and China.
Speaker 6 (05:27):
Well, it's certainly there and we have seen that, you know,
impact certain areas of the market, you know, but overall,
as we're heading into you know, the bulk of the
tech earning season here in just a couple of weeks,
you know, I think it's helpful just to kind of
zoom out a little bit and see where the fundamentals are.
And we've got to early read on that this week,
of course, with ASML and TSM showing there's very strong demand,
(05:48):
you know, Oracles Investor Day as well, supported as much,
you know, and when we look at the returns thus
far for the top of the market, I think one
of the most interesting things to me is that we
actually have not seen returns driven by valuations increasing this year. So,
you know, as we head into earning season, I think
it's a really good, really good point to remember and
kind of zoom out for a little bit of the
bigger picture and we'll see how this, you know, trying
(06:10):
to kind of trade tention stuff works out. But the
underwine fundamentals are very much strong.
Speaker 2 (06:14):
Okay, what have the returns been driven by?
Speaker 6 (06:16):
Then It's been driven by this you know, increased demand
and you know, overall, just the expected expected earnings continuing
to grow and clip clip along at very high rates,
and you know we're seeing that through uh, you know,
through the continued you know, AI demand, and I think
strong fundamentals supporting the returns is a much better place
(06:37):
to be than having that be driven by just the
increase in investor optimism through evaluations going up. And I
really do think it's a very strong place to be
as we head into earning season to actually see valuations
be at or below for a lot of these bigger names,
and they really were even to come into the year,
and I think investors really need to be aware of
that that, you know, especially those that that are bearish on,
(07:00):
you know, some of this continuation of the trend, because
the fundamentals are very strong and it is supporting the
price trends that we've seen.
Speaker 3 (07:07):
Okay, so it feels as though you're not thinking there
is some sort of bubble, but that's in parts of
the market which have seen the AI well optimism really
like fire. We've seen it, particularly as you say TSMCSML.
I just want to go back to some companies that
they are rallying today that have exposure to China in particular,
I'm looking at Tesla, I'm looking at Apple, I am
looking at ASML, which managed to calm our anxieties that
(07:28):
they can continue to see the mega trend continue even
if China falls away in terms of demand. But what
about those companies that have high exposure to China? Is
that something that you need to be anxious about?
Speaker 6 (07:39):
Well, I think we need to go back to just
what we've seen over the last six months with all
of the tariff stuff. Of course, we're you know, you know,
in this period where we're not exactly sure how this
is going to work out. But when we look at
the last six months, there has been a lot of
fits and starts of teriff situation is going to be
terrible and then we ultimately get a deal. And look,
(07:59):
I think overall the market has become a little desensitized
to a lot of this back and forth, you know,
tariff situation. For one, think that you know, ultimately, and
Trump alloted as much in his interview, I think wants
to make a deal. Uh, And so I think that
that that that should be kind of our our base
case here and this headline volatility that we've seen, you know,
(08:20):
is U is just necessary for you know that risk
premium to be realized.
Speaker 3 (08:25):
Mike, going back therefore to the idea of valuations, Yes
they're high, but it's because earnings have grown into them.
Where are you seeing the earnings likely to catch fire
in this set of earnings for the companies that you follow,
because you are in all the major players when it
comes to AI.
Speaker 4 (08:43):
Yeah, that's right.
Speaker 6 (08:44):
I mean when you look at just the top of
the market, you know, Max seven obviously comes up a
lot there. There's pretty big, uh, you know, divergence amongst
that group this year, and so you know some of
the names that have been laggers amongst that group, that
the Teslas, the Apples, the Amazons, you know, I think
where that sits as you know, what's attractive with the
(09:07):
top of the market, I think that's probably still going
to be the case that in the medium term those
are probably still going to be the laggards and the winners,
and that you know, AI group at the top of
the market are still going to be the winners. And
a lot of that I think has to do with
you know, a lot of the smaller software and services
type names have had a difficult time really kind of
separating themselves and really showing unique value propositions for their products,
(09:28):
and therefore the market is kind of defaulting to what
they know, and that is those AI winners. So I think,
you know, even amongst that top of the market in
the Max seven names, the ones that have been doing well,
I think are poised to continue to do well, and
the laggards are, at least in the medium term, probably
still going to be the laggards.
Speaker 2 (09:45):
Follow the trend might extent and horizon. We appreciate you
have a good weekend.
Speaker 3 (09:49):
Now coming up will break down the latest F five
cybersecurity hacks, how it's affecting the Defense Department, and wider
implications for the cybersecurity industry.
Speaker 2 (09:57):
Do I have blues with us? From il meg Tech.
Speaker 3 (10:20):
Shares, a cybersecurity provider. F five Networks look. They tumbled
this week following revelations that it was hit by a
prolonged hack that could lead to potentially catastrophic compromises. Now,
according to sources, the breach has been blamed on state
backed hackers from China. China Foreign Ministry spokesman Ninjian said
that China always opposes and fights hacking activities in.
Speaker 2 (10:38):
Accordance with the law.
Speaker 3 (10:40):
For more it's Bloomberg Cybersecurity editor Jeff Stone. But why
is this so potentially catastrophic.
Speaker 7 (10:47):
One of the things we have to remember, Caroline, is
that cybersecurity companies like F five, like a lot of
technology companies, but cyber companies in particular, have really deep
access to their clients' systems, their networks. They control firewalls,
they control who has access to what they control, which
ips can access other computers, certainly passwords and user names
and that kind of thing. So when the people who
(11:09):
are trying to stop hackers from getting in ultimately are
compromise that gives outsiders, spies from places like China really
really deep, valuable insight.
Speaker 3 (11:20):
For a long time, for a long time twelve months,
and what sort of companies and institutions are being implicated here.
Speaker 4 (11:27):
We're still trying to get a sense of that.
Speaker 7 (11:29):
We're really trying to understand how Chinese hackers also access
F five in the first place. But we know F
five works with government agencies. We know they work with
a huge number of the Fortune five hundred, it's a big,
successful publicly trade company. You mentioned the shares fell. I
mean that's a reflection of the severity the issue obviously.
Speaker 2 (11:48):
Severity the issue.
Speaker 3 (11:49):
That means the UK and the US have both together
put out these warnings. But as companies try to tackle this,
how else are they analyzing their defense systems and how
else are they also thinking about other companies that are
at the very backbone of their own infrastructure.
Speaker 4 (12:02):
That's right.
Speaker 7 (12:02):
One of the things that we've seen, certainly out of China,
for instance, is this evolution from typical email phishing attacks
and they're now resorting to companies with deeper access. Instead
of trying to hack your email, they are hacking the
company that you rely on to protect your email. So
for companies that are potentially affected by that, they need
to take a closer look, and they are taking a
(12:23):
closer look at who they rely on to do what.
They're looking at their vetting procedures, and they're really looking
at who they trust with their own kind of crown jewels.
Speaker 4 (12:31):
But it's hard, it's a really difficult process.
Speaker 3 (12:33):
We understand according to people familiar that the CEO of
F five themselves is out there calling up clients trying
to discuss how Chinese hackers, in particular, we're able to access.
But what are the next steps for a company in
this situation.
Speaker 7 (12:45):
They f five is going through this process where they're
going to try to generate as much trust as they
possibly can. Part of that is going to mean being
transparent about what they do know, what they don't know,
and some of the things that they're trying to fix.
I know that the CEO, for instance, you mentioned, is
talking about China. One of the reasons that we see
executives do that a lot is because it's a serious
(13:06):
argument for a CEO to make to say, hey, we're
a private company, we are being attacked by some of
the world's most advanced, thoughtful, sophisticated spies. Really and this
is how they got in and here's what we're going
to try to do about it.
Speaker 2 (13:20):
Jeff Stone, we thank you from Bloomberg.
Speaker 3 (13:24):
Sorry, excuse me now, and let's bring in Giant Blue
into the conversation. She is co founder, CEO and chief
information security officer and Ale it's a new AI native
cyber reasoning system for vulnerability management, which just came out
of Stealth yesterday. Perfect timing for us and our audience. Jia,
and I'm interested as to what your read is on
this situation. How fierce is the threat coming from State
(13:47):
related activists and hackers.
Speaker 8 (13:50):
It's actually incredibly fierce, and it's because there's a very
strong motivation to do these kinds of attacks. And what
you'll see is that this particular group, who is you know,
part of we think Silk Typhoon or maybe a separate group.
We've been seeing this type of activity classified under something
called brickstorm. And it sounds terrifying because it is terrifying,
and that's why the Cybersecurity Agency in the United States
(14:13):
put out an emergency directive just this Wednesday. Because forty
eight out of the Fortune fifty are using F five,
A vast number of the federal government they're using FI.
We suspect that there's thousands of devices being deployed. And
you know, really, because the source code is now out
there and in the hands of the Chinese, that means
(14:35):
that a nation state attacker is now looking for vulnerabilities
in this source code and has information they never should
have had about undisclosed vulnerabilities that F five was already investigating.
And because the attacker was there for more than a
year studying F five, it's actually quite terrifying. All the
(14:56):
capability they could have.
Speaker 2 (14:57):
How have they gone unnoticed?
Speaker 3 (15:00):
Solo.
Speaker 8 (15:01):
Well, one of the biggest reasons is because if the
attacker comes in over remote management devices and protocols using
zero days, it's very hard to find the initial vector
of how they originally got into that network. And you know,
simply if they got in more than a year ago,
the chances are high that there's not even logs that
(15:22):
hold that type of log retention for over a year.
Speaker 4 (15:26):
That's let's start there. That's how we.
Speaker 8 (15:27):
Don't know when they actually got in in the first place.
The second part of that problem is most of these
network devices don't have like a sort of you know,
detection and response that we can actually see. There's no
EDR in these network devices, so we can't actually see
this malicious activity. We don't necessarily see this telemetry as
(15:50):
they're conducting this ladder movement. I mean, theoretically we should,
and at some point F five did, but that was
as late as August of this year, and they were
directed for national security concerns to keep it quiet until
they could release this information in their SEC filing.
Speaker 3 (16:08):
You are making it clear to our audience how critical
this is. But when we all go home and sit
around our dinner tables, I don't feel like this is
becoming the top of conversation that perhaps it should be
given the strength of the concerns and anxieties. You make
clear what is it that ends up affecting the consumer
or more written large in this circumstance.
Speaker 8 (16:27):
The fact of the matter is, especially from a consumer perspective,
we don't always feel like paying for cybersecurity. We think
it should be built in rather than bolted on. From
a consumer perspective, enterprises are more used to this notion
that you know, it's like a never done thing that
we continuously need to improve, that it's a rint and
repeat like action. But we still expect more and better
(16:49):
from cybersecurity vendors, from people who are comfortable in this space.
But frankly, if you are really successful with your software
and hardware, you should expect that Nation States it will
target you for some type of supply chain compromise. It's
almost inevitable. It's because of that very success that your
reputation and your network and information systems are critically at risk.
Speaker 3 (17:11):
And particularly in the world of AI, where ever more
sophisticated attacks are happening and written large at such pace, John,
this is where your company comes in and I'm so
interested in ILE and what you're currently building because you're
saying it's the first AI native cyber reasoning system. Can
you talk us through exactly how it works differently from others.
Speaker 4 (17:29):
Yes.
Speaker 8 (17:30):
So we are in ED, which means that everything we
do starts from an AI first principle. And one of
the most tenacious problems we have in cybersecurity is this
ability to both find the right set of vulnerabilities and
then remediate them quickly. So what we do at ILE
is exactly that we have an analyzer that actually looks
(17:50):
to find those vulnerabilities that truly matter, not just small,
low level bugs. And we've proven that with several very
famous programs that you have online, open source programs. We
found incredibly critical zero days, We've reported them responsibly to
the maintainers of these open source projects, and they have
(18:10):
fixed them. And what we've really been trying to do
is make sure that we are not just showing, hey,
this stuff is broken, but allowing customers to actually be
able to remediate those incredibly quickly, at superhuman speed. And
that has to be how we work because you can
bet your botom dollar that the attackers are using AI
now we need to make sure that the defenders are too.
(18:33):
And this is something that really we haven't been doing
in this way for so long, and this kind of
static basis that we've had is no longer suitable for
the types of threats that we face.
Speaker 3 (18:44):
Just going to Aisle and who its core customer is
feels that it's everyone. But all these cyber companies are
becoming ever.
Speaker 2 (18:51):
More platforms and want to own your.
Speaker 3 (18:54):
Entire ecosystem of cybers So where do you fittinger.
Speaker 8 (18:58):
Well, we start where everything is being built. So if
you're right now, I feel like every customer that we
look at is really I mean, it's remarkable, but we
have changed into a planet that operates on software. So
everything that we actually look at is a company that's
using software. So if they build software, if they're having
someone else build software for them, for their manufacturing process,
(19:20):
for their supply chain, you know, for those kinds of
potential customers and design partners, that's where we come in
and we try to make sure that those supply chain
vulnerabilities that could impact others downstream as well as their
own vulnerabilities, that we give them critical knowledge to know
what is that that's really broken? That you need to
(19:40):
focus on and how can we get you to a
place where you have zero vulnerabilities coming in. Most of
these companies also have rather terrifying backlogs of vulnerabilities that
they have not fixed, millions in the backlog. And I'm
telling you, as a CZO of three different publicly listed companies,
I've had these experiences myself of these tenacious, hard to
(20:01):
fix vulnerabilities, and I wished for this solution, which is
why we now built it.
Speaker 3 (20:06):
Well, you've got some phenomenal backers and some phenomenal co
founders Javalu Coo and Ciso at Aisle. It's great to
have you back on the show. Have a good weekend
having out. Apple is finally getting in on the touch
display game with a revamped MacBook Pro details.
Speaker 2 (20:23):
Next to is the BLUEBG tech.
Speaker 3 (20:31):
Apple and it's planning to launch a revamped MacBook Pro
with a touch display in late twenty twenty six or
early twenty twenty seven.
Speaker 2 (20:37):
It's all according to sources.
Speaker 3 (20:39):
The new computers will also have thinner, lighter frames and
run on Apples, M six.
Speaker 2 (20:43):
Line and chips.
Speaker 3 (20:43):
Let's cut out to the man who, of course has
been breaking in order down it's Mark German, our consumer
tech editson Mark. I so often personally try to move
my MacBook Pro with my hand.
Speaker 2 (20:53):
Finally it'll actually work.
Speaker 4 (20:56):
This is a yes.
Speaker 9 (20:57):
This is a very big deal for Apple. For fifteen
years or longer, they've been resistant to doing touchscreen macs.
Why because they sell iPads and they had the sphere
that the Mac, if it got touched, would cannibalize iPads.
They also strongly believe that the ergonomics of a touch
screen computer to quote these jobs were terrible and to
quote Tim Cook would be like merging a toaster in
(21:19):
a refrigerator. But the reality is the market has changed.
Touch screens on PCs are now table stakes. MacBooks are
out selling iPads. You also have the reality that Apple
has now combined many of the fundamental technologies between the
ipen and the Mac. They both run the same processors, now,
they both run the same user interfaces. They both have
(21:42):
a shared app ecosystem because of Apple's new App Store,
where they've merged the applications across iOS and mac os.
So there's so many similarities. Now consumers are desperate for
touch and so they finally are doing it, and they
think they can bring the Mac more upmarket by doing so.
Speaker 2 (21:59):
We're desperate to make toast and our refrigerators.
Speaker 3 (22:01):
That's okay, Map, but I'm also interested that we're all
desperate to consume more sport on Apple TV, just quickly
on F one. It's been a long time in the making.
Speaker 9 (22:09):
Yeah, you know, F one is interesting. There are a
lot of fans, specifically overseas. Apple is now bringing F
one in a big way to the United States. This
is going to make the Apple TV not Plus now
just Apple TV subscription more valuable. Clearly, there was a
lot of interest in the F one movie with Brad Pitt.
Now they're getting more clearly into sports. I'm personally hoping
(22:31):
they do something about the NBA because it's completely flum mixing.
How many apps you need to access that now? But
I guess F one is good for.
Speaker 3 (22:38):
Now we can see your sports fan from over your shoulder,
Blue most Mark German, It's always great to have you on.
Speaker 2 (22:42):
Thank you so much.
Speaker 3 (22:43):
And now coming up, Oracle Coyle's Wall Street fears over
its aiprofitability or does it? Why is it sinking off
by almost eight percent? This is bluembg tech as welcome
back to Bloomberg Tech.
Speaker 2 (23:04):
Let's take quick check on these.
Speaker 3 (23:05):
Markets, because maybe we've had some nerves soothed a little bit.
We are off on the day by three tenths of
a percent, bouncing off some of our lows as we
try to steady the reader cross of whether or not
Jijingping and President Trump will indeed meet in the next
few weeks and will indeed manage to back away from
the highest possible towers one hundred and forty five percent.
We know that President Trump's for two Fox Business saying
(23:26):
that this would be unsustainable if we did hit that
sort of a level. We also, though, think about the
risk and the anxiety in the market. Yes, there's about
the banks, the particularly the smaller banks and exposure to credit.
There's also the riskier parts of the market. Bitcoin ist
us see over the last five days has been under
some serious pressure. We can see the seller for more
than seven percent amid that big liquidation that occurred over
(23:47):
the course of the weekend prior.
Speaker 2 (23:49):
Let's talk about all of this.
Speaker 3 (23:50):
Bloomberg ETFs and Cross Asset reporter Emily Graffeo joins us
on the more should we say, frothy parts of the
market are starting to lose a bit of esteem, particularly
in crypto and old coins in particular.
Speaker 2 (24:01):
That's exactly right.
Speaker 10 (24:02):
You look at what bitcoin's done over the last week,
it's down about eight percent. Typically, the frothier parts to
all coins, like doge coin, Polka Dot, those drop more
than Bitcoin an ether. There's a little bit less liquidity there.
We see them as more kind of high beta. What's
interesting now is in the ETF world, issuers are trying
to package those all coins into ETFs, into products. Given
(24:25):
the success of black Rocks Bitcoin ETF, they're looking at
products like a pokea dot ETF, a chain link ETF, Caroline,
a pengu ETF integral. I don't know if you've heard
of business okay affiliated with pudgy penguins.
Speaker 3 (24:40):
Who doesn't have a pudgy penguin I mean, and I've
seen to have its is Zabatov.
Speaker 8 (24:46):
Yeah.
Speaker 10 (24:46):
So we have one hundred and thirty ETF applications right
now filed with the SEC pending UH listing. So they
haven't launched yet, but it just speaks to kind of
that appetite from Wall Street to take these all coins,
even though they're dropping right now, and put them into.
Speaker 3 (25:00):
I mean We're just looking at the dough ETF, which
has been under considerable pressure. We've seen a lot of
these etns happen over in Europe. US maybe the government
shutdown has put them on polls. But why the sudden
anxiety in these parts of the market. Is it more
broadly US China? Is it more the macro fed side.
Is it gold because gold is being seen as a
have but digital gold got so much.
Speaker 10 (25:21):
Yeah, that's exactly where a couple sources have pointed to
potential stresses in the credit market, maybe seeping into the
frothier risk on parts of the market.
Speaker 2 (25:30):
I mean, what coaches, you mean, right, the cockroaches.
Speaker 10 (25:32):
I think that comment kind of has spread to other
parts of the market.
Speaker 2 (25:36):
You look at what tech is doing tech stocks right now.
Speaker 10 (25:39):
Typically when we see the Nasdaq one hundred down, we
do see crypto down even more. But then again, there's
some days where it does act as a safe haven.
I would say in this current cycle, crypto's not acting
as a safe haven. We're seeing it drop further than
what the traditional tech markets are doing. But you know,
you look at that dogecoin ETF, the ticker d OJE.
(26:01):
It's gotten some influence it's actually thirty million dollars in
AUM for a new ETF, especially for a meme coin ETF.
It's actually not that bad. There could be some investors
in the market trying to buy the dip here and
buy something like this.
Speaker 3 (26:15):
Well, we know those liquidations over ok to tenth and
eleventh were really painful. In particular binances linked token. BnB
has been under significant pressure ever since. It seems to
have been being blamed for some of that big move. Emily,
great to have you back on the show. Please come
again soon. Emily Graffeo breaking all down for us.
Speaker 2 (26:31):
But let's pivot a little bit.
Speaker 3 (26:33):
And talk about what's happening over on shares of Oracle,
because they're also lower. But that's even as the company
has been saying, Look, it can reach thirty five percent
gross margins for its large AI infrastructure projects. Why are
investors skeptical a scope to bloombag Intelligence Senior tech anlis
Anna Agrana. Look, there was that report from the Information
that we were worried that basically Oracle wasn't going to
(26:53):
be making that much money for itself when it gets
a big three hundred billion dollar contract.
Speaker 2 (26:57):
From open Ai.
Speaker 3 (26:58):
They tried to reassure the market hasn't paid off for
today it seems.
Speaker 11 (27:03):
You know, I think the big push came on the
stock when they announced that big RPO number, you know,
a few weeks ago. So I think you could, you know,
perhaps say that this is more sell on the news
kind of you know, information or reaction. But you know
from our site that thirty five percent is a very
good number, frankly, because you can go back in the
history of cloud computing, even in the days of an Amazon,
(27:26):
you know, web services was formed, getting to a gross
margin starting off this early, and you know it's not
a bad thing because over time that number is going
to grow as you scale up, as you were able
to do things in a much more effective way. Fourteen
percent number from that article that you mentioned was concerning,
and I think these guys did a good job of
explaining why that's not the case for them, and I
(27:49):
you know, from our side, I think the profitability aspect
is fine. They talked about you know, revenue growth of
thirty percent over the next five year per year and
earning's growth of twenty eight percent, so only mild you know,
depression in you could say, EPs growth rate, but at
the same time, I think it's going to be more
back end loaded, which is you're not going to see
(28:09):
you know, you'll see compression over the next two years,
three years, and then you're going to see a rebound
from that. So I think that's where you could see
some disappointment. But from our side, you know what we heard,
what we like that these guys.
Speaker 2 (28:21):
Said, really like that.
Speaker 3 (28:23):
You've been talking to some of the great elements our
producers have had ready for us. Talking about that twenty
thirty goal. But going back to this pie chart that
really breaks down where it's gross profit comes from. They're
saying they're going to be having twenty one billion dollars.
For example, if we took an over that's their thirty
five percent gross margin for a certain sized contract.
Speaker 2 (28:40):
Can you tell us in.
Speaker 3 (28:41):
The future how they reduce the hardware costs, how they
reduced the land and power costs just by economies of scale.
Speaker 11 (28:49):
It's a combination of economies of scale and using more
software to optimize the workloads. That has been the case.
You know, going back to history of any large infrastructure project,
you can go back and see that in the same
way CPU computing happened. Over time, you get better at
managing these things. On top of that, you add more
value added services. So when you look at the stack
(29:10):
of software as a service, platform as a service, or
infrastructure as a service, you're first giving the infrastructure layer.
Then you're going to give added services on top of it.
Those added services have gross margins of seventy eighty percent
or so. That's usually how cloud providers work. So over
time you're going to have those things come in. That's
going to help the gross margins even more.
Speaker 3 (29:29):
When they get those sixty billion dollars in total revenue
deals for six years. As the theory of that pie
chart when Anna rag Grana, great breakdown and always great analysis.
We appreciate you, Blueberg Intelligence. Now let's turn our attention
to Salesforce. Interestingly, it recently also gave its outlook for
twenty thirty, but we want to talk about philanthropic part
of it. Benure capitalist Ron Conway has resigned from Salesforce's
(29:50):
board following CEO mart Benioff's call for President Trump to
deploy the National Guard to San Francisco. In an email
to Benioff and several board members, Conway rights me immensely
to say that with your recent comments and failure to
understand their impact.
Speaker 2 (30:04):
I now barely recognize the.
Speaker 3 (30:06):
Person I've so long and mad for more Bloomberg Wealth
reporter Biz cass and joins us, why is Ron Conway
such an important voice?
Speaker 2 (30:14):
Hib is.
Speaker 12 (30:16):
Well, Ron Conway and Mark Benioff have worked together for
a long time. He's been on the board of Salesforce
Foundation for over ten years, and they're both seen as
two big benefactors to the city. So for this to
create a rift between the two, to the point where
Ron is stepping down from the Salesforce Foundation board saying
he will no longer work with Benioff is a big
deal it and it shows that you know, he's not
(30:38):
standing behind his comments, Benioff's comments to send in the
National Guard to the city to clean it up.
Speaker 3 (30:45):
I mean, he's not the only voice that have been
more calling out Mark Benioff for his words in San Francisco,
and in particular Lon Powell Job seems to have done
in an article she's penned herself in the Wall Street Journal.
Just discuss what it is that Mark Benioff what he
feels here, because some would say, you know, just his
alignment with Trump shouldn't always cause such riffs with people
(31:08):
he's known for years.
Speaker 12 (31:10):
Correct, I mean that should not cause this alignment. Benioff
has literally changed the skyline of San Francisco at the
Salesforce Tower. His name is on the hospitals here. He
has done a lot through his philanthropy to change and
help the city of San Francisco, and so Loreene pell
Job's criticism was that he should not be expecting things
though in return for that generosity, when he was asked
(31:32):
about the National Guard coming to San Francisco, he said,
if they can be cops, I'm all for it. But
a lot of people, including Benioff and or including Loreene
pell Jobs and Conway, don't believe that. Because he has
been a philanthropist means he doesn't get to dictate what
happens in the city, especially when he's no longer living
here and the company is here, but he's in Hawaii
(31:54):
these days.
Speaker 3 (31:54):
As Rong Honway put it, san Francisco does not need
a federal invasion because you don't like paying for extra
security for dream Biscrson, it's an extraordinary story. Thanks for
bringing it to us. Now coming up, we're going to
be speaking with Seth Rosenberg of Greylock Partners on the
impact of AI in the fintech space and so much more.
This is Blomberg Tech. Take a look as shares of
(32:23):
American Express look. The company reported third quarter earnings that
be destomers, buoyed by the strong cards spending and recently
refreshed Platinum Card. The results come as rising rates and
high delinquencies across the industry I fueled some concerns about
credit quality, but look cosd Squerry.
Speaker 2 (32:38):
I spoke with him earlier.
Speaker 3 (32:40):
He told me there's a lot of concern about credit
in the markets, but ours continues to be pristine. And
look beyond the earnings, American Express is also leaning into
your guests to artificial intelligence, rolling out new tools features
both the customers.
Speaker 2 (32:53):
And within the company.
Speaker 3 (32:54):
Scurry told me, look, we're getting there just like everyone else.
We are rolling out the tools and the training for us.
I think it'll be an accelerant to growth. Here to
discuss how AI is reshaping the fintech landscape in particular,
not just big players like Ames Seth Rosenberg partner at
Greylock Partners, and you have some stellar.
Speaker 2 (33:13):
Companies in the portfolio.
Speaker 3 (33:15):
We've also seen fintech on a tear until the government
shutdown with Klana and Chime coming to the market, So
how much is artifician intelligence what companies need to infuse
within themselves right now?
Speaker 4 (33:26):
Yeah, well, first of all, thanks for having me.
Speaker 13 (33:30):
I think financial services is one of actually the most
interesting verticals for AI. First of all, if you just
look at the size of the industry right financial service
is about twenty five percent of the economy, about seventeen
trillion dollars of aggregate market cap. And then second, if
you look at just the amount of both structured and
unstructured data that you have to work with that is
currently not being used in the industry. If you think
(33:52):
about receipt data, bank statement data, ten k's, ten q's,
earnings calls, there's all of this data that's currently not
being used in an optimal way. And then I think
the last thing is if you think about the incremental
economic value of making slightly better decisions with that value
with that data, whether it's making investments decisions, making underwriting
(34:12):
decisions for credit or for fraud.
Speaker 4 (34:14):
And so yeah, at Greylock.
Speaker 13 (34:16):
We're very optimistic about the opportunity for AI in financial services.
Speaker 3 (34:20):
It's interesting that at the moment we come off a
week where there has been anxiety fueled into the.
Speaker 2 (34:26):
Public parts of the market.
Speaker 3 (34:27):
Right now, we're worried about community banks and their exposure
to credit risk and Jamie Diamond and JP Morgan talking
about cockroaches. When we've suddenly seen some key companies roll
over with exposure to auto loans and they're like, will
I feed that out?
Speaker 13 (34:41):
I feel like that's the story of the economy in general.
There's a lot of risks underlying. And then everyone's very
excited about AI, right, and so we're focused a little
bit more on the early stage software side, and the
opportunity that we see is we're moving from a world
where software is maybe you know, one to two percent
of the over all budget of a company, maybeer point
(35:01):
seven percent of the GDP represents software spend.
Speaker 4 (35:05):
We're moving from capabilities.
Speaker 13 (35:07):
Where software is just a tool where people can enter data,
to software is actually capable of completing end to end work.
Speaker 4 (35:15):
So if you just take any subset sub segment.
Speaker 13 (35:17):
Within financial services, take accounting for example, you have maybe
one and a half billion dollars spent today on accounting software,
and you have one hundred and forty billion dollars spent
on bookkeepers and accountants that are actually.
Speaker 4 (35:28):
Doing the work.
Speaker 13 (35:29):
And we believe that gap is actually going to narrow
significantly because AI and software is now actually capable of
completing end to end work. And that is just one example,
but if you take every piece of the services side
of financial services, that's kind of the trend that we're
paying attention to it.
Speaker 3 (35:44):
But for those services to be so impactful and so
productive has to be the infusion of general generatorve AI.
Speaker 2 (35:51):
That has to be correct.
Speaker 3 (35:52):
If we're talking about making sure that the cockroaches aren't
creeping in, and so how our company is in stress
testing ensuring that the the advances they're making on't having
unknown consequences to the companies they've taken on.
Speaker 4 (36:05):
That's a great question.
Speaker 13 (36:06):
And the first thing that we think about is you're
not comparing yourself against perfection. You're comparing yourself so against humans,
and unfortunately humans are also not perfect. Right, And so
if you take compliance as one example, right, this is
a huge cost center for banks. Right, if you take
one of the large Tier one banks, they can spend
upwards of three to four hundred million dollars on compliance analysts.
(36:28):
And the problem is they're spending three to four hundred
million dollars for terrible outcomes. Right, We're still seeing three
to five billion dollars a year in compliance fines. We're
still seeing very slow customer onboarding. We're still seeing very
inconsistent results. And so, for example, one of the companies
that we invest in at Greylock is called green Light.
They use AI to basically automate this compliance workflow, and
(36:51):
if people are concerned initially about accuracy, they basically use
a human in the loop system. Right, So they have
green Light basically automate a lot of the work that
L one analysts do, and then you still have L
two and L three analysts checking the work and signing off.
Speaker 3 (37:06):
When you're thinking about investing in a green Light, there's
also another green Light that my family uses when it
comes to saving.
Speaker 2 (37:12):
For small children and their literacy.
Speaker 3 (37:15):
You are starting to see these companies looking for the
public markets themselves. How is your portfolio looking at aging
out when you're writing into the smaller, earliest stage companies.
Are they seeing a ray of light by what's happened
with colonnor on Chime.
Speaker 2 (37:27):
Even though we seem simple hotel training.
Speaker 13 (37:29):
Yes, I mean we were fortunate to be early investors
in Coinbase, which is one of the public fintech companies
in our portfolio. And yeah, I think what's interesting about
the public market opportunity for fintech is there's just a
supply and demand imbalance.
Speaker 12 (37:47):
Right.
Speaker 13 (37:47):
If you look at the seventeen trillion dollars of market
cap and financial services, a very small percentage of that
is currently represented by fintech companies that are available for
public market investors. And so I think there's a very
interesting pipeline of really high performing and valuable late stage privates,
including Ramp in our portfolio, you know, Revolue, twelfth Simple
(38:11):
in our portfolio, as as well as companies like Stripe
that everyone knows what.
Speaker 3 (38:15):
About M and A because I know Ce Square he's
been buying up certain FinTechs as well.
Speaker 13 (38:20):
I think I think the theme, like in all areas
of the economy, is going to be AI and so
I think if larger companies don't have an AI native strategy,
they're going to be looking for for M and A opportunities.
Speaker 3 (38:32):
Seth Rosenberg. Great to have you on the show. Thanks
today your expertise from Graylock Partners. We thank you now look.
Chinese e commerce John ali Baba is hoping AI can
to help boost sales and customer engagement too. Kaifud jam Is,
vice president of Ali Baba Group, sat down with Blue
Meg's minman Loo for details on the platform's revamp search feature.
Speaker 14 (38:51):
We actually did a very substantial rework over our search
and recommendation this year, starting with our two billion product
leads right, because we have really one of the biggest
product category in the world, which is two billing straw
and we actually used AI and large language model to
rework that underlying product catalog. We enrich the product content
(39:13):
when it also reindexed the entire product catalog, which is
a foundation for the search engine. And you can ask
our search engine and what is the best gift for
someone who's really stressed out in high school and he's
hiving headaches for example, right, and AI will be able
to comprehend your under your semantic query and to analyze
(39:34):
your underlying need and give your recommendation of the right products.
So this was not possible in a simplistic search engine
where you have to tell the search a product name
and it's going to give you that particular product.
Speaker 15 (39:48):
So you mentioned twenty percent increase in product relevance. So
does that mean we can expect very robust numbers from
this year? Is November eleventh sales?
Speaker 14 (39:56):
So a twenty percent is sentially be a very large number, right,
because I mean we operate a very mature tax stack.
I mean this technology stack has been optimized a year
over year for many years. So you don't often see
twenty percent lift in a bit testing, but we are
able to achieve that with large language model. Of course
(40:16):
there are modifiers. Right, that's twenty percent increase in relevance
when the consumers qurees semantically complex right.
Speaker 15 (40:24):
How much is the conversion rate?
Speaker 12 (40:25):
Though?
Speaker 14 (40:26):
So if you have a twenty percent uplift in relevance,
the conversion rate improvement is also quite significant. We are
able to achieve a ten percent improvement in or click
through by using a large language model to give the
consumer more positive surprises.
Speaker 12 (40:42):
Right.
Speaker 2 (40:43):
The idea is that, I mean.
Speaker 14 (40:44):
The consumers have a lot of product browsing and click preferences,
but sometimes you want to see new products. You want
to see something that you've never expressed any interesting, Right,
And that was kind of hard architect.
Speaker 15 (41:01):
So how much is the cost savings that you are
able to help your merchants achieve with AI.
Speaker 14 (41:05):
Yeah, so, because we are providing a very comprehensive suit
of tools for the for our merchants, including content generation,
including customer service, including marketing, and all these other use cases.
Speaker 2 (41:16):
But I'll just I'll just.
Speaker 14 (41:17):
Give you one example. So in AI customer service, you know,
like Chadboat, we provide our merchants and the cost saving
is actually twenty million Chinese per day.
Speaker 4 (41:26):
Your CEO did.
Speaker 15 (41:27):
Mention that Alibaba is planning to increase CAPEX spending beyond
the three hundred and eighty billion un that was previously pledged.
Do you have a concrete number to share in terms
of how much more investment it is?
Speaker 14 (41:37):
So obviously I'm not the right person to answer that question,
but i'm you know, but I'm on application, and what
I can tell you is that the actual number of
usage in terms of you know, the AI inference and
tokens is actually growing pretty.
Speaker 3 (41:50):
Fast, if you John Ali Babak, vice president there now.
Camer Con is dubbed China's Nvidia by retail investors. It
reported a fourteen fold surge in quarterly revenue, one of
the starkest signs yet of how China's chip makers are
benefiting from a national drive to replace restricted in video
gear as part of a domestic AI development boon. Now,
the company swung between net profit of seventy nine point
(42:13):
six million dollars in the September quarter two.
Speaker 2 (42:15):
Look it's not quite the tens of billions.
Speaker 3 (42:17):
And in videos making, but it is compared to a
net loss of twenty seven million dollars a year ago,
according to a filing on the.
Speaker 2 (42:23):
Shanghai Stock Exchange.
Speaker 3 (42:25):
And coming up meta, it's set to seal a thirty
billion dollar financing package for a data center site in
rural Louisiana.
Speaker 2 (42:30):
More next the supremebg Tech
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Carolline Hide in New York
and EVA though in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:23):
President Trump says they're threatened one hundred and forty five
percent taris with China are not viable. Will this soothes
trade relations between the two world's biggest economies. Plus billions
of dollars in crypto market value banished as old cooin's plunged.
We'll dive deeper into some of the riskier parts of
the tech markets, and Apple plans a revamped MacBook Pro
with a touch display in late twenty twenty six or early.
Speaker 2 (00:45):
Twenty twenty seven. But first we check in on these
markets then.
Speaker 3 (00:49):
Have been whipsawed this week, and we shine like what's
happened with the NaSTA one hundred that throughout some of
those trade tensions. Despite the anxiety around credit in the
banking sector, we remain higher at one point six percent.
We really have earnings on top for some of the
key players take TSMC, take ASML. But let's return now,
of course, to what's been happening in the world of
crypto as well, we have seen some pressure on that
(01:10):
particular part of the market, the riskier edges, look at
some of the contum stocks, look at some of the
more risky leverage ETFs more of fine more than eight
percent when it comes to bitcoin. So has not managed
to revive from that tummult that we experienced over the
course of the weekend and leverage getting flushed out returned
to all of these parts of the market. But so
as we talk the macro context here, because President Trump
(01:30):
says indeed that the threatened high tariffs with China are
not viable, as tensions between the world's two largest economies
intensify ahead of an expected face to face meeting with
Chinese counterpart Shaging Ping. Here's what he said on Fox Business.
Speaker 2 (01:45):
It's not sustainable, but that's what the number is. It's
probably naty and I could stand, but they forced me
to do that.
Speaker 4 (01:57):
I think we're going.
Speaker 2 (01:58):
To be fine with China, but we have to have
a fair deal. It's got to be fair.
Speaker 3 (02:03):
It's southing markets also long term impact. Bloom Vaccina Tech
editor Mike Sheppard joins us now.
Speaker 2 (02:08):
To break it down.
Speaker 3 (02:09):
Look, we'd worried that that meeting between she and Trump
wouldn't be on It looks as though, tantalizingly, it might be.
Speaker 1 (02:17):
Yes.
Speaker 5 (02:18):
He is indicating Caro that this meeting will take place.
Of course, we still don't have the details on when
or exactly where, although it is expected to take place
during the APEX summit that both leaders are scheduled to
attend at the end of the month, which is really
about ten or twelve days away, so they don't have
a lot of time to lock that in and then
(02:38):
also do some of the key legwork ahead of time,
and that's grown only more complex with all of the
back and forth over some really sticky trade issues that
we've seen more recently, and this all was thrown into
doubt by last week's move by China to impose curbs
on exports of rare earth elements, which are critical across
the economy and everything from autos to consumer electronics to
(03:01):
defense equipment, and that was something that really set off
US officials. We saw Treasury Secretary Scott Besson's really visceral
reaction earlier this week, and the US has since moved
to rally allies against China's move, recognizing that this would
have global implications and that it would affect far more
(03:22):
than just the US economy. So it'll be interesting to
see how this all plays out in those lower level negotiations.
But for now, the President is saying the quiet part
out loud, acknowledging Caro that there will be some severe
economic follow if those very high tariffs actually take effect.
Speaker 3 (03:38):
I'm looking at certain tech names that are exposed to
China and they have been rallying, whether or not it's
just a risk one attitude into the weekend, or whether
it is on the back of these comments. But what
are you watching for in the tech sector more broadly
mic as to how they weather this ongoing instability uncertainty.
Speaker 5 (03:55):
Well, part of the question really is going to be
the degree of investment that will flow to China and
whether there is any sort of chill elsewhere as well.
As a result, one of the key questions in the
US China relationship has been not only the Chinese export
curves on rare earths, but the US export restrictions on
events technology. That includes the AI chips from Nvidia and
(04:18):
AMD that you and I've talked about so much in
this space, but also the semiconductor manufacturing equipment from the
likes of ASML and Tokyo Electron that is so critical
to making those chips that are powering the AI revolution.
That gear has been restricted by US measures over the
past couple of years, and one of the reasons Beijing
is trying to use this leverage right now at this
(04:40):
moment on rare earths, a market and a sector that
it really dominates. It has this control over that supply chain.
It wants the US to relent a little bit in
this area so that it can gain back some access
to those critical materials itself, the AI chips and the
semiconductor equipment, manufacturing equipment needed to make them.
Speaker 3 (05:01):
Cto Palenter telling us that exact thing this time last
week on our Defense Tech special Mike Shephard, It's great
to have you on the show. Thanks for the context.
Let's go out to Mike Dixon now for the market
impact of US Chine and trade tensions. Here's the head
of Research and Qunitive Strategies over Horizon Investments. You've got
ten billion dollars in assets under management, all told, Mike,
and I'm interested as to how you weather the ongoing
(05:23):
headline risk that we see about US and China.
Speaker 6 (05:27):
Well, it's certainly there and we have seen that, you know,
impact certain areas of the market, you know, but overall,
as we're heading into you know, the bulk of the
tech earning season here in just a couple of weeks,
you know, I think it's helpful just to kind of
zoom out a little bit and see where the fundamentals are.
And we've got to early read on that this week,
of course, with ASML and TSM showing there's very strong demand,
(05:48):
you know, Oracles Investor Day as well, supported as much,
you know, and when we look at the returns thus
far for the top of the market, I think one
of the most interesting things to me is that we
actually have not seen returns driven by valuations increasing this year. So,
you know, as we head into earning season, I think
it's a really good, really good point to remember and
kind of zoom out for a little bit of the
bigger picture and we'll see how this, you know, trying
(06:10):
to kind of trade tention stuff works out. But the
underwine fundamentals are very much strong.
Speaker 2 (06:14):
Okay, what have the returns been driven by?
Speaker 6 (06:16):
Then It's been driven by this you know, increased demand
and you know, overall, just the expected expected earnings continuing
to grow and clip clip along at very high rates,
and you know we're seeing that through uh, you know,
through the continued you know, AI demand, and I think
strong fundamentals supporting the returns is a much better place
(06:37):
to be than having that be driven by just the
increase in investor optimism through evaluations going up. And I
really do think it's a very strong place to be
as we head into earning season to actually see valuations
be at or below for a lot of these bigger names,
and they really were even to come into the year,
and I think investors really need to be aware of
that that, you know, especially those that that are bearish on,
(07:00):
you know, some of this continuation of the trend, because
the fundamentals are very strong and it is supporting the
price trends that we've seen.
Speaker 3 (07:07):
Okay, so it feels as though you're not thinking there
is some sort of bubble, but that's in parts of
the market which have seen the AI well optimism really
like fire. We've seen it, particularly as you say TSMCSML.
I just want to go back to some companies that
they are rallying today that have exposure to China in particular,
I'm looking at Tesla, I'm looking at Apple, I am
looking at ASML, which managed to calm our anxieties that
(07:28):
they can continue to see the mega trend continue even
if China falls away in terms of demand. But what
about those companies that have high exposure to China? Is
that something that you need to be anxious about?
Speaker 6 (07:39):
Well, I think we need to go back to just
what we've seen over the last six months with all
of the tariff stuff. Of course, we're you know, you know,
in this period where we're not exactly sure how this
is going to work out. But when we look at
the last six months, there has been a lot of
fits and starts of teriff situation is going to be
terrible and then we ultimately get a deal. And look,
(07:59):
I think overall the market has become a little desensitized
to a lot of this back and forth, you know,
tariff situation. For one, think that you know, ultimately, and
Trump alloted as much in his interview, I think wants
to make a deal. Uh, And so I think that
that that that should be kind of our our base
case here and this headline volatility that we've seen, you know,
(08:20):
is U is just necessary for you know that risk
premium to be realized.
Speaker 3 (08:25):
Mike, going back therefore to the idea of valuations, Yes
they're high, but it's because earnings have grown into them.
Where are you seeing the earnings likely to catch fire
in this set of earnings for the companies that you follow,
because you are in all the major players when it
comes to AI.
Speaker 4 (08:43):
Yeah, that's right.
Speaker 6 (08:44):
I mean when you look at just the top of
the market, you know, Max seven obviously comes up a
lot there. There's pretty big, uh, you know, divergence amongst
that group this year, and so you know some of
the names that have been laggers amongst that group, that
the Teslas, the Apples, the Amazons, you know, I think
where that sits as you know, what's attractive with the
(09:07):
top of the market, I think that's probably still going
to be the case that in the medium term those
are probably still going to be the laggards and the winners,
and that you know, AI group at the top of
the market are still going to be the winners. And
a lot of that I think has to do with
you know, a lot of the smaller software and services
type names have had a difficult time really kind of
separating themselves and really showing unique value propositions for their products,
(09:28):
and therefore the market is kind of defaulting to what
they know, and that is those AI winners. So I think,
you know, even amongst that top of the market in
the Max seven names, the ones that have been doing well,
I think are poised to continue to do well, and
the laggards are, at least in the medium term, probably
still going to be the laggards.
Speaker 2 (09:45):
Follow the trend might extent and horizon. We appreciate you
have a good weekend.
Speaker 3 (09:49):
Now coming up will break down the latest F five
cybersecurity hacks, how it's affecting the Defense Department, and wider
implications for the cybersecurity industry.
Speaker 2 (09:57):
Do I have blues with us? From il meg Tech.
Speaker 3 (10:20):
Shares, a cybersecurity provider. F five Networks look. They tumbled
this week following revelations that it was hit by a
prolonged hack that could lead to potentially catastrophic compromises. Now,
according to sources, the breach has been blamed on state
backed hackers from China. China Foreign Ministry spokesman Ninjian said
that China always opposes and fights hacking activities in.
Speaker 2 (10:38):
Accordance with the law.
Speaker 3 (10:40):
For more it's Bloomberg Cybersecurity editor Jeff Stone. But why
is this so potentially catastrophic.
Speaker 7 (10:47):
One of the things we have to remember, Caroline, is
that cybersecurity companies like F five, like a lot of
technology companies, but cyber companies in particular, have really deep
access to their clients' systems, their networks. They control firewalls,
they control who has access to what they control, which
ips can access other computers, certainly passwords and user names
and that kind of thing. So when the people who
(11:09):
are trying to stop hackers from getting in ultimately are
compromise that gives outsiders, spies from places like China really
really deep, valuable insight.
Speaker 3 (11:20):
For a long time, for a long time twelve months,
and what sort of companies and institutions are being implicated here.
Speaker 4 (11:27):
We're still trying to get a sense of that.
Speaker 7 (11:29):
We're really trying to understand how Chinese hackers also access
F five in the first place. But we know F
five works with government agencies. We know they work with
a huge number of the Fortune five hundred, it's a big,
successful publicly trade company. You mentioned the shares fell. I
mean that's a reflection of the severity the issue obviously.
Speaker 2 (11:48):
Severity the issue.
Speaker 3 (11:49):
That means the UK and the US have both together
put out these warnings. But as companies try to tackle this,
how else are they analyzing their defense systems and how
else are they also thinking about other companies that are
at the very backbone of their own infrastructure.
Speaker 4 (12:02):
That's right.
Speaker 7 (12:02):
One of the things that we've seen, certainly out of China,
for instance, is this evolution from typical email phishing attacks
and they're now resorting to companies with deeper access. Instead
of trying to hack your email, they are hacking the
company that you rely on to protect your email. So
for companies that are potentially affected by that, they need
to take a closer look, and they are taking a
(12:23):
closer look at who they rely on to do what.
They're looking at their vetting procedures, and they're really looking
at who they trust with their own kind of crown jewels.
Speaker 4 (12:31):
But it's hard, it's a really difficult process.
Speaker 3 (12:33):
We understand according to people familiar that the CEO of
F five themselves is out there calling up clients trying
to discuss how Chinese hackers, in particular, we're able to access.
But what are the next steps for a company in
this situation.
Speaker 7 (12:45):
They f five is going through this process where they're
going to try to generate as much trust as they
possibly can. Part of that is going to mean being
transparent about what they do know, what they don't know,
and some of the things that they're trying to fix.
I know that the CEO, for instance, you mentioned, is
talking about China. One of the reasons that we see
executives do that a lot is because it's a serious
(13:06):
argument for a CEO to make to say, hey, we're
a private company, we are being attacked by some of
the world's most advanced, thoughtful, sophisticated spies. Really and this
is how they got in and here's what we're going
to try to do about it.
Speaker 2 (13:20):
Jeff Stone, we thank you from Bloomberg.
Speaker 3 (13:24):
Sorry, excuse me now, and let's bring in Giant Blue
into the conversation. She is co founder, CEO and chief
information security officer and Ale it's a new AI native
cyber reasoning system for vulnerability management, which just came out
of Stealth yesterday. Perfect timing for us and our audience. Jia,
and I'm interested as to what your read is on
this situation. How fierce is the threat coming from State
(13:47):
related activists and hackers.
Speaker 8 (13:50):
It's actually incredibly fierce, and it's because there's a very
strong motivation to do these kinds of attacks. And what
you'll see is that this particular group, who is you know,
part of we think Silk Typhoon or maybe a separate group.
We've been seeing this type of activity classified under something
called brickstorm. And it sounds terrifying because it is terrifying,
and that's why the Cybersecurity Agency in the United States
(14:13):
put out an emergency directive just this Wednesday. Because forty
eight out of the Fortune fifty are using F five,
A vast number of the federal government they're using FI.
We suspect that there's thousands of devices being deployed. And
you know, really, because the source code is now out
there and in the hands of the Chinese, that means
(14:35):
that a nation state attacker is now looking for vulnerabilities
in this source code and has information they never should
have had about undisclosed vulnerabilities that F five was already investigating.
And because the attacker was there for more than a
year studying F five, it's actually quite terrifying. All the
(14:56):
capability they could have.
Speaker 2 (14:57):
How have they gone unnoticed?
Speaker 3 (15:00):
Solo.
Speaker 8 (15:01):
Well, one of the biggest reasons is because if the
attacker comes in over remote management devices and protocols using
zero days, it's very hard to find the initial vector
of how they originally got into that network. And you know,
simply if they got in more than a year ago,
the chances are high that there's not even logs that
(15:22):
hold that type of log retention for over a year.
Speaker 4 (15:26):
That's let's start there. That's how we.
Speaker 8 (15:27):
Don't know when they actually got in in the first place.
The second part of that problem is most of these
network devices don't have like a sort of you know,
detection and response that we can actually see. There's no
EDR in these network devices, so we can't actually see
this malicious activity. We don't necessarily see this telemetry as
(15:50):
they're conducting this ladder movement. I mean, theoretically we should,
and at some point F five did, but that was
as late as August of this year, and they were
directed for national security concerns to keep it quiet until
they could release this information in their SEC filing.
Speaker 3 (16:08):
You are making it clear to our audience how critical
this is. But when we all go home and sit
around our dinner tables, I don't feel like this is
becoming the top of conversation that perhaps it should be
given the strength of the concerns and anxieties. You make
clear what is it that ends up affecting the consumer
or more written large in this circumstance.
Speaker 8 (16:27):
The fact of the matter is, especially from a consumer perspective,
we don't always feel like paying for cybersecurity. We think
it should be built in rather than bolted on. From
a consumer perspective, enterprises are more used to this notion
that you know, it's like a never done thing that
we continuously need to improve, that it's a rint and
repeat like action. But we still expect more and better
(16:49):
from cybersecurity vendors, from people who are comfortable in this space.
But frankly, if you are really successful with your software
and hardware, you should expect that Nation States it will
target you for some type of supply chain compromise. It's
almost inevitable. It's because of that very success that your
reputation and your network and information systems are critically at risk.
Speaker 3 (17:11):
And particularly in the world of AI, where ever more
sophisticated attacks are happening and written large at such pace, John,
this is where your company comes in and I'm so
interested in ILE and what you're currently building because you're
saying it's the first AI native cyber reasoning system. Can
you talk us through exactly how it works differently from others.
Speaker 4 (17:29):
Yes.
Speaker 8 (17:30):
So we are in ED, which means that everything we
do starts from an AI first principle. And one of
the most tenacious problems we have in cybersecurity is this
ability to both find the right set of vulnerabilities and
then remediate them quickly. So what we do at ILE
is exactly that we have an analyzer that actually looks
(17:50):
to find those vulnerabilities that truly matter, not just small,
low level bugs. And we've proven that with several very
famous programs that you have online, open source programs. We
found incredibly critical zero days, We've reported them responsibly to
the maintainers of these open source projects, and they have
(18:10):
fixed them. And what we've really been trying to do
is make sure that we are not just showing, hey,
this stuff is broken, but allowing customers to actually be
able to remediate those incredibly quickly, at superhuman speed. And
that has to be how we work because you can
bet your botom dollar that the attackers are using AI
now we need to make sure that the defenders are too.
(18:33):
And this is something that really we haven't been doing
in this way for so long, and this kind of
static basis that we've had is no longer suitable for
the types of threats that we face.
Speaker 3 (18:44):
Just going to Aisle and who its core customer is
feels that it's everyone. But all these cyber companies are
becoming ever.
Speaker 2 (18:51):
More platforms and want to own your.
Speaker 3 (18:54):
Entire ecosystem of cybers So where do you fittinger.
Speaker 8 (18:58):
Well, we start where everything is being built. So if
you're right now, I feel like every customer that we
look at is really I mean, it's remarkable, but we
have changed into a planet that operates on software. So
everything that we actually look at is a company that's
using software. So if they build software, if they're having
someone else build software for them, for their manufacturing process,
(19:20):
for their supply chain, you know, for those kinds of
potential customers and design partners, that's where we come in
and we try to make sure that those supply chain
vulnerabilities that could impact others downstream as well as their
own vulnerabilities, that we give them critical knowledge to know
what is that that's really broken? That you need to
(19:40):
focus on and how can we get you to a
place where you have zero vulnerabilities coming in. Most of
these companies also have rather terrifying backlogs of vulnerabilities that
they have not fixed, millions in the backlog. And I'm
telling you, as a CZO of three different publicly listed companies,
I've had these experiences myself of these tenacious, hard to
(20:01):
fix vulnerabilities, and I wished for this solution, which is
why we now built it.
Speaker 3 (20:06):
Well, you've got some phenomenal backers and some phenomenal co
founders Javalu Coo and Ciso at Aisle. It's great to
have you back on the show. Have a good weekend
having out. Apple is finally getting in on the touch
display game with a revamped MacBook Pro details.
Speaker 2 (20:23):
Next to is the BLUEBG tech.
Speaker 3 (20:31):
Apple and it's planning to launch a revamped MacBook Pro
with a touch display in late twenty twenty six or
early twenty twenty seven.
Speaker 2 (20:37):
It's all according to sources.
Speaker 3 (20:39):
The new computers will also have thinner, lighter frames and
run on Apples, M six.
Speaker 2 (20:43):
Line and chips.
Speaker 3 (20:43):
Let's cut out to the man who, of course has
been breaking in order down it's Mark German, our consumer
tech editson Mark. I so often personally try to move
my MacBook Pro with my hand.
Speaker 2 (20:53):
Finally it'll actually work.
Speaker 4 (20:56):
This is a yes.
Speaker 9 (20:57):
This is a very big deal for Apple. For fifteen
years or longer, they've been resistant to doing touchscreen macs.
Why because they sell iPads and they had the sphere
that the Mac, if it got touched, would cannibalize iPads.
They also strongly believe that the ergonomics of a touch
screen computer to quote these jobs were terrible and to
quote Tim Cook would be like merging a toaster in
(21:19):
a refrigerator. But the reality is the market has changed.
Touch screens on PCs are now table stakes. MacBooks are
out selling iPads. You also have the reality that Apple
has now combined many of the fundamental technologies between the
ipen and the Mac. They both run the same processors, now,
they both run the same user interfaces. They both have
(21:42):
a shared app ecosystem because of Apple's new App Store,
where they've merged the applications across iOS and mac os.
So there's so many similarities. Now consumers are desperate for
touch and so they finally are doing it, and they
think they can bring the Mac more upmarket by doing so.
Speaker 2 (21:59):
We're desperate to make toast and our refrigerators.
Speaker 3 (22:01):
That's okay, Map, but I'm also interested that we're all
desperate to consume more sport on Apple TV, just quickly
on F one. It's been a long time in the making.
Speaker 9 (22:09):
Yeah, you know, F one is interesting. There are a
lot of fans, specifically overseas. Apple is now bringing F
one in a big way to the United States. This
is going to make the Apple TV not Plus now
just Apple TV subscription more valuable. Clearly, there was a
lot of interest in the F one movie with Brad Pitt.
Now they're getting more clearly into sports. I'm personally hoping
(22:31):
they do something about the NBA because it's completely flum mixing.
How many apps you need to access that now? But
I guess F one is good for.
Speaker 3 (22:38):
Now we can see your sports fan from over your shoulder,
Blue most Mark German, It's always great to have you on.
Speaker 2 (22:42):
Thank you so much.
Speaker 3 (22:43):
And now coming up, Oracle Coyle's Wall Street fears over
its aiprofitability or does it? Why is it sinking off
by almost eight percent? This is bluembg tech as welcome
back to Bloomberg Tech.
Speaker 2 (23:04):
Let's take quick check on these.
Speaker 3 (23:05):
Markets, because maybe we've had some nerves soothed a little bit.
We are off on the day by three tenths of
a percent, bouncing off some of our lows as we
try to steady the reader cross of whether or not
Jijingping and President Trump will indeed meet in the next
few weeks and will indeed manage to back away from
the highest possible towers one hundred and forty five percent.
We know that President Trump's for two Fox Business saying
(23:26):
that this would be unsustainable if we did hit that
sort of a level. We also, though, think about the
risk and the anxiety in the market. Yes, there's about
the banks, the particularly the smaller banks and exposure to credit.
There's also the riskier parts of the market. Bitcoin ist
us see over the last five days has been under
some serious pressure. We can see the seller for more
than seven percent amid that big liquidation that occurred over
(23:47):
the course of the weekend prior.
Speaker 2 (23:49):
Let's talk about all of this.
Speaker 3 (23:50):
Bloomberg ETFs and Cross Asset reporter Emily Graffeo joins us
on the more should we say, frothy parts of the
market are starting to lose a bit of esteem, particularly
in crypto and old coins in particular.
Speaker 2 (24:01):
That's exactly right.
Speaker 10 (24:02):
You look at what bitcoin's done over the last week,
it's down about eight percent. Typically, the frothier parts to
all coins, like doge coin, Polka Dot, those drop more
than Bitcoin an ether. There's a little bit less liquidity there.
We see them as more kind of high beta. What's
interesting now is in the ETF world, issuers are trying
to package those all coins into ETFs, into products. Given
(24:25):
the success of black Rocks Bitcoin ETF, they're looking at
products like a pokea dot ETF, a chain link ETF, Caroline,
a pengu ETF integral. I don't know if you've heard
of business okay affiliated with pudgy penguins.
Speaker 3 (24:40):
Who doesn't have a pudgy penguin I mean, and I've
seen to have its is Zabatov.
Speaker 8 (24:46):
Yeah.
Speaker 10 (24:46):
So we have one hundred and thirty ETF applications right
now filed with the SEC pending UH listing. So they
haven't launched yet, but it just speaks to kind of
that appetite from Wall Street to take these all coins,
even though they're dropping right now, and put them into.
Speaker 3 (25:00):
I mean We're just looking at the dough ETF, which
has been under considerable pressure. We've seen a lot of
these etns happen over in Europe. US maybe the government
shutdown has put them on polls. But why the sudden
anxiety in these parts of the market. Is it more
broadly US China? Is it more the macro fed side.
Is it gold because gold is being seen as a
have but digital gold got so much.
Speaker 10 (25:21):
Yeah, that's exactly where a couple sources have pointed to
potential stresses in the credit market, maybe seeping into the
frothier risk on parts of the market.
Speaker 2 (25:30):
I mean, what coaches, you mean, right, the cockroaches.
Speaker 10 (25:32):
I think that comment kind of has spread to other
parts of the market.
Speaker 2 (25:36):
You look at what tech is doing tech stocks right now.
Speaker 10 (25:39):
Typically when we see the Nasdaq one hundred down, we
do see crypto down even more. But then again, there's
some days where it does act as a safe haven.
I would say in this current cycle, crypto's not acting
as a safe haven. We're seeing it drop further than
what the traditional tech markets are doing. But you know,
you look at that dogecoin ETF, the ticker d OJE.
(26:01):
It's gotten some influence it's actually thirty million dollars in
AUM for a new ETF, especially for a meme coin ETF.
It's actually not that bad. There could be some investors
in the market trying to buy the dip here and
buy something like this.
Speaker 3 (26:15):
Well, we know those liquidations over ok to tenth and
eleventh were really painful. In particular binances linked token. BnB
has been under significant pressure ever since. It seems to
have been being blamed for some of that big move. Emily,
great to have you back on the show. Please come
again soon. Emily Graffeo breaking all down for us.
Speaker 2 (26:31):
But let's pivot a little bit.
Speaker 3 (26:33):
And talk about what's happening over on shares of Oracle,
because they're also lower. But that's even as the company
has been saying, Look, it can reach thirty five percent
gross margins for its large AI infrastructure projects. Why are
investors skeptical a scope to bloombag Intelligence Senior tech anlis
Anna Agrana. Look, there was that report from the Information
that we were worried that basically Oracle wasn't going to
(26:53):
be making that much money for itself when it gets
a big three hundred billion dollar contract.
Speaker 2 (26:57):
From open Ai.
Speaker 3 (26:58):
They tried to reassure the market hasn't paid off for
today it seems.
Speaker 11 (27:03):
You know, I think the big push came on the
stock when they announced that big RPO number, you know,
a few weeks ago. So I think you could, you know,
perhaps say that this is more sell on the news
kind of you know, information or reaction. But you know
from our site that thirty five percent is a very
good number, frankly, because you can go back in the
history of cloud computing, even in the days of an Amazon,
(27:26):
you know, web services was formed, getting to a gross
margin starting off this early, and you know it's not
a bad thing because over time that number is going
to grow as you scale up, as you were able
to do things in a much more effective way. Fourteen
percent number from that article that you mentioned was concerning,
and I think these guys did a good job of
explaining why that's not the case for them, and I
(27:49):
you know, from our side, I think the profitability aspect
is fine. They talked about you know, revenue growth of
thirty percent over the next five year per year and
earning's growth of twenty eight percent, so only mild you know,
depression in you could say, EPs growth rate, but at
the same time, I think it's going to be more
back end loaded, which is you're not going to see
(28:09):
you know, you'll see compression over the next two years,
three years, and then you're going to see a rebound
from that. So I think that's where you could see
some disappointment. But from our side, you know what we heard,
what we like that these guys.
Speaker 2 (28:21):
Said, really like that.
Speaker 3 (28:23):
You've been talking to some of the great elements our
producers have had ready for us. Talking about that twenty
thirty goal. But going back to this pie chart that
really breaks down where it's gross profit comes from. They're
saying they're going to be having twenty one billion dollars.
For example, if we took an over that's their thirty
five percent gross margin for a certain sized contract.
Speaker 2 (28:40):
Can you tell us in.
Speaker 3 (28:41):
The future how they reduce the hardware costs, how they
reduced the land and power costs just by economies of scale.
Speaker 11 (28:49):
It's a combination of economies of scale and using more
software to optimize the workloads. That has been the case.
You know, going back to history of any large infrastructure project,
you can go back and see that in the same
way CPU computing happened. Over time, you get better at
managing these things. On top of that, you add more
value added services. So when you look at the stack
(29:10):
of software as a service, platform as a service, or
infrastructure as a service, you're first giving the infrastructure layer.
Then you're going to give added services on top of it.
Those added services have gross margins of seventy eighty percent
or so. That's usually how cloud providers work. So over
time you're going to have those things come in. That's
going to help the gross margins even more.
Speaker 3 (29:29):
When they get those sixty billion dollars in total revenue
deals for six years. As the theory of that pie
chart when Anna rag Grana, great breakdown and always great analysis.
We appreciate you, Blueberg Intelligence. Now let's turn our attention
to Salesforce. Interestingly, it recently also gave its outlook for
twenty thirty, but we want to talk about philanthropic part
of it. Benure capitalist Ron Conway has resigned from Salesforce's
(29:50):
board following CEO mart Benioff's call for President Trump to
deploy the National Guard to San Francisco. In an email
to Benioff and several board members, Conway rights me immensely
to say that with your recent comments and failure to
understand their impact.
Speaker 2 (30:04):
I now barely recognize the.
Speaker 3 (30:06):
Person I've so long and mad for more Bloomberg Wealth
reporter Biz cass and joins us, why is Ron Conway
such an important voice?
Speaker 2 (30:14):
Hib is.
Speaker 12 (30:16):
Well, Ron Conway and Mark Benioff have worked together for
a long time. He's been on the board of Salesforce
Foundation for over ten years, and they're both seen as
two big benefactors to the city. So for this to
create a rift between the two, to the point where
Ron is stepping down from the Salesforce Foundation board saying
he will no longer work with Benioff is a big
deal it and it shows that you know, he's not
(30:38):
standing behind his comments, Benioff's comments to send in the
National Guard to the city to clean it up.
Speaker 3 (30:45):
I mean, he's not the only voice that have been
more calling out Mark Benioff for his words in San Francisco,
and in particular Lon Powell Job seems to have done
in an article she's penned herself in the Wall Street Journal.
Just discuss what it is that Mark Benioff what he
feels here, because some would say, you know, just his
alignment with Trump shouldn't always cause such riffs with people
(31:08):
he's known for years.
Speaker 12 (31:10):
Correct, I mean that should not cause this alignment. Benioff
has literally changed the skyline of San Francisco at the
Salesforce Tower. His name is on the hospitals here. He
has done a lot through his philanthropy to change and
help the city of San Francisco, and so Loreene pell
Job's criticism was that he should not be expecting things
though in return for that generosity, when he was asked
(31:32):
about the National Guard coming to San Francisco, he said,
if they can be cops, I'm all for it. But
a lot of people, including Benioff and or including Loreene
pell Jobs and Conway, don't believe that. Because he has
been a philanthropist means he doesn't get to dictate what
happens in the city, especially when he's no longer living
here and the company is here, but he's in Hawaii
(31:54):
these days.
Speaker 3 (31:54):
As Rong Honway put it, san Francisco does not need
a federal invasion because you don't like paying for extra
security for dream Biscrson, it's an extraordinary story. Thanks for
bringing it to us. Now coming up, we're going to
be speaking with Seth Rosenberg of Greylock Partners on the
impact of AI in the fintech space and so much more.
This is Blomberg Tech. Take a look as shares of
(32:23):
American Express look. The company reported third quarter earnings that
be destomers, buoyed by the strong cards spending and recently
refreshed Platinum Card. The results come as rising rates and
high delinquencies across the industry I fueled some concerns about
credit quality, but look cosd Squerry.
Speaker 2 (32:38):
I spoke with him earlier.
Speaker 3 (32:40):
He told me there's a lot of concern about credit
in the markets, but ours continues to be pristine. And
look beyond the earnings, American Express is also leaning into
your guests to artificial intelligence, rolling out new tools features
both the customers.
Speaker 2 (32:53):
And within the company.
Speaker 3 (32:54):
Scurry told me, look, we're getting there just like everyone else.
We are rolling out the tools and the training for us.
I think it'll be an accelerant to growth. Here to
discuss how AI is reshaping the fintech landscape in particular,
not just big players like Ames Seth Rosenberg partner at
Greylock Partners, and you have some stellar.
Speaker 2 (33:13):
Companies in the portfolio.
Speaker 3 (33:15):
We've also seen fintech on a tear until the government
shutdown with Klana and Chime coming to the market, So
how much is artifician intelligence what companies need to infuse
within themselves right now?
Speaker 4 (33:26):
Yeah, well, first of all, thanks for having me.
Speaker 13 (33:30):
I think financial services is one of actually the most
interesting verticals for AI. First of all, if you just
look at the size of the industry right financial service
is about twenty five percent of the economy, about seventeen
trillion dollars of aggregate market cap. And then second, if
you look at just the amount of both structured and
unstructured data that you have to work with that is
currently not being used in the industry. If you think
(33:52):
about receipt data, bank statement data, ten k's, ten q's,
earnings calls, there's all of this data that's currently not
being used in an optimal way. And then I think
the last thing is if you think about the incremental
economic value of making slightly better decisions with that value
with that data, whether it's making investments decisions, making underwriting
(34:12):
decisions for credit or for fraud.
Speaker 4 (34:14):
And so yeah, at Greylock.
Speaker 13 (34:16):
We're very optimistic about the opportunity for AI in financial services.
Speaker 3 (34:20):
It's interesting that at the moment we come off a
week where there has been anxiety fueled into the.
Speaker 2 (34:26):
Public parts of the market.
Speaker 3 (34:27):
Right now, we're worried about community banks and their exposure
to credit risk and Jamie Diamond and JP Morgan talking
about cockroaches. When we've suddenly seen some key companies roll
over with exposure to auto loans and they're like, will
I feed that out?
Speaker 13 (34:41):
I feel like that's the story of the economy in general.
There's a lot of risks underlying. And then everyone's very
excited about AI, right, and so we're focused a little
bit more on the early stage software side, and the
opportunity that we see is we're moving from a world
where software is maybe you know, one to two percent
of the over all budget of a company, maybeer point
(35:01):
seven percent of the GDP represents software spend.
Speaker 4 (35:05):
We're moving from capabilities.
Speaker 13 (35:07):
Where software is just a tool where people can enter data,
to software is actually capable of completing end to end work.
Speaker 4 (35:15):
So if you just take any subset sub segment.
Speaker 13 (35:17):
Within financial services, take accounting for example, you have maybe
one and a half billion dollars spent today on accounting software,
and you have one hundred and forty billion dollars spent
on bookkeepers and accountants that are actually.
Speaker 4 (35:28):
Doing the work.
Speaker 13 (35:29):
And we believe that gap is actually going to narrow
significantly because AI and software is now actually capable of
completing end to end work. And that is just one example,
but if you take every piece of the services side
of financial services, that's kind of the trend that we're
paying attention to it.
Speaker 3 (35:44):
But for those services to be so impactful and so
productive has to be the infusion of general generatorve AI.
Speaker 2 (35:51):
That has to be correct.
Speaker 3 (35:52):
If we're talking about making sure that the cockroaches aren't
creeping in, and so how our company is in stress
testing ensuring that the the advances they're making on't having
unknown consequences to the companies they've taken on.
Speaker 4 (36:05):
That's a great question.
Speaker 13 (36:06):
And the first thing that we think about is you're
not comparing yourself against perfection. You're comparing yourself so against humans,
and unfortunately humans are also not perfect. Right, And so
if you take compliance as one example, right, this is
a huge cost center for banks. Right, if you take
one of the large Tier one banks, they can spend
upwards of three to four hundred million dollars on compliance analysts.
(36:28):
And the problem is they're spending three to four hundred
million dollars for terrible outcomes. Right, We're still seeing three
to five billion dollars a year in compliance fines. We're
still seeing very slow customer onboarding. We're still seeing very
inconsistent results. And so, for example, one of the companies
that we invest in at Greylock is called green Light.
They use AI to basically automate this compliance workflow, and
(36:51):
if people are concerned initially about accuracy, they basically use
a human in the loop system. Right, So they have
green Light basically automate a lot of the work that
L one analysts do, and then you still have L
two and L three analysts checking the work and signing off.
Speaker 3 (37:06):
When you're thinking about investing in a green Light, there's
also another green Light that my family uses when it
comes to saving.
Speaker 2 (37:12):
For small children and their literacy.
Speaker 3 (37:15):
You are starting to see these companies looking for the
public markets themselves. How is your portfolio looking at aging
out when you're writing into the smaller, earliest stage companies.
Are they seeing a ray of light by what's happened
with colonnor on Chime.
Speaker 2 (37:27):
Even though we seem simple hotel training.
Speaker 13 (37:29):
Yes, I mean we were fortunate to be early investors
in Coinbase, which is one of the public fintech companies
in our portfolio. And yeah, I think what's interesting about
the public market opportunity for fintech is there's just a
supply and demand imbalance.
Speaker 12 (37:47):
Right.
Speaker 13 (37:47):
If you look at the seventeen trillion dollars of market
cap and financial services, a very small percentage of that
is currently represented by fintech companies that are available for
public market investors. And so I think there's a very
interesting pipeline of really high performing and valuable late stage privates,
including Ramp in our portfolio, you know, Revolue, twelfth Simple
(38:11):
in our portfolio, as as well as companies like Stripe
that everyone knows what.
Speaker 3 (38:15):
About M and A because I know Ce Square he's
been buying up certain FinTechs as well.
Speaker 13 (38:20):
I think I think the theme, like in all areas
of the economy, is going to be AI and so
I think if larger companies don't have an AI native strategy,
they're going to be looking for for M and A opportunities.
Speaker 3 (38:32):
Seth Rosenberg. Great to have you on the show. Thanks
today your expertise from Graylock Partners. We thank you now look.
Chinese e commerce John ali Baba is hoping AI can
to help boost sales and customer engagement too. Kaifud jam Is,
vice president of Ali Baba Group, sat down with Blue
Meg's minman Loo for details on the platform's revamp search feature.
Speaker 14 (38:51):
We actually did a very substantial rework over our search
and recommendation this year, starting with our two billion product
leads right, because we have really one of the biggest
product category in the world, which is two billing straw
and we actually used AI and large language model to
rework that underlying product catalog. We enrich the product content
(39:13):
when it also reindexed the entire product catalog, which is
a foundation for the search engine. And you can ask
our search engine and what is the best gift for
someone who's really stressed out in high school and he's
hiving headaches for example, right, and AI will be able
to comprehend your under your semantic query and to analyze
(39:34):
your underlying need and give your recommendation of the right products.
So this was not possible in a simplistic search engine
where you have to tell the search a product name
and it's going to give you that particular product.
Speaker 15 (39:48):
So you mentioned twenty percent increase in product relevance. So
does that mean we can expect very robust numbers from
this year? Is November eleventh sales?
Speaker 14 (39:56):
So a twenty percent is sentially be a very large number, right,
because I mean we operate a very mature tax stack.
I mean this technology stack has been optimized a year
over year for many years. So you don't often see
twenty percent lift in a bit testing, but we are
able to achieve that with large language model. Of course
(40:16):
there are modifiers. Right, that's twenty percent increase in relevance
when the consumers qurees semantically complex right.
Speaker 15 (40:24):
How much is the conversion rate?
Speaker 12 (40:25):
Though?
Speaker 14 (40:26):
So if you have a twenty percent uplift in relevance,
the conversion rate improvement is also quite significant. We are
able to achieve a ten percent improvement in or click
through by using a large language model to give the
consumer more positive surprises.
Speaker 12 (40:42):
Right.
Speaker 2 (40:43):
The idea is that, I mean.
Speaker 14 (40:44):
The consumers have a lot of product browsing and click preferences,
but sometimes you want to see new products. You want
to see something that you've never expressed any interesting, Right,
And that was kind of hard architect.
Speaker 15 (41:01):
So how much is the cost savings that you are
able to help your merchants achieve with AI.
Speaker 14 (41:05):
Yeah, so, because we are providing a very comprehensive suit
of tools for the for our merchants, including content generation,
including customer service, including marketing, and all these other use cases.
Speaker 2 (41:16):
But I'll just I'll just.
Speaker 14 (41:17):
Give you one example. So in AI customer service, you know,
like Chadboat, we provide our merchants and the cost saving
is actually twenty million Chinese per day.
Speaker 4 (41:26):
Your CEO did.
Speaker 15 (41:27):
Mention that Alibaba is planning to increase CAPEX spending beyond
the three hundred and eighty billion un that was previously pledged.
Do you have a concrete number to share in terms
of how much more investment it is?
Speaker 14 (41:37):
So obviously I'm not the right person to answer that question,
but i'm you know, but I'm on application, and what
I can tell you is that the actual number of
usage in terms of you know, the AI inference and
tokens is actually growing pretty.
Speaker 3 (41:50):
Fast, if you John Ali Babak, vice president there now.
Camer Con is dubbed China's Nvidia by retail investors. It
reported a fourteen fold surge in quarterly revenue, one of
the starkest signs yet of how China's chip makers are
benefiting from a national drive to replace restricted in video
gear as part of a domestic AI development boon. Now,
the company swung between net profit of seventy nine point
(42:13):
six million dollars in the September quarter two.
Speaker 2 (42:15):
Look it's not quite the tens of billions.
Speaker 3 (42:17):
And in videos making, but it is compared to a
net loss of twenty seven million dollars a year ago,
according to a filing on the.
Speaker 2 (42:23):
Shanghai Stock Exchange.
Speaker 3 (42:25):
And coming up meta, it's set to seal a thirty
billion dollar financing package for a data center site in
rural Louisiana.
Speaker 2 (42:30):
More next the supremebg Tech
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