July 29, 2025 • 40 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss ongoing trade talks between the US and China taking place in Stockholm and how those could affect AI and the sale of rare earths. Plus, for the first time ever, Apple is shuttering a retail store in China. And Microsoft and OpenAI are in advanced talks to change the partnership that helped kick off the AI boom.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and ed La Loow in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up. Apple closes a retail
store in China for the first time ever. What this
means for the iPhone maker's plan to revive sales, Plus US.
Speaker 3 (00:32):
And Chinese officials continue talks to extend the tariff truth
beyond mid August expiring with Tech Export Controls under the microscope, and.
Speaker 2 (00:40):
We discuss SOFI second quarter earnings with the CEO, Anthony Nodo.
Speaker 4 (00:44):
As the stock surges, Apple's.
Speaker 2 (00:47):
Kind of softer down seven ten to one percent, a
big points drag at the index level, closing a store
in China which we can get to, and then headlines
in the last hour from the Wall Street Journal that
JP Morgan is now the front runner to take over
that Apple credit card business.
Speaker 3 (01:01):
There's a lot to discuss, there is, and there's a
person to do it with. Bloomberg's Tom Giles joins us
now and Tom just first of all, this signal that
we're getting pulling back from one particular area bricks and
water in China.
Speaker 5 (01:13):
Is it a big deal for Apple?
Speaker 6 (01:17):
China is a huge deal for Apple.
Speaker 7 (01:20):
Let's put it in perspective this one particular store.
Speaker 4 (01:23):
There's a question mark about this mall.
Speaker 7 (01:26):
You've had other retailers US based retailers like Coach, Hugo
Boss have gotten out of there. So I'm not sure
how much to read into those one particular mall. But
let's dial the lens back and talk about the big
picture in China. China is a huge market for Apple,
and they have seen sales declining there for a whole.
Speaker 6 (01:45):
Host of reasons. Most recently.
Speaker 7 (01:47):
You have to look at the domestic economy in China.
There are deflationary pressures. There are questions about how much
the tariffs are going to affect that economy. Remember, exports
are a huge part of China's global economy, so demand there.
How big is demand for products like Apple's iPhone. That's
what Apple needs to take into consideration. We're going to
(02:08):
be hearing from them in the next couple of days
to see how things are going in China. And don't
forget there's a lot of competition domestically in China from
names like Huawei and Opo and Viva We talked about
them before, but the competition there is real and people
are looking for alternatives to Apple because of this whole
all these questions about US China relations and whether and
(02:32):
how much pressure the government is putting on domestic markets
to focus on China names and not Apple.
Speaker 4 (02:40):
That sets us up really well for earning.
Speaker 2 (02:42):
So I think analyst consensus is that they will swing
back to revenue growth on a year on year basis
in Greater China. So we wait for that. The headline
this morning is from the Wall Sweet Journal and that
JP Morgan, in a pack of many, is now the
front runner to take over the credit card business. Interesting
in a sense that SERVICESVA is important.
Speaker 4 (03:00):
But what do we need to know?
Speaker 7 (03:02):
Well, remember that this is an important relationship for the banks.
Goldman tried it with Apple, it fizzled. There are questions
about Goldman's consumer strategy and whether that was the right
mix for them. It's a big deal for JP Morgan.
Gives them opportunity to push financial services products to a
whole new legions of Apple customers.
Speaker 4 (03:24):
Big deal for them.
Speaker 2 (03:25):
Bloomberg's Senior executive edit for Tech, Tom Giles here in
San Francisco. Thank you very much, let's stick with that
China story. US and Chinese officials are in their second
day of trade talks in Stockholm, this to extend their
tariff truce beyond an initial ninety day period. Let's get
over to Stockholm where Blueberg's Oliver Crook is standing by.
Speaker 4 (03:44):
Oliver, what's the latest. Yeah, that's right.
Speaker 8 (03:47):
We're just in the briefing room here where were expecting
Treasury Secretary Scott Bessett at any moment now in the
next couple of minutes, Jamison Greer, who have been locked
in discussions with their Chinese counterparts for the last two days,
with the Vice Premiere of China five hours yea yesterday,
about six hours so far today.
Speaker 9 (04:01):
In terms of the trade.
Speaker 8 (04:02):
Negotiations and the ambition, as you say it is, to
extend that trade truth that currently stands between the United
States and China. Those teriffs from the US have dropped
down to thirty percent, twenty percent of those are fentanyl related,
ten percent of those sort of baseline tariffs, and that's
down from the one hundred and twenty five percent level
we reached at the sort of fever pitch of the
trade war between the two sides. That is set to
(04:23):
expire on August the twelfth, and that is what they're
sort of locked in the discussions to try to extend
over another ninety days. There are plani play of other
issues at as you cover every single day that they
have to discuss. The question will be we did they
make progress on any of those things? Is there enough
progress to give a kind of timeline on when a
comprehensive framework could potentially be happening with the Chinese? Could
there be something of a timeline on the meeting between
(04:44):
Shiji Ping and Trump. These are going to be all
of the questions that are going to have for Treasury
Secretary Scott Besson't and probably a few other questions on
other issues of trade, the deal with the EU. There's
still some open questions about steel tariffs, about pharmaceutical tarrafts,
so great many questions to put to the Treasury Secretary
when it comes out in the next few minutes.
Speaker 3 (05:01):
There certainly is Oliver just going back to our sweet
spot of tech that has been a lot been made
of rare earth metals, whether or not they've actually been
able to get more swiftly from China into the United States,
And of course there was that offering that olive branch
of h twenties going back from Nvidia.
Speaker 8 (05:18):
Yeah, that's right, and that's really kind of the only
place you've seen a great deal of olive branches extended
from the US and from China.
Speaker 4 (05:24):
To one another.
Speaker 8 (05:25):
And we should say these are not just sort of
acts of goodwill. These are two sectors in which each
side is dependent on the other. Whether it's the Chinese
who have a stranglehold on those rare earth metals, on
those magnets, whether it's the United States that has a
stranglehold on those advanced AI chips. And they've made those concessions,
but not necessarily out of the goodness of their heart.
There is going to be a question about whether or
not those deliveries those rare earth metals have been flowing.
Speaker 4 (05:45):
I'm sure that will be one.
Speaker 8 (05:46):
Of the questions to Treasury Secretary Scott Besson. So we
will get a little bit more detail on that, Caroline
in the next couple of minutes. So stay tuned and
we'll hear from the Treasury Secretary quite soon.
Speaker 3 (05:56):
We'll be coming back to you, Oliver Kruk, thank you
from dot com. Let's get you bought a context now.
Michelle Guide is with us. She is the CEO of
the CROC Institute for Techti Promacy at Purdue. Served as
Assistant Secretary of State for Global Public Affairs under the
first Trump administration that was twenty eighteen to twenty twenty,
and Michelle the context now is one of which US
and China are setting themselves up for this race, whether
(06:18):
it be in AI, whether it be in manufacturing, whether
it be in energy, which is the most important outcomes
you think in terms of where we take trade going forward, the.
Speaker 10 (06:26):
Most important outcome is going to be American security, prosperity,
and leadership, and that's what all of these trade negotiations
are about.
Speaker 11 (06:33):
There are means to that end.
Speaker 10 (06:35):
China has built a massive manufacturing economy, the United States
has built a massive consumer economy.
Speaker 11 (06:41):
So they make stuff and we consume it and we
buy it.
Speaker 10 (06:44):
And now, being a consumer at that scale is a
big vulnerability when your largest supplier is an adversary, and
we buy and consume three hundred billion dollars more stuff
from China than they buy from US.
Speaker 11 (06:57):
And that matters.
Speaker 10 (06:58):
When it's not just toys at walm More, and it's
not just home appliances.
Speaker 11 (07:02):
We are consuming things independent on them for.
Speaker 10 (07:04):
Things that are really important to our national security, as
you had just mentioned rare earth magnets, it's batteries, it's
pharmaceutical ingredients, it's the ability to make ships across the
world that have a commercial and a defense implication. So
rebalancing our trade relationship is key to making sure that
we are reincentivizing our ability and making it more attractive
to buy and to build these things at home than
(07:26):
to rely on China to.
Speaker 11 (07:28):
Do those things.
Speaker 3 (07:29):
It's interesting we've of course had MPY Materials with an
announcement that they as one of the only rare rev
metal miners here in the United States, they're going to
be supplying apple in some way. But are there enough incentives? Well,
what is ultimately a very dirty process? Do we want
to bring that home?
Speaker 10 (07:43):
Michelle more portly, Well, China is either going to do
it in a very dirty process, because we have seen
that the Chinese Communist Party does not.
Speaker 11 (07:51):
Have a lot of regard for the environment.
Speaker 10 (07:53):
Or we can incentivize American companies to do it here
in a much cleaner and more efficient and effective way.
Speaker 11 (07:59):
And so I think have America lead in these things.
Speaker 10 (08:02):
Rare earth processing and other critical minerals is going to
be really important. We'll do it much cleaner, more effectively, safely,
and trustworthy than the Chinese Communist Party.
Speaker 4 (08:12):
Michelle, good morning, it's ed in San Francisco.
Speaker 2 (08:15):
I don't want to go broad that meeting that's happening
right now in Stockholm between Chinese trade officials and American
trade officials. Who is currently on top in this negotiation.
Speaker 10 (08:27):
Well, I think what we've seen is that everything is
on the table, and the United States has a lot
of leverage. As you said, you know, they want a
lot of things from the United States, including our chips
and including our consumer economy because they are largely export based, and.
Speaker 11 (08:41):
So we matter to them as much as they matter
to us.
Speaker 10 (08:43):
And so I think everything's on the table, and ultimately
here the goal is to walk out with a better
deal for the United States, so we are more prosperous,
more free, more secure, and we can incentivize building the
sectors here that are going to be important to American leadership.
The President last week just talked about our big AI
Action plan and wanting to run on American tech, and
so we need to incentivize the industries that are going
(09:05):
to make that possible.
Speaker 2 (09:06):
And one of the pillars of that plan is for
America to export technology to the world. How important an
export market is China for the American technology stack.
Speaker 10 (09:18):
Well, the jury is still out on whether or not
China is going to be an economy that wants the
American technology stack. If you listen to what Hijin Ping
has said, he wants an independent, controllable AI hardware and
software foundational system.
Speaker 11 (09:32):
That means a Chinese tech stack.
Speaker 10 (09:34):
And so we'll see whether or not Chi Jianping and
the Chinese economy wants American tech. It's all the more
reason that deals with our allies like the EU that
just happened, like Japan that just happened matter because if
you look at the US and our top ten democratic
allies the EU included, that's like sixty to seventy percent
of global GDP. What a great place to start for
(09:56):
us to deploy American technology is the backbone of the
global economy and the free world and then start to
work out from there.
Speaker 3 (10:02):
Michelle, it's almost the one area of bipartisanship has been
a hawkish nature towards China. But I think about a
potential ban on TikTok.
Speaker 5 (10:12):
Currently not happening.
Speaker 3 (10:13):
When we think about a potential meeting between Trump and jijingping,
some China Hawks, some of the most odd and in
the current administration for frustrated that actually President Trump is
giving way too much for a deal.
Speaker 5 (10:25):
What do you make of it?
Speaker 10 (10:26):
Well, I think the big picture is all of these
things are chips in the bargaining tools. They're all on
the table and up for negotiation, so we can ultimately
get to a deal that does make us more secure
and more prosperous. And so we've seen back and forth
on TikTok. We know that the Age twenty chips from
Nvidia were under export controls in April, and then in
(10:46):
July there were assurances that those licenses would be granted
to export them.
Speaker 11 (10:50):
But all of these things are in flux.
Speaker 10 (10:51):
And it's part of the high stakes negotiations that are
taking place. Ultimately that we want to get to a
place where we are incentivizing American leadership and security first.
Speaker 3 (11:01):
And that takes regulation here at home as well. The
AI Action Plan meant to foster growth, particularly when it
comes to the underlying large language models and indeed the infrastructure.
What's interesting is there is this game of cat and
mouse and China yet more and more sophisticated models, open
ones coming to the full. How do you measure how
far China is in the generative AI race?
Speaker 10 (11:24):
Well, I think it's how many countries and partners across
the world are adopting Chinese tech versus American tech. And
our goal is to have more countries and more companies
adopting American tech and in some cases Allied tech if
we're not the category leader, so that the tech stack
across the world is trusted. And so having a scorecard
where we track how many companies and countries are adopting
(11:45):
US and Allied technology versus Chinese technology is really important.
And I think, as the President laid out in his
AI Action Plan, what the administration is going to start
to do is put together exportable AI packages to start
to facilitate that more effectively.
Speaker 2 (12:00):
Michelle Geider of the CROC Institute of Tech Diplomacy at Purdue,
thank you very much. Now, coming up, Spotify shares drop
as the music streaming company disappoints investors with a surprise
second quarter loss.
Speaker 4 (12:11):
We'll have the details next. This is Bloomberg Tech.
Speaker 3 (12:21):
Spotify shares having their worst day in two years, as
the company reported a loss in the second quarter. Let's
get more of Spotify's earnings or Bloomberg's Ashley Carmen, the
scene seems to be about employee pay in some ways
and taxes upon that.
Speaker 12 (12:36):
Yeah, in some ways, Spotify is a victim of its
own success. They've basically said that because they've been doing
so well on the stock market, they've had to pay
out a.
Speaker 5 (12:43):
Lot more than they anticipated.
Speaker 12 (12:44):
To employees for payroll, taxes and whatnot, and so that
ended up in a loss in earnings per share.
Speaker 2 (12:50):
There's a lot of like earnings mechanics and financial wizardry
around this kind of stuff. Is there a kind of
core Spotify story actually of how streaming audio is going
for them, and maybe a little bit about their video
strategy as well.
Speaker 12 (13:03):
Yeah, So Spotify keeps adding subscribers users like they keep.
Speaker 5 (13:07):
Growing every single quarter. It's pretty remarkable.
Speaker 12 (13:10):
But what's sort of been a challenge for them is
figuring out what their next verticals are.
Speaker 5 (13:13):
And seeing that through successfully.
Speaker 12 (13:15):
So they've really made a push for advertising that hasn't
really panned out. They said now they are going to
be kind of rethinking.
Speaker 5 (13:22):
That approach with advertising.
Speaker 12 (13:24):
Their head of advertising actually stepped down yesterday. He's taking
a job at DoorDash, So they sort of suggested that
this is going to be a direction that they're going
to change course. And then they're making a very concentrated
push into video, and on today's earnings call, they said
one of their co praresidents said that.
Speaker 5 (13:39):
This is a very exciting opportunity, but it's not a
necessary opportunity.
Speaker 12 (13:43):
So I think they're still kind of figuring out where
they want to move next.
Speaker 3 (13:46):
It's interesting that the week dollar, of course, plays into
all of this, and the third quarter to forecasts not
looking that pretty either. Ultimately, they are building more and
more users. As they say, it's sort of growing like
a weed, so that's going to be a positive momentum
story for many longer term.
Speaker 12 (14:00):
Yeah, I think that that's how they're trying to position
this is that in the long term they seem very bullish,
they're excited, they feel like they've had a really great product.
Speaker 5 (14:08):
It's just these.
Speaker 12 (14:08):
Short term issues that they're kind of dealing with, and investors,
we'll see how they're feeling about it.
Speaker 2 (14:14):
The stock's down almost eleven percent, which introday is the
biggest drop since early April, but if it closed, there
be the biggest drop since June of twenty twenty three,
So it's.
Speaker 4 (14:21):
A strong reaction.
Speaker 2 (14:23):
I'm not asking you something to ask you every single
quarter because this is how I listen to podcasts. How
is Spotify doing in podcasts?
Speaker 12 (14:30):
They've really pivoted into video podcasts and they've been trying
to recruit more video creators to the platform, so they
really have not focused on these audio podcasts anymore. I've
reported quite a bit on how this initiative is going
for them. They're still missing quite a few of the
largest podcasters on that service.
Speaker 5 (14:46):
For video, but they're still pushing and they're still trying.
Speaker 3 (14:49):
Where is the audience for them? Always the growth story
at least it seems like.
Speaker 12 (14:54):
It's developing markets, Yeah, but then also just trying to
get people to spend more time on the platform watch
these video which they compensate based.
Speaker 5 (15:01):
That consumption rather than adds.
Speaker 12 (15:03):
They're really trying to appeal spend more time through audiobooks
and maybe up level them to different tiers of subscriptions.
So I think that's where they're eyeing some possible growth.
Speaker 2 (15:11):
Bluemogs actually Carmen on the streaming and Spotify beat. Thank
you very much. We have another earning story in PayPal.
Look at shares of the company down significantly, on track
for their biggest drop in almost six months. In part,
it's just the basics that they're seeing slow in growth
and payment volumes. But what happened in the morning session
was that the CEO on the call was talking about
(15:31):
US retail spending and sort of softening economic consumer data.
Speaker 4 (15:37):
That kind thing.
Speaker 2 (15:38):
But he was basically saying that they see a slight
acceleration and that's kind of worried people a little bit.
It's going to be interesting later in the hour Carrier
when we have Sofi, because it's somewhat analogous, right that
we might get a similar or maybe different read on
the strength of the consumer through the fintech lens.
Speaker 3 (15:52):
From a share performance is a very different story for
so Far, which is up a whopping thirteen percent right now.
That interview to come at right here, right now. Coming up,
we've got open Ai back startup Ambient's healthcare. It was
reaching a one billion dollars valuation. We speak the co
founder Nik Kilberduma.
Speaker 4 (16:08):
That's an expertive roombed tech.
Speaker 2 (16:21):
Open AI back startup Ambience Healthcare has announced it's raised
two hundred and forty three million dollars in a new
funding round, valuing the administrative AI company at more than
one billion dollars.
Speaker 4 (16:31):
For more.
Speaker 2 (16:32):
Nik Kilberduma, Ambience Healthcare co founder and chief scientists, joins
us it's really interesting, you know, I actually go back
to maybe even three years, and this is where a
lot of people said the promise in the near term
was AI and healthcare, you know, the administrative task.
Speaker 4 (16:47):
But the round is big.
Speaker 2 (16:48):
I mean, what do you need two hundred and forty
three million dollars to do?
Speaker 4 (16:51):
Yeah.
Speaker 13 (16:52):
I think this round two hundred forty three million dollars
values as the company at one point twenty five billion dollars.
Now that round is led by oak HCFT and recent
Horoitz and with participation from open AI. I think it's
a testament to this platform that we've built for health systems,
which liberates clinicians from the administrative burden and enables them
to focus on their patient. And a big part of
it is we've built the sort of busting class platform,
(17:14):
which in practice what it does is before the patient
walks into the room. The system actually summarizes all the
context for the clinicians so they know what's going on
with that particular patient in the visit. It's listening in
the background, it's generating the documentation automatically for the clinician
on behalf of them, as also summary for the patient
and their families. And then afterwards it's automating all the
downstream sort of revenue cycle, coding and billing prior authorization workflows,
(17:38):
which is how health systems get paid. I think it's
allowing us to essentially work with many more institutions. We
work with some of the largest healthcare organizations, academic medical
centers in the country Cleveland Clinic, UCSF, Houston Methodists.
Speaker 4 (17:50):
I think this surround is a testament to that way.
Speaker 2 (17:52):
What's the company's core competence? You know, I understand the platform,
but what is it that you're good at that's allowed
you to build the platform.
Speaker 13 (17:58):
I think a big part of it is we've built
an incredibly deep working relationship with open AI and other
foundation model makers to build the most capable foundation models
for healthcare and medicine, and then we've taken that and
packaged that into a series of workflows to help clinicians.
So I'll give you one example. We work with Cleveland Clinic,
one of the most sub specialized academic institutions in the country.
(18:18):
They have one hundred plus different specialty and sub specialty areas,
and you could imagine every single one of those specialists
practices different medicine, they have different workflows, there's different administrative rules,
and so what we've been able to do is create
a platform that services the needs of every single one
of those specialists. Over eighty percent of clinicians of Cleveland
Clinic use the technology in clinic every single day for
(18:40):
over seventy percent of those visits, and that's more than
two to three times some of the other alternatives in
the market.
Speaker 3 (18:46):
Nikill go to that relationship, that working relationship that you
want to invest in further with open AI. What makes
your business defensible versus open AI just sort of building
it themselves.
Speaker 13 (18:55):
I think a big part of it is as you
think about sort of the gap between general purpose reasoning
models and models that are actually a clinical grade and
compliance grade. There's a massive gap between models that truly
understand the medicine that's happening in every single visit.
Speaker 4 (19:08):
We talked about Cleveland Clinic.
Speaker 13 (19:10):
And other academic medical centers. Just the level of depth
and clinical reasoning that's happening across one hundred plus different specialties,
and how that's different from primary care to if you
have to go see an oncologist to even an oncological
subspecialist who might specialize in a particular type of cancer.
And it's bridging that gap in sort of the understanding
and reasoning capabilities of these models that ultimately allows us
(19:31):
to build software that really solves the problem for clinicians
on the front lines.
Speaker 3 (19:35):
We are currently as we speak, just also seeing live
pictures of President Trump, who is currently in Scotland. He's opened,
of course, a new golf course, but he's also been
negotiating with EU, continues to be discussing relationships with the
UK going forward. We're going to be diving into that
as and where necessary for you. But let's just return
to you, Nikhil, as we hear, of course what President
(19:56):
Trump has been doing. I want to go to the
regulatory perspective here for your business at ambience, because I
am thinking immediately about healthcare requirements. When it comes to privacy.
How have you made sure that that's front and center
when you're relying on so many different users who well,
each hospital has a different rule case.
Speaker 4 (20:15):
I'm sure it's a great question.
Speaker 13 (20:17):
I think the idea of how do we build AI
that's safe, how do we do it responsibly, how do
we roll it out in a way that's effective. We're
lucky to work with some of the premier academic institutions
in the country, and that's allowed us to build infrastructure
not only to create and train AI in a safe
and private way, but also the governance processes to roll
it out responsibly. But I think the opportunity getting this
(20:38):
right is actually massive. You think about the ten thousand
seniors aging into Medicare every single day, the fact that
in every sort of virtual virtually every category of our
healthcare workforce, we are projecting the shortage of one hundred
plus thousand people over the next five to ten years,
and we as a country spend one trillion on administrative waste.
The opportunity to leverage AI to sort of help rehaul
how the system works, have better tools for our clinicians,
(21:02):
and actually take better care of our patients is pretty exciting.
Speaker 3 (21:05):
Nikail Baduma of Ambience Healthcare.
Speaker 5 (21:13):
Let's just shift gears into.
Speaker 3 (21:15):
The other of AI and the relationship between Microsoft and
open Ai, because apparently when they're in advanced negotiations that
could change that relationship and actually help inaugurate the AI age.
The ongoing talks would give Microsoft access to open AI's
tech even after the chatchipte maker has reached its goal
of building artificial general intelligence. For more on what is
(21:35):
going on spring Bloomberg's Map Day. Now, this is an
age old relationship. It was the What bore really chatchipt
to the fold was the financial backing of open ai.
But the deal was always that they would have limited
access to tech if open Ai did reach AGI.
Speaker 5 (21:51):
How is this going to change? Map?
Speaker 9 (21:53):
That's right.
Speaker 14 (21:54):
So Microsoft, as a condition of all the investment they
poured into open ai, they have access to their technology.
Speaker 9 (21:58):
They can make it into their product.
Speaker 14 (22:00):
They're worried for some time about a potential cliff, you know,
should open Ai say hey, we've you know, built an
artificially general intelligence system, Microsoft.
Speaker 9 (22:08):
Would lose access to the tech.
Speaker 14 (22:09):
So what we're hearing recently is that Microsoft is getting
more comfortable at the terms they're talking about now, I
mean that cliff might not occur, there might be a
way that they can continue to have access to some
of open AI's technology, you know, should they hit that milestone.
Speaker 2 (22:21):
Matt, We've heard that talks of progressing, that they're positive
that they're still ongoing. We heard from sources that in
some valley, Sam Altman actually met with Sati Nadella to
talk about the issue. The part of it that is
on the open Ai side of this is that they
want to change that corporate structure. What do we know
about how these negotiations are moving toward that.
Speaker 14 (22:42):
So we know that first of all, Microsoft is is
the biggest holdout to that re negotiation of open ai structure.
We know that open ai wants to alter it's it's
corporate charter. They want more flexibility, they want the ability
to raise a whole lot more money. And that's really
what's kind of ticking the clock here, particularly a bunch
of cash from SoftBank, the big investor, has the authority
to dial down some of that investment if opening Ey doesn't.
Speaker 9 (23:04):
Complete the restructure before at the end of the year.
Speaker 14 (23:05):
So it's just created this little bit of ticking clock
in the background, putting pressure on both sides to come.
Speaker 3 (23:09):
Up with a deal and also revenue share. Right, Matt,
it feels as though open ai is realizing, well, how
much value they're adding and what's a little bit more
of it?
Speaker 9 (23:19):
That's right.
Speaker 14 (23:20):
I mean, if you want back the clock to twenty
nineteen when Microsoft first put cash in the open AI,
Microsoft got a really good deal on kind of a
flyer at this AI lab was going to be a
big deal. Roll the clock forward. Turns out there an
enormous deal and opening iye wants a bit more of
that pie for sure.
Speaker 2 (23:35):
Bloomberg's Matt Day reporting with the rest of the AI
and infrastructure team really appreciate it, Thank you very much.
Just stick with Microsoft, which reports earnings tomorrow. Cashranging Global
Investment Research Managing Director the Goldman Sachs joins us. He
covers the software sector has a buy rating and a
five hundred and fifty dollars price target for Microsoft TV
time cash. But you heard the reporting there. When you
(23:58):
are covering Microsoft, one assumes you have to model in
this relationship with open AI, both the financial exposure but
the technology exposure as well.
Speaker 4 (24:08):
What did you hear then and what do you make
of it?
Speaker 9 (24:10):
Yeah?
Speaker 15 (24:11):
So, first of all, congratulations on breaking that news story.
So that's incremental development. And we actually publish our note
later yesterday and we didn't cover the detailed reporting that
you guys did, so that certainly is a wrinkle, but
it does not change the overall thesis. Our view has
been that the partnership has more legs to it than
commonly believed in the media and in the Wall Street community.
(24:34):
There's a lot more to be gained on either side
of the fence beat access to technology from Microsoft's perspective,
or access to distribution and a work class customer base
at Microsoft brings and the ability to certainly not to
overemphasize the very common thing to train models.
Speaker 9 (24:50):
And run on work cus infrastructure.
Speaker 15 (24:52):
So I think if this word of progress to its
ultimate fruition that of the deal word we signed, it
would take away a at least an investor's perspective as
to what is the time duration that you can bank
and your model and what is the longevity of this partnership.
Because the AI revenues have come out of nowhere seemingly,
and I've scaled and helped Microsoft's Azzure business propel itself
(25:14):
to a not to thirty percent growth through which we
thought was unthinkable two years ago. So both parties have
so much to be gained to gain from this, and
I think it's incrementally.
Speaker 2 (25:23):
Let me ask it this way, what has the biggest
net benefit to Microsoft been from the relationship with open Ai.
Speaker 15 (25:30):
Yeah, many things. First of all, that they are tech forward,
and you could argue that in the cloud competing cycle
that they were not exactly the first ones out of
the gate, but in this AI cycle they are the
first ones out of the gate. And there's so much
of a cachet and boasting right that you have, especially
with Ceosatin Adela, who is a ranking cider of the company,
(25:52):
has been there for a long time. Being able to
pivot the company at the right time. That of enormous
strategic importance. Right from a financial perspective, what it has
allowed the company to do is, although it has required
a lot of capital build out of a scale that
the world has never seen so far in the technology
world and maybe in broader industry as well, it has
allowed the Azure business to grow at scale. So depending
(26:16):
on whose numbers you look at, we're roughly close to
an eighty billion dollar run rate for the Azure business.
And AI has helped keep that growth rate steadily in
the thirty plus percent range, and if we get an
inflection point with respect to AI moving up from golden sacks.
We have this thing that AI is stuck at the
infrastructure layer. For every computing cycle. You need to move
(26:37):
to the platform and applications. When you make the progression,
you see monumental shifts that are happening in the market.
Speaker 9 (26:43):
So that's all to myself's benefit.
Speaker 3 (26:45):
The eighty billion run rate for Azure comes in tandem
cash with a more than eighty billion dollar need to
spend on capital expenditure. Is that currently totally vindicated in
your mind? Zyme when we see it increase.
Speaker 15 (26:58):
It's a dollar for dollar right of capis gives you
a dollar of AS revenues roughly give or take, and
there's within that there is a slightly more inefficient conversion
of the dollar of capis into AI revenue and slightly
more efficient conversion. So we think that it is the
right trade off at this point in time. And the
good news of your Microsoft is that you're running a
very diversified business that all the capex is not extremely
(27:22):
punitive to your free cash flowers. I mean, you could
run a model where you're not generating any free cashlodob
that's not Microsoft's things, so they do generate a pretty
meaningful significant free capital margin because of the health of
the overall business. You've got to look at Microsoft not
just in the context of Azure, but there is a
broader Microsoft Cloud business which has the M three sixty five,
(27:43):
and then you have the server on premises business and
a couple of other businesses that are equally significant in
terms of revenue scope and significant drivers are profitable, so
they've got the ability to generate the cash to be
able to fund this capex.
Speaker 9 (27:58):
That's a very important consideration.
Speaker 15 (28:00):
Long as the returns keep coming and you're able to
generate a dollar of revenue for every dollar of capiss,
as long as that algorithm, broadly speaking, holes, I think
it's the right trade off for the company.
Speaker 3 (28:10):
There have been concerns though, surrounding Microsoft, whether or not
it's just how great the product is to use when
you're sat within its ecosystem, but also the cyber issues
that we've seen running front and center this month cash
how much do you expect Satia to really talk.
Speaker 9 (28:25):
To those issues.
Speaker 15 (28:27):
I believe that there is a bit of a lag
between the actual chat GPT technology that is open a
I brought, broadly speaking technology and how much of that
gets incorporated in the Microsoft Office Copilot, and I believe
that that lag is likely to reduce over a period
of time. And we're also implementing consumer grade technology in
(28:47):
the enterprise. I mean, that is a completely different piece.
So I'm not surprised to hear what you've heard with
respective where the product is relative to enterprise expectations. And
I would argue that the product is I use it personally, Goldman,
and it's come a long way since about six months
nine months ago, and it's likely to go a long.
Speaker 6 (29:05):
Way in the future.
Speaker 15 (29:08):
That version of co pilot that we used today is
going to go through significant enhancements liberally to customize it
tailor at your workflows. Oh, that's going to get significantly better.
So the buzz is going to get better.
Speaker 2 (29:18):
One thing I've always wanted to ask you cash is
present day, middle of twenty twenty five, Microsoft is the
world's second most valuable company. Right, And if I think
back to when I arrived in Silicon Valley in twenty eighteen,
but even two years ago, did you see that coming
where Microsoft would vie with Nvidia to be the most
valuable company in the world based on the direction it
(29:40):
was headed pre open AI and all of that.
Speaker 15 (29:43):
So when I launched coverage at Goldman in twenty twenty one,
we had a big price target on Microsoft, and the
pushback that we got was, you're implying that the market
cap can grow by another half a trillion. Two it's
already a multi trillion dollar market or what was And
I think it was a couple of tillion. Yeah, And
I think what it comes down to is, if you
unlock a big tech cycle, the dollars at stake and
every tech cycle are larger and larger.
Speaker 6 (30:04):
And if you are.
Speaker 15 (30:05):
Leading this cycle as opposed to being a fast.
Speaker 4 (30:08):
Follower, who is to say what the new market?
Speaker 15 (30:10):
Nobody envisioned this kind of playing out the way it
did so, and we're still early in AI. So if
you listen to the economist, they're talking about how the
labor market could be incorporated by way of AI. If
that were to happen, you got a lot more value
creation along the way. So I'm not I'm pleasantly surprised
about how quickly it has happened, but I was just
remarking earlier that Microsoft stock has actually performed in line
(30:33):
with the nastac finally, since the launch of Chat GPT.
For a while, it was lagging, and I kept telling myself,
this is the company that facilitated the birth of this
AI revolution a long with Nvidia and Open Ai, and
their stock is lagging.
Speaker 6 (30:43):
It doesn't make any sense right now.
Speaker 15 (30:44):
Finally we're just about even, Sophie vindication.
Speaker 2 (30:48):
Yashraan and Managing Director of Global Investment Research at Goldman's
has great to have you here on Bloomberg Tech.
Speaker 4 (30:53):
Thank you very much. Carry some news.
Speaker 3 (30:55):
Yeah, it's time to talking tech now and first up,
door Dash spotifflies Global of Advertising Lee Brown will join
the food delivery company as chief revenue Officer starting in
late August.
Speaker 13 (31:05):
Now.
Speaker 3 (31:05):
Brown previously led Spotify's two billion dollar ad business across
ninety international markets and is set to oversee door Dash's
revenue in the US, Canada, Australia and New Zealand.
Speaker 5 (31:15):
Whilst Weimo is set to.
Speaker 3 (31:16):
Launch its robo taxi service in Dallas next year in
a partnership with rental cil company Avis. Now Weiver says
Avis will serve as a pleat fleet partner providing infrastructure, maintenance,
car management operations.
Speaker 4 (31:27):
The Dallas Deel.
Speaker 3 (31:28):
Marks a multi year partnership that Waimo and Avis plan
to expand into more cities over time and venture debt
firm to Cora, Hare's raised six hundred eighty five million
dollars with the backings from the likes of Peter Teel
and Marc Andreesen. Now, according to CEO Kerry Finley, the
money will be used to make loans to about twenty
to thirty million dollars to startups. Now, the latest investment
(31:50):
brings the firm's assets and management to about one point
four billion dollar zed.
Speaker 4 (31:55):
Okay, coming up.
Speaker 2 (31:55):
So FI CEO Anthony Noto joins us to discuss the company's.
Speaker 4 (31:58):
Second quarter result.
Speaker 2 (32:00):
An upbeat forecast and my goodness to shares already taking
off this Tuesday.
Speaker 4 (32:04):
Stay with us.
Speaker 16 (32:05):
This is Bloomberg Tech shares are so far climbing off.
Speaker 2 (32:19):
The company reported second quarter revenue seventy two percent EU
of year jump in fee based revenues. Let's discuss with
the man in charge, SOFI CEO Anthony Noto. You know
the SOFI story, Anthony, has become kind of simple. You've
kind of invested in fee based business lines, many of
them they've been consistent. But now what the market seems
to be seeing is that flowing through to the bottom
(32:40):
line as well. Would you just explain how that went
in the quarter.
Speaker 17 (32:45):
Sure, we've made the conscious effort of diverse fire or
business into these capital light, less credit risk a few
revenue streams, one of which is our long platform business
where people pay us to use our originations platform, which
includes our underwriting capability, our marketing capabilities, and our servicing
capabilities to produce loans for them.
Speaker 6 (33:04):
For a fee that they pay us.
Speaker 17 (33:06):
We also generate fees in our SOFI money account business
through interchange, as well as our brokerage business, and then
of course our credit card businesses. And so as we've
diversified the products that we offer, the revenue streams have
also diversified. We're about forty four percent of our revenue
outcomes from these fees that are generated without use of
capital and without credit risk, and so.
Speaker 6 (33:27):
That deversks the balance sheet quite a bit.
Speaker 17 (33:29):
So our ability to grow their overall business forty four
percent with a twenty nine percent operating margin is reflective
of that diversification and less risky revenue that's more visible
as well.
Speaker 2 (33:41):
Anthony, you just talked about de risking. Elsewhere in the
earnings domain, PayPal was asked about the strength of the
US consumer and comments from that company with somewhat negative
that they see some sort of cracks in the strength
of the consumer from those that use your platfor your
various financial offerings.
Speaker 4 (34:02):
What are you seeing present day?
Speaker 17 (34:04):
Yeah, they have a very different strategy and business than us,
and a very different target audience. We're appealing to the
overachievers in the United States that are looking for ways
to be able to save, to achieve, and invest to
achieve their long term ambitions, whatever their American dream may be.
So we're helping them spend less than they make and
invest the rest, and we're seeing really strong trends for them.
(34:26):
We see them loaning their cost of debt by refinancing
out of expensive credit card debt that charges twenty four
to thirty percent interest into our loans that only charge
twelve to thirty percent interest.
Speaker 6 (34:38):
We see them moving their money into SOFI money. We
give three point.
Speaker 17 (34:41):
Eight percent interest on our savings account in SOFI money
with it if you're a direct deposit customer or a
SOFI plus customer, we offer them investment opportunities that are
really attractive. We offer stocks without commissions, fractional shares, we
have sofi ets that are award winning as well as
robo accounts. But we also offer IPOs in addition to that,
(35:02):
private equity, so you can invest in private credit, private
real estate, venture capital funds as well as long short
public hedge funds and then finally private growth, growth equity
capabilities and so much more diverse business are consumers very strong, credits,
performing very well, continues improved spending through SOFI money is
(35:23):
also very strong. So we're seeing a consumer that's really
trying to lower their costs and spend less than they
make and invest the rest and the flywheel is really working.
Speaker 5 (35:32):
Avan.
Speaker 3 (35:33):
It's interesting that that flywheel comes at the same time
as basically the market's got a flywheel of its own
and seeing froth in certain sectors, Retail investors really wanted
to get in on the latest meme stock as well
as ipo. How are you thinking about general to AI,
like helping with the education side of things. I know
you're targeting over achievers, but are they diversified enough in
their own investments?
Speaker 9 (35:54):
Sure?
Speaker 17 (35:54):
And let me take your question and talk about what
I think are two technology supercycles that are unprecedented. We're
driving the growth that we are over the last eight
years without the benefit of crypto.
Speaker 4 (36:05):
Or blockchain or AI, but I think the combination.
Speaker 17 (36:08):
Of blockchain and crypto as well as AI are two
super cycles that will put a tail wind behind our
company and really help us really revolutionize the financial services
industry in ways that continue to give people faster ways
to send money at lower costs and to do it safer.
Speaker 6 (36:26):
In addition to.
Speaker 17 (36:26):
Being able to invest in this asset class, which does
help as it relates to the areas outside of the
country that may not have exposure to the US dollar
and its stability. In addition to be able to invest
in that asset, will allow people to borrow against that asset,
which will lower their cost of funding and in addition
to that will allow them to be able to pay
across borders more easily and quicker. Artificial intelligence is helping
(36:51):
us today across our entire business. We're using in the
back office to resolve disputes faster, to file suspecify reports,
to solve account takeover issues faster. On the consumer side,
we're offering something called cash Coach, which is the ability
to look at your cash crossed all your accounts. So
it's really that's not impacting our results yet. It's on
(37:13):
the com but they're both really exciting super cycles to
see the benefits.
Speaker 2 (37:17):
From Anthony Nodo, CEO of sci Fi A Sofi, thank
you very much joining us. We actually has some breaking
news crossing the Bloomberg terminal and it comes from China's
trade envoy Lee Chengyang. He's talking about the progress of
talks in Stockholm. He says that the US and China
have agreed to extend the trade truce. They have exchanged
views on various macro economic issues, They agree on the
(37:38):
importance of safeguarding soald trade, and that the talks have
been constructive on major topics. The main headline I think
right Carra, is that they have agreed to extend the
trade truce and that the talks between the China, between
China and US negotiators currently in Stockholm will continue. In
what Lee calls close communication.
Speaker 3 (38:03):
Meta set to report earnings after the closing bell on Wednesday.
I believe it is with investors closely watching its AI
investments for more Blue megs, Kurt Wagner joins us, Look,
we've got some big ends to think about more broadly, Kurt,
and I'm interested as to where we go in terms
of the spending that everyone's looking at is about talent,
it's about capex.
Speaker 5 (38:21):
Will it be raised?
Speaker 18 (38:23):
I think that's the speculation, is that, especially once you
saw what Google did last week raising their capital expenditure
target for the year, I think there's some assumption that
Meta might do the same, given the scale a ideal
and all this very expensive hiring they're doing on the
AI front.
Speaker 6 (38:37):
Now, remember they already raised.
Speaker 18 (38:40):
The range for their capex last quarter as well, So
there was a different number in January, a different number
in April, and now we'll be watching tomorrow to see
if there's another new number. But given the spending AI,
I would not be surprised if they go that route.
Speaker 2 (38:53):
And yet we're always reminded every quarter that Meta makes
all its money from advertising, and so there's AI story
where adds a better price more powerfully, and then there's like,
is all this investment going to pay off?
Speaker 4 (39:06):
What is the street expecting?
Speaker 9 (39:08):
Well?
Speaker 18 (39:08):
I think the good news for them now is that
the AI story they're telling today feels more urgent and
more timely, I think than the one they've been telling
for the last year or two, which was related to
like the metaverse, and so here now they're talking about chatbots,
they're talking about LMS, data centers, like things that people
I think have a better understanding of what the potential
(39:29):
outcome is.
Speaker 6 (39:30):
The metaverse was always ed.
Speaker 18 (39:31):
You will remember that the main thing that they were
sinking all of this money into, and there was no real, you.
Speaker 6 (39:37):
Know, end insight to that.
Speaker 18 (39:39):
Now I don't think there's an end insight to AI either,
but at least I think they're doing something that a
bunch of other companies are doing.
Speaker 6 (39:46):
It's a little easier perhaps to wrap your head around.
Speaker 2 (39:48):
Blue Vers Kurt Wagner looking forward to meta after the
bell tomorrow. Thank you very much, Caro. That does it
for this additional Bloomberg Tech. But we had some big
breaking news in the last few moments.
Speaker 3 (39:57):
We did, and it's so important to the tech eCos
and more broadly the world economy. We're looking at China
saying it does indeed agree with the United States to
extend that tariff truce. Remember it was likely to expire
in mid August as to where currently tariff's had been
set at about the thirty percent level.
Speaker 2 (40:14):
We are going to read the language very carefully. All
those experts on wording China and US talks with candid
says Lee chain Gang candid good thing or bad thing?
Speaker 4 (40:25):
The markets will tell us in due course caract.
Speaker 3 (40:27):
And what does it mean for semiconductors? What does it
mean for the flow of rare earth metals? Do not
forget to check out our podcast. You can find it
on the Terminal soll As, online on Apple, Spotify, and
iHeart from New York from San Francisco.
Speaker 5 (40:39):
This is Bloomberg Tech
Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and ed La Loow in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up. Apple closes a retail
store in China for the first time ever. What this
means for the iPhone maker's plan to revive sales, Plus US.
Speaker 3 (00:32):
And Chinese officials continue talks to extend the tariff truth
beyond mid August expiring with Tech Export Controls under the microscope, and.
Speaker 2 (00:40):
We discuss SOFI second quarter earnings with the CEO, Anthony Nodo.
Speaker 4 (00:44):
As the stock surges, Apple's.
Speaker 2 (00:47):
Kind of softer down seven ten to one percent, a
big points drag at the index level, closing a store
in China which we can get to, and then headlines
in the last hour from the Wall Street Journal that
JP Morgan is now the front runner to take over
that Apple credit card business.
Speaker 3 (01:01):
There's a lot to discuss, there is, and there's a
person to do it with. Bloomberg's Tom Giles joins us
now and Tom just first of all, this signal that
we're getting pulling back from one particular area bricks and
water in China.
Speaker 5 (01:13):
Is it a big deal for Apple?
Speaker 6 (01:17):
China is a huge deal for Apple.
Speaker 7 (01:20):
Let's put it in perspective this one particular store.
Speaker 4 (01:23):
There's a question mark about this mall.
Speaker 7 (01:26):
You've had other retailers US based retailers like Coach, Hugo
Boss have gotten out of there. So I'm not sure
how much to read into those one particular mall. But
let's dial the lens back and talk about the big
picture in China. China is a huge market for Apple,
and they have seen sales declining there for a whole.
Speaker 6 (01:45):
Host of reasons. Most recently.
Speaker 7 (01:47):
You have to look at the domestic economy in China.
There are deflationary pressures. There are questions about how much
the tariffs are going to affect that economy. Remember, exports
are a huge part of China's global economy, so demand there.
How big is demand for products like Apple's iPhone. That's
what Apple needs to take into consideration. We're going to
(02:08):
be hearing from them in the next couple of days
to see how things are going in China. And don't
forget there's a lot of competition domestically in China from
names like Huawei and Opo and Viva We talked about
them before, but the competition there is real and people
are looking for alternatives to Apple because of this whole
all these questions about US China relations and whether and
(02:32):
how much pressure the government is putting on domestic markets
to focus on China names and not Apple.
Speaker 4 (02:40):
That sets us up really well for earning.
Speaker 2 (02:42):
So I think analyst consensus is that they will swing
back to revenue growth on a year on year basis
in Greater China. So we wait for that. The headline
this morning is from the Wall Sweet Journal and that
JP Morgan, in a pack of many, is now the
front runner to take over the credit card business. Interesting
in a sense that SERVICESVA is important.
Speaker 4 (03:00):
But what do we need to know?
Speaker 7 (03:02):
Well, remember that this is an important relationship for the banks.
Goldman tried it with Apple, it fizzled. There are questions
about Goldman's consumer strategy and whether that was the right
mix for them. It's a big deal for JP Morgan.
Gives them opportunity to push financial services products to a
whole new legions of Apple customers.
Speaker 4 (03:24):
Big deal for them.
Speaker 2 (03:25):
Bloomberg's Senior executive edit for Tech, Tom Giles here in
San Francisco. Thank you very much, let's stick with that
China story. US and Chinese officials are in their second
day of trade talks in Stockholm, this to extend their
tariff truce beyond an initial ninety day period. Let's get
over to Stockholm where Blueberg's Oliver Crook is standing by.
Speaker 4 (03:44):
Oliver, what's the latest. Yeah, that's right.
Speaker 8 (03:47):
We're just in the briefing room here where were expecting
Treasury Secretary Scott Bessett at any moment now in the
next couple of minutes, Jamison Greer, who have been locked
in discussions with their Chinese counterparts for the last two days,
with the Vice Premiere of China five hours yea yesterday,
about six hours so far today.
Speaker 9 (04:01):
In terms of the trade.
Speaker 8 (04:02):
Negotiations and the ambition, as you say it is, to
extend that trade truth that currently stands between the United
States and China. Those teriffs from the US have dropped
down to thirty percent, twenty percent of those are fentanyl related,
ten percent of those sort of baseline tariffs, and that's
down from the one hundred and twenty five percent level
we reached at the sort of fever pitch of the
trade war between the two sides. That is set to
(04:23):
expire on August the twelfth, and that is what they're
sort of locked in the discussions to try to extend
over another ninety days. There are plani play of other
issues at as you cover every single day that they
have to discuss. The question will be we did they
make progress on any of those things? Is there enough
progress to give a kind of timeline on when a
comprehensive framework could potentially be happening with the Chinese? Could
there be something of a timeline on the meeting between
(04:44):
Shiji Ping and Trump. These are going to be all
of the questions that are going to have for Treasury
Secretary Scott Besson't and probably a few other questions on
other issues of trade, the deal with the EU. There's
still some open questions about steel tariffs, about pharmaceutical tarrafts,
so great many questions to put to the Treasury Secretary
when it comes out in the next few minutes.
Speaker 3 (05:01):
There certainly is Oliver just going back to our sweet
spot of tech that has been a lot been made
of rare earth metals, whether or not they've actually been
able to get more swiftly from China into the United States,
And of course there was that offering that olive branch
of h twenties going back from Nvidia.
Speaker 8 (05:18):
Yeah, that's right, and that's really kind of the only
place you've seen a great deal of olive branches extended
from the US and from China.
Speaker 4 (05:24):
To one another.
Speaker 8 (05:25):
And we should say these are not just sort of
acts of goodwill. These are two sectors in which each
side is dependent on the other. Whether it's the Chinese
who have a stranglehold on those rare earth metals, on
those magnets, whether it's the United States that has a
stranglehold on those advanced AI chips. And they've made those concessions,
but not necessarily out of the goodness of their heart.
There is going to be a question about whether or
not those deliveries those rare earth metals have been flowing.
Speaker 4 (05:45):
I'm sure that will be one.
Speaker 8 (05:46):
Of the questions to Treasury Secretary Scott Besson. So we
will get a little bit more detail on that, Caroline
in the next couple of minutes. So stay tuned and
we'll hear from the Treasury Secretary quite soon.
Speaker 3 (05:56):
We'll be coming back to you, Oliver Kruk, thank you
from dot com. Let's get you bought a context now.
Michelle Guide is with us. She is the CEO of
the CROC Institute for Techti Promacy at Purdue. Served as
Assistant Secretary of State for Global Public Affairs under the
first Trump administration that was twenty eighteen to twenty twenty,
and Michelle the context now is one of which US
and China are setting themselves up for this race, whether
(06:18):
it be in AI, whether it be in manufacturing, whether
it be in energy, which is the most important outcomes
you think in terms of where we take trade going forward, the.
Speaker 10 (06:26):
Most important outcome is going to be American security, prosperity,
and leadership, and that's what all of these trade negotiations
are about.
Speaker 11 (06:33):
There are means to that end.
Speaker 10 (06:35):
China has built a massive manufacturing economy, the United States
has built a massive consumer economy.
Speaker 11 (06:41):
So they make stuff and we consume it and we
buy it.
Speaker 10 (06:44):
And now, being a consumer at that scale is a
big vulnerability when your largest supplier is an adversary, and
we buy and consume three hundred billion dollars more stuff
from China than they buy from US.
Speaker 11 (06:57):
And that matters.
Speaker 10 (06:58):
When it's not just toys at walm More, and it's
not just home appliances.
Speaker 11 (07:02):
We are consuming things independent on them for.
Speaker 10 (07:04):
Things that are really important to our national security, as
you had just mentioned rare earth magnets, it's batteries, it's
pharmaceutical ingredients, it's the ability to make ships across the
world that have a commercial and a defense implication. So
rebalancing our trade relationship is key to making sure that
we are reincentivizing our ability and making it more attractive
to buy and to build these things at home than
(07:26):
to rely on China to.
Speaker 11 (07:28):
Do those things.
Speaker 3 (07:29):
It's interesting we've of course had MPY Materials with an
announcement that they as one of the only rare rev
metal miners here in the United States, they're going to
be supplying apple in some way. But are there enough incentives? Well,
what is ultimately a very dirty process? Do we want
to bring that home?
Speaker 10 (07:43):
Michelle more portly, Well, China is either going to do
it in a very dirty process, because we have seen
that the Chinese Communist Party does not.
Speaker 11 (07:51):
Have a lot of regard for the environment.
Speaker 10 (07:53):
Or we can incentivize American companies to do it here
in a much cleaner and more efficient and effective way.
Speaker 11 (07:59):
And so I think have America lead in these things.
Speaker 10 (08:02):
Rare earth processing and other critical minerals is going to
be really important. We'll do it much cleaner, more effectively, safely,
and trustworthy than the Chinese Communist Party.
Speaker 4 (08:12):
Michelle, good morning, it's ed in San Francisco.
Speaker 2 (08:15):
I don't want to go broad that meeting that's happening
right now in Stockholm between Chinese trade officials and American
trade officials. Who is currently on top in this negotiation.
Speaker 10 (08:27):
Well, I think what we've seen is that everything is
on the table, and the United States has a lot
of leverage. As you said, you know, they want a
lot of things from the United States, including our chips
and including our consumer economy because they are largely export based, and.
Speaker 11 (08:41):
So we matter to them as much as they matter
to us.
Speaker 10 (08:43):
And so I think everything's on the table, and ultimately
here the goal is to walk out with a better
deal for the United States, so we are more prosperous,
more free, more secure, and we can incentivize building the
sectors here that are going to be important to American leadership.
The President last week just talked about our big AI
Action plan and wanting to run on American tech, and
so we need to incentivize the industries that are going
(09:05):
to make that possible.
Speaker 2 (09:06):
And one of the pillars of that plan is for
America to export technology to the world. How important an
export market is China for the American technology stack.
Speaker 10 (09:18):
Well, the jury is still out on whether or not
China is going to be an economy that wants the
American technology stack. If you listen to what Hijin Ping
has said, he wants an independent, controllable AI hardware and
software foundational system.
Speaker 11 (09:32):
That means a Chinese tech stack.
Speaker 10 (09:34):
And so we'll see whether or not Chi Jianping and
the Chinese economy wants American tech. It's all the more
reason that deals with our allies like the EU that
just happened, like Japan that just happened matter because if
you look at the US and our top ten democratic
allies the EU included, that's like sixty to seventy percent
of global GDP. What a great place to start for
(09:56):
us to deploy American technology is the backbone of the
global economy and the free world and then start to
work out from there.
Speaker 3 (10:02):
Michelle, it's almost the one area of bipartisanship has been
a hawkish nature towards China. But I think about a
potential ban on TikTok.
Speaker 5 (10:12):
Currently not happening.
Speaker 3 (10:13):
When we think about a potential meeting between Trump and jijingping,
some China Hawks, some of the most odd and in
the current administration for frustrated that actually President Trump is
giving way too much for a deal.
Speaker 5 (10:25):
What do you make of it?
Speaker 10 (10:26):
Well, I think the big picture is all of these
things are chips in the bargaining tools. They're all on
the table and up for negotiation, so we can ultimately
get to a deal that does make us more secure
and more prosperous. And so we've seen back and forth
on TikTok. We know that the Age twenty chips from
Nvidia were under export controls in April, and then in
(10:46):
July there were assurances that those licenses would be granted
to export them.
Speaker 11 (10:50):
But all of these things are in flux.
Speaker 10 (10:51):
And it's part of the high stakes negotiations that are
taking place. Ultimately that we want to get to a
place where we are incentivizing American leadership and security first.
Speaker 3 (11:01):
And that takes regulation here at home as well. The
AI Action Plan meant to foster growth, particularly when it
comes to the underlying large language models and indeed the infrastructure.
What's interesting is there is this game of cat and
mouse and China yet more and more sophisticated models, open
ones coming to the full. How do you measure how
far China is in the generative AI race?
Speaker 10 (11:24):
Well, I think it's how many countries and partners across
the world are adopting Chinese tech versus American tech. And
our goal is to have more countries and more companies
adopting American tech and in some cases Allied tech if
we're not the category leader, so that the tech stack
across the world is trusted. And so having a scorecard
where we track how many companies and countries are adopting
(11:45):
US and Allied technology versus Chinese technology is really important.
And I think, as the President laid out in his
AI Action Plan, what the administration is going to start
to do is put together exportable AI packages to start
to facilitate that more effectively.
Speaker 2 (12:00):
Michelle Geider of the CROC Institute of Tech Diplomacy at Purdue,
thank you very much. Now, coming up, Spotify shares drop
as the music streaming company disappoints investors with a surprise
second quarter loss.
Speaker 4 (12:11):
We'll have the details next. This is Bloomberg Tech.
Speaker 3 (12:21):
Spotify shares having their worst day in two years, as
the company reported a loss in the second quarter. Let's
get more of Spotify's earnings or Bloomberg's Ashley Carmen, the
scene seems to be about employee pay in some ways
and taxes upon that.
Speaker 12 (12:36):
Yeah, in some ways, Spotify is a victim of its
own success. They've basically said that because they've been doing
so well on the stock market, they've had to pay
out a.
Speaker 5 (12:43):
Lot more than they anticipated.
Speaker 12 (12:44):
To employees for payroll, taxes and whatnot, and so that
ended up in a loss in earnings per share.
Speaker 2 (12:50):
There's a lot of like earnings mechanics and financial wizardry
around this kind of stuff. Is there a kind of
core Spotify story actually of how streaming audio is going
for them, and maybe a little bit about their video
strategy as well.
Speaker 12 (13:03):
Yeah, So Spotify keeps adding subscribers users like they keep.
Speaker 5 (13:07):
Growing every single quarter. It's pretty remarkable.
Speaker 12 (13:10):
But what's sort of been a challenge for them is
figuring out what their next verticals are.
Speaker 5 (13:13):
And seeing that through successfully.
Speaker 12 (13:15):
So they've really made a push for advertising that hasn't
really panned out. They said now they are going to
be kind of rethinking.
Speaker 5 (13:22):
That approach with advertising.
Speaker 12 (13:24):
Their head of advertising actually stepped down yesterday. He's taking
a job at DoorDash, So they sort of suggested that
this is going to be a direction that they're going
to change course. And then they're making a very concentrated
push into video, and on today's earnings call, they said
one of their co praresidents said that.
Speaker 5 (13:39):
This is a very exciting opportunity, but it's not a
necessary opportunity.
Speaker 12 (13:43):
So I think they're still kind of figuring out where
they want to move next.
Speaker 3 (13:46):
It's interesting that the week dollar, of course, plays into
all of this, and the third quarter to forecasts not
looking that pretty either. Ultimately, they are building more and
more users. As they say, it's sort of growing like
a weed, so that's going to be a positive momentum
story for many longer term.
Speaker 12 (14:00):
Yeah, I think that that's how they're trying to position
this is that in the long term they seem very bullish,
they're excited, they feel like they've had a really great product.
Speaker 5 (14:08):
It's just these.
Speaker 12 (14:08):
Short term issues that they're kind of dealing with, and investors,
we'll see how they're feeling about it.
Speaker 2 (14:14):
The stock's down almost eleven percent, which introday is the
biggest drop since early April, but if it closed, there
be the biggest drop since June of twenty twenty three,
So it's.
Speaker 4 (14:21):
A strong reaction.
Speaker 2 (14:23):
I'm not asking you something to ask you every single
quarter because this is how I listen to podcasts. How
is Spotify doing in podcasts?
Speaker 12 (14:30):
They've really pivoted into video podcasts and they've been trying
to recruit more video creators to the platform, so they
really have not focused on these audio podcasts anymore. I've
reported quite a bit on how this initiative is going
for them. They're still missing quite a few of the
largest podcasters on that service.
Speaker 5 (14:46):
For video, but they're still pushing and they're still trying.
Speaker 3 (14:49):
Where is the audience for them? Always the growth story
at least it seems like.
Speaker 12 (14:54):
It's developing markets, Yeah, but then also just trying to
get people to spend more time on the platform watch
these video which they compensate based.
Speaker 5 (15:01):
That consumption rather than adds.
Speaker 12 (15:03):
They're really trying to appeal spend more time through audiobooks
and maybe up level them to different tiers of subscriptions.
So I think that's where they're eyeing some possible growth.
Speaker 2 (15:11):
Bluemogs actually Carmen on the streaming and Spotify beat. Thank
you very much. We have another earning story in PayPal.
Look at shares of the company down significantly, on track
for their biggest drop in almost six months. In part,
it's just the basics that they're seeing slow in growth
and payment volumes. But what happened in the morning session
was that the CEO on the call was talking about
(15:31):
US retail spending and sort of softening economic consumer data.
Speaker 4 (15:37):
That kind thing.
Speaker 2 (15:38):
But he was basically saying that they see a slight
acceleration and that's kind of worried people a little bit.
It's going to be interesting later in the hour Carrier
when we have Sofi, because it's somewhat analogous, right that
we might get a similar or maybe different read on
the strength of the consumer through the fintech lens.
Speaker 3 (15:52):
From a share performance is a very different story for
so Far, which is up a whopping thirteen percent right now.
That interview to come at right here, right now. Coming up,
we've got open Ai back startup Ambient's healthcare. It was
reaching a one billion dollars valuation. We speak the co
founder Nik Kilberduma.
Speaker 4 (16:08):
That's an expertive roombed tech.
Speaker 2 (16:21):
Open AI back startup Ambience Healthcare has announced it's raised
two hundred and forty three million dollars in a new
funding round, valuing the administrative AI company at more than
one billion dollars.
Speaker 4 (16:31):
For more.
Speaker 2 (16:32):
Nik Kilberduma, Ambience Healthcare co founder and chief scientists, joins
us it's really interesting, you know, I actually go back
to maybe even three years, and this is where a
lot of people said the promise in the near term
was AI and healthcare, you know, the administrative task.
Speaker 4 (16:47):
But the round is big.
Speaker 2 (16:48):
I mean, what do you need two hundred and forty
three million dollars to do?
Speaker 4 (16:51):
Yeah.
Speaker 13 (16:52):
I think this round two hundred forty three million dollars
values as the company at one point twenty five billion dollars.
Now that round is led by oak HCFT and recent
Horoitz and with participation from open AI. I think it's
a testament to this platform that we've built for health systems,
which liberates clinicians from the administrative burden and enables them
to focus on their patient. And a big part of
it is we've built the sort of busting class platform,
(17:14):
which in practice what it does is before the patient
walks into the room. The system actually summarizes all the
context for the clinicians so they know what's going on
with that particular patient in the visit. It's listening in
the background, it's generating the documentation automatically for the clinician
on behalf of them, as also summary for the patient
and their families. And then afterwards it's automating all the
downstream sort of revenue cycle, coding and billing prior authorization workflows,
(17:38):
which is how health systems get paid. I think it's
allowing us to essentially work with many more institutions. We
work with some of the largest healthcare organizations, academic medical
centers in the country Cleveland Clinic, UCSF, Houston Methodists.
Speaker 4 (17:50):
I think this surround is a testament to that way.
Speaker 2 (17:52):
What's the company's core competence? You know, I understand the platform,
but what is it that you're good at that's allowed
you to build the platform.
Speaker 13 (17:58):
I think a big part of it is we've built
an incredibly deep working relationship with open AI and other
foundation model makers to build the most capable foundation models
for healthcare and medicine, and then we've taken that and
packaged that into a series of workflows to help clinicians.
So I'll give you one example. We work with Cleveland Clinic,
one of the most sub specialized academic institutions in the country.
(18:18):
They have one hundred plus different specialty and sub specialty areas,
and you could imagine every single one of those specialists
practices different medicine, they have different workflows, there's different administrative rules,
and so what we've been able to do is create
a platform that services the needs of every single one
of those specialists. Over eighty percent of clinicians of Cleveland
Clinic use the technology in clinic every single day for
(18:40):
over seventy percent of those visits, and that's more than
two to three times some of the other alternatives in
the market.
Speaker 3 (18:46):
Nikill go to that relationship, that working relationship that you
want to invest in further with open AI. What makes
your business defensible versus open AI just sort of building
it themselves.
Speaker 13 (18:55):
I think a big part of it is as you
think about sort of the gap between general purpose reasoning
models and models that are actually a clinical grade and
compliance grade. There's a massive gap between models that truly
understand the medicine that's happening in every single visit.
Speaker 4 (19:08):
We talked about Cleveland Clinic.
Speaker 13 (19:10):
And other academic medical centers. Just the level of depth
and clinical reasoning that's happening across one hundred plus different specialties,
and how that's different from primary care to if you
have to go see an oncologist to even an oncological
subspecialist who might specialize in a particular type of cancer.
And it's bridging that gap in sort of the understanding
and reasoning capabilities of these models that ultimately allows us
(19:31):
to build software that really solves the problem for clinicians
on the front lines.
Speaker 3 (19:35):
We are currently as we speak, just also seeing live
pictures of President Trump, who is currently in Scotland. He's opened,
of course, a new golf course, but he's also been
negotiating with EU, continues to be discussing relationships with the
UK going forward. We're going to be diving into that
as and where necessary for you. But let's just return
to you, Nikhil, as we hear, of course what President
(19:56):
Trump has been doing. I want to go to the
regulatory perspective here for your business at ambience, because I
am thinking immediately about healthcare requirements. When it comes to privacy.
How have you made sure that that's front and center
when you're relying on so many different users who well,
each hospital has a different rule case.
Speaker 4 (20:15):
I'm sure it's a great question.
Speaker 13 (20:17):
I think the idea of how do we build AI
that's safe, how do we do it responsibly, how do
we roll it out in a way that's effective. We're
lucky to work with some of the premier academic institutions
in the country, and that's allowed us to build infrastructure
not only to create and train AI in a safe
and private way, but also the governance processes to roll
it out responsibly. But I think the opportunity getting this
(20:38):
right is actually massive. You think about the ten thousand
seniors aging into Medicare every single day, the fact that
in every sort of virtual virtually every category of our
healthcare workforce, we are projecting the shortage of one hundred
plus thousand people over the next five to ten years,
and we as a country spend one trillion on administrative waste.
The opportunity to leverage AI to sort of help rehaul
how the system works, have better tools for our clinicians,
(21:02):
and actually take better care of our patients is pretty exciting.
Speaker 3 (21:05):
Nikail Baduma of Ambience Healthcare.
Speaker 5 (21:13):
Let's just shift gears into.
Speaker 3 (21:15):
The other of AI and the relationship between Microsoft and
open Ai, because apparently when they're in advanced negotiations that
could change that relationship and actually help inaugurate the AI age.
The ongoing talks would give Microsoft access to open AI's
tech even after the chatchipte maker has reached its goal
of building artificial general intelligence. For more on what is
(21:35):
going on spring Bloomberg's Map Day. Now, this is an
age old relationship. It was the What bore really chatchipt
to the fold was the financial backing of open ai.
But the deal was always that they would have limited
access to tech if open Ai did reach AGI.
Speaker 5 (21:51):
How is this going to change? Map?
Speaker 9 (21:53):
That's right.
Speaker 14 (21:54):
So Microsoft, as a condition of all the investment they
poured into open ai, they have access to their technology.
Speaker 9 (21:58):
They can make it into their product.
Speaker 14 (22:00):
They're worried for some time about a potential cliff, you know,
should open Ai say hey, we've you know, built an
artificially general intelligence system, Microsoft.
Speaker 9 (22:08):
Would lose access to the tech.
Speaker 14 (22:09):
So what we're hearing recently is that Microsoft is getting
more comfortable at the terms they're talking about now, I
mean that cliff might not occur, there might be a
way that they can continue to have access to some
of open AI's technology, you know, should they hit that milestone.
Speaker 2 (22:21):
Matt, We've heard that talks of progressing, that they're positive
that they're still ongoing. We heard from sources that in
some valley, Sam Altman actually met with Sati Nadella to
talk about the issue. The part of it that is
on the open Ai side of this is that they
want to change that corporate structure. What do we know
about how these negotiations are moving toward that.
Speaker 14 (22:42):
So we know that first of all, Microsoft is is
the biggest holdout to that re negotiation of open ai structure.
We know that open ai wants to alter it's it's
corporate charter. They want more flexibility, they want the ability
to raise a whole lot more money. And that's really
what's kind of ticking the clock here, particularly a bunch
of cash from SoftBank, the big investor, has the authority
to dial down some of that investment if opening Ey doesn't.
Speaker 9 (23:04):
Complete the restructure before at the end of the year.
Speaker 14 (23:05):
So it's just created this little bit of ticking clock
in the background, putting pressure on both sides to come.
Speaker 3 (23:09):
Up with a deal and also revenue share. Right, Matt,
it feels as though open ai is realizing, well, how
much value they're adding and what's a little bit more
of it?
Speaker 9 (23:19):
That's right.
Speaker 14 (23:20):
I mean, if you want back the clock to twenty
nineteen when Microsoft first put cash in the open AI,
Microsoft got a really good deal on kind of a
flyer at this AI lab was going to be a
big deal. Roll the clock forward. Turns out there an
enormous deal and opening iye wants a bit more of
that pie for sure.
Speaker 2 (23:35):
Bloomberg's Matt Day reporting with the rest of the AI
and infrastructure team really appreciate it, Thank you very much.
Just stick with Microsoft, which reports earnings tomorrow. Cashranging Global
Investment Research Managing Director the Goldman Sachs joins us. He
covers the software sector has a buy rating and a
five hundred and fifty dollars price target for Microsoft TV
time cash. But you heard the reporting there. When you
(23:58):
are covering Microsoft, one assumes you have to model in
this relationship with open AI, both the financial exposure but
the technology exposure as well.
Speaker 4 (24:08):
What did you hear then and what do you make
of it?
Speaker 9 (24:10):
Yeah?
Speaker 15 (24:11):
So, first of all, congratulations on breaking that news story.
So that's incremental development. And we actually publish our note
later yesterday and we didn't cover the detailed reporting that
you guys did, so that certainly is a wrinkle, but
it does not change the overall thesis. Our view has
been that the partnership has more legs to it than
commonly believed in the media and in the Wall Street community.
(24:34):
There's a lot more to be gained on either side
of the fence beat access to technology from Microsoft's perspective,
or access to distribution and a work class customer base
at Microsoft brings and the ability to certainly not to
overemphasize the very common thing to train models.
Speaker 9 (24:50):
And run on work cus infrastructure.
Speaker 15 (24:52):
So I think if this word of progress to its
ultimate fruition that of the deal word we signed, it
would take away a at least an investor's perspective as
to what is the time duration that you can bank
and your model and what is the longevity of this partnership.
Because the AI revenues have come out of nowhere seemingly,
and I've scaled and helped Microsoft's Azzure business propel itself
(25:14):
to a not to thirty percent growth through which we
thought was unthinkable two years ago. So both parties have
so much to be gained to gain from this, and
I think it's incrementally.
Speaker 2 (25:23):
Let me ask it this way, what has the biggest
net benefit to Microsoft been from the relationship with open Ai.
Speaker 15 (25:30):
Yeah, many things. First of all, that they are tech forward,
and you could argue that in the cloud competing cycle
that they were not exactly the first ones out of
the gate, but in this AI cycle they are the
first ones out of the gate. And there's so much
of a cachet and boasting right that you have, especially
with Ceosatin Adela, who is a ranking cider of the company,
(25:52):
has been there for a long time. Being able to
pivot the company at the right time. That of enormous
strategic importance. Right from a financial perspective, what it has
allowed the company to do is, although it has required
a lot of capital build out of a scale that
the world has never seen so far in the technology
world and maybe in broader industry as well, it has
allowed the Azure business to grow at scale. So depending
(26:16):
on whose numbers you look at, we're roughly close to
an eighty billion dollar run rate for the Azure business.
And AI has helped keep that growth rate steadily in
the thirty plus percent range, and if we get an
inflection point with respect to AI moving up from golden sacks.
We have this thing that AI is stuck at the
infrastructure layer. For every computing cycle. You need to move
(26:37):
to the platform and applications. When you make the progression,
you see monumental shifts that are happening in the market.
Speaker 9 (26:43):
So that's all to myself's benefit.
Speaker 3 (26:45):
The eighty billion run rate for Azure comes in tandem
cash with a more than eighty billion dollar need to
spend on capital expenditure. Is that currently totally vindicated in
your mind? Zyme when we see it increase.
Speaker 15 (26:58):
It's a dollar for dollar right of capis gives you
a dollar of AS revenues roughly give or take, and
there's within that there is a slightly more inefficient conversion
of the dollar of capis into AI revenue and slightly
more efficient conversion. So we think that it is the
right trade off at this point in time. And the
good news of your Microsoft is that you're running a
very diversified business that all the capex is not extremely
(27:22):
punitive to your free cash flowers. I mean, you could
run a model where you're not generating any free cashlodob
that's not Microsoft's things, so they do generate a pretty
meaningful significant free capital margin because of the health of
the overall business. You've got to look at Microsoft not
just in the context of Azure, but there is a
broader Microsoft Cloud business which has the M three sixty five,
(27:43):
and then you have the server on premises business and
a couple of other businesses that are equally significant in
terms of revenue scope and significant drivers are profitable, so
they've got the ability to generate the cash to be
able to fund this capex.
Speaker 9 (27:58):
That's a very important consideration.
Speaker 15 (28:00):
Long as the returns keep coming and you're able to
generate a dollar of revenue for every dollar of capiss,
as long as that algorithm, broadly speaking, holes, I think
it's the right trade off for the company.
Speaker 3 (28:10):
There have been concerns though, surrounding Microsoft, whether or not
it's just how great the product is to use when
you're sat within its ecosystem, but also the cyber issues
that we've seen running front and center this month cash
how much do you expect Satia to really talk.
Speaker 9 (28:25):
To those issues.
Speaker 15 (28:27):
I believe that there is a bit of a lag
between the actual chat GPT technology that is open a
I brought, broadly speaking technology and how much of that
gets incorporated in the Microsoft Office Copilot, and I believe
that that lag is likely to reduce over a period
of time. And we're also implementing consumer grade technology in
(28:47):
the enterprise. I mean, that is a completely different piece.
So I'm not surprised to hear what you've heard with
respective where the product is relative to enterprise expectations. And
I would argue that the product is I use it personally, Goldman,
and it's come a long way since about six months
nine months ago, and it's likely to go a long.
Speaker 6 (29:05):
Way in the future.
Speaker 15 (29:08):
That version of co pilot that we used today is
going to go through significant enhancements liberally to customize it
tailor at your workflows. Oh, that's going to get significantly better.
So the buzz is going to get better.
Speaker 2 (29:18):
One thing I've always wanted to ask you cash is
present day, middle of twenty twenty five, Microsoft is the
world's second most valuable company. Right, And if I think
back to when I arrived in Silicon Valley in twenty eighteen,
but even two years ago, did you see that coming
where Microsoft would vie with Nvidia to be the most
valuable company in the world based on the direction it
(29:40):
was headed pre open AI and all of that.
Speaker 15 (29:43):
So when I launched coverage at Goldman in twenty twenty one,
we had a big price target on Microsoft, and the
pushback that we got was, you're implying that the market
cap can grow by another half a trillion. Two it's
already a multi trillion dollar market or what was And
I think it was a couple of tillion. Yeah, And
I think what it comes down to is, if you
unlock a big tech cycle, the dollars at stake and
every tech cycle are larger and larger.
Speaker 6 (30:04):
And if you are.
Speaker 15 (30:05):
Leading this cycle as opposed to being a fast.
Speaker 4 (30:08):
Follower, who is to say what the new market?
Speaker 15 (30:10):
Nobody envisioned this kind of playing out the way it
did so, and we're still early in AI. So if
you listen to the economist, they're talking about how the
labor market could be incorporated by way of AI. If
that were to happen, you got a lot more value
creation along the way. So I'm not I'm pleasantly surprised
about how quickly it has happened, but I was just
remarking earlier that Microsoft stock has actually performed in line
(30:33):
with the nastac finally, since the launch of Chat GPT.
For a while, it was lagging, and I kept telling myself,
this is the company that facilitated the birth of this
AI revolution a long with Nvidia and Open Ai, and
their stock is lagging.
Speaker 6 (30:43):
It doesn't make any sense right now.
Speaker 15 (30:44):
Finally we're just about even, Sophie vindication.
Speaker 2 (30:48):
Yashraan and Managing Director of Global Investment Research at Goldman's
has great to have you here on Bloomberg Tech.
Speaker 4 (30:53):
Thank you very much. Carry some news.
Speaker 3 (30:55):
Yeah, it's time to talking tech now and first up,
door Dash spotifflies Global of Advertising Lee Brown will join
the food delivery company as chief revenue Officer starting in
late August.
Speaker 13 (31:05):
Now.
Speaker 3 (31:05):
Brown previously led Spotify's two billion dollar ad business across
ninety international markets and is set to oversee door Dash's
revenue in the US, Canada, Australia and New Zealand.
Speaker 5 (31:15):
Whilst Weimo is set to.
Speaker 3 (31:16):
Launch its robo taxi service in Dallas next year in
a partnership with rental cil company Avis. Now Weiver says
Avis will serve as a pleat fleet partner providing infrastructure, maintenance,
car management operations.
Speaker 4 (31:27):
The Dallas Deel.
Speaker 3 (31:28):
Marks a multi year partnership that Waimo and Avis plan
to expand into more cities over time and venture debt
firm to Cora, Hare's raised six hundred eighty five million
dollars with the backings from the likes of Peter Teel
and Marc Andreesen. Now, according to CEO Kerry Finley, the
money will be used to make loans to about twenty
to thirty million dollars to startups. Now, the latest investment
(31:50):
brings the firm's assets and management to about one point
four billion dollar zed.
Speaker 4 (31:55):
Okay, coming up.
Speaker 2 (31:55):
So FI CEO Anthony Noto joins us to discuss the company's.
Speaker 4 (31:58):
Second quarter result.
Speaker 2 (32:00):
An upbeat forecast and my goodness to shares already taking
off this Tuesday.
Speaker 4 (32:04):
Stay with us.
Speaker 16 (32:05):
This is Bloomberg Tech shares are so far climbing off.
Speaker 2 (32:19):
The company reported second quarter revenue seventy two percent EU
of year jump in fee based revenues. Let's discuss with
the man in charge, SOFI CEO Anthony Noto. You know
the SOFI story, Anthony, has become kind of simple. You've
kind of invested in fee based business lines, many of
them they've been consistent. But now what the market seems
to be seeing is that flowing through to the bottom
(32:40):
line as well. Would you just explain how that went
in the quarter.
Speaker 17 (32:45):
Sure, we've made the conscious effort of diverse fire or
business into these capital light, less credit risk a few
revenue streams, one of which is our long platform business
where people pay us to use our originations platform, which
includes our underwriting capability, our marketing capabilities, and our servicing
capabilities to produce loans for them.
Speaker 6 (33:04):
For a fee that they pay us.
Speaker 17 (33:06):
We also generate fees in our SOFI money account business
through interchange, as well as our brokerage business, and then
of course our credit card businesses. And so as we've
diversified the products that we offer, the revenue streams have
also diversified. We're about forty four percent of our revenue
outcomes from these fees that are generated without use of
capital and without credit risk, and so.
Speaker 6 (33:27):
That deversks the balance sheet quite a bit.
Speaker 17 (33:29):
So our ability to grow their overall business forty four
percent with a twenty nine percent operating margin is reflective
of that diversification and less risky revenue that's more visible
as well.
Speaker 2 (33:41):
Anthony, you just talked about de risking. Elsewhere in the
earnings domain, PayPal was asked about the strength of the
US consumer and comments from that company with somewhat negative
that they see some sort of cracks in the strength
of the consumer from those that use your platfor your
various financial offerings.
Speaker 4 (34:02):
What are you seeing present day?
Speaker 17 (34:04):
Yeah, they have a very different strategy and business than us,
and a very different target audience. We're appealing to the
overachievers in the United States that are looking for ways
to be able to save, to achieve, and invest to
achieve their long term ambitions, whatever their American dream may be.
So we're helping them spend less than they make and
invest the rest, and we're seeing really strong trends for them.
(34:26):
We see them loaning their cost of debt by refinancing
out of expensive credit card debt that charges twenty four
to thirty percent interest into our loans that only charge
twelve to thirty percent interest.
Speaker 6 (34:38):
We see them moving their money into SOFI money. We
give three point.
Speaker 17 (34:41):
Eight percent interest on our savings account in SOFI money
with it if you're a direct deposit customer or a
SOFI plus customer, we offer them investment opportunities that are
really attractive. We offer stocks without commissions, fractional shares, we
have sofi ets that are award winning as well as
robo accounts. But we also offer IPOs in addition to that,
(35:02):
private equity, so you can invest in private credit, private
real estate, venture capital funds as well as long short
public hedge funds and then finally private growth, growth equity
capabilities and so much more diverse business are consumers very strong, credits,
performing very well, continues improved spending through SOFI money is
(35:23):
also very strong. So we're seeing a consumer that's really
trying to lower their costs and spend less than they
make and invest the rest and the flywheel is really working.
Speaker 5 (35:32):
Avan.
Speaker 3 (35:33):
It's interesting that that flywheel comes at the same time
as basically the market's got a flywheel of its own
and seeing froth in certain sectors, Retail investors really wanted
to get in on the latest meme stock as well
as ipo. How are you thinking about general to AI,
like helping with the education side of things. I know
you're targeting over achievers, but are they diversified enough in
their own investments?
Speaker 9 (35:54):
Sure?
Speaker 17 (35:54):
And let me take your question and talk about what
I think are two technology supercycles that are unprecedented. We're
driving the growth that we are over the last eight
years without the benefit of crypto.
Speaker 4 (36:05):
Or blockchain or AI, but I think the combination.
Speaker 17 (36:08):
Of blockchain and crypto as well as AI are two
super cycles that will put a tail wind behind our
company and really help us really revolutionize the financial services
industry in ways that continue to give people faster ways
to send money at lower costs and to do it safer.
Speaker 6 (36:26):
In addition to.
Speaker 17 (36:26):
Being able to invest in this asset class, which does
help as it relates to the areas outside of the
country that may not have exposure to the US dollar
and its stability. In addition to be able to invest
in that asset, will allow people to borrow against that asset,
which will lower their cost of funding and in addition
to that will allow them to be able to pay
across borders more easily and quicker. Artificial intelligence is helping
(36:51):
us today across our entire business. We're using in the
back office to resolve disputes faster, to file suspecify reports,
to solve account takeover issues faster. On the consumer side,
we're offering something called cash Coach, which is the ability
to look at your cash crossed all your accounts. So
it's really that's not impacting our results yet. It's on
(37:13):
the com but they're both really exciting super cycles to
see the benefits.
Speaker 2 (37:17):
From Anthony Nodo, CEO of sci Fi A Sofi, thank
you very much joining us. We actually has some breaking
news crossing the Bloomberg terminal and it comes from China's
trade envoy Lee Chengyang. He's talking about the progress of
talks in Stockholm. He says that the US and China
have agreed to extend the trade truce. They have exchanged
views on various macro economic issues, They agree on the
(37:38):
importance of safeguarding soald trade, and that the talks have
been constructive on major topics. The main headline I think
right Carra, is that they have agreed to extend the
trade truce and that the talks between the China, between
China and US negotiators currently in Stockholm will continue. In
what Lee calls close communication.
Speaker 3 (38:03):
Meta set to report earnings after the closing bell on Wednesday.
I believe it is with investors closely watching its AI
investments for more Blue megs, Kurt Wagner joins us, Look,
we've got some big ends to think about more broadly, Kurt,
and I'm interested as to where we go in terms
of the spending that everyone's looking at is about talent,
it's about capex.
Speaker 5 (38:21):
Will it be raised?
Speaker 18 (38:23):
I think that's the speculation, is that, especially once you
saw what Google did last week raising their capital expenditure
target for the year, I think there's some assumption that
Meta might do the same, given the scale a ideal
and all this very expensive hiring they're doing on the
AI front.
Speaker 6 (38:37):
Now, remember they already raised.
Speaker 18 (38:40):
The range for their capex last quarter as well, So
there was a different number in January, a different number
in April, and now we'll be watching tomorrow to see
if there's another new number. But given the spending AI,
I would not be surprised if they go that route.
Speaker 2 (38:53):
And yet we're always reminded every quarter that Meta makes
all its money from advertising, and so there's AI story
where adds a better price more powerfully, and then there's like,
is all this investment going to pay off?
Speaker 4 (39:06):
What is the street expecting?
Speaker 9 (39:08):
Well?
Speaker 18 (39:08):
I think the good news for them now is that
the AI story they're telling today feels more urgent and
more timely, I think than the one they've been telling
for the last year or two, which was related to
like the metaverse, and so here now they're talking about chatbots,
they're talking about LMS, data centers, like things that people
I think have a better understanding of what the potential
(39:29):
outcome is.
Speaker 6 (39:30):
The metaverse was always ed.
Speaker 18 (39:31):
You will remember that the main thing that they were
sinking all of this money into, and there was no real, you.
Speaker 6 (39:37):
Know, end insight to that.
Speaker 18 (39:39):
Now I don't think there's an end insight to AI either,
but at least I think they're doing something that a
bunch of other companies are doing.
Speaker 6 (39:46):
It's a little easier perhaps to wrap your head around.
Speaker 2 (39:48):
Blue Vers Kurt Wagner looking forward to meta after the
bell tomorrow. Thank you very much, Caro. That does it
for this additional Bloomberg Tech. But we had some big
breaking news in the last few moments.
Speaker 3 (39:57):
We did, and it's so important to the tech eCos
and more broadly the world economy. We're looking at China
saying it does indeed agree with the United States to
extend that tariff truce. Remember it was likely to expire
in mid August as to where currently tariff's had been
set at about the thirty percent level.
Speaker 2 (40:14):
We are going to read the language very carefully. All
those experts on wording China and US talks with candid
says Lee chain Gang candid good thing or bad thing?
Speaker 4 (40:25):
The markets will tell us in due course caract.
Speaker 3 (40:27):
And what does it mean for semiconductors? What does it
mean for the flow of rare earth metals? Do not
forget to check out our podcast. You can find it
on the Terminal soll As, online on Apple, Spotify, and
iHeart from New York from San Francisco.
Speaker 5 (40:39):
This is Bloomberg Tech
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