April 9, 2025 • 45 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss markets' continued volatility as investors race to react to global tariffs. Plus, Rhodium Group’s Reva Goujon explains why US tech companies should brace for more than a tariff impact from Chinese retaliation. And Ben Lerer, Managing Partner at Lerer Hippeau, discusses the firm’s $200 million ninth seed fund and how he’s advising portfolio companies on tariffs.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news from the heart of
where innovation, money and power collide in Silicon Valley and beyond.
This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 2 (00:34):
Live from New York and San Francisco. This is Bloomberg Technology.
Terrify anxieties are not going away with President Trump's global
levies going into effect today, including those eyewatering one hundred
and four percent tarifs on China. This is both China
and the EU fight back with counter tariffs on US products.
We cling to gains, but we fade this rally hard quickly.
(00:55):
We're only up about a tenth of a percent on
the nasat one hundred, after we managed to sell off
yesterday as well. And it feels as though the magnificence
sendmen trying to claw on Ed but no longer what
you got on the micro.
Speaker 3 (01:05):
I want to go to a story that Bloomberg Spencer
Soaper broke in the last thirty minutes. That is, Amazon
has started canceling orders of inventory on specific products made
in China. I'm talking consumer electronics, household goods. It didn't
do much to change the fortune of the stock. It's higher,
as many Mag seven names are, But that is an interesting,
(01:26):
real time, real term story about the impact of tariffs
that are now implemented right elsewhere. There's buoyancy in some
of the MAG seven names. Apple in particular for now
emphasize the for now why because at one point in
yesterday's session, Apple was hired by a similar level closed
down more than double that five percent. There is a
function on the Bloomberg terminal ECTR. It's our trade flow map.
(01:50):
The data is backward looking. We care about the relationship
between US and China. There is a trade deficit. The
US has a trade deficit with the US and China.
And later in the program, when it came to tech,
it is so important to discuss that number two hundred
and sixty billion in twenty twenty three. We know from
prelim data it went up in twenty twenty four. And
we are talking about a US reliance on Chinese computers,
(02:12):
consumer electronics, hair dryers, electric heated blankets, and that ties
into that Amazon story that spent so sober broke.
Speaker 2 (02:19):
And Amazon just turned negative as you were talking about
at ED. Let's just get the perspective of the global
trade war heating up China the EU both retaliating against
US tarifs. This is President Trump aims to bring back
manufacturing in America, setting all his eyes on.
Speaker 4 (02:34):
Apple jobs in advanced technologies. The President is looking at
all of those, he wants them to come back home.
Speaker 5 (02:40):
But iPhones specifically, is that's something that he thinks is
the kind of technology that can move to the US.
Speaker 4 (02:44):
Absolutely, he believes we have the labor, we have the workforce,
we have the resources to do it. And as you know,
Apple has invested five hundred billion dollars here in the
United States. So if Apple didn't think the United States
could do it, they probably wouldn't have put up that
big chunk of change.
Speaker 2 (02:58):
Well, as we all wait for more US made products,
Amazon meanwhile canceling orders on some China made goods. So,
according to sources and those Cadie Nines joins us from Washington,
and at the moment, the response is a coming thick
and fast, EU and China. What does the White House.
Speaker 6 (03:14):
Make of it?
Speaker 5 (03:16):
Well, the White House is sticking to its guns here, Caroline.
President Trump, while he has indicated he wants to make
a deal with China, wants China to come to him
and at this point, it doesn't look like China is
willing to have those conversations, as they have retaliated with
this eighty four percent tariff against all US imports in
exchange for one hundred and four percent levies the US
implemented as of twelve oh one am this morning. So
(03:36):
obviously an escalation in the trade war between the two
largest economies and potentially has the ability to choke off
the vast majority of trade that happens between the US
and China. Already we're seeing, obviously our reporting on Amazon
cutting off orders of things like air conditioning units or
beach shares. That is changing company behavior in terms of
where they want to source their inventory from. But it
also has the potential ramification to affect whether or non
(03:59):
American can access supply of things that don't easily have
alternative suppliers to China. At the moment, according to data
from the US Trade Commission, things like laptop computers for example,
PC monitors, gaming consoles, all of that has about a
seventy percent or more share of imports that come from
China specifically, so that is where you could start to
see some gaps emerging as this depending on how long
(04:23):
this continues, but the administration argues all of this has
an aim, and that aim is to bring back American manufacturing.
As we just heard from the White House Press Secretary
Caroline Levitt, but we've heard from others and the administration
as well. If you recalled, just this past weekend on
Sunday Morning television, the Commerce Secretary Howard Lutnik talked about
the army of millions and millions of people screwing in
tiny little screws and iPhones. He says, that's the kind
(04:44):
of thing they're bringing back to America.
Speaker 3 (04:47):
That aim is so interesting because for the last twenty
four hours I listened to everybody on Bloomberg Television, read
every story, and I think the market still thinks, what
is the aim here? Is it revenue generation for our country?
Bring manufact uring back. I usually would like to go
to the politics. I think I'm right in saying that
away from tariffs, President Trump has not yet spoken to
(05:08):
President she at any point since he took office. Am
I right?
Speaker 5 (05:13):
He has spoken to President She and he actually invited
him to his inauguration, but there hasn't been a conversation
really since this escalation of the trade war. The initial
tariffs that went into place regarding fentanyl, which first of
course was ten percent and twenty percent, then the eighty
four percent on top that has gone into effect as
of midnight tonight, But there have not been direct high
level talks between those two leaders. That there has been
(05:34):
communication at some lower rungs of the Chinese and US
government when it comes to trade. I guess we'll see
if that phone call is scheduled, because again, the President
and others in the Administration and White House have made
clear he is looking to make a deal with China here,
and we understand based off of our reporting and as
well as what the White House is saying, that there's
some seventy countries that have called into the White House
to try to begin negotiations. It's just not clear at
(05:56):
this time that China is one of them. In the meantime,
the Administration is our arguing that China fundamentally has been
messing with the US on trade and has been engaging
in unfair trade practices for years, and that is what
they are trying to reverse, which is one of the
reasons they use to justify tariffs. That it's not just
about bringing back American manufacturing. They also think it's about
lowering trade deficits with the US making trade fairer across
(06:19):
the globe.
Speaker 7 (06:19):
In addition to the.
Speaker 5 (06:20):
Revenue raising aspect, they also argue would be a benefit
of this. The thing is, if you have tariffs of
this level, like one hundred and four percent, that is
likely to reduce important volumes according to most economists you
would speak with, and that means less imports that you
actually can tear iff, which actually could mean that you're
not bringing in the kind of revenue levels you would
think that you wil Bloomberg Economics estimates that if tariffs
(06:41):
are intact as it stands now, they could bring in
about three hundred billion dollars a year because of the
reduction in imports. That's half of what the White Houses
argued could generate.
Speaker 3 (06:52):
Blimbers K lines, we appreciate it, Thank you very much.
Let's get more on the global tech markets perspective amid
what is an active trade war? A Sema Shah, Principal
Asset Management Chief Global Strategists, joins us, Now, when you
think about the mag seven, let's say Apple in particular
is an example, right, are you preparing for that Scenariokaylee outlined,
which is the onshoring of jobs in this country or
(07:13):
is this more about pricing in modeling a fundamental change
in how the world does trade effectively.
Speaker 6 (07:22):
I think everything is on the table at the moment.
I mean, one of the things that Cody was talking
about with regards to having a lot of those other
jobs that go into making the parts something to move
to the US, I mean one of the clear impacts
of that is the US has got much much higher
wage wages than parts of Asia, So you would be
looking at significant increase in cost brushes for these companies
(07:42):
for the mag seven impact on their margins and therefore
on their earnings growth potential. So there are so many
offsets of this, so it makes it quite difficult to
even fathom that you could see this complete alteration and
change in the way that I think the world has
got accustom to thinking about trade and a product. But
this is all encompassing. Of course, It's not just technology.
(08:03):
This is about every single product that you think through.
Because of global trade, every single part will have elements
of different countries about them, and shifting it back to
the US is simply very inflationary.
Speaker 3 (08:15):
I want to show the earnings calendar for the mag
seven and those names that have asteriskness to them are
still tensative right. They haven't confirmed the date. But there
is a split in the market I see this morning.
Many believe that we won't see a bottom in equity
markets until we have earnings calls and a revision to
guidance that's been given, or a complete removal of guidance.
(08:36):
Others say that earnings and guidance is not important. All
we need is a strong positive piece of political news.
Where do you stand, Seema, I think we need one
or the other.
Speaker 6 (08:48):
Either one would be important. I think probably the most
important would be if the administration walks back from tariffs
very significantly. Then you would see the market centerment improving.
And I think you see markets start to write, and
not a very very sharp rally, because I think some
fundamental damage has been done here, but certainly a rally
in terms of earnings guidance. I think one of the
things that we're waiting to see is that, look, if
(09:09):
recession really is on the cards, we need to see
a more realistic earnings outlook for companies across all sectors,
including technology, and it's only once you have that realistic forecast,
when you have got that forward guidance talking through what
the impact of tarists and this new global environment is,
only then can you start to think about where the
(09:29):
floor is. And then once you know where the flora is,
then you can start thinking forward.
Speaker 2 (09:33):
Why there are people buying if we're not sure where
the floor is in the moment, why is Apple in
the green for example?
Speaker 6 (09:41):
Well, I think one of the things that we've been
seeing for MAC seven has been really interesting for US
is I mean, from an asset allocation portfolio perspective, we
have been trying to move away from the tactical. It's
very difficult to be tactical when there's such an uncertain environment,
so you almost go back to your strategic positioning. From
a strategic perspective, we still like big tech if you're
looking out over five to ten year horizon. Certainly the
(10:01):
outlook has deteriorated even on the long term horizon, but
it's still fairly important from a global or a US
growth perspective. The other part of this is is that
typically in this kind of environment, when there is uncertainty,
when there are fears about what's going to happen, to
economic growth. You want companies which you've got the big
balance sheets, the positive cash flow, the fairly large motes
(10:22):
around them, and the Max seven dies still come into play.
And you've already seen a very significant valuation rerating in
the past couple of months, which means that at least
the Max seven the big tech companies are a little
bit head of the game in terms of having a
slightly more realistic pictures attached to them.
Speaker 2 (10:38):
It has to be said Apple having its worst four
day sell off since the year two thousand, many saying
from an RSI perspective relative strength index, it was over sold.
This must be the point at which you pick up
some of these shares. But seem who are the investor
base right now who are willing to buy into big tech?
You yourself sat in London. Are international buyers still coming in?
(10:58):
Are we seeing it more from not only funds in
the United States? For example?
Speaker 6 (11:03):
I think we have seen some retail invest is studying
to do their feed in them. They really believe in
the brand's perspective. So I think that's where you're seeing
a bit of a dip bike. But as I said,
you know, I mean the other thing to consider is
that whilst you do start to see if we see
some positive headlines coming through which can be sustained. Again,
these are the companies which have got that long term
earnings potential. So I think people have got an eye
(11:24):
on the idea that there could be a walk back
at any time. May not come, but certainly could happen
at any moment. So people do still want to have
exposure to these companies that can potentially ride out what
would you most likely be still a challenging economic environment
for the coming months.
Speaker 3 (11:40):
There's this note from Bank of America out this morning
that says a US bill typhoon could cost ninety nine
zero percent more than it currently does. But that is
a goal of this administration right bring jobs, manufacturing, jobs
in tech back to the United States or to the
United States for the first time. Is there any upside
or sort of silver lining or bright outcome that you
(12:01):
see with this tariff's process.
Speaker 8 (12:06):
I'm not sure if there's.
Speaker 6 (12:07):
Well, look I think over a long term perspective, you know,
a four or five year period, then maybe yes, there
could be some positive. You would have maybe a US
economy which is a bit stronger, you have a manufacturing
base which is more formidable, you have less reliance on
external partners, so that would be the positive, but it
really comes through in the longside. It's really in the
short term that you start to see this additional pain
coming through. So I think it's challenging to see some
(12:30):
really good positive news coming through. I guess the one
thing is though, is that you know to that point
where an iPhone could be significantly more expensive, that inflation
pressure just puts upper pressure on the long end of
the yeelk CUB. We're already being seen that playing out
in the last couple of days, and from our perspective,
that may be the pressure point from the Trump administration.
They have repeatedly talked about their focus on treasury yields,
(12:52):
so maybe this is what necessarily pushes them back from
the edge and you could see some negotiations coming through
in the next.
Speaker 2 (12:58):
Couple of days, or of a bio straight on the
bond market. At least, yealds up about nine basis points
in the ten ure. Simashah and Principal Asset Management, thanks
so much for joining us.
Speaker 7 (13:07):
Coming up.
Speaker 2 (13:07):
Look as companies they race to adjust plans amid the
trade tensions. Neither the US or China appears to be
backing down. We'll have more on the impact for the
tech sector. This has been their technology.
Speaker 9 (13:28):
China's paid almost seven hundred billion dollars in tariffs under me,
and then they say Donald Trump hasn't been tough on China.
Speaker 2 (13:38):
Meanwhile, Apple's lost about seven hundred billion dollars worth of
its market cap since the tariffs were imposed. Let's get
more on what the one hundred and four percent tariffs
on Chinese goods could mean for the tech world, and
of course the eight percent counter tariff on US exports
to China. Riva Gujano's with US director for Roodium Group Riva.
It's really interesting to understand how supply chains are going
(13:59):
to be impacted by all of this, because we know
that in many ways China is the assembly point for apples.
Some of the products in an Apple phone are actually
made in Kentucky and ship to China and then ship
back to US. But ultimately, are we in a game
of chicken when it comes to US China tip for
tat right now?
Speaker 10 (14:14):
Well, yeah, at one hundred and four percent tariffs, I'd
say so. And so yeah, there are loaded assumptions on
both the US and the Chinese sides over this trade war.
Each side believes the others, in the weaker economic position
that the other one will fold, and Beijing at this
point is basically saying bring it right. They're counting on
US inventories to get shaved down. People checking their Amazon
(14:37):
orders and seeing that they're not coming through, going to Walmart,
seeing their shelves empty out, and so at that point,
this is obviously going to force a conversation, but to
what end. Right, there's not much fodder for real negotiation here.
You could have some sort of a reset, maybe getting
back to let's say fifty four percent tariffs, but that's
(14:58):
not much of a win here right after this scale
of disruption, and already supply chains as you as you mentioned,
are going to be greatly disrupted.
Speaker 2 (15:06):
We've heard time and time again that the US thinks
China wants to make a deal. Do you think that
ultimately it does that we ever get to a better
outcome in this scenario, because there are companies currently locked
not knowing what to do in this scenario as to
whether the tariff's a short term a long term.
Speaker 10 (15:22):
Look, China would of course love a real negotiation with
the US that spans into other domains as well, to say,
for example, okay, if the US wants to reduce its
trade deficit with China, then fine, let's talk about large
scale purchases. Let's talk about importing more in video semiconductors,
for example, which would in part then blow apart the
(15:42):
export control regime. You can see how Beijing would be
angling for that now with that happen, I think that's
very low likelihood because remember we're just talking about a
conflict spiral in the trade domain right now. There is
a whole other layer here when it comes to the
tech controls trajectory escalation on that front also, so how
China is getting more creative with its own retaliatory toolkit,
(16:04):
which is going to put multinationals in China, particularly tech companies,
in a very difficult position in the months ahead.
Speaker 3 (16:10):
So I want to stay on this point because for
the technology industry, tariffs are one tool or policy point,
and the export of technology and the controls and those exports,
as you point out, were the most significant prior to
last week. Do you expect both to increase? In other words,
where we see further specific controls by the United States
(16:32):
on cutting edge GPUs and other technology.
Speaker 10 (16:36):
So attention span is a question right for the current
US administration, We'll have to see you as BIS under
commerce is starting to ramp up, is it going to
have the latitude to patch up export controls? For example,
there have been pending controls to expand chip controls to
cover for example, in VIDEAH twenty chips in the wake
(16:57):
of deep Seek's big breakthrough. But there's more than that, right,
there's a bigger conversation around how do you evolve economic
security standards that effectively exclude China from AI infrastructure build
outs globally. So there's a lot more that's coming on
the tech front. And meanwhile, China's looking at a number
(17:18):
of retaliatory tools where it's singling out US big tech
companies as well.
Speaker 3 (17:23):
It's REVA. How do you interpret China's responses China's actions.
Speaker 10 (17:26):
In this, Yeah, so a few things, right, So when
you look beyond the tip for tat on the tariffs, right,
China's doing some interesting things where, for example, in it's
implementing provisions for the Anti Foreign Sanctions Law, it's talking
about countermeasures that include suspending IP rights for US companies
(17:47):
in China. That's explosive. Right, if China goes down that path,
that's a very slippery slope. That's something that's going to
spread alarm, not just to US companies, right, but Japanese,
European everyone, once you start to break apart those norms. Moreover,
you know, China has its anti monopoly arm sammer that
has veto power over a number of strategic m and
(18:08):
a around the world. There are a lot of strategic
deals that are supposed to be struck as a result
of these trade wars. At least that's the intent of
the administration. We still don't know, for example, what's going
to happen with Intel and TSMC. Right as Intel has
been struggling, do you really think that the US is
going to recognize the Chinese veto over a major merger
(18:29):
that is based on national security arguments? So we're already
vearying toward this conflict of law conundrum on that front,
as well as on the IP front, which again is
a very slippery slope for tech companies.
Speaker 3 (18:44):
With Gujon, director at Roodium Group, really great having the show.
Speaker 8 (18:47):
Thank you.
Speaker 2 (18:54):
President Trump's AI promises. They started strong with the announcement
of a five hundred billion dollar style Gate infrastructure project
back in January. Remember, but his new Liberation Day agenda
looks set to undermine those earlier AI ambitions. Bluemberg Opinion
columnists Daily writing, the Trump taroff agenda risks a cascading
effect that will drag down the America AI effort. The
(19:15):
new economic order could force the American AI industry to
compete on China's terms rather than harness its own strengths.
Davely is with us now. And when you say compete
on China terms, ultimately it's about forcing them not to
have access to the most sophistic GPUs and therefore having
to do more with less. We become more Deep.
Speaker 11 (19:34):
Seek absolutely exactly like Deep Sea. I mean, you remember
when there was the market sell off when deep Seek
made its arrival because everyone thought, wow, China knows how
to do this more cheaply and with less computing power
and so on. But the American response, and the response
that we got from the likes of Saturn Adella at
Microsoft was don't worry, because our differentiate is we can
(19:55):
do this on a bigger scale with more computing power.
We can serve more people, we can do more inferencing.
You know, the powering of AI once you've you've trained it.
Now if all of that gets more expensive, which these
towers seems set to do, then all of a sudden
that advantage doesn't go away completely, but I think it
becomes just harder to deploy, and it could take longer
(20:15):
to deploy it as well. So I've had, you know,
I've talking to a number of people who have said,
maybe if you're a small startup in the space, you
might be thinking maybe we could try and become more
of a deep seek than you know, an open AI
for example.
Speaker 3 (20:28):
Well, your core point is that the ability of a
Meta or an Amazon or a Microsoft to invest was
built on its core businesses and that is where the
uncertainty impact comes. I think at least.
Speaker 11 (20:40):
Yeah, absolutely, And last earning season, all of these companies
came out and said and shared their capex plans for
the year, and they were huge. I think I tossed
up at one point more than three hundred and fifty
billion dollars that is going to be spent on data
centers and you know, getting more energy and so forth.
That money, even if they keep at those levels, which
I think is in question, it's not going to go
(21:02):
as far because building these data centers just got considerably
more expensive, even though the sort of core component of
the semiconductor right now is the subject to a tariff,
although some are speculating that it might be in the
not to some future. So yes, and all of that
spending was concocted and agreed to it, you know, backed
by investors on the basis that companies like Apple have
(21:23):
the iPhone and it was a rowing business, or companies
like Meta have this great advertising business that just prints money.
That may not be the case anymore.
Speaker 3 (21:33):
Daily a Bloomberg opinion, it's a must read today. Liberation day,
Thank you very much.
Speaker 11 (21:45):
This is like uncharted territory we are talking about here.
Speaker 12 (21:49):
It's really tough to be a technology You have to
wear a company right now.
Speaker 13 (21:52):
I think the more significant area that is a factor
is the Asian nations to have deeply and better supply Chaine.
Speaker 9 (21:58):
Obviously, Apple is more of a because of the tariffs
and what they manufacture in China. Right the rest of
the MAC seven, more of the communication names. They're a
little bit better space, but it's not as if anyone's
in great space.
Speaker 12 (22:11):
From a valuation perspective, I think the good news is
we don't have a valuation problem in tech.
Speaker 14 (22:16):
Mega SIN seven is something like fifty five percent of
profits coming from overseas, So while they have a lot
of secular AI driven growth, they also tend to have
a lot of international driven growth. So we don't really
see MAG seven coming back to the fore. If these
tariffs stick.
Speaker 12 (22:30):
Big tech has massive recash flow generation, even if we
kind of discount some of the tariff issues at hand.
Speaker 3 (22:38):
Right now, that's what some of Bloomberg Television's recent guests
had to say about the impact of tariffs on the
tech sector. And this is what markets look like right now.
Way off session highs on the Nasdaq one hundred, you know,
I go to the NAZDAK one hundred cause concentration of tech.
But then as that Golden Dragon China index really interested US,
listed ADRs of many Chinese technology companies been higher two
(23:00):
and a half percent now lowering the session, and we're
trying to digest China's retaliative measures single names. This is
what we're looking like in the green. Apple continues to
push hiring. Caroline made a really important point earlier prior
to this session, four straight days of declines where Apple
experienced its biggest drop since the year two thousand. That's important.
We should keep saying.
Speaker 1 (23:20):
That, KARC.
Speaker 2 (23:21):
We should. But also what's interesting in another data point
that you and I saw today, the PC shipment data,
it actually grew the fastest quarterly pace in four years.
Has has companies stocked up inventory ahead of tariffs? Look desktops, workstations,
portable computers. They rose more than nine percent, according to
market tracker Canalis. For more on how these tarifts are
(23:41):
impacting tech supply chains, We've got the perfect guest, David Warwick,
executive vice president over an overhaul a supply chain visibility
and risk management company, who work for Microsoft for years
overseeing their global supply chain. Have companies how long have
they bought in terms of inventory because they seem to
see the risk while investors didn't.
Speaker 15 (24:01):
I mean, and I think everybody has known this is
coming at some level, and so what they've been trying
to do is they've been trying.
Speaker 8 (24:06):
To prepare as best they can.
Speaker 15 (24:08):
And you know, even this week, you know, in the
last seven or ten days, what we've seen is an
increase in rates for air cargo coming out of China,
which means that you know, supply is drying up a
little bit, and people are still trying to move as
much product as they can before they were impacted by tariffs.
Speaker 8 (24:26):
So I think that companies have tried to be smart,
They've tried.
Speaker 15 (24:28):
To position themselves as best they can, but I'm not
sure that anybody actually saw the sheer extent of these
tariffs and what it would mean.
Speaker 2 (24:36):
You are currently still advising the Microsoft's the dicens. I
go to the data that shows that China is basically
ninety percent of all consoles coming from China to the
United States, and I'm interested as what on earth Xbox
executives do at this moment. Are they thinking, Okay, longer term,
we shift our supply chain even further away from China,
(24:57):
or do they just ride this out in the short term.
Speaker 8 (25:00):
I think that it's a very challenging situation to be in.
Speaker 15 (25:03):
I think that, you know, the advice that I'm giving
a lot of companies right now is basically to hurry
up and wait and making a strategic decision today could
fall apart very quickly within the next week, as we've
kind of seen over the last month, Caroline, you know,
we saw the Mexico, Canada dispute. We saw a lot
of things happening there very quickly. If you'd made a
(25:24):
strategic decision to move everything overnight, you could have been
caught on the wrong side of that.
Speaker 8 (25:30):
So right now, I think that you know, it's not
just the consoles.
Speaker 15 (25:33):
It's not just PCs, it's across the board, And I
think that companies have to be really, really thoughtful in
terms of their immediate next steps versus their longer term strategies.
If the tireff stick and if we have to ride
out this entire storm, it's a different set of decisions
that you would make if you knew that this was
going to happen for you know, maybe three months and
then start to taper off.
Speaker 8 (25:54):
So it's a very challenging time for.
Speaker 15 (25:56):
Supply chains and trying to figure out the short term
versus the media term versus the long term.
Speaker 3 (26:02):
David, explain to our audience how an iPhone would be
built or assembled in the United States and what the
price impact would be based on your experience.
Speaker 15 (26:15):
That's a challenging question, Ed, I'm not sure you know,
I'm not sure that I understand the full extent of
the Apple supply chain. But look, you've got to understand
that this is not about just moving a manufacturing plant.
This is an ecosystem. The tier two suppliers, the Tier
three suppliers have all built up over time around those
specific factories in China.
Speaker 8 (26:34):
Or in Vietnam or in India, and.
Speaker 15 (26:36):
It takes time to develop that ecosystem. So what would
it take. Well, you have to build a factory. Then
you have to develop that ecosystem to be able to
supply that factory. You have to source your raw materials,
you have to source your semi finished goods, your sub assemblies.
Speaker 8 (26:50):
And bring all of those in. So this isn't just
flicking a switch.
Speaker 15 (26:54):
And you build a new factory and everything starts up again.
It takes time to build that ecosystem them and to
make sure that your supply chain meains intact from a
quality perspective and everything else.
Speaker 3 (27:05):
That was a pretty good answer, David. To be fair,
I think that sums up well. And I know Tesla
in its local supply chain in Shanghai has a similar situation.
What happens in four years time if there's a completely
different administration in the White House and all of the
tariffs get undone and the executives at the companies you
advise decided to do something extreme in adjusting their supply
(27:27):
chain here and now.
Speaker 15 (27:29):
I think in the first case, I'll be a little
bit bored. If at all reverses, then you know, I'm
not sure what I'll be doing every day. But you know,
I think that this short term versus medium term versus
long term, I think that that is where we're caught
in a trap right now, whereby it's very difficult to
make that long term decision because to your point, a
new administration could decide to go in a very different
(27:52):
direction from a trade perspective, and so supply chains have
to be cautiously. We were taught some lessons over the
last five years through COVID. We realized that our supply
chains were ultimately fragile, and we had to find a
better way to build some resilience into those supply chains.
So we diversified a little bit. We started to move
manufacturing to other countries. We started to do very sensible things.
(28:14):
Did we do that to the level that we should
have done it? Maybe not, Maybe there was more room
to actually move things aby, But I think supply chains
now you know, we are problem solver. Supply chain practitioners
are designed to solve problems. This is another major problem.
Call it a gray swan or a black swan. It's
another major problem that we have to deal with. It
will force a change in terms of high supply chains.
(28:37):
Think high supply chains are engineered over the coming years.
Speaker 2 (28:40):
And ultimately you might have tried to front run by
moving out of China as many have take it Apple
more into India and Vietnam, and ultimately they've been tariff too.
I mean, of course to a less extent when it
comes to India. But longer term, then are we seeing
companies willing to hit the margin when you've got a
record gross margin of forty six point nine percent for
(29:02):
Apple recently. In the short term they swallow it, David,
Is that what Dyson's and Microsoft do? They take the
hit until they get long term charity.
Speaker 15 (29:11):
I think in the short term, any supply chain will
look at what can be done. So if you've already
diversified to some level, and you've moved production to more
friendlier tariff countries, you would look now to say, is
there any excess capacity available? Can I move maybe from
a China to a Philippines or to Malaysia to reduce
(29:31):
some of that tariff burden.
Speaker 8 (29:33):
However, you know, the longer term.
Speaker 15 (29:35):
Is going to be Okay, what does a tar friendly
country actually look like?
Speaker 8 (29:40):
Have we actually moved the dynamics too far?
Speaker 15 (29:43):
And you know, we're all hoping that this will actually
roll over. We are all hoping that the president will
do as he says and he is open to negotiation,
and the countries are coming to the table. We've heard today,
South Korea, Japan are already coming to the table.
Speaker 8 (29:59):
From a supply chain.
Speaker 15 (30:00):
Perspective, we're hoping that common sense will prevail and there
will be a more balanced trading agreements set setup trading
agreements put in place in the coming weeks and months,
which will alleviate some of the current pin but it
still doesn't take away from the longer term strategy nine
needs to be figured on, and that's what supply chains
are going to be working hard to do.
Speaker 2 (30:19):
David. I'm going to make a really pointed question on
many of the executives you're talking to taking it seriously
that they need to build or assemble in the United
States more fully, a lot.
Speaker 15 (30:30):
Of executives are certainly having the discussion, they're looking at
the implications of obviously the capital cost and also the
timeline is involved. You know, setting up a factory in
the United States to manufacture in the United States.
Speaker 8 (30:44):
You don't do that overnight.
Speaker 15 (30:46):
And then, as I said earlier, it's the ecosystem which
is the really important part. How long will it take
to actually, you know, bring all those things together.
Speaker 8 (30:54):
I answered a question earlier.
Speaker 15 (30:55):
On this week in a different interview where somebody said, hey,
you know, for a American med products, how are going
to be impacted by the new China tariffs?
Speaker 8 (31:05):
And my question to that question.
Speaker 15 (31:07):
Was, well, what do you mean by American made products?
You're talking about chocolate in this instance, you know, where
does the coca come from to make that chocolate?
Speaker 8 (31:15):
It in itself is subject.
Speaker 15 (31:17):
To a tariff coming into the US to manufacture in
the US.
Speaker 8 (31:20):
Supply chains are complicated. Supply chains are.
Speaker 15 (31:23):
Very very complex elements, and so figuring these pieces out
is everything that executives are doing right now to understand
the impact but also to understand what can be done next.
Speaker 3 (31:35):
Hair dryers, toasters all come from China as well. David
Warwick from Overhaul, really great conversation. Thank you for joining US.
Speaker 2 (31:41):
Care now coming up. We're going to get the VC
the private market perspective. Ben Lahra is with US VC
firm Lara Hippo is actually just closed a mammoth two
hundred million dollars round for a new fund. Amiddle this uncertainty,
how they do it? This is a broom, big technology
(32:04):
VC firm. Lara Hippo is just closed a two hundred
million dollar fund. It's ninth early stage one. This is
vcs and startups faced Tarif anxiety, many opting to pause
plans for IPOs. But yet the conviction is there from LPs.
Let's talk about why Nara Hippo managing partner Ben Lara
joins us. Now, Ben, how did you get this over
the line in this current environment?
Speaker 16 (32:27):
Yeah, I think Look, one of the one of the
things we're proudest of is that we, over a long
period of time, have been really consistent and I think
pretty disciplined. We do one thing, we do one thing well,
which is true early stage investing. And so while markets
rise and fall, and you know, lots of things outside
of our control happened in the background, we don't tend
(32:50):
to get sucked into sort of hype cycles. And and
I you know, it's sort of been reflected in our returns,
and so we're fortunate that LPs continue to support us,
and you know, we're but let's say, we're happy to
have this behind us.
Speaker 3 (33:03):
In this book, Ben, you know, we've discussed for many
years how early stage companies and their investors are more
like insulated from public markets and macro events until what
happened with Silicon Valley Bank and it became about operational
cash flow. Right, But you're still doing a new fund.
This report's about andresen doing a very very big fund.
(33:25):
Just talk to me about that environment more specifically at
the early stage.
Speaker 16 (33:30):
Yeah, And actually I think the SVB crisis was for
certain funds a wake up call where you know, that
was sort of coming out of a hype cycle in
twenty one where money was flowing very freely. Companies were
raising lots of money and chasing growth at all costs.
And I think even for us at LH, we took
(33:50):
a moment to be very introspective and say, are we
on a company by company by company bases making sure
that folks are being really responsible and not falling prey
to lots of late stage money chasing hot companies and
driving some not great behaviors. And right now as we
sort of enter another moment of prices, I think that
(34:11):
some of the learnings from from that last significant sort
of blip have set at least our portfolio up in
a way where we feel like we have arms around
every company in the portfolio, where companies on a quarter
by quarter basis are burning less and less are being
are just taking more responsibility for building really sustainable long
term businesses and falling a little bit less sort of
(34:34):
a victim to getting on the late stage VC, you know,
sort of hamster wheel.
Speaker 3 (34:41):
Well kind of companies. Where are the companies? And how
much of an unlock has AI been? Because what I
here's my in box all the time right now and
is discussed in the zeitgeist, is you don't need to
learn how to code anymore. You know, previously, if you
pitched at Y Combinator or something and you didn't code
or have anyone your team that was a computer science
that would be dead for you. That avenue. I think
(35:02):
that's changed, right, Yeah.
Speaker 16 (35:05):
Look, I mean our goal has always been sort of
to find great talent as true early stage investors. That's
the key to every investment that we make, and AI
is going to be an unlock in every single industry.
And frankly, if you're not leaning in incredibly heavily to
AI as an existing business or certainly as a sort
of Denobo startup, you're missing a huge opportunity to create
(35:26):
efficiency and move faster. And the tools that exist now
in terms of you know, helping companies code and build
product faster are unbelievable. There are companies in our portfolio
that are writing less than five percent of code by
hand at this point and are really just prompting and
managing third party AI software who are helping them with
(35:48):
much smaller teams, create unbelievable leverage in their business. It's
really exciting, but it's also terrifying because it's moving so quickly,
and you know, we're kitting ourselves if we know how
this all sort of where this land and where the
value falls and what is owned by the big large
language models and what's going to be owned by application
layer companies, and so you know, we take solace in
(36:11):
the idea that we're going to back incredible people and
they're going to navigate through this challenging environment and we're
going to be there to help keep them on the rails.
Speaker 2 (36:19):
A big personal fan of ba ble Bar, I can
imagine that's the sort of company that's having to think
about it supply chains right now. Ben. But I go
to that company because many associate you with consumer focused tech,
but you are exposed to enterprise. You've got fingers in
the fintech space in DeFi as well. You're across the board.
But when you're looking at the consumer opportunity right now, Ben,
(36:40):
how unnerving is that?
Speaker 8 (36:43):
Yeah?
Speaker 16 (36:43):
So I think that you know, we've been talking to
our sort of scaled consumer companies about tariffs and what
the implications of this could would should be over the
last several months. I think the best and most mature
businesses have been planning for this and have you know,
there's there's and have some mitigations in place. But the
(37:05):
reality is that there are companies that this is gonna
punch directly in the face and and it's going to
be unpleasant and they're going to need to figure out
how to manage through it. I think people are also
it's just so unclear.
Speaker 7 (37:16):
You know that the.
Speaker 16 (37:17):
Floor moves by the hour right now, and so I
think people don't want to over rotate and over respond
and you know, decide that they're absolutely positively pulling out
of China on a permanent basis. But it's going to
be It's something that companies are going to manage through.
People had to manage through COVID, and we saw the
best founders handle that not easily, but survive and thrive
(37:40):
on the backside of it. And the same is going
to happen here. I really believe that the best founders fight.
Speaker 2 (37:45):
Away and then you're known for investing right here in
New York. Is that still a thesis?
Speaker 16 (37:49):
Yeah, I mean we are huge believers in New York.
I grew up in New York. We started the fund
here in New York on a sort of high level
bet that New York has always had unbelievable talent, but
twenty years ago that talent naturally matriculated first to Wall Street,
and over time that talent now wants to go work
in tech. That's the biggest growth area that New York
(38:10):
has seen over the last decade in terms of job
growth and company growth. We think it's going to continue,
and we again see that sort of overlap of very
early stage in New York as a competitive edge for
US in a space where we have real right to win.
Speaker 8 (38:25):
So we're going to keep doing that.
Speaker 3 (38:27):
Ben Lara, Larryhip, it's great to have you back on
the program. Appreciate it. Thank you, Caroline. Some news in talking.
Speaker 2 (38:31):
Tech, Yeah, time for talking tech. First up, Google ed
plans to help developers build AI assistance for a variety
of tasks at its annual Cloud Computing conference in Las
Vegas yesterday. The company said it would release the Agent
Development Kit, which can increase dependence on and revenue for
as cloud services. Plus the EU It's just presented a
plan to boost its AI industry and help it compete
(38:52):
more aggressively with the US and China. One of the
ways Europe plans to bolster regional AI developments is a
commitment to build a network of AI factories and create
specialized labs to improve the access of startups to high
quality training data. And The Energy and Commerce Committee just
approved a bipartisan bill known as Take It Down Act,
which aims to curb the spread of unauthorized deep fake pornography.
(39:14):
Getting the bill to the President's desk could mark one
of the most significant actions by Congress to respond to
risks and harms posed by AI ed.
Speaker 3 (39:22):
Another news story we're watching, a Meta whistleblow is set
to testify before Congress, claiming that the social media giant
threaten US national security as it cozied up with China.
The former Meta executive alleges that the company brief members
of the CCP on emerging tech, which includes AI. Metas
denying those allegations. For let's bringing Bloomberg's Riley Griffin here
(39:43):
in SF what do we need to watch for? This
is going to happen very soon.
Speaker 7 (39:46):
Yes, this is coming later today. In Washington, d C.
We're seeing Sarah wyn Williams, the author of the best
selling memoir Now Careless People, be asked to speak before
lawmakers about her what she witnessed the dealings Meta in
China back through her tenure in twenty seventeen. The interesting
thing about her prepared remarks, which we've gotten our hands
(40:08):
on here at Bloomberg, is that she's going to make
the case that Meta's discussions with China have actually helped
it in its AI ambitions in this global race arms
race that she's describing around AI.
Speaker 2 (40:21):
What's interesting is Meta's response has been clear on all
of this, Riley, and for example, they've said that Mark
Zackerberg has been public about the company's past interest in
offering services in China, and details were widely reported beginning
over a decade ago. But the fact is this, says
Andy Stone, we do not operate our services in China today.
What will Meta's response be, particularly in this global environment
(40:44):
of US versus China.
Speaker 7 (40:46):
Meta is holding firm that it does not offer services
like Facebook, Instagram and China. Sarah and Williams, however, will
be contending that it continues to make a great deal
of its revenue out of China. About eight billion last
year in advertising revenue came from China, and so she
is making the case that this is a present discussion.
(41:09):
While Meta calls this old news, Sarah and Williams is
making this about the here and now and about this
arms race and about the money that matter continues to make.
Speaker 2 (41:17):
Well, we'll watch for that hearing later today. Riley Griffin,
thanks for bringing it to us. Now let's stick with
social media. Can't Look Away. It is a new film
by Bluemberg Originals, which followed a team of lawyers battling
tech giants on behalf of families. His children suffered great harm.
Link to social media, and the film is based on
the reporting by Our Burero's Varion Olivia Carvill, who joins us.
(41:38):
Now the reaction, of course, is to the legal battle
that is trying to hold big tech accountable. Is it
managing to in the courts right now?
Speaker 8 (41:48):
We don't know yet.
Speaker 13 (41:49):
There are positive signs that some of these cases are
breaking through and that we might see at least one
lawsuit pus section two thirty of the Communications Decency Act,
which is really been that immunity blanket for big tech
over the past two decades, preventing them from being held
liable for user harms like what are portrayed in the film,
(42:10):
And as it currently stands, it looks like we are
going to see one of these cases go to trial
later this year. So it's kind of all eyes on
the justice system right now.
Speaker 3 (42:19):
Olivia Peace, could you explain what the process of making
the film was like? And it's a different medium, but
I guess the reporting that went into it from you.
Speaker 13 (42:28):
Yeah, it's been a two and a half year journey
to get here. I first approached Christen Powers, Bloomberg's deputy
head of media, asking if it might be possible to
shadow this law firm, and we really dove in without
knowing where these cases were going to go or if
any of them would eventually reach trial.
Speaker 2 (42:45):
So it was a leap of.
Speaker 13 (42:46):
Faith by Bloomberg and the production team at DCTV, particularly
directors Met O'Neil and Perry Peltz. Documentary is a completely
different medium to print, which is what I'm used to.
It's like a jigsaw puzzle trying to pull together all
these different scenes, and you really need to have visual
segues between talking heads on camera, and that's something that
(43:07):
you know, It's been a huge learning process for me
trying to understand what it takes to bring a documentary
to the screens. And I also think that there needs
to be a broader message in the film and for
us with Can't Look Away, that is really the fight
for corporate accountability. Can't look Away is about, you know
exactly what that title implies, That there's a generation of
(43:28):
kids who are glued to their screens and quite literally
can't look away, and the lawyers and families fighting to
hold those companies accountable for this situation.
Speaker 2 (43:37):
Protections continue to come though Matter has brought them to Instagram,
bringing them also to Facebook. Some of their other products.
You've had Roblock CEO joining us recently with more parental controls.
I'm interested as to the visuals that Mark Zuckerberg himself
had to be confronted with. The pictures of the children
have had tragic ends to consumption of social media. They're
(43:57):
getting it, do you think or not?
Speaker 16 (44:00):
Well?
Speaker 13 (44:00):
I think the whole conversation around social media has shifted
in recent years. We've seen it move from a question
of can these platforms how mental health?
Speaker 2 (44:08):
Are they really good for our kids?
Speaker 13 (44:10):
And it's moved towards this is a full blown public
health crisis for our children. And that's what I'm hearing
now from the experts because we've seen books like Jonathan
Height's Anxious Generations, Sarah wyn Williams Careless People, which we're
just talking about on this show Netflix series like Adolescents,
really pushing the cultural conversation towards is this a good
(44:32):
situation for our children?
Speaker 2 (44:34):
Is this what we want them to be doing?
Speaker 13 (44:36):
And let's just think about the facts. Ninety five percent
of kids use social media, more than a third are
showing signs of addiction. And this film was chronicling the
very extreme harms that some of those kids have experienced
in the digital world.
Speaker 2 (44:50):
It's been such a long journey of reporting and now
in to the big theaters as well. Olivia Carvill, we
thank you so much. That does it for this addition
of let's just check in on these markets for a moment.
Speaker 1 (45:02):
Ed.
Speaker 2 (45:03):
We're currently seeing a whitsawing on the day, Magnificent sevens
staying higher to the tune of one point three percent,
but who knows how we'll close today and then as
that one hundred rebounding from yesterday's sellof This is Bloomberg
Technology
Bloomberg Audio Studios, podcasts, radio news from the heart of
where innovation, money and power collide in Silicon Valley and beyond.
This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 2 (00:34):
Live from New York and San Francisco. This is Bloomberg Technology.
Terrify anxieties are not going away with President Trump's global
levies going into effect today, including those eyewatering one hundred
and four percent tarifs on China. This is both China
and the EU fight back with counter tariffs on US products.
We cling to gains, but we fade this rally hard quickly.
(00:55):
We're only up about a tenth of a percent on
the nasat one hundred, after we managed to sell off
yesterday as well. And it feels as though the magnificence
sendmen trying to claw on Ed but no longer what
you got on the micro.
Speaker 3 (01:05):
I want to go to a story that Bloomberg Spencer
Soaper broke in the last thirty minutes. That is, Amazon
has started canceling orders of inventory on specific products made
in China. I'm talking consumer electronics, household goods. It didn't
do much to change the fortune of the stock. It's higher,
as many Mag seven names are, But that is an interesting,
(01:26):
real time, real term story about the impact of tariffs
that are now implemented right elsewhere. There's buoyancy in some
of the MAG seven names. Apple in particular for now
emphasize the for now why because at one point in
yesterday's session, Apple was hired by a similar level closed
down more than double that five percent. There is a
function on the Bloomberg terminal ECTR. It's our trade flow map.
(01:50):
The data is backward looking. We care about the relationship
between US and China. There is a trade deficit. The
US has a trade deficit with the US and China.
And later in the program, when it came to tech,
it is so important to discuss that number two hundred
and sixty billion in twenty twenty three. We know from
prelim data it went up in twenty twenty four. And
we are talking about a US reliance on Chinese computers,
(02:12):
consumer electronics, hair dryers, electric heated blankets, and that ties
into that Amazon story that spent so sober broke.
Speaker 2 (02:19):
And Amazon just turned negative as you were talking about
at ED. Let's just get the perspective of the global
trade war heating up China the EU both retaliating against
US tarifs. This is President Trump aims to bring back
manufacturing in America, setting all his eyes on.
Speaker 4 (02:34):
Apple jobs in advanced technologies. The President is looking at
all of those, he wants them to come back home.
Speaker 5 (02:40):
But iPhones specifically, is that's something that he thinks is
the kind of technology that can move to the US.
Speaker 4 (02:44):
Absolutely, he believes we have the labor, we have the workforce,
we have the resources to do it. And as you know,
Apple has invested five hundred billion dollars here in the
United States. So if Apple didn't think the United States
could do it, they probably wouldn't have put up that
big chunk of change.
Speaker 2 (02:58):
Well, as we all wait for more US made products,
Amazon meanwhile canceling orders on some China made goods. So,
according to sources and those Cadie Nines joins us from Washington,
and at the moment, the response is a coming thick
and fast, EU and China. What does the White House.
Speaker 6 (03:14):
Make of it?
Speaker 5 (03:16):
Well, the White House is sticking to its guns here, Caroline.
President Trump, while he has indicated he wants to make
a deal with China, wants China to come to him
and at this point, it doesn't look like China is
willing to have those conversations, as they have retaliated with
this eighty four percent tariff against all US imports in
exchange for one hundred and four percent levies the US
implemented as of twelve oh one am this morning. So
(03:36):
obviously an escalation in the trade war between the two
largest economies and potentially has the ability to choke off
the vast majority of trade that happens between the US
and China. Already we're seeing, obviously our reporting on Amazon
cutting off orders of things like air conditioning units or
beach shares. That is changing company behavior in terms of
where they want to source their inventory from. But it
also has the potential ramification to affect whether or non
(03:59):
American can access supply of things that don't easily have
alternative suppliers to China. At the moment, according to data
from the US Trade Commission, things like laptop computers for example,
PC monitors, gaming consoles, all of that has about a
seventy percent or more share of imports that come from
China specifically, so that is where you could start to
see some gaps emerging as this depending on how long
(04:23):
this continues, but the administration argues all of this has
an aim, and that aim is to bring back American manufacturing.
As we just heard from the White House Press Secretary
Caroline Levitt, but we've heard from others and the administration
as well. If you recalled, just this past weekend on
Sunday Morning television, the Commerce Secretary Howard Lutnik talked about
the army of millions and millions of people screwing in
tiny little screws and iPhones. He says, that's the kind
(04:44):
of thing they're bringing back to America.
Speaker 3 (04:47):
That aim is so interesting because for the last twenty
four hours I listened to everybody on Bloomberg Television, read
every story, and I think the market still thinks, what
is the aim here? Is it revenue generation for our country?
Bring manufact uring back. I usually would like to go
to the politics. I think I'm right in saying that
away from tariffs, President Trump has not yet spoken to
(05:08):
President she at any point since he took office. Am
I right?
Speaker 5 (05:13):
He has spoken to President She and he actually invited
him to his inauguration, but there hasn't been a conversation
really since this escalation of the trade war. The initial
tariffs that went into place regarding fentanyl, which first of
course was ten percent and twenty percent, then the eighty
four percent on top that has gone into effect as
of midnight tonight, But there have not been direct high
level talks between those two leaders. That there has been
(05:34):
communication at some lower rungs of the Chinese and US
government when it comes to trade. I guess we'll see
if that phone call is scheduled, because again, the President
and others in the Administration and White House have made
clear he is looking to make a deal with China here,
and we understand based off of our reporting and as
well as what the White House is saying, that there's
some seventy countries that have called into the White House
to try to begin negotiations. It's just not clear at
(05:56):
this time that China is one of them. In the meantime,
the Administration is our arguing that China fundamentally has been
messing with the US on trade and has been engaging
in unfair trade practices for years, and that is what
they are trying to reverse, which is one of the
reasons they use to justify tariffs. That it's not just
about bringing back American manufacturing. They also think it's about
lowering trade deficits with the US making trade fairer across
(06:19):
the globe.
Speaker 7 (06:19):
In addition to the.
Speaker 5 (06:20):
Revenue raising aspect, they also argue would be a benefit
of this. The thing is, if you have tariffs of
this level, like one hundred and four percent, that is
likely to reduce important volumes according to most economists you
would speak with, and that means less imports that you
actually can tear iff, which actually could mean that you're
not bringing in the kind of revenue levels you would
think that you wil Bloomberg Economics estimates that if tariffs
(06:41):
are intact as it stands now, they could bring in
about three hundred billion dollars a year because of the
reduction in imports. That's half of what the White Houses
argued could generate.
Speaker 3 (06:52):
Blimbers K lines, we appreciate it, Thank you very much.
Let's get more on the global tech markets perspective amid
what is an active trade war? A Sema Shah, Principal
Asset Management Chief Global Strategists, joins us, Now, when you
think about the mag seven, let's say Apple in particular
is an example, right, are you preparing for that Scenariokaylee outlined,
which is the onshoring of jobs in this country or
(07:13):
is this more about pricing in modeling a fundamental change
in how the world does trade effectively.
Speaker 6 (07:22):
I think everything is on the table at the moment.
I mean, one of the things that Cody was talking
about with regards to having a lot of those other
jobs that go into making the parts something to move
to the US, I mean one of the clear impacts
of that is the US has got much much higher
wage wages than parts of Asia, So you would be
looking at significant increase in cost brushes for these companies
(07:42):
for the mag seven impact on their margins and therefore
on their earnings growth potential. So there are so many
offsets of this, so it makes it quite difficult to
even fathom that you could see this complete alteration and
change in the way that I think the world has
got accustom to thinking about trade and a product. But
this is all encompassing. Of course, It's not just technology.
(08:03):
This is about every single product that you think through.
Because of global trade, every single part will have elements
of different countries about them, and shifting it back to
the US is simply very inflationary.
Speaker 3 (08:15):
I want to show the earnings calendar for the mag
seven and those names that have asteriskness to them are
still tensative right. They haven't confirmed the date. But there
is a split in the market I see this morning.
Many believe that we won't see a bottom in equity
markets until we have earnings calls and a revision to
guidance that's been given, or a complete removal of guidance.
(08:36):
Others say that earnings and guidance is not important. All
we need is a strong positive piece of political news.
Where do you stand, Seema, I think we need one
or the other.
Speaker 6 (08:48):
Either one would be important. I think probably the most
important would be if the administration walks back from tariffs
very significantly. Then you would see the market centerment improving.
And I think you see markets start to write, and
not a very very sharp rally, because I think some
fundamental damage has been done here, but certainly a rally
in terms of earnings guidance. I think one of the
things that we're waiting to see is that, look, if
(09:09):
recession really is on the cards, we need to see
a more realistic earnings outlook for companies across all sectors,
including technology, and it's only once you have that realistic forecast,
when you have got that forward guidance talking through what
the impact of tarists and this new global environment is,
only then can you start to think about where the
(09:29):
floor is. And then once you know where the flora is,
then you can start thinking forward.
Speaker 2 (09:33):
Why there are people buying if we're not sure where
the floor is in the moment, why is Apple in
the green for example?
Speaker 6 (09:41):
Well, I think one of the things that we've been
seeing for MAC seven has been really interesting for US
is I mean, from an asset allocation portfolio perspective, we
have been trying to move away from the tactical. It's
very difficult to be tactical when there's such an uncertain environment,
so you almost go back to your strategic positioning. From
a strategic perspective, we still like big tech if you're
looking out over five to ten year horizon. Certainly the
(10:01):
outlook has deteriorated even on the long term horizon, but
it's still fairly important from a global or a US
growth perspective. The other part of this is is that
typically in this kind of environment, when there is uncertainty,
when there are fears about what's going to happen, to
economic growth. You want companies which you've got the big
balance sheets, the positive cash flow, the fairly large motes
(10:22):
around them, and the Max seven dies still come into play.
And you've already seen a very significant valuation rerating in
the past couple of months, which means that at least
the Max seven the big tech companies are a little
bit head of the game in terms of having a
slightly more realistic pictures attached to them.
Speaker 2 (10:38):
It has to be said Apple having its worst four
day sell off since the year two thousand, many saying
from an RSI perspective relative strength index, it was over sold.
This must be the point at which you pick up
some of these shares. But seem who are the investor
base right now who are willing to buy into big tech?
You yourself sat in London. Are international buyers still coming in?
(10:58):
Are we seeing it more from not only funds in
the United States? For example?
Speaker 6 (11:03):
I think we have seen some retail invest is studying
to do their feed in them. They really believe in
the brand's perspective. So I think that's where you're seeing
a bit of a dip bike. But as I said,
you know, I mean the other thing to consider is
that whilst you do start to see if we see
some positive headlines coming through which can be sustained. Again,
these are the companies which have got that long term
earnings potential. So I think people have got an eye
(11:24):
on the idea that there could be a walk back
at any time. May not come, but certainly could happen
at any moment. So people do still want to have
exposure to these companies that can potentially ride out what
would you most likely be still a challenging economic environment
for the coming months.
Speaker 3 (11:40):
There's this note from Bank of America out this morning
that says a US bill typhoon could cost ninety nine
zero percent more than it currently does. But that is
a goal of this administration right bring jobs, manufacturing, jobs
in tech back to the United States or to the
United States for the first time. Is there any upside
or sort of silver lining or bright outcome that you
(12:01):
see with this tariff's process.
Speaker 8 (12:06):
I'm not sure if there's.
Speaker 6 (12:07):
Well, look I think over a long term perspective, you know,
a four or five year period, then maybe yes, there
could be some positive. You would have maybe a US
economy which is a bit stronger, you have a manufacturing
base which is more formidable, you have less reliance on
external partners, so that would be the positive, but it
really comes through in the longside. It's really in the
short term that you start to see this additional pain
coming through. So I think it's challenging to see some
(12:30):
really good positive news coming through. I guess the one
thing is though, is that you know to that point
where an iPhone could be significantly more expensive, that inflation
pressure just puts upper pressure on the long end of
the yeelk CUB. We're already being seen that playing out
in the last couple of days, and from our perspective,
that may be the pressure point from the Trump administration.
They have repeatedly talked about their focus on treasury yields,
(12:52):
so maybe this is what necessarily pushes them back from
the edge and you could see some negotiations coming through
in the next.
Speaker 2 (12:58):
Couple of days, or of a bio straight on the
bond market. At least, yealds up about nine basis points
in the ten ure. Simashah and Principal Asset Management, thanks
so much for joining us.
Speaker 7 (13:07):
Coming up.
Speaker 2 (13:07):
Look as companies they race to adjust plans amid the
trade tensions. Neither the US or China appears to be
backing down. We'll have more on the impact for the
tech sector. This has been their technology.
Speaker 9 (13:28):
China's paid almost seven hundred billion dollars in tariffs under me,
and then they say Donald Trump hasn't been tough on China.
Speaker 2 (13:38):
Meanwhile, Apple's lost about seven hundred billion dollars worth of
its market cap since the tariffs were imposed. Let's get
more on what the one hundred and four percent tariffs
on Chinese goods could mean for the tech world, and
of course the eight percent counter tariff on US exports
to China. Riva Gujano's with US director for Roodium Group Riva.
It's really interesting to understand how supply chains are going
(13:59):
to be impacted by all of this, because we know
that in many ways China is the assembly point for apples.
Some of the products in an Apple phone are actually
made in Kentucky and ship to China and then ship
back to US. But ultimately, are we in a game
of chicken when it comes to US China tip for
tat right now?
Speaker 10 (14:14):
Well, yeah, at one hundred and four percent tariffs, I'd
say so. And so yeah, there are loaded assumptions on
both the US and the Chinese sides over this trade war.
Each side believes the others, in the weaker economic position
that the other one will fold, and Beijing at this
point is basically saying bring it right. They're counting on
US inventories to get shaved down. People checking their Amazon
(14:37):
orders and seeing that they're not coming through, going to Walmart,
seeing their shelves empty out, and so at that point,
this is obviously going to force a conversation, but to
what end. Right, there's not much fodder for real negotiation here.
You could have some sort of a reset, maybe getting
back to let's say fifty four percent tariffs, but that's
(14:58):
not much of a win here right after this scale
of disruption, and already supply chains as you as you mentioned,
are going to be greatly disrupted.
Speaker 2 (15:06):
We've heard time and time again that the US thinks
China wants to make a deal. Do you think that
ultimately it does that we ever get to a better
outcome in this scenario, because there are companies currently locked
not knowing what to do in this scenario as to
whether the tariff's a short term a long term.
Speaker 10 (15:22):
Look, China would of course love a real negotiation with
the US that spans into other domains as well, to say,
for example, okay, if the US wants to reduce its
trade deficit with China, then fine, let's talk about large
scale purchases. Let's talk about importing more in video semiconductors,
for example, which would in part then blow apart the
(15:42):
export control regime. You can see how Beijing would be
angling for that now with that happen, I think that's
very low likelihood because remember we're just talking about a
conflict spiral in the trade domain right now. There is
a whole other layer here when it comes to the
tech controls trajectory escalation on that front also, so how
China is getting more creative with its own retaliatory toolkit,
(16:04):
which is going to put multinationals in China, particularly tech companies,
in a very difficult position in the months ahead.
Speaker 3 (16:10):
So I want to stay on this point because for
the technology industry, tariffs are one tool or policy point,
and the export of technology and the controls and those exports,
as you point out, were the most significant prior to
last week. Do you expect both to increase? In other words,
where we see further specific controls by the United States
(16:32):
on cutting edge GPUs and other technology.
Speaker 10 (16:36):
So attention span is a question right for the current
US administration, We'll have to see you as BIS under
commerce is starting to ramp up, is it going to
have the latitude to patch up export controls? For example,
there have been pending controls to expand chip controls to
cover for example, in VIDEAH twenty chips in the wake
(16:57):
of deep Seek's big breakthrough. But there's more than that, right,
there's a bigger conversation around how do you evolve economic
security standards that effectively exclude China from AI infrastructure build
outs globally. So there's a lot more that's coming on
the tech front. And meanwhile, China's looking at a number
(17:18):
of retaliatory tools where it's singling out US big tech
companies as well.
Speaker 3 (17:23):
It's REVA. How do you interpret China's responses China's actions.
Speaker 10 (17:26):
In this, Yeah, so a few things, right, So when
you look beyond the tip for tat on the tariffs, right,
China's doing some interesting things where, for example, in it's
implementing provisions for the Anti Foreign Sanctions Law, it's talking
about countermeasures that include suspending IP rights for US companies
(17:47):
in China. That's explosive. Right, if China goes down that path,
that's a very slippery slope. That's something that's going to
spread alarm, not just to US companies, right, but Japanese,
European everyone, once you start to break apart those norms. Moreover,
you know, China has its anti monopoly arm sammer that
has veto power over a number of strategic m and
(18:08):
a around the world. There are a lot of strategic
deals that are supposed to be struck as a result
of these trade wars. At least that's the intent of
the administration. We still don't know, for example, what's going
to happen with Intel and TSMC. Right as Intel has
been struggling, do you really think that the US is
going to recognize the Chinese veto over a major merger
(18:29):
that is based on national security arguments? So we're already
vearying toward this conflict of law conundrum on that front,
as well as on the IP front, which again is
a very slippery slope for tech companies.
Speaker 3 (18:44):
With Gujon, director at Roodium Group, really great having the show.
Speaker 8 (18:47):
Thank you.
Speaker 2 (18:54):
President Trump's AI promises. They started strong with the announcement
of a five hundred billion dollar style Gate infrastructure project
back in January. Remember, but his new Liberation Day agenda
looks set to undermine those earlier AI ambitions. Bluemberg Opinion
columnists Daily writing, the Trump taroff agenda risks a cascading
effect that will drag down the America AI effort. The
(19:15):
new economic order could force the American AI industry to
compete on China's terms rather than harness its own strengths.
Davely is with us now. And when you say compete
on China terms, ultimately it's about forcing them not to
have access to the most sophistic GPUs and therefore having
to do more with less. We become more Deep.
Speaker 11 (19:34):
Seek absolutely exactly like Deep Sea. I mean, you remember
when there was the market sell off when deep Seek
made its arrival because everyone thought, wow, China knows how
to do this more cheaply and with less computing power
and so on. But the American response, and the response
that we got from the likes of Saturn Adella at
Microsoft was don't worry, because our differentiate is we can
(19:55):
do this on a bigger scale with more computing power.
We can serve more people, we can do more inferencing.
You know, the powering of AI once you've you've trained it.
Now if all of that gets more expensive, which these
towers seems set to do, then all of a sudden
that advantage doesn't go away completely, but I think it
becomes just harder to deploy, and it could take longer
(20:15):
to deploy it as well. So I've had, you know,
I've talking to a number of people who have said,
maybe if you're a small startup in the space, you
might be thinking maybe we could try and become more
of a deep seek than you know, an open AI
for example.
Speaker 3 (20:28):
Well, your core point is that the ability of a
Meta or an Amazon or a Microsoft to invest was
built on its core businesses and that is where the
uncertainty impact comes. I think at least.
Speaker 11 (20:40):
Yeah, absolutely, And last earning season, all of these companies
came out and said and shared their capex plans for
the year, and they were huge. I think I tossed
up at one point more than three hundred and fifty
billion dollars that is going to be spent on data
centers and you know, getting more energy and so forth.
That money, even if they keep at those levels, which
I think is in question, it's not going to go
(21:02):
as far because building these data centers just got considerably
more expensive, even though the sort of core component of
the semiconductor right now is the subject to a tariff,
although some are speculating that it might be in the
not to some future. So yes, and all of that
spending was concocted and agreed to it, you know, backed
by investors on the basis that companies like Apple have
(21:23):
the iPhone and it was a rowing business, or companies
like Meta have this great advertising business that just prints money.
That may not be the case anymore.
Speaker 3 (21:33):
Daily a Bloomberg opinion, it's a must read today. Liberation day,
Thank you very much.
Speaker 11 (21:45):
This is like uncharted territory we are talking about here.
Speaker 12 (21:49):
It's really tough to be a technology You have to
wear a company right now.
Speaker 13 (21:52):
I think the more significant area that is a factor
is the Asian nations to have deeply and better supply Chaine.
Speaker 9 (21:58):
Obviously, Apple is more of a because of the tariffs
and what they manufacture in China. Right the rest of
the MAC seven, more of the communication names. They're a
little bit better space, but it's not as if anyone's
in great space.
Speaker 12 (22:11):
From a valuation perspective, I think the good news is
we don't have a valuation problem in tech.
Speaker 14 (22:16):
Mega SIN seven is something like fifty five percent of
profits coming from overseas, So while they have a lot
of secular AI driven growth, they also tend to have
a lot of international driven growth. So we don't really
see MAG seven coming back to the fore. If these
tariffs stick.
Speaker 12 (22:30):
Big tech has massive recash flow generation, even if we
kind of discount some of the tariff issues at hand.
Speaker 3 (22:38):
Right now, that's what some of Bloomberg Television's recent guests
had to say about the impact of tariffs on the
tech sector. And this is what markets look like right now.
Way off session highs on the Nasdaq one hundred, you know,
I go to the NAZDAK one hundred cause concentration of tech.
But then as that Golden Dragon China index really interested US,
listed ADRs of many Chinese technology companies been higher two
(23:00):
and a half percent now lowering the session, and we're
trying to digest China's retaliative measures single names. This is
what we're looking like in the green. Apple continues to
push hiring. Caroline made a really important point earlier prior
to this session, four straight days of declines where Apple
experienced its biggest drop since the year two thousand. That's important.
We should keep saying.
Speaker 1 (23:20):
That, KARC.
Speaker 2 (23:21):
We should. But also what's interesting in another data point
that you and I saw today, the PC shipment data,
it actually grew the fastest quarterly pace in four years.
Has has companies stocked up inventory ahead of tariffs? Look desktops, workstations,
portable computers. They rose more than nine percent, according to
market tracker Canalis. For more on how these tarifts are
(23:41):
impacting tech supply chains, We've got the perfect guest, David Warwick,
executive vice president over an overhaul a supply chain visibility
and risk management company, who work for Microsoft for years
overseeing their global supply chain. Have companies how long have
they bought in terms of inventory because they seem to
see the risk while investors didn't.
Speaker 15 (24:01):
I mean, and I think everybody has known this is
coming at some level, and so what they've been trying
to do is they've been trying.
Speaker 8 (24:06):
To prepare as best they can.
Speaker 15 (24:08):
And you know, even this week, you know, in the
last seven or ten days, what we've seen is an
increase in rates for air cargo coming out of China,
which means that you know, supply is drying up a
little bit, and people are still trying to move as
much product as they can before they were impacted by tariffs.
Speaker 8 (24:26):
So I think that companies have tried to be smart,
They've tried.
Speaker 15 (24:28):
To position themselves as best they can, but I'm not
sure that anybody actually saw the sheer extent of these
tariffs and what it would mean.
Speaker 2 (24:36):
You are currently still advising the Microsoft's the dicens. I
go to the data that shows that China is basically
ninety percent of all consoles coming from China to the
United States, and I'm interested as what on earth Xbox
executives do at this moment. Are they thinking, Okay, longer term,
we shift our supply chain even further away from China,
(24:57):
or do they just ride this out in the short term.
Speaker 8 (25:00):
I think that it's a very challenging situation to be in.
Speaker 15 (25:03):
I think that, you know, the advice that I'm giving
a lot of companies right now is basically to hurry
up and wait and making a strategic decision today could
fall apart very quickly within the next week, as we've
kind of seen over the last month, Caroline, you know,
we saw the Mexico, Canada dispute. We saw a lot
of things happening there very quickly. If you'd made a
(25:24):
strategic decision to move everything overnight, you could have been
caught on the wrong side of that.
Speaker 8 (25:30):
So right now, I think that you know, it's not
just the consoles.
Speaker 15 (25:33):
It's not just PCs, it's across the board, And I
think that companies have to be really, really thoughtful in
terms of their immediate next steps versus their longer term strategies.
If the tireff stick and if we have to ride
out this entire storm, it's a different set of decisions
that you would make if you knew that this was
going to happen for you know, maybe three months and
then start to taper off.
Speaker 8 (25:54):
So it's a very challenging time for.
Speaker 15 (25:56):
Supply chains and trying to figure out the short term
versus the media term versus the long term.
Speaker 3 (26:02):
David, explain to our audience how an iPhone would be
built or assembled in the United States and what the
price impact would be based on your experience.
Speaker 15 (26:15):
That's a challenging question, Ed, I'm not sure you know,
I'm not sure that I understand the full extent of
the Apple supply chain. But look, you've got to understand
that this is not about just moving a manufacturing plant.
This is an ecosystem. The tier two suppliers, the Tier
three suppliers have all built up over time around those
specific factories in China.
Speaker 8 (26:34):
Or in Vietnam or in India, and.
Speaker 15 (26:36):
It takes time to develop that ecosystem. So what would
it take. Well, you have to build a factory. Then
you have to develop that ecosystem to be able to
supply that factory. You have to source your raw materials,
you have to source your semi finished goods, your sub assemblies.
Speaker 8 (26:50):
And bring all of those in. So this isn't just
flicking a switch.
Speaker 15 (26:54):
And you build a new factory and everything starts up again.
It takes time to build that ecosystem them and to
make sure that your supply chain meains intact from a
quality perspective and everything else.
Speaker 3 (27:05):
That was a pretty good answer, David. To be fair,
I think that sums up well. And I know Tesla
in its local supply chain in Shanghai has a similar situation.
What happens in four years time if there's a completely
different administration in the White House and all of the
tariffs get undone and the executives at the companies you
advise decided to do something extreme in adjusting their supply
(27:27):
chain here and now.
Speaker 15 (27:29):
I think in the first case, I'll be a little
bit bored. If at all reverses, then you know, I'm
not sure what I'll be doing every day. But you know,
I think that this short term versus medium term versus
long term, I think that that is where we're caught
in a trap right now, whereby it's very difficult to
make that long term decision because to your point, a
new administration could decide to go in a very different
(27:52):
direction from a trade perspective, and so supply chains have
to be cautiously. We were taught some lessons over the
last five years through COVID. We realized that our supply
chains were ultimately fragile, and we had to find a
better way to build some resilience into those supply chains.
So we diversified a little bit. We started to move
manufacturing to other countries. We started to do very sensible things.
(28:14):
Did we do that to the level that we should
have done it? Maybe not, Maybe there was more room
to actually move things aby, But I think supply chains
now you know, we are problem solver. Supply chain practitioners
are designed to solve problems. This is another major problem.
Call it a gray swan or a black swan. It's
another major problem that we have to deal with. It
will force a change in terms of high supply chains.
(28:37):
Think high supply chains are engineered over the coming years.
Speaker 2 (28:40):
And ultimately you might have tried to front run by
moving out of China as many have take it Apple
more into India and Vietnam, and ultimately they've been tariff too.
I mean, of course to a less extent when it
comes to India. But longer term, then are we seeing
companies willing to hit the margin when you've got a
record gross margin of forty six point nine percent for
(29:02):
Apple recently. In the short term they swallow it, David,
Is that what Dyson's and Microsoft do? They take the
hit until they get long term charity.
Speaker 15 (29:11):
I think in the short term, any supply chain will
look at what can be done. So if you've already
diversified to some level, and you've moved production to more
friendlier tariff countries, you would look now to say, is
there any excess capacity available? Can I move maybe from
a China to a Philippines or to Malaysia to reduce
(29:31):
some of that tariff burden.
Speaker 8 (29:33):
However, you know, the longer term.
Speaker 15 (29:35):
Is going to be Okay, what does a tar friendly
country actually look like?
Speaker 8 (29:40):
Have we actually moved the dynamics too far?
Speaker 15 (29:43):
And you know, we're all hoping that this will actually
roll over. We are all hoping that the president will
do as he says and he is open to negotiation,
and the countries are coming to the table. We've heard today,
South Korea, Japan are already coming to the table.
Speaker 8 (29:59):
From a supply chain.
Speaker 15 (30:00):
Perspective, we're hoping that common sense will prevail and there
will be a more balanced trading agreements set setup trading
agreements put in place in the coming weeks and months,
which will alleviate some of the current pin but it
still doesn't take away from the longer term strategy nine
needs to be figured on, and that's what supply chains
are going to be working hard to do.
Speaker 2 (30:19):
David. I'm going to make a really pointed question on
many of the executives you're talking to taking it seriously
that they need to build or assemble in the United
States more fully, a lot.
Speaker 15 (30:30):
Of executives are certainly having the discussion, they're looking at
the implications of obviously the capital cost and also the
timeline is involved. You know, setting up a factory in
the United States to manufacture in the United States.
Speaker 8 (30:44):
You don't do that overnight.
Speaker 15 (30:46):
And then, as I said earlier, it's the ecosystem which
is the really important part. How long will it take
to actually, you know, bring all those things together.
Speaker 8 (30:54):
I answered a question earlier.
Speaker 15 (30:55):
On this week in a different interview where somebody said, hey,
you know, for a American med products, how are going
to be impacted by the new China tariffs?
Speaker 8 (31:05):
And my question to that question.
Speaker 15 (31:07):
Was, well, what do you mean by American made products?
You're talking about chocolate in this instance, you know, where
does the coca come from to make that chocolate?
Speaker 8 (31:15):
It in itself is subject.
Speaker 15 (31:17):
To a tariff coming into the US to manufacture in
the US.
Speaker 8 (31:20):
Supply chains are complicated. Supply chains are.
Speaker 15 (31:23):
Very very complex elements, and so figuring these pieces out
is everything that executives are doing right now to understand
the impact but also to understand what can be done next.
Speaker 3 (31:35):
Hair dryers, toasters all come from China as well. David
Warwick from Overhaul, really great conversation. Thank you for joining US.
Speaker 2 (31:41):
Care now coming up. We're going to get the VC
the private market perspective. Ben Lahra is with US VC
firm Lara Hippo is actually just closed a mammoth two
hundred million dollars round for a new fund. Amiddle this uncertainty,
how they do it? This is a broom, big technology
(32:04):
VC firm. Lara Hippo is just closed a two hundred
million dollar fund. It's ninth early stage one. This is
vcs and startups faced Tarif anxiety, many opting to pause
plans for IPOs. But yet the conviction is there from LPs.
Let's talk about why Nara Hippo managing partner Ben Lara
joins us. Now, Ben, how did you get this over
the line in this current environment?
Speaker 16 (32:27):
Yeah, I think Look, one of the one of the
things we're proudest of is that we, over a long
period of time, have been really consistent and I think
pretty disciplined. We do one thing, we do one thing well,
which is true early stage investing. And so while markets
rise and fall, and you know, lots of things outside
of our control happened in the background, we don't tend
(32:50):
to get sucked into sort of hype cycles. And and
I you know, it's sort of been reflected in our returns,
and so we're fortunate that LPs continue to support us,
and you know, we're but let's say, we're happy to
have this behind us.
Speaker 3 (33:03):
In this book, Ben, you know, we've discussed for many
years how early stage companies and their investors are more
like insulated from public markets and macro events until what
happened with Silicon Valley Bank and it became about operational
cash flow. Right, But you're still doing a new fund.
This report's about andresen doing a very very big fund.
(33:25):
Just talk to me about that environment more specifically at
the early stage.
Speaker 16 (33:30):
Yeah, And actually I think the SVB crisis was for
certain funds a wake up call where you know, that
was sort of coming out of a hype cycle in
twenty one where money was flowing very freely. Companies were
raising lots of money and chasing growth at all costs.
And I think even for us at LH, we took
(33:50):
a moment to be very introspective and say, are we
on a company by company by company bases making sure
that folks are being really responsible and not falling prey
to lots of late stage money chasing hot companies and
driving some not great behaviors. And right now as we
sort of enter another moment of prices, I think that
(34:11):
some of the learnings from from that last significant sort
of blip have set at least our portfolio up in
a way where we feel like we have arms around
every company in the portfolio, where companies on a quarter
by quarter basis are burning less and less are being
are just taking more responsibility for building really sustainable long
term businesses and falling a little bit less sort of
(34:34):
a victim to getting on the late stage VC, you know,
sort of hamster wheel.
Speaker 3 (34:41):
Well kind of companies. Where are the companies? And how
much of an unlock has AI been? Because what I
here's my in box all the time right now and
is discussed in the zeitgeist, is you don't need to
learn how to code anymore. You know, previously, if you
pitched at Y Combinator or something and you didn't code
or have anyone your team that was a computer science
that would be dead for you. That avenue. I think
(35:02):
that's changed, right, Yeah.
Speaker 16 (35:05):
Look, I mean our goal has always been sort of
to find great talent as true early stage investors. That's
the key to every investment that we make, and AI
is going to be an unlock in every single industry.
And frankly, if you're not leaning in incredibly heavily to
AI as an existing business or certainly as a sort
of Denobo startup, you're missing a huge opportunity to create
(35:26):
efficiency and move faster. And the tools that exist now
in terms of you know, helping companies code and build
product faster are unbelievable. There are companies in our portfolio
that are writing less than five percent of code by
hand at this point and are really just prompting and
managing third party AI software who are helping them with
(35:48):
much smaller teams, create unbelievable leverage in their business. It's
really exciting, but it's also terrifying because it's moving so quickly,
and you know, we're kitting ourselves if we know how
this all sort of where this land and where the
value falls and what is owned by the big large
language models and what's going to be owned by application
layer companies, and so you know, we take solace in
(36:11):
the idea that we're going to back incredible people and
they're going to navigate through this challenging environment and we're
going to be there to help keep them on the rails.
Speaker 2 (36:19):
A big personal fan of ba ble Bar, I can
imagine that's the sort of company that's having to think
about it supply chains right now. Ben. But I go
to that company because many associate you with consumer focused tech,
but you are exposed to enterprise. You've got fingers in
the fintech space in DeFi as well. You're across the board.
But when you're looking at the consumer opportunity right now, Ben,
(36:40):
how unnerving is that?
Speaker 8 (36:43):
Yeah?
Speaker 16 (36:43):
So I think that you know, we've been talking to
our sort of scaled consumer companies about tariffs and what
the implications of this could would should be over the
last several months. I think the best and most mature
businesses have been planning for this and have you know,
there's there's and have some mitigations in place. But the
(37:05):
reality is that there are companies that this is gonna
punch directly in the face and and it's going to
be unpleasant and they're going to need to figure out
how to manage through it. I think people are also
it's just so unclear.
Speaker 7 (37:16):
You know that the.
Speaker 16 (37:17):
Floor moves by the hour right now, and so I
think people don't want to over rotate and over respond
and you know, decide that they're absolutely positively pulling out
of China on a permanent basis. But it's going to
be It's something that companies are going to manage through.
People had to manage through COVID, and we saw the
best founders handle that not easily, but survive and thrive
(37:40):
on the backside of it. And the same is going
to happen here. I really believe that the best founders fight.
Speaker 2 (37:45):
Away and then you're known for investing right here in
New York. Is that still a thesis?
Speaker 16 (37:49):
Yeah, I mean we are huge believers in New York.
I grew up in New York. We started the fund
here in New York on a sort of high level
bet that New York has always had unbelievable talent, but
twenty years ago that talent naturally matriculated first to Wall Street,
and over time that talent now wants to go work
in tech. That's the biggest growth area that New York
(38:10):
has seen over the last decade in terms of job
growth and company growth. We think it's going to continue,
and we again see that sort of overlap of very
early stage in New York as a competitive edge for
US in a space where we have real right to win.
Speaker 8 (38:25):
So we're going to keep doing that.
Speaker 3 (38:27):
Ben Lara, Larryhip, it's great to have you back on
the program. Appreciate it. Thank you, Caroline. Some news in talking.
Speaker 2 (38:31):
Tech, Yeah, time for talking tech. First up, Google ed
plans to help developers build AI assistance for a variety
of tasks at its annual Cloud Computing conference in Las
Vegas yesterday. The company said it would release the Agent
Development Kit, which can increase dependence on and revenue for
as cloud services. Plus the EU It's just presented a
plan to boost its AI industry and help it compete
(38:52):
more aggressively with the US and China. One of the
ways Europe plans to bolster regional AI developments is a
commitment to build a network of AI factories and create
specialized labs to improve the access of startups to high
quality training data. And The Energy and Commerce Committee just
approved a bipartisan bill known as Take It Down Act,
which aims to curb the spread of unauthorized deep fake pornography.
(39:14):
Getting the bill to the President's desk could mark one
of the most significant actions by Congress to respond to
risks and harms posed by AI ed.
Speaker 3 (39:22):
Another news story we're watching, a Meta whistleblow is set
to testify before Congress, claiming that the social media giant
threaten US national security as it cozied up with China.
The former Meta executive alleges that the company brief members
of the CCP on emerging tech, which includes AI. Metas
denying those allegations. For let's bringing Bloomberg's Riley Griffin here
(39:43):
in SF what do we need to watch for? This
is going to happen very soon.
Speaker 7 (39:46):
Yes, this is coming later today. In Washington, d C.
We're seeing Sarah wyn Williams, the author of the best
selling memoir Now Careless People, be asked to speak before
lawmakers about her what she witnessed the dealings Meta in
China back through her tenure in twenty seventeen. The interesting
thing about her prepared remarks, which we've gotten our hands
(40:08):
on here at Bloomberg, is that she's going to make
the case that Meta's discussions with China have actually helped
it in its AI ambitions in this global race arms
race that she's describing around AI.
Speaker 2 (40:21):
What's interesting is Meta's response has been clear on all
of this, Riley, and for example, they've said that Mark
Zackerberg has been public about the company's past interest in
offering services in China, and details were widely reported beginning
over a decade ago. But the fact is this, says
Andy Stone, we do not operate our services in China today.
What will Meta's response be, particularly in this global environment
(40:44):
of US versus China.
Speaker 7 (40:46):
Meta is holding firm that it does not offer services
like Facebook, Instagram and China. Sarah and Williams, however, will
be contending that it continues to make a great deal
of its revenue out of China. About eight billion last
year in advertising revenue came from China, and so she
is making the case that this is a present discussion.
(41:09):
While Meta calls this old news, Sarah and Williams is
making this about the here and now and about this
arms race and about the money that matter continues to make.
Speaker 2 (41:17):
Well, we'll watch for that hearing later today. Riley Griffin,
thanks for bringing it to us. Now let's stick with
social media. Can't Look Away. It is a new film
by Bluemberg Originals, which followed a team of lawyers battling
tech giants on behalf of families. His children suffered great harm.
Link to social media, and the film is based on
the reporting by Our Burero's Varion Olivia Carvill, who joins us.
(41:38):
Now the reaction, of course, is to the legal battle
that is trying to hold big tech accountable. Is it
managing to in the courts right now?
Speaker 8 (41:48):
We don't know yet.
Speaker 13 (41:49):
There are positive signs that some of these cases are
breaking through and that we might see at least one
lawsuit pus section two thirty of the Communications Decency Act,
which is really been that immunity blanket for big tech
over the past two decades, preventing them from being held
liable for user harms like what are portrayed in the film,
(42:10):
And as it currently stands, it looks like we are
going to see one of these cases go to trial
later this year. So it's kind of all eyes on
the justice system right now.
Speaker 3 (42:19):
Olivia Peace, could you explain what the process of making
the film was like? And it's a different medium, but
I guess the reporting that went into it from you.
Speaker 13 (42:28):
Yeah, it's been a two and a half year journey
to get here. I first approached Christen Powers, Bloomberg's deputy
head of media, asking if it might be possible to
shadow this law firm, and we really dove in without
knowing where these cases were going to go or if
any of them would eventually reach trial.
Speaker 2 (42:45):
So it was a leap of.
Speaker 13 (42:46):
Faith by Bloomberg and the production team at DCTV, particularly
directors Met O'Neil and Perry Peltz. Documentary is a completely
different medium to print, which is what I'm used to.
It's like a jigsaw puzzle trying to pull together all
these different scenes, and you really need to have visual
segues between talking heads on camera, and that's something that
(43:07):
you know, It's been a huge learning process for me
trying to understand what it takes to bring a documentary
to the screens. And I also think that there needs
to be a broader message in the film and for
us with Can't Look Away, that is really the fight
for corporate accountability. Can't look Away is about, you know
exactly what that title implies, That there's a generation of
(43:28):
kids who are glued to their screens and quite literally
can't look away, and the lawyers and families fighting to
hold those companies accountable for this situation.
Speaker 2 (43:37):
Protections continue to come though Matter has brought them to Instagram,
bringing them also to Facebook. Some of their other products.
You've had Roblock CEO joining us recently with more parental controls.
I'm interested as to the visuals that Mark Zuckerberg himself
had to be confronted with. The pictures of the children
have had tragic ends to consumption of social media. They're
(43:57):
getting it, do you think or not?
Speaker 16 (44:00):
Well?
Speaker 13 (44:00):
I think the whole conversation around social media has shifted
in recent years. We've seen it move from a question
of can these platforms how mental health?
Speaker 2 (44:08):
Are they really good for our kids?
Speaker 13 (44:10):
And it's moved towards this is a full blown public
health crisis for our children. And that's what I'm hearing
now from the experts because we've seen books like Jonathan
Height's Anxious Generations, Sarah wyn Williams Careless People, which we're
just talking about on this show Netflix series like Adolescents,
really pushing the cultural conversation towards is this a good
(44:32):
situation for our children?
Speaker 2 (44:34):
Is this what we want them to be doing?
Speaker 13 (44:36):
And let's just think about the facts. Ninety five percent
of kids use social media, more than a third are
showing signs of addiction. And this film was chronicling the
very extreme harms that some of those kids have experienced
in the digital world.
Speaker 2 (44:50):
It's been such a long journey of reporting and now
in to the big theaters as well. Olivia Carvill, we
thank you so much. That does it for this addition
of let's just check in on these markets for a moment.
Speaker 1 (45:02):
Ed.
Speaker 2 (45:03):
We're currently seeing a whitsawing on the day, Magnificent sevens
staying higher to the tune of one point three percent,
but who knows how we'll close today and then as
that one hundred rebounding from yesterday's sellof This is Bloomberg
Technology
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