April 11, 2025 • 45 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss how the US-China tit-for-tat tariffs are impacting tech policy. Plus, Mitchell Green, Managing Partner at Lead Edge Capital discusses why he’s still bullish on China and why he hasn't purchased more ByteDance shares despite the company's 29% revenue growth. And Rylan Hamilton, CEO of Blue Water Autonomy describes the startup’s efforts to build autonomous ships as the US looks to boost its shipbuilding capacity.
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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 (00:35):
Live from New York and San Francisco. This is Bloomberg Technology.
The trade war between the US and China it continues,
China raising its own tariffs on all US goods from
eighty four percent to one hundred and twenty five percent
starting tomorrow, after the US raised tariffs to one hundred
and forty five percent on China. China saying your tariffs
are a joke. United States, It's no joke to investors.
(00:57):
What an extraordinary week we have had. We are are
currently up almost six percent over the course of the
past five trading days ed on the NASDAP. But it
really doesn't paint the picture of the extent of the
whiplash that we've seen throughout that week as you pull
back on tariffs towards other nations. Look at what we've
done on the month, though, this context is needed sure
up on the week. On the downside, for the course
(01:18):
of April the trading month were off five percent on
the nast like one hundred dig into the details.
Speaker 3 (01:22):
ED.
Speaker 4 (01:23):
Yeah, I'm looking at the chip sector and across semi conductors.
There's divergence in the session between fad less names, those
American companies that design chips that don't make them, and
those with domestic operations in the US. And buried among
the headlines overnight was the Chinese regulator and industry body saying,
by the way, when we think about tariffs on US
goods imposed by China, this is how we'll define it
(01:46):
you and are going to get into that throughout the
course of the show. We have to talk about Apple.
I feel like Bloomberg Technology as a show was early
to this discussion on Monday. Will the US build an
iPhone in the future five days we're higher, but it's
been so volatile and the analysis from different corners of
the market is so different. I think we should get
into it.
Speaker 2 (02:05):
Carry we should because we've been debating time and time again.
A made in America iPhone is the goal that President
Trump believes could be a reality ED. But replicating China's
advanced supply chain it's skilled labor in the United States
will prove nigh on impossible for the tech giant and
rak Rana of Blue meg Intelligence joins us, You've got
a new note out just talking about the implications of
(02:27):
taris on the margin of Apple. But what would it
do to the margin of Apple if they ever brought
production for the iPhone to the United States?
Speaker 5 (02:33):
Anag see, I think a lot would depend on our
materials that go there, the component costs, the labor cost,
and I think it'll be very hard for Apple to
you know, let's say, raise the price of the phone
to two x and then make it in the US.
It has to be done in a way that actually
keeps the cost down and at that point, I mean
keeps their margins. The reason why Apple shines compares to
(02:55):
any of the consumer electronics companies because it has very
high gross margins compared to you know, let's say somebody
who just sells an Android phone in Asia, for example.
Speaker 4 (03:07):
But those margins run the threats heem. Let's bring up
Anaag's research that published I think about thirty minutes ago,
twenty minutes ago. I'm just going to read it. Our
analysis suggests a margin impact of one hundred to one
hundred and seventy basis points for every ten percent tariff
increase on China manufactured products. Apple could mitigate some of
the impact through price increases. You've been talking about price
(03:27):
increases a week. The key question seems to beware and
you think that will be on the services side, not
on the handsets.
Speaker 5 (03:35):
Because as I said, it's you know, it's very difficult
to take a thousand dollars phone and double it up
two thousand, but it's slightly easier to take a you know,
two ninety nine dollars to ninety nine nicloud plan and
let's say make it up to five or seven dollars.
And also remember some of those you know, revenue streams.
When it comes to the services business, especially cloud services,
they have very high incremental margins. These are products with
(03:58):
seventy five, eighty percent or margins much much more than
the product side of it. And it doesn't really pinch
the consumer that much. And you know, they could praise
it as it's only going to be done you know,
over the next six months or the time period when
the tabs are and then they can scale it back.
I think from a consumer point of view, it is less,
you know, it hurts them less. But again, you know,
(04:19):
that's just one service.
Speaker 6 (04:20):
I talk about.
Speaker 5 (04:21):
They could be others as well, but I feel very,
you know, strongly that I don't think they can raise
the price of a phone up by you know, fifty
sixty percent, maybe maybe slightly, maybe five percent, ten percent
or so, but anything above that, you know, I think
destructs demand.
Speaker 4 (04:35):
Aner Rana Bloomberg Intelligence, thank you very much. They stick
with Apple and the impact of tariffs on technology. Tony
one trow Price, science and Tech equity portfolio manager joins us.
Now Apple the number one holding a tro Price is
Science and Tech fund that Tony oversees. Tony, when I
was learning about the technology industry and the markets and
(04:58):
making my way through Bloomberg Televisions newsroom, I was always
told that Apple and names like it had an entrench
market position, strong balance sheet, and in crises or recession,
that's where they would survive and thrive. But I think
right now, you can't necessarily look back at history and precedent.
(05:18):
How on earth are you modeling the future of this company?
Speaker 7 (05:21):
Yeah, well it's a great question.
Speaker 8 (05:23):
Obviously, it's historically been a kind of a balancing name.
Just that whether a real kind of stock market storm,
I'd say here, you know, I think that there is
a lot of fear in the market and concerns amount
of trade war and what deglobalization could possibly do to
kind of Apple's manufacturing advantage in China. And so you know,
when I take a step back, they do have diversified
(05:46):
supply chains.
Speaker 7 (05:47):
I think they are.
Speaker 8 (05:48):
They do have the ability to move around, and they
do produce iPhones.
Speaker 7 (05:51):
In India, and when we think.
Speaker 8 (05:53):
About the US, the consumption of iPhones is roughly twenty
five or thirty percent, and so I expect that there's
some flexibility to move some of that production to India
more and therefore diversify that risk a bit. And you know,
at the end of the day, I think that it
is about like, you know, how much of a staple
(06:14):
the iPhone is, and so there's price you know, kind
of sensitively among the customer to actually you'll pay up.
Speaker 7 (06:21):
For the iPhone. I think that actually could be bullish
for the stock.
Speaker 8 (06:24):
That just demonstrates more of a it's more of a
staple than people appreciate. But here I do think that
there is a lot of fear there and so generally,
you know, historically you've been a reward for leaning into weakness.
Speaker 2 (06:36):
Then in this weakness Tony. Yes, on the day Apple
is trading somewhat higher. On the week it is too,
but on the course of the month it's down fourteen percent.
Speaker 9 (06:45):
Have you been adding to your number one holding?
Speaker 2 (06:47):
Has it at any point looked attract him to get
back in with more addition, I think, you know, the.
Speaker 8 (06:53):
Company's still really well positioned over the long term. You
look at like the ecosystem they built, the quality of
the product, and then you're also an iPhone upgrade cycle coming,
and you know, a placement cycle has been elongated, and
if you get a new form factor, I think that
could be like really attractive.
Speaker 7 (07:09):
And you know, at the end of the day, like
the evaluation has become more.
Speaker 8 (07:15):
Attractive, especially at these levels versus where they were, you know,
six and nine months ago. You know, in addition, it
is one of the Max seven that hasn't been spending
a ton on large language models.
Speaker 7 (07:27):
So the capital intensity.
Speaker 8 (07:28):
And the free cash flow quality of the company is
still very, very high quality.
Speaker 2 (07:34):
Go there, Tony for a moment, Because people were ringing
their hands about Apple before the trade war because of
a lack of urgency on AI, the implementation within Siri,
this distraction that Tariff's cause does it set them back
even further about upgrading the product from an AI perspective.
Speaker 8 (07:53):
Well, I think that they are, you know, constantly optimizing
their supply chains. Obviously it's additional work on their their plate,
but I don't think that they are standing still on
the AI front. I think they're besting more actually, and
you see that, you know some news are them purchasing
more GPUs And you know, when I when I think
about the space, there's just a lot of things evolving
(08:15):
and what we thought a year ago.
Speaker 7 (08:17):
Uh has has kind of changed in a lot.
Speaker 8 (08:19):
Of ways in terms of, you know, who can participate
in AI and like what these large language models can
cost and which one is the best. So every time,
like it feels like every month, there's a new headline
of who is in the lead. And so it could
be prudent of Apple to kind of, you know, focus
on what they're really good at, what their competitive vantage is,
which is designing really high quality products that fit into
(08:42):
our lives, that can be incorporated elegantly. And at the
end of they do own that kind of ecosystem and
you know, over time, I think they can you know,
drive value from that for their shareholders.
Speaker 4 (08:55):
Tony, let's end this conversation on Apple with a yes
or no. Does Apple manufacturer and assemble an iPhone in
the United States in the future.
Speaker 8 (09:08):
I think it's possible in the very kind of long
term future. I think in the near term. And you
look at kind of what it takes the man manufacturing iPhone.
I mean, you know, there's thousands of people that are
living at the factory that can be woken up, you know,
anytime the hour to make a change. And so you know,
I think that in the long term that could be
(09:28):
possible with additional advancements and robotics and AI.
Speaker 7 (09:31):
But I don't think it's going to be a next
year kind of thing, right.
Speaker 4 (09:36):
I saw a headline overnight that we think is a
critical right, which is China Semiconductor Industry Association issue this
emergency notice and they clarified that in the context of tariffs,
they define point of origin where a semiconductor is taped out,
in other words, where the electronic instruction set is formulated
(09:57):
before it goes to the fab And if you think
about the fabulous US names, many of which you have
big holdings in, they use TSMC or maybe Samsung. So
the tape out happens in those countries as well. How
much insulation do you think that gives them from the
heavy China tariffs on US products.
Speaker 8 (10:16):
Yeah, well, I think that if you take a step back, right,
like the two countries have been trying to disentangle them
each other from major kind of supply chains and you know,
areas of where if you could substitute a domestic product
that would be preferred.
Speaker 7 (10:33):
And that's nothing new over the past few years.
Speaker 8 (10:35):
And I think that you know, this kind of the
latest piece of news is further kind of a step
in that direction, where you know, it doesn't make sense to.
Speaker 7 (10:44):
Hurt yourself by kind of terrifying.
Speaker 8 (10:47):
The only source that you have, and so like in
terms of stuff made in TSMC, like both countries need that,
so it makes a little bit less sense to put
a high tariff on that when it's when it's sole source.
So that's kind of my perspective. That's a continuation of
industrial policy that kind of kind of makes sense.
Speaker 2 (11:06):
Let's talk about the others though, that are exposed now.
I'm interested as to whether you have holdings in those
that are manufacturing in the United States or looking to
even more with the cost money coming from federal government
wanting them made in the US, and what that does
to the business model if they ship to Asia to
China specifically, Tony, do you have to get out of
intels and Texas instruments?
Speaker 8 (11:28):
Well, I think that over the long term, it's more
about the technology and the differentiation and what you can
the value add that you can. So if you have
leadership products, I think that's still number one, you know,
I think number two. I think that divers sized supply chains,
like serving the local industry that it's based out of
(11:48):
or the region is probably going to be a good thing.
And so at the end of the day, I think
it's those two things, like some flexibility manufacturing, but like
the main thing is the product, leadership and the seculor
trend that a company is kind of, you know, kind
of positioned to capitalize on.
Speaker 4 (12:05):
Tony, like all technology investors, you have had to digest
and understand communication from policymakers. How would you rate and
rank what you've heard from the President, Treasury, Secretary best
and others.
Speaker 8 (12:18):
Well, I'm a tech investor, so you know, geopolitics is
above my pay grade obviously, but you know, at the
end of the day, I think that the US leap
administration and the leaders that we have acted, you know,
they will do what's best for the country for companies
here in the US. So I think that we need
to trust them and they do. You know, I think
(12:38):
they are trend trying their best, and you know, at
the end of the day, I think that they will
protect American interest and what's most important is keeping US
technology at the forefront. And you know, that's that's what's
what I look for as an investor.
Speaker 9 (12:54):
Tony one, thank you so much of trow price.
Speaker 2 (12:57):
So important to have the investor take today and after
one long week Chinese social media and giant bite dance,
it saw its revenue jump twenty nine percent last year.
It was driven by the global expansion of you guessed at.
Speaker 9 (13:18):
TikTok.
Speaker 2 (13:18):
International sales grew thirty nine billion dollars, contributing about a
quarter of the company's revenue.
Speaker 9 (13:23):
It's all according to people.
Speaker 2 (13:24):
Briefed on the numbers, now that as the Chinese business slowed. Now,
of course, tensions between Washington and Beijing expect to impact
both the global economy possible sale of TikTok in the
United States.
Speaker 9 (13:35):
We've got to get to it.
Speaker 6 (13:36):
All.
Speaker 2 (13:36):
Mitchell Green, founder, managing partner of lead Edge Capital, longtime
investor in names like Byte Dances with us. Mitchell, have
you been adding to Byte Dance. What do you make
of where we stand in terms of TikTok in the
United States?
Speaker 10 (13:50):
Yeah, and hey, Carolyn, thanks so much for having me on.
What do I think we can talk about that for
a while. The company continues to see you very well.
As we've said past, in the grand scheme of things,
you know, uncertainty kills deals. I wish I could tell
you exactly where things stand in this negotiation between the
White House, White Dance, the Chinese government.
Speaker 6 (14:13):
Discussions are on tariffs.
Speaker 10 (14:15):
Look, we've always had frankly questions on the on the
US TikTok uh. You know, again, as I've mentioned in
the past, we model out TikTok usa to be worth zero.
I suspect something will come of it. I don't know
if it's in a month from now, three months, or
now from six months or now.
Speaker 6 (14:33):
We shall see.
Speaker 10 (14:34):
It is obviously a very valuable business that a lot
of constituents want to figure out, not only board members
and shareholders and the CEO of Bite Dance, but we
now have this giant taraph war going on between the
US and China, So.
Speaker 6 (14:46):
It's all going to get dragged into it and play
out together.
Speaker 2 (14:49):
Mitchell, you've been on the secondary market picking up Byte
Dance in recent months. Would you want exposure to us
TikTok if it was indeed extricated out of bite ants
and had US ownership.
Speaker 10 (15:02):
Absolutely, And we have also not bought any Byte Dance
shares this year. There's been some there's been some changes
with Sippius.
Speaker 6 (15:09):
A lot of people don't know about this publicly known
that Syphius came out and put some.
Speaker 10 (15:15):
Restrictions on what kinds of companies you could buy globally
related t if the AI model speed was fast enough
or not. It's a questionable area if White Dance falls
into this or not. But in order to just stay
conservative and be on the right side, you know, we
have not bought anymore of the last several months.
Speaker 6 (15:32):
We do on it.
Speaker 10 (15:33):
What I like, What would I like to own TikTok Usa? Absolutely,
if you know, if they're allowed existing investors, and again
about sixty percent of investors in the company are non
Chinese investors. If we could add to our position, obviously
it depends on price.
Speaker 6 (15:51):
You know, we could be quite interested, Mitchell.
Speaker 4 (15:54):
Starting Monday night into Tuesday morning, I started getting phone
calls that there was quite a lot of activity on
the secondary's market for byte dance valuation range two eighty
to three hundred and twenty billion, depending on the offer
lot size.
Speaker 11 (16:09):
Right.
Speaker 4 (16:10):
But to your point, what I was told is a
lot of that activity was from Asia, right, China, maybe Singapore.
But it followed the President on Sunday night. You may
have seen the clip on Air Force one saying that
if it weren't for tariffs that he'd put in place,
they had a deal. How do you interpret that trading?
(16:30):
You know, if the outlook for the deal is poor,
but you see private market investors in Asia trying to
get more of a foothold.
Speaker 10 (16:42):
Oh, the Chinese business is doing phenomenally well, which is
absolutely incredible, given I don't think the Chinese economy is
like rowing right now, and I don't know if it's
far apart, but I mean it's just it's been unique.
And you can look at some of the other ecomerce
businesses across China and so, actually, how are the performances
in right answers doing in China is strong. I wouldn't
(17:03):
read into I have no clue if the deal is
almost done or close to done or whatever.
Speaker 6 (17:08):
I have. When it comes to politics.
Speaker 10 (17:10):
I tend to just listen and not really make opinions
and I don't really know.
Speaker 6 (17:16):
Yeah, well, we'll see it again again. There's a handful
of people that need to be involved. Chi President of
the United States had.
Speaker 10 (17:23):
The CEO bite dance, and I can't say any of
them are good friends of mine.
Speaker 4 (17:26):
So if they do telephone you, you let us know.
Speaker 6 (17:31):
I'll let you know if she calls me die.
Speaker 4 (17:34):
There is a there is a technology conversation here right.
I go back to when I was at CEES and
at GtC very recently, and Jensen Wong's point the CEO
of and Video that basically more than fifty percent of
all the computer scientists in the world working on artificial
intelligence are doing so in China or they are from China.
What kind of future is there to sort of work
(17:55):
with that country on technology and founding new companies.
Speaker 10 (18:01):
I strongly believe whether it's technology transfer, technology exports, imports.
Speaker 6 (18:08):
Like the trade trade is global, we all need to
figure out how to work together. China plus the us
working together is a good thing.
Speaker 10 (18:18):
I am a strong believer in like the education system
in China, the entrepreneurship in China as well as in
the United States as well. But again, like for instance,
we I've talked about this another I think I'm Bloomberg
and other sessions.
Speaker 6 (18:37):
Chinese regulate social media.
Speaker 10 (18:41):
You know, in the United States, kids go on TikTok
and post ridiculous videos about all kinds of stupid stuff.
In China, they learn about science and math on TikTok.
I think maybe we should ask should we be regulating
this stuff more?
Speaker 6 (18:53):
Should we be.
Speaker 10 (18:54):
Repeeling some of these laws that don't hold social media
companies accountable by the.
Speaker 6 (18:58):
Way that gets does in China? And so I think
there are things that we should be learning at. And
some of those things that are happening in China and
applying to the United.
Speaker 2 (19:05):
States interesting tat Mitchell and I want to go there
because you have exposure, not just to China. We bring
you on because you've been so long in the names
like Ali Baba, you're an aunt, you're in byte Dance,
long term investor, understanding that economy. We look at the
rest of your old portfolio. You know, well, us exposure
too uber bumble, you know, Europe with Spotify. How difficult
(19:26):
is it to remain committed to China right now when
Sophius is changing up the rules, When you are unable
to commit capital and the way you'd like to, it's complicated.
Speaker 10 (19:35):
And again, most of our business is actually North America
and Western Europe. You know, we have a team of
eighteen associates that are twenty two to twenty four years
old that you know, speak about nine thousand companies a year,
and we all you know, we might speak to ten
to twenty companies and all across Stasia. So what we've
done in China is a very handful of some of
(19:56):
the largest businesses over there where they could effectively be there.
Speaker 6 (19:59):
They are a to be public companies, it just happened
to be private. We tend to like to be contrarian,
you know.
Speaker 10 (20:06):
And it was funny a year ago, nine months ago,
nobody liked wanted to invest anything in China. Yet then
you saw stocks like Ali Baba go from once, you know,
from sixty seventy dollars a share, it's like one hundred
and thirty hundred and twenty. Now people were liking China
again because they saw Chi and Jack ma. I think
it's some conference together and I don't know where all
(20:27):
about this today. Maybe it's back at one hundred a share.
So this stuff is so volatile, but we find that
you buy China when the rest of the world hates it,
you can tend to make lots of money. But again,
most of the stuff we invest in is right back
in in the United States and right now. Look, I
think in the terriff situation, I can have an opinion
of it today, it'll probably change.
Speaker 6 (20:48):
In a week, a month, and six months.
Speaker 10 (20:50):
But uncertainty is what actually slows down the economy, right
And you know, our portfolio has made the high high
margin software companies that don't have direct you know, inputs
coming overseas and things being chipped in.
Speaker 6 (21:02):
With that being said, if.
Speaker 10 (21:03):
You sell airline software, are you sell software manufacturing companies?
And those companies are nervous about what's going to happen
in their businesses. They might start to pull back on
spending and the whole thing kind of like unravels on itself.
Speaker 2 (21:15):
And if there's cuts to R and D in healthcare
research and you're in a name like Benchling, which is
all about community of scientists. I'm really interested in Mitchell
ultimately how difficult this environment is when some of the
companies that we thought were going to go public now
can't or don't want to. How is that impacting the
way in which you raise the next fund for example?
Speaker 6 (21:35):
Yeah, so we were so, we were very We don't.
Speaker 10 (21:39):
Talk about performance on obviously and pull me or anything
like that, but you know, we believe that investor funds
that took advantage of getting the quidity and what's called DPI.
It's so much money you've given back on a net
basis to your investors over the last few years, in
(22:00):
the last five years, is really going to matter for
funds as they go forward graating money.
Speaker 6 (22:05):
We are we are going to everybody.
Speaker 10 (22:07):
Thought two thousand and six, twenty twenty five is going
to be the year of the IPO. There was maybe
this giant IPO. Aa, Well that's dead, Like that's not
happening now.
Speaker 6 (22:16):
Again. I think these companies could go public.
Speaker 10 (22:18):
It's just the question of what valuation will could they
and will they then go public?
Speaker 6 (22:21):
And you know, your guess is as good as mine.
Speaker 10 (22:23):
But I think this liquidity drought is going to continue,
and I think as a result of liquidity drought, you're
going to have a lot of endowments and foundations and
other big institutional investors that are networks that are over
allocated to private equity, venture capital, growth equity, real estate,
private equity, everything that are going that are.
Speaker 6 (22:41):
Going to unlock the secondary market. And the secondary market
has already been busy.
Speaker 10 (22:45):
It is about to if this continues, call it six months,
nine months, and twelve months, you are about to see
a huge amount of institutions that are going to be
massively over allocated to private equity, that are going to
need to turn to the secondary markets and sell things
that for us will create a great opportunity. Did you
want to be buying from sellers that are forced to sell?
Speaker 4 (23:06):
Mitchell Green, lead Edge Capital. Thank you really appreciated conversation, Caroline.
Speaker 7 (23:10):
What you got a's time.
Speaker 2 (23:11):
For talking tech head and first up, Logitech It withdrew
its full year twenty twenty six outlook due to quote
continuing uncertainties of the tariff environment.
Speaker 9 (23:19):
Now Vonda Bell analysts.
Speaker 2 (23:20):
Say this is a sensible move, but the company's margins
will certainly be challenged, and you saw the impact on
the shares plus Tesla, it stopped taking orders in China
for its model ES Sedans its model Export utility vehicles,
both of which are imported from the United States. That's
after the country has raised tariffs on one another. Of course,
this could be a setback to the company's already shaky
position in the Chinese market. Meanwhile, Ali Baba co founder
(23:42):
Jack Maer He's worn that AI shouldn't replace humans, but
work instead to meet their every need. The Chinese billionaire
who wants like an AI to love here hogued that
the technology should protect livelihoods and make lives better.
Speaker 4 (23:56):
Okay, coming up analog devices, Texas instruments, big declines. We
take it deep dive into two a city's top semiconductor pigs.
The timing of that call very different from where the
stocks are heading right now. This has been bo Technology.
Speaker 2 (24:23):
Welcome back to Bloomberg Technology and Caroline hid in New
York and.
Speaker 4 (24:26):
I'm Ed Ludlow in San Francisco. San Francisco's mayor, Daniel Lurie,
is pledging an economic and tech revival, aiming to restore
the city's status as a global innovation hub. I sat
down with the mayor to discuss his growth strategy in
the face of tariffs.
Speaker 11 (24:41):
First, we're the most beautiful city in the world. Second,
the horse power is here, the intellectual horsepower is here.
We have great universities, including UCSF around here, and young
people want to be in.
Speaker 7 (24:56):
Urban environments.
Speaker 4 (24:57):
They want to be in San Francisco.
Speaker 11 (24:59):
That's been proven truth throughout history, and we're going to
prove that again. We have great arts and culture institutions.
We were just named the culinary capital of the country,
so we have so much to be proud of. And
we know that workers want to be here. Our CEOs
who were talking to they know that their employees want
(25:20):
to be in San Francisco. No offense to my friends
down in the Peninsula, but people live in San Francisco
and we want them to work here. And we do
have to get competitive, but it starts with safe and
clean streets. Our property crime rates have dropped thirty five percent,
Our violent crime has dropped fifteen percent. Car break ins
(25:42):
in February the lowest in twenty two years. This is
a safe American city and we want everybody coming back
to work here, to play here, and to live here.
Speaker 4 (25:56):
Mis very how is the White House and is tariffs
Paulus going to impact your ability to do what you've
just outlined, bring more of the technology industry to the city.
Speaker 11 (26:07):
Well, listen, we are all and you all are reporting
on it minute by minute. The uncertainty is impacting everybody
around the globe, and so we have to plan for
that here at city Hall. We're working with our department heads.
We have a big budget deficit. We inherited one of
the largest deficits in our city's history. So we're working
(26:29):
day and night to make sure that we tighten our belts,
we deliver core services to our taxpayers and to our residents,
making sure that we focus on public safety, focus on
the behavioral health crisis and the drug crisis that is
causing people to feel the disorder on our streets. But
that is all starting to improve. And so we can
(26:51):
only control what we can control here in San Francisco,
and that's our fifteen point nine billion dollar budget. We
have a one point one billion dollar budget deficit. Over
the next two years, we're going to get that under control.
We're going to fix our structure or budget deficit, and
I'm telling you we're then going to be off to
the races.
Speaker 7 (27:10):
Data bricks knows it.
Speaker 11 (27:11):
They just secured an office space one hundred and fifty
thousand square feet open AI just open new headquarters by
Chase Center. We are on the cusp of lift off
here in San Francisco, and we want everybody to come
be a part of it.
Speaker 4 (27:28):
So that was my conversation with San Francisco Meytor, Daniel Lurie,
and Caro. Like the pitch to the technology industry seems
to be San Francisco is beautiful and it's full of nerds,
and that's not really a policy platform. But if you
think about how the history of Silicon Valley's works, right,
there are many tech people here in the city, and
what do they do each day?
Speaker 7 (27:47):
Right?
Speaker 4 (27:48):
Where are all the big tech companies that they.
Speaker 7 (27:49):
Go to work at.
Speaker 2 (27:50):
They're not an SF they reverse commute out to the valley.
But also what I wonder about is when we've got
an economic quandary coming from the United States, when advertising
dollars might be pulled back, when we've already got a
meta for example, that has been laying off people, how
does that affect in NEEF economy going forward. We'll have
(28:12):
to debate that a little bit more in terms of
what's happening over in San Francisco.
Speaker 9 (28:15):
But we also want a little bit more in.
Speaker 2 (28:17):
Context about what the global tech policies look like in
this current context. That meta has to navigate, that alphabet
has to navigate, that these SF giants have to navigate.
Liza Tobins with US Managin director at are not Global,
and Liza, I'm so interested in just your take right
now and where we stand in this so called tit
for tat that today China's leader came out and said,
(28:39):
it's a joke. We're going to stop raising to meet you.
But we stand at one hundred more than one one
hundred and twenty five percent tariff on US goods. The
US has one hundred and forty five percent tariff on
Chinese goods.
Speaker 9 (28:51):
Where do we go from here?
Speaker 12 (28:54):
Yeah, So, of course, about a week and a half ago,
President Trump declared a trade war on the entire world,
and then over the last couple of days it seems
to have kind of slipped into an isolate China strategy.
Clearly the president is torn between his deal making and
his decoupling instincts. He's hoping for a phone call with
Chi Jinping. But what we've learned really over the last
(29:16):
twenty years of US China relations is that US trade
negotiators are always disappointed with what Paiging brings to the table.
And I'm seeing things play out this week that remind
me of when I was in the White House in
twenty twenty, and that, of course was when President Trump
got his Phase one trade deal with the Chinese, and
then a couple months later he started getting seriously disappointed
(29:38):
and blaming Sheijinping for COVID, which of course tanked the
global economy and he felt ruined his electoral prospects, and
so in some of the President's comments just a few
days ago in a speech, he's talking about she He's
hoping for a phone call, but he's referring back to
COVID and saying, you know, I like Sheijinping, we get
along great, but COVID.
Speaker 9 (29:59):
That was a bridge too far.
Speaker 12 (30:01):
That's what the president's saying. So he seems to be
remembering the disappointment and the anger from twenty twenty, and
he seems to be shifting from deal making to decoupling.
Speaker 2 (30:13):
We go to you because of your depth of expertise,
when you've worked with the CIA, when you've been in
the US Indo Pacific Command analysis for them as well, Liza,
not to mention what you've done over at the when
you're sc CP SCSP, I should call it, of course,
and I'm interested, Lisa therefore on where you go from,
who has the upper hand, where the TikTok's involved in
(30:35):
this negotiation. Just take us forward as to what plays
out next. If we are seeing a US president getting
more and more triggered by what happened in twenty twenty, right.
Speaker 12 (30:45):
So I think we could potentially see some kind of
a deal. Clearly, the President still would like a deal,
perhaps involving some tariff concessions, maybe americanizing TikTok, although he's
already conceded that aging will retain the algorithm, which is
really the brain that controls TikTok and controls Americans media diet.
(31:06):
So we may or may not see that. But I
want to remind your audience not to over index on
the strategic importance of a deal, because we've always been
disappointed by how China actually implements that deal. So I
think if folks are looking for some kind of grand
bargain that really makes some goes beyond symbolism and short
(31:28):
term measures and really addresses the fundamental imbalances of Chinese economy,
this massive trade surplus, unfair trade practices. They're going to
be disappointed by that. So markets will react and go
up and down on news or rumors of a potential deal,
But a true grand bargain is really off the table.
Speaker 4 (31:45):
I think, Liza, I'd like to hold you to account
on two points that you've made, or at least debate them.
One isolate China as an accidental strategy. And then the
data that you just flag the deficit between the United
States and China. So this is the ECTR function on
the Bloomberg terminal. It's twenty twenty three data showing the
(32:05):
deficit with China two hundred and sixty billion dollars. But
I think I'm right in saying prelim data showed the
deficit growing in twenty twenty four. Materially, when we think
about technology, what we're talking about is a country that
dominates the manufacturing of most of the world's consumer electronics
and other things. So forget numbers and tariffs and markets
(32:26):
and trade. Do you see the White House ever resulting
this policy in more of that stuff happening in America.
Speaker 12 (32:35):
The President certainly wants to, and he and his advisors
that are constantly talking about reindustrialization. I mean, the problem
is the devils in the details here, and it does
it's unclear if President Trump really understands the details and
the extreme intricacies of these supply chains and what it
actually takes to reindustrialize. And of course there's big structural
(32:59):
challenge is like do we have the workforce for this.
The administration talks about manufacturing jobs coming back. Well, that's great,
but actually we have a shortage of skilled manufacturing workforce,
and advanced manufacturing is now a knowledge industry. This is
a highly skilled profession. It's more like software coding and
applying AI to the factory floor. And it's not yet
(33:23):
clear to me if that kind of advanced manufacturing is
front and center on the administration's agenda.
Speaker 9 (33:30):
It's very much right.
Speaker 12 (33:31):
Now a teriffs first, tax cuts, the regulation and energy
and those may be a great start, but they also
need to be kind of leaning into these more structural.
Speaker 2 (33:41):
Issues suddenly if they want to make iPhones in the
United States. Pizeitoven, managing director of Ghano Global, was great
to have you join us. Thank you now Federal is
a bank of New York President John Williams. He expects
slow economic growth, high unemployment, and a pickup in inflation,
all of this due to the US tarris policy and
reduced immigration. Take listen to what he had to say
(34:02):
just moments ago.
Speaker 3 (34:03):
Well uncertainly about the economic outlook reflects many factors. Effects
of tariffs and trade policy and the economy are certainly
at the top of the list. For example, my business
in financial market contacts highlight that this has made it
more difficult to plan for investments and for hiring.
Speaker 4 (34:43):
Let's get right back to financial markets. It's Friday, at
the end of a long week. Basically flat on the
Nasdaq one hundred, but up more than five percent over
the course of the week. Basically flat on the Philadelphia
Semiconductor Index, down to tens percent, but up more than
seven percent on the course of the week. And Cara,
if you allow me to there was a really important
headline overnight that I think our audience needs to understand,
(35:04):
and it came from China's semiconductor industry body, basically citing
customs regulators that how are they going to define the
point of origin of a semiconductor right think about global
supply chains. And in the market right now you see
names like in video higher and Vidia doesn't manufacture its
own chips, names like Intel and Texas instruments that do
(35:26):
significantly lower. Here's what they said. The point of origin
for a chip in deciding whether to apply tariffs or
not will be the point it is taped out. And
what that means is when an American company, for example,
is done designing its chip in San Diego or here
in the Bay Area, it then needs to send the
designs to a contract manufacturer. We're talking TSMC and Korean
(35:47):
names like Samsung, but that happens locally, and so they're saying,
that's how we decide where your chip comes from. You
tell me the big story that we've learned in the
last two years about all these American chip makers. What
are they actually not?
Speaker 2 (36:01):
Well, they're not makers of chips, but some of them
are trying to be. Some of them trying to be
contract makers of chips. Intel, for one, which is actually
expanding its presence of making chips in the United States.
Speaker 9 (36:12):
What does that mean in terms of business model?
Speaker 2 (36:13):
You've just got to take out China from the equation
and on the flip side. Of course, domestic chip makers
in China rallied hard. You saw the CSI three hundred
index up more than thirty percent on the day. This
had real tailwinds for Chinese local players and of cause
pressure on some of the local makers here in the
United States.
Speaker 4 (36:29):
Said yeah, And the one thing I would say is
that it all comes back to the end market. What
does China do. It makes most electronics high end or
low end, And so that's why I've tracking this so closely.
But you're exactly right. But in some of the names
you've just mentioned, analysts are paying attention for other reasons.
Speaker 9 (36:47):
They certainly are.
Speaker 2 (36:48):
Let's get to one of those analysts calls because likes
of Aanamon Devices or Texas Instruments, as you say, pressure today.
But City named actually those two companies, and it's top
semiconductive picks amid tar of pressures and recession fears. Like
City manager director and semiconductor analyst Chris Stanley writing, high
end analog companies such as ADI and TXN have outperformed
during downturns. We would expect the same to occur in
(37:10):
a recession, with ADI performing best given higher margins. Nimas
rym Vstella can can break down some of the moves
on Semi got a fair few downgrades in terms of
price targets today as well on Semi meant to feel
more of headwind versus some of these players.
Speaker 13 (37:23):
According to City, absolutely, I think people are still really
struggling to kind of figure out what this environment is
going to be like for different chip makers, depending on
their in market, depending on their manufacturing systems, their supply chains.
It's all very uncertain, very up in the air at
the moment. So beyond the naming TI on one of
its top picks, City also said it was taken out
(37:44):
the lawnmower. Those are exact words, cutting estimates by twenty
percent on average across the board for chip makers. That
just speaks to how much uncertainty there is when it
comes to this sector at this point in time.
Speaker 4 (37:56):
They the firm City had this estimate a while ago
that the socks the index would drop twenty percent if
there were to be a recession, and I think I'm
right in saying that they now assume a recession is
a firm there's a lot happening in the market. You
also wrote about the takes out point of origin story
yourself this morning, just go back to explain some of
(38:18):
the moves of the market in the here and now.
Speaker 13 (38:21):
Yeah, so absolutely, like you were saying before, companies like TI, Intel,
Global Foundries, Microchip, all these have sort of domestic manufacturing
plants for their products, and these are the stocks that
are really falling today. Other ones that do most of
their manufacturing are Broad Taiwan, Simi, Vidia, AMD, Qualcom, BROCM
(38:42):
all those names. They're probably higher in the morning. It's
obviously a very volatile situation. There's a lot of cross
currents going on right now, but certainly we are seeing
Texas instruments in particular weaker today, Intel particularly weaker today,
whereas companies like Nvidia are higher.
Speaker 2 (38:58):
Let's go to Nvidia for a moment, because for an
analyst over at City has actually been downgrading in video
as well. Their key concern is that these hyperscalers, meta
alphabet you name them, are going to actually start to
curtail they're spending on AI data centers.
Speaker 9 (39:14):
How much of an overhang is that for names.
Speaker 2 (39:16):
Like whether you're a fablus or fab kind of a
chip maker.
Speaker 13 (39:20):
Well, for Nvidia in particular, I had to go and
look but I think forty percent or so of their
revenue comes from just four companies, which is Microsoft, Meta, Alphabet,
and Amazon. So to the extent those companies pull back,
and I'll say Alphabet a couple of days ago it
had a bigger cloud conference and it did affirm its
CAPEX plans. Microsoft, you know, it affirmed its own plans
earlier this year. So right now, it seems like maybe
(39:41):
for the next twelve months, all those spending plants are
pretty intact. But if we get to twelve months from now,
and maybe especially if we're not seeing a huge ROI
on all this AI spending, especially if the cost picture
has changed dramatically due to tariffs, if the whole picture
has just changed because of weaker economic growth, all these
other kind of factors, it would not be super surprising
under those circumstances if these companies started pulling back on
(40:04):
their CAPEX, especially as it retains to their AI infrastructure,
which is at this point a lot of Nvidia products,
and what that means for them in terms of their growth,
in terms of their profitability. While just given its customer concentration,
that would be a pretty dramatic hit a company like
it in video.
Speaker 4 (40:21):
Blimbo's Ryan vlastatica terrific, Thank you very much.
Speaker 14 (40:32):
A single shipyard in China now produces more ships every
year than all of the American shipyards combined. Think of that,
and it was a business that we used to dominate.
Speaker 9 (40:44):
President Trump.
Speaker 2 (40:44):
There now one startup looking to manufacture ships in the
United States.
Speaker 9 (40:48):
It's blue Water Autonomy, preparing.
Speaker 2 (40:50):
To build large vessels able to travel between San Francisco
and Hawaii without a captain or a crew. Rdan Hamilton
as the CEO co founder of blue Water. Rather, you're
coming out of stell fourteen million dollars in the bank.
You've got vcs that batch your prior really successful companies.
You were in warehouse automation prior to this. How much
(41:11):
is the time now to be making automated ships? Suddenly
far more prevalent when we've got us China tensions.
Speaker 15 (41:18):
The time is definitely now. If we hear the current administration,
they're talking about shipbuilding, shipbuilding and shipbuilding, and we're designing
and building autonomous ships. And when you make them autonomous,
you can remove the bridge, the birthing, the galley, the showers,
so you can make them a lot smaller. And because
they're smaller, you don't have to build them at the
big navy shipyards. So we should continue to build the
(41:39):
big warships, the guided missile destroyers, the aircraft carriers, the
submarines as quickly as possible. But our ship can be
built at all these mid tier shipyards that have capacity today.
Speaker 2 (41:49):
Why is now the right time from a technology perspective
as well, what is going into making automation far more
easy or certainly not easy, but far more able to
enact ry now?
Speaker 6 (42:00):
Well, this is a hard problem.
Speaker 15 (42:01):
This is not easy because for designing ships that can
operate across the open ocean, and the last thing our
Navy needs is for these ships to be dead in
the water of the mill the ocean, and the ocean
is extreme. You're thinking about extreme temperatures and salt water.
In fact, ships get hit by lightning, and so we
need to build a very It happens as we did
research for this and we talked to the chief engineers
on some of the sort of workboats that operate around.
Speaker 6 (42:23):
The United States.
Speaker 15 (42:24):
They said, yeah, last week my ship got hit by
lightning and a fried all the electronics. And so there's
a ton of challenges to do this. But we feel
we have the team to do this because we've been
at some of the most successful robotic companies in the
United States, and two of my co founders include myself.
We were also in the Navy.
Speaker 4 (42:43):
Ryland. The big picture is to modernize the maritime industry,
but this is a Navy application. As you just point out,
American dynamism, this big emphasis on the private sector's relationship
with the military industrial complex. What is it you actually
want the president to do to allow for you to
make this a success.
Speaker 15 (43:04):
So we want to move fast, and we'll move as
fast as the Navy wants us to move. And so
we definitely want the president to continue to focus on
shipbuilding and innovation, especially around autonomous systems. And there are autonomous
systems that are in the air, that are on the surface,
and that are underwater. Our focus is on these autonomous
ships that can operate on the surface of the water
and have high endurance and range, the range that you
(43:25):
need for the Pacific Ocean.
Speaker 4 (43:27):
Anderill picked Ohio for its skilled labor and for its
history and aviation. For example, where is your Ohio? Where
do you think you need to build these ships?
Speaker 15 (43:38):
So we'll have more to announce later this year. But
we've definitely been looking for the perfect place to go
build these ships, and there are a lot of really
good options, whether it's on the East coast or the
West coast or sort of in the Gulf, and so
we'll make an announcement later this year.
Speaker 2 (43:51):
You were early leader in Amazon Robotics. When you are
building six river systems. How good is US at manufacturing? Now?
Speaker 9 (43:58):
Can we bring back what we want to bring that?
Speaker 15 (44:00):
Yeah, so the US is actually really good at advanced manufacturing.
So early in my career I was at Amazon Robotics
when there are a couple thousand robots.
Speaker 6 (44:07):
In the field.
Speaker 15 (44:08):
They're now over a million robots in Amazon warehouses throughout
the world. That is amazing what that company has done
over the last ten years. So when it comes to
complex systems where you need to take sort of commercial
off the shelf components and put them together and then
write the software on top, we're amazing at that.
Speaker 4 (44:25):
Rylan Hamilinson, CEO, co founder of blue Water Autonomy, you
have to come back when you announce the location rights.
That's how it works. That does it for this distion
of Bloomberg Technology. What a week? This is what markets
look like Caroline. I mean, it's kind of odd in
a way to give a snapshot of a session in
the moment and now's that one hundred higher by modestly
right pressure on US listed shares of Chinese names. Take
(44:48):
it away, what are you seeing.
Speaker 2 (44:49):
What's extraordinary is we had a week where we're actually
more than five percent higher, but what a volatile five days.
The bond market has seen extraordinary moves, and then over
the course of the month that now's back, it's lower ed.
Speaker 4 (45:03):
Happy weekend everyone, This is Bloomberg.
Speaker 6 (45:08):
H
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 (00:35):
Live from New York and San Francisco. This is Bloomberg Technology.
The trade war between the US and China it continues,
China raising its own tariffs on all US goods from
eighty four percent to one hundred and twenty five percent
starting tomorrow, after the US raised tariffs to one hundred
and forty five percent on China. China saying your tariffs
are a joke. United States, It's no joke to investors.
(00:57):
What an extraordinary week we have had. We are are
currently up almost six percent over the course of the
past five trading days ed on the NASDAP. But it
really doesn't paint the picture of the extent of the
whiplash that we've seen throughout that week as you pull
back on tariffs towards other nations. Look at what we've
done on the month, though, this context is needed sure
up on the week. On the downside, for the course
(01:18):
of April the trading month were off five percent on
the nast like one hundred dig into the details.
Speaker 3 (01:22):
ED.
Speaker 4 (01:23):
Yeah, I'm looking at the chip sector and across semi conductors.
There's divergence in the session between fad less names, those
American companies that design chips that don't make them, and
those with domestic operations in the US. And buried among
the headlines overnight was the Chinese regulator and industry body saying,
by the way, when we think about tariffs on US
goods imposed by China, this is how we'll define it
(01:46):
you and are going to get into that throughout the
course of the show. We have to talk about Apple.
I feel like Bloomberg Technology as a show was early
to this discussion on Monday. Will the US build an
iPhone in the future five days we're higher, but it's
been so volatile and the analysis from different corners of
the market is so different. I think we should get
into it.
Speaker 2 (02:05):
Carry we should because we've been debating time and time again.
A made in America iPhone is the goal that President
Trump believes could be a reality ED. But replicating China's
advanced supply chain it's skilled labor in the United States
will prove nigh on impossible for the tech giant and
rak Rana of Blue meg Intelligence joins us, You've got
a new note out just talking about the implications of
(02:27):
taris on the margin of Apple. But what would it
do to the margin of Apple if they ever brought
production for the iPhone to the United States?
Speaker 5 (02:33):
Anag see, I think a lot would depend on our
materials that go there, the component costs, the labor cost,
and I think it'll be very hard for Apple to
you know, let's say, raise the price of the phone
to two x and then make it in the US.
It has to be done in a way that actually
keeps the cost down and at that point, I mean
keeps their margins. The reason why Apple shines compares to
(02:55):
any of the consumer electronics companies because it has very
high gross margins compared to you know, let's say somebody
who just sells an Android phone in Asia, for example.
Speaker 4 (03:07):
But those margins run the threats heem. Let's bring up
Anaag's research that published I think about thirty minutes ago,
twenty minutes ago. I'm just going to read it. Our
analysis suggests a margin impact of one hundred to one
hundred and seventy basis points for every ten percent tariff
increase on China manufactured products. Apple could mitigate some of
the impact through price increases. You've been talking about price
(03:27):
increases a week. The key question seems to beware and
you think that will be on the services side, not
on the handsets.
Speaker 5 (03:35):
Because as I said, it's you know, it's very difficult
to take a thousand dollars phone and double it up
two thousand, but it's slightly easier to take a you know,
two ninety nine dollars to ninety nine nicloud plan and
let's say make it up to five or seven dollars.
And also remember some of those you know, revenue streams.
When it comes to the services business, especially cloud services,
they have very high incremental margins. These are products with
(03:58):
seventy five, eighty percent or margins much much more than
the product side of it. And it doesn't really pinch
the consumer that much. And you know, they could praise
it as it's only going to be done you know,
over the next six months or the time period when
the tabs are and then they can scale it back.
I think from a consumer point of view, it is less,
you know, it hurts them less. But again, you know,
(04:19):
that's just one service.
Speaker 6 (04:20):
I talk about.
Speaker 5 (04:21):
They could be others as well, but I feel very,
you know, strongly that I don't think they can raise
the price of a phone up by you know, fifty
sixty percent, maybe maybe slightly, maybe five percent, ten percent
or so, but anything above that, you know, I think
destructs demand.
Speaker 4 (04:35):
Aner Rana Bloomberg Intelligence, thank you very much. They stick
with Apple and the impact of tariffs on technology. Tony
one trow Price, science and Tech equity portfolio manager joins us.
Now Apple the number one holding a tro Price is
Science and Tech fund that Tony oversees. Tony, when I
was learning about the technology industry and the markets and
(04:58):
making my way through Bloomberg Televisions newsroom, I was always
told that Apple and names like it had an entrench
market position, strong balance sheet, and in crises or recession,
that's where they would survive and thrive. But I think
right now, you can't necessarily look back at history and precedent.
(05:18):
How on earth are you modeling the future of this company?
Speaker 7 (05:21):
Yeah, well it's a great question.
Speaker 8 (05:23):
Obviously, it's historically been a kind of a balancing name.
Just that whether a real kind of stock market storm,
I'd say here, you know, I think that there is
a lot of fear in the market and concerns amount
of trade war and what deglobalization could possibly do to
kind of Apple's manufacturing advantage in China. And so you know,
when I take a step back, they do have diversified
(05:46):
supply chains.
Speaker 7 (05:47):
I think they are.
Speaker 8 (05:48):
They do have the ability to move around, and they
do produce iPhones.
Speaker 7 (05:51):
In India, and when we think.
Speaker 8 (05:53):
About the US, the consumption of iPhones is roughly twenty
five or thirty percent, and so I expect that there's
some flexibility to move some of that production to India
more and therefore diversify that risk a bit. And you know,
at the end of the day, I think that it
is about like, you know, how much of a staple
(06:14):
the iPhone is, and so there's price you know, kind
of sensitively among the customer to actually you'll pay up.
Speaker 7 (06:21):
For the iPhone. I think that actually could be bullish
for the stock.
Speaker 8 (06:24):
That just demonstrates more of a it's more of a
staple than people appreciate. But here I do think that
there is a lot of fear there and so generally,
you know, historically you've been a reward for leaning into weakness.
Speaker 2 (06:36):
Then in this weakness Tony. Yes, on the day Apple
is trading somewhat higher. On the week it is too,
but on the course of the month it's down fourteen percent.
Speaker 9 (06:45):
Have you been adding to your number one holding?
Speaker 2 (06:47):
Has it at any point looked attract him to get
back in with more addition, I think, you know, the.
Speaker 8 (06:53):
Company's still really well positioned over the long term. You
look at like the ecosystem they built, the quality of
the product, and then you're also an iPhone upgrade cycle coming,
and you know, a placement cycle has been elongated, and
if you get a new form factor, I think that
could be like really attractive.
Speaker 7 (07:09):
And you know, at the end of the day, like
the evaluation has become more.
Speaker 8 (07:15):
Attractive, especially at these levels versus where they were, you know,
six and nine months ago. You know, in addition, it
is one of the Max seven that hasn't been spending
a ton on large language models.
Speaker 7 (07:27):
So the capital intensity.
Speaker 8 (07:28):
And the free cash flow quality of the company is
still very, very high quality.
Speaker 2 (07:34):
Go there, Tony for a moment, Because people were ringing
their hands about Apple before the trade war because of
a lack of urgency on AI, the implementation within Siri,
this distraction that Tariff's cause does it set them back
even further about upgrading the product from an AI perspective.
Speaker 8 (07:53):
Well, I think that they are, you know, constantly optimizing
their supply chains. Obviously it's additional work on their their plate,
but I don't think that they are standing still on
the AI front. I think they're besting more actually, and
you see that, you know some news are them purchasing
more GPUs And you know, when I when I think
about the space, there's just a lot of things evolving
(08:15):
and what we thought a year ago.
Speaker 7 (08:17):
Uh has has kind of changed in a lot.
Speaker 8 (08:19):
Of ways in terms of, you know, who can participate
in AI and like what these large language models can
cost and which one is the best. So every time,
like it feels like every month, there's a new headline
of who is in the lead. And so it could
be prudent of Apple to kind of, you know, focus
on what they're really good at, what their competitive vantage is,
which is designing really high quality products that fit into
(08:42):
our lives, that can be incorporated elegantly. And at the
end of they do own that kind of ecosystem and
you know, over time, I think they can you know,
drive value from that for their shareholders.
Speaker 4 (08:55):
Tony, let's end this conversation on Apple with a yes
or no. Does Apple manufacturer and assemble an iPhone in
the United States in the future.
Speaker 8 (09:08):
I think it's possible in the very kind of long
term future. I think in the near term. And you
look at kind of what it takes the man manufacturing iPhone.
I mean, you know, there's thousands of people that are
living at the factory that can be woken up, you know,
anytime the hour to make a change. And so you know,
I think that in the long term that could be
(09:28):
possible with additional advancements and robotics and AI.
Speaker 7 (09:31):
But I don't think it's going to be a next
year kind of thing, right.
Speaker 4 (09:36):
I saw a headline overnight that we think is a
critical right, which is China Semiconductor Industry Association issue this
emergency notice and they clarified that in the context of tariffs,
they define point of origin where a semiconductor is taped out,
in other words, where the electronic instruction set is formulated
(09:57):
before it goes to the fab And if you think
about the fabulous US names, many of which you have
big holdings in, they use TSMC or maybe Samsung. So
the tape out happens in those countries as well. How
much insulation do you think that gives them from the
heavy China tariffs on US products.
Speaker 8 (10:16):
Yeah, well, I think that if you take a step back, right,
like the two countries have been trying to disentangle them
each other from major kind of supply chains and you know,
areas of where if you could substitute a domestic product
that would be preferred.
Speaker 7 (10:33):
And that's nothing new over the past few years.
Speaker 8 (10:35):
And I think that you know, this kind of the
latest piece of news is further kind of a step
in that direction, where you know, it doesn't make sense to.
Speaker 7 (10:44):
Hurt yourself by kind of terrifying.
Speaker 8 (10:47):
The only source that you have, and so like in
terms of stuff made in TSMC, like both countries need that,
so it makes a little bit less sense to put
a high tariff on that when it's when it's sole source.
So that's kind of my perspective. That's a continuation of
industrial policy that kind of kind of makes sense.
Speaker 2 (11:06):
Let's talk about the others though, that are exposed now.
I'm interested as to whether you have holdings in those
that are manufacturing in the United States or looking to
even more with the cost money coming from federal government
wanting them made in the US, and what that does
to the business model if they ship to Asia to
China specifically, Tony, do you have to get out of
intels and Texas instruments?
Speaker 8 (11:28):
Well, I think that over the long term, it's more
about the technology and the differentiation and what you can
the value add that you can. So if you have
leadership products, I think that's still number one, you know,
I think number two. I think that divers sized supply chains,
like serving the local industry that it's based out of
(11:48):
or the region is probably going to be a good thing.
And so at the end of the day, I think
it's those two things, like some flexibility manufacturing, but like
the main thing is the product, leadership and the seculor
trend that a company is kind of, you know, kind
of positioned to capitalize on.
Speaker 4 (12:05):
Tony, like all technology investors, you have had to digest
and understand communication from policymakers. How would you rate and
rank what you've heard from the President, Treasury, Secretary best
and others.
Speaker 8 (12:18):
Well, I'm a tech investor, so you know, geopolitics is
above my pay grade obviously, but you know, at the
end of the day, I think that the US leap
administration and the leaders that we have acted, you know,
they will do what's best for the country for companies
here in the US. So I think that we need
to trust them and they do. You know, I think
(12:38):
they are trend trying their best, and you know, at
the end of the day, I think that they will
protect American interest and what's most important is keeping US
technology at the forefront. And you know, that's that's what's
what I look for as an investor.
Speaker 9 (12:54):
Tony one, thank you so much of trow price.
Speaker 2 (12:57):
So important to have the investor take today and after
one long week Chinese social media and giant bite dance,
it saw its revenue jump twenty nine percent last year.
It was driven by the global expansion of you guessed at.
Speaker 9 (13:18):
TikTok.
Speaker 2 (13:18):
International sales grew thirty nine billion dollars, contributing about a
quarter of the company's revenue.
Speaker 9 (13:23):
It's all according to people.
Speaker 2 (13:24):
Briefed on the numbers, now that as the Chinese business slowed. Now,
of course, tensions between Washington and Beijing expect to impact
both the global economy possible sale of TikTok in the
United States.
Speaker 9 (13:35):
We've got to get to it.
Speaker 6 (13:36):
All.
Speaker 2 (13:36):
Mitchell Green, founder, managing partner of lead Edge Capital, longtime
investor in names like Byte Dances with us. Mitchell, have
you been adding to Byte Dance. What do you make
of where we stand in terms of TikTok in the
United States?
Speaker 10 (13:50):
Yeah, and hey, Carolyn, thanks so much for having me on.
What do I think we can talk about that for
a while. The company continues to see you very well.
As we've said past, in the grand scheme of things,
you know, uncertainty kills deals. I wish I could tell
you exactly where things stand in this negotiation between the
White House, White Dance, the Chinese government.
Speaker 6 (14:13):
Discussions are on tariffs.
Speaker 10 (14:15):
Look, we've always had frankly questions on the on the
US TikTok uh. You know, again, as I've mentioned in
the past, we model out TikTok usa to be worth zero.
I suspect something will come of it. I don't know
if it's in a month from now, three months, or
now from six months or now.
Speaker 6 (14:33):
We shall see.
Speaker 10 (14:34):
It is obviously a very valuable business that a lot
of constituents want to figure out, not only board members
and shareholders and the CEO of Bite Dance, but we
now have this giant taraph war going on between the
US and China, So.
Speaker 6 (14:46):
It's all going to get dragged into it and play
out together.
Speaker 2 (14:49):
Mitchell, you've been on the secondary market picking up Byte
Dance in recent months. Would you want exposure to us
TikTok if it was indeed extricated out of bite ants
and had US ownership.
Speaker 10 (15:02):
Absolutely, And we have also not bought any Byte Dance
shares this year. There's been some there's been some changes
with Sippius.
Speaker 6 (15:09):
A lot of people don't know about this publicly known
that Syphius came out and put some.
Speaker 10 (15:15):
Restrictions on what kinds of companies you could buy globally
related t if the AI model speed was fast enough
or not. It's a questionable area if White Dance falls
into this or not. But in order to just stay
conservative and be on the right side, you know, we
have not bought anymore of the last several months.
Speaker 6 (15:32):
We do on it.
Speaker 10 (15:33):
What I like, What would I like to own TikTok Usa? Absolutely,
if you know, if they're allowed existing investors, and again
about sixty percent of investors in the company are non
Chinese investors. If we could add to our position, obviously
it depends on price.
Speaker 6 (15:51):
You know, we could be quite interested, Mitchell.
Speaker 4 (15:54):
Starting Monday night into Tuesday morning, I started getting phone
calls that there was quite a lot of activity on
the secondary's market for byte dance valuation range two eighty
to three hundred and twenty billion, depending on the offer
lot size.
Speaker 11 (16:09):
Right.
Speaker 4 (16:10):
But to your point, what I was told is a
lot of that activity was from Asia, right, China, maybe Singapore.
But it followed the President on Sunday night. You may
have seen the clip on Air Force one saying that
if it weren't for tariffs that he'd put in place,
they had a deal. How do you interpret that trading?
(16:30):
You know, if the outlook for the deal is poor,
but you see private market investors in Asia trying to
get more of a foothold.
Speaker 10 (16:42):
Oh, the Chinese business is doing phenomenally well, which is
absolutely incredible, given I don't think the Chinese economy is
like rowing right now, and I don't know if it's
far apart, but I mean it's just it's been unique.
And you can look at some of the other ecomerce
businesses across China and so, actually, how are the performances
in right answers doing in China is strong. I wouldn't
(17:03):
read into I have no clue if the deal is
almost done or close to done or whatever.
Speaker 6 (17:08):
I have. When it comes to politics.
Speaker 10 (17:10):
I tend to just listen and not really make opinions
and I don't really know.
Speaker 6 (17:16):
Yeah, well, we'll see it again again. There's a handful
of people that need to be involved. Chi President of
the United States had.
Speaker 10 (17:23):
The CEO bite dance, and I can't say any of
them are good friends of mine.
Speaker 4 (17:26):
So if they do telephone you, you let us know.
Speaker 6 (17:31):
I'll let you know if she calls me die.
Speaker 4 (17:34):
There is a there is a technology conversation here right.
I go back to when I was at CEES and
at GtC very recently, and Jensen Wong's point the CEO
of and Video that basically more than fifty percent of
all the computer scientists in the world working on artificial
intelligence are doing so in China or they are from China.
What kind of future is there to sort of work
(17:55):
with that country on technology and founding new companies.
Speaker 10 (18:01):
I strongly believe whether it's technology transfer, technology exports, imports.
Speaker 6 (18:08):
Like the trade trade is global, we all need to
figure out how to work together. China plus the us
working together is a good thing.
Speaker 10 (18:18):
I am a strong believer in like the education system
in China, the entrepreneurship in China as well as in
the United States as well. But again, like for instance,
we I've talked about this another I think I'm Bloomberg
and other sessions.
Speaker 6 (18:37):
Chinese regulate social media.
Speaker 10 (18:41):
You know, in the United States, kids go on TikTok
and post ridiculous videos about all kinds of stupid stuff.
In China, they learn about science and math on TikTok.
I think maybe we should ask should we be regulating
this stuff more?
Speaker 6 (18:53):
Should we be.
Speaker 10 (18:54):
Repeeling some of these laws that don't hold social media
companies accountable by the.
Speaker 6 (18:58):
Way that gets does in China? And so I think
there are things that we should be learning at. And
some of those things that are happening in China and
applying to the United.
Speaker 2 (19:05):
States interesting tat Mitchell and I want to go there
because you have exposure, not just to China. We bring
you on because you've been so long in the names
like Ali Baba, you're an aunt, you're in byte Dance,
long term investor, understanding that economy. We look at the
rest of your old portfolio. You know, well, us exposure
too uber bumble, you know, Europe with Spotify. How difficult
(19:26):
is it to remain committed to China right now when
Sophius is changing up the rules, When you are unable
to commit capital and the way you'd like to, it's complicated.
Speaker 10 (19:35):
And again, most of our business is actually North America
and Western Europe. You know, we have a team of
eighteen associates that are twenty two to twenty four years
old that you know, speak about nine thousand companies a year,
and we all you know, we might speak to ten
to twenty companies and all across Stasia. So what we've
done in China is a very handful of some of
(19:56):
the largest businesses over there where they could effectively be there.
Speaker 6 (19:59):
They are a to be public companies, it just happened
to be private. We tend to like to be contrarian,
you know.
Speaker 10 (20:06):
And it was funny a year ago, nine months ago,
nobody liked wanted to invest anything in China. Yet then
you saw stocks like Ali Baba go from once, you know,
from sixty seventy dollars a share, it's like one hundred
and thirty hundred and twenty. Now people were liking China
again because they saw Chi and Jack ma. I think
it's some conference together and I don't know where all
(20:27):
about this today. Maybe it's back at one hundred a share.
So this stuff is so volatile, but we find that
you buy China when the rest of the world hates it,
you can tend to make lots of money. But again,
most of the stuff we invest in is right back
in in the United States and right now. Look, I
think in the terriff situation, I can have an opinion
of it today, it'll probably change.
Speaker 6 (20:48):
In a week, a month, and six months.
Speaker 10 (20:50):
But uncertainty is what actually slows down the economy, right
And you know, our portfolio has made the high high
margin software companies that don't have direct you know, inputs
coming overseas and things being chipped in.
Speaker 6 (21:02):
With that being said, if.
Speaker 10 (21:03):
You sell airline software, are you sell software manufacturing companies?
And those companies are nervous about what's going to happen
in their businesses. They might start to pull back on
spending and the whole thing kind of like unravels on itself.
Speaker 2 (21:15):
And if there's cuts to R and D in healthcare
research and you're in a name like Benchling, which is
all about community of scientists. I'm really interested in Mitchell
ultimately how difficult this environment is when some of the
companies that we thought were going to go public now
can't or don't want to. How is that impacting the
way in which you raise the next fund for example?
Speaker 6 (21:35):
Yeah, so we were so, we were very We don't.
Speaker 10 (21:39):
Talk about performance on obviously and pull me or anything
like that, but you know, we believe that investor funds
that took advantage of getting the quidity and what's called DPI.
It's so much money you've given back on a net
basis to your investors over the last few years, in
(22:00):
the last five years, is really going to matter for
funds as they go forward graating money.
Speaker 6 (22:05):
We are we are going to everybody.
Speaker 10 (22:07):
Thought two thousand and six, twenty twenty five is going
to be the year of the IPO. There was maybe
this giant IPO. Aa, Well that's dead, Like that's not
happening now.
Speaker 6 (22:16):
Again. I think these companies could go public.
Speaker 10 (22:18):
It's just the question of what valuation will could they
and will they then go public?
Speaker 6 (22:21):
And you know, your guess is as good as mine.
Speaker 10 (22:23):
But I think this liquidity drought is going to continue,
and I think as a result of liquidity drought, you're
going to have a lot of endowments and foundations and
other big institutional investors that are networks that are over
allocated to private equity, venture capital, growth equity, real estate,
private equity, everything that are going that are.
Speaker 6 (22:41):
Going to unlock the secondary market. And the secondary market
has already been busy.
Speaker 10 (22:45):
It is about to if this continues, call it six months,
nine months, and twelve months, you are about to see
a huge amount of institutions that are going to be
massively over allocated to private equity, that are going to
need to turn to the secondary markets and sell things
that for us will create a great opportunity. Did you
want to be buying from sellers that are forced to sell?
Speaker 4 (23:06):
Mitchell Green, lead Edge Capital. Thank you really appreciated conversation, Caroline.
Speaker 7 (23:10):
What you got a's time.
Speaker 2 (23:11):
For talking tech head and first up, Logitech It withdrew
its full year twenty twenty six outlook due to quote
continuing uncertainties of the tariff environment.
Speaker 9 (23:19):
Now Vonda Bell analysts.
Speaker 2 (23:20):
Say this is a sensible move, but the company's margins
will certainly be challenged, and you saw the impact on
the shares plus Tesla, it stopped taking orders in China
for its model ES Sedans its model Export utility vehicles,
both of which are imported from the United States. That's
after the country has raised tariffs on one another. Of course,
this could be a setback to the company's already shaky
position in the Chinese market. Meanwhile, Ali Baba co founder
(23:42):
Jack Maer He's worn that AI shouldn't replace humans, but
work instead to meet their every need. The Chinese billionaire
who wants like an AI to love here hogued that
the technology should protect livelihoods and make lives better.
Speaker 4 (23:56):
Okay, coming up analog devices, Texas instruments, big declines. We
take it deep dive into two a city's top semiconductor pigs.
The timing of that call very different from where the
stocks are heading right now. This has been bo Technology.
Speaker 2 (24:23):
Welcome back to Bloomberg Technology and Caroline hid in New
York and.
Speaker 4 (24:26):
I'm Ed Ludlow in San Francisco. San Francisco's mayor, Daniel Lurie,
is pledging an economic and tech revival, aiming to restore
the city's status as a global innovation hub. I sat
down with the mayor to discuss his growth strategy in
the face of tariffs.
Speaker 11 (24:41):
First, we're the most beautiful city in the world. Second,
the horse power is here, the intellectual horsepower is here.
We have great universities, including UCSF around here, and young
people want to be in.
Speaker 7 (24:56):
Urban environments.
Speaker 4 (24:57):
They want to be in San Francisco.
Speaker 11 (24:59):
That's been proven truth throughout history, and we're going to
prove that again. We have great arts and culture institutions.
We were just named the culinary capital of the country,
so we have so much to be proud of. And
we know that workers want to be here. Our CEOs
who were talking to they know that their employees want
(25:20):
to be in San Francisco. No offense to my friends
down in the Peninsula, but people live in San Francisco
and we want them to work here. And we do
have to get competitive, but it starts with safe and
clean streets. Our property crime rates have dropped thirty five percent,
Our violent crime has dropped fifteen percent. Car break ins
(25:42):
in February the lowest in twenty two years. This is
a safe American city and we want everybody coming back
to work here, to play here, and to live here.
Speaker 4 (25:56):
Mis very how is the White House and is tariffs
Paulus going to impact your ability to do what you've
just outlined, bring more of the technology industry to the city.
Speaker 11 (26:07):
Well, listen, we are all and you all are reporting
on it minute by minute. The uncertainty is impacting everybody
around the globe, and so we have to plan for
that here at city Hall. We're working with our department heads.
We have a big budget deficit. We inherited one of
the largest deficits in our city's history. So we're working
(26:29):
day and night to make sure that we tighten our belts,
we deliver core services to our taxpayers and to our residents,
making sure that we focus on public safety, focus on
the behavioral health crisis and the drug crisis that is
causing people to feel the disorder on our streets. But
that is all starting to improve. And so we can
(26:51):
only control what we can control here in San Francisco,
and that's our fifteen point nine billion dollar budget. We
have a one point one billion dollar budget deficit. Over
the next two years, we're going to get that under control.
We're going to fix our structure or budget deficit, and
I'm telling you we're then going to be off to
the races.
Speaker 7 (27:10):
Data bricks knows it.
Speaker 11 (27:11):
They just secured an office space one hundred and fifty
thousand square feet open AI just open new headquarters by
Chase Center. We are on the cusp of lift off
here in San Francisco, and we want everybody to come
be a part of it.
Speaker 4 (27:28):
So that was my conversation with San Francisco Meytor, Daniel Lurie,
and Caro. Like the pitch to the technology industry seems
to be San Francisco is beautiful and it's full of nerds,
and that's not really a policy platform. But if you
think about how the history of Silicon Valley's works, right,
there are many tech people here in the city, and
what do they do each day?
Speaker 7 (27:47):
Right?
Speaker 4 (27:48):
Where are all the big tech companies that they.
Speaker 7 (27:49):
Go to work at.
Speaker 2 (27:50):
They're not an SF they reverse commute out to the valley.
But also what I wonder about is when we've got
an economic quandary coming from the United States, when advertising
dollars might be pulled back, when we've already got a
meta for example, that has been laying off people, how
does that affect in NEEF economy going forward. We'll have
(28:12):
to debate that a little bit more in terms of
what's happening over in San Francisco.
Speaker 9 (28:15):
But we also want a little bit more in.
Speaker 2 (28:17):
Context about what the global tech policies look like in
this current context. That meta has to navigate, that alphabet
has to navigate, that these SF giants have to navigate.
Liza Tobins with US Managin director at are not Global,
and Liza, I'm so interested in just your take right
now and where we stand in this so called tit
for tat that today China's leader came out and said,
(28:39):
it's a joke. We're going to stop raising to meet you.
But we stand at one hundred more than one one
hundred and twenty five percent tariff on US goods. The
US has one hundred and forty five percent tariff on
Chinese goods.
Speaker 9 (28:51):
Where do we go from here?
Speaker 12 (28:54):
Yeah, So, of course, about a week and a half ago,
President Trump declared a trade war on the entire world,
and then over the last couple of days it seems
to have kind of slipped into an isolate China strategy.
Clearly the president is torn between his deal making and
his decoupling instincts. He's hoping for a phone call with
Chi Jinping. But what we've learned really over the last
(29:16):
twenty years of US China relations is that US trade
negotiators are always disappointed with what Paiging brings to the table.
And I'm seeing things play out this week that remind
me of when I was in the White House in
twenty twenty, and that, of course was when President Trump
got his Phase one trade deal with the Chinese, and
then a couple months later he started getting seriously disappointed
(29:38):
and blaming Sheijinping for COVID, which of course tanked the
global economy and he felt ruined his electoral prospects, and
so in some of the President's comments just a few
days ago in a speech, he's talking about she He's
hoping for a phone call, but he's referring back to
COVID and saying, you know, I like Sheijinping, we get
along great, but COVID.
Speaker 9 (29:59):
That was a bridge too far.
Speaker 12 (30:01):
That's what the president's saying. So he seems to be
remembering the disappointment and the anger from twenty twenty, and
he seems to be shifting from deal making to decoupling.
Speaker 2 (30:13):
We go to you because of your depth of expertise,
when you've worked with the CIA, when you've been in
the US Indo Pacific Command analysis for them as well, Liza,
not to mention what you've done over at the when
you're sc CP SCSP, I should call it, of course,
and I'm interested, Lisa therefore on where you go from,
who has the upper hand, where the TikTok's involved in
(30:35):
this negotiation. Just take us forward as to what plays
out next. If we are seeing a US president getting
more and more triggered by what happened in twenty twenty, right.
Speaker 12 (30:45):
So I think we could potentially see some kind of
a deal. Clearly, the President still would like a deal,
perhaps involving some tariff concessions, maybe americanizing TikTok, although he's
already conceded that aging will retain the algorithm, which is
really the brain that controls TikTok and controls Americans media diet.
(31:06):
So we may or may not see that. But I
want to remind your audience not to over index on
the strategic importance of a deal, because we've always been
disappointed by how China actually implements that deal. So I
think if folks are looking for some kind of grand
bargain that really makes some goes beyond symbolism and short
(31:28):
term measures and really addresses the fundamental imbalances of Chinese economy,
this massive trade surplus, unfair trade practices. They're going to
be disappointed by that. So markets will react and go
up and down on news or rumors of a potential deal,
But a true grand bargain is really off the table.
Speaker 4 (31:45):
I think, Liza, I'd like to hold you to account
on two points that you've made, or at least debate them.
One isolate China as an accidental strategy. And then the
data that you just flag the deficit between the United
States and China. So this is the ECTR function on
the Bloomberg terminal. It's twenty twenty three data showing the
(32:05):
deficit with China two hundred and sixty billion dollars. But
I think I'm right in saying prelim data showed the
deficit growing in twenty twenty four. Materially, when we think
about technology, what we're talking about is a country that
dominates the manufacturing of most of the world's consumer electronics
and other things. So forget numbers and tariffs and markets
(32:26):
and trade. Do you see the White House ever resulting
this policy in more of that stuff happening in America.
Speaker 12 (32:35):
The President certainly wants to, and he and his advisors
that are constantly talking about reindustrialization. I mean, the problem
is the devils in the details here, and it does
it's unclear if President Trump really understands the details and
the extreme intricacies of these supply chains and what it
actually takes to reindustrialize. And of course there's big structural
(32:59):
challenge is like do we have the workforce for this.
The administration talks about manufacturing jobs coming back. Well, that's great,
but actually we have a shortage of skilled manufacturing workforce,
and advanced manufacturing is now a knowledge industry. This is
a highly skilled profession. It's more like software coding and
applying AI to the factory floor. And it's not yet
(33:23):
clear to me if that kind of advanced manufacturing is
front and center on the administration's agenda.
Speaker 9 (33:30):
It's very much right.
Speaker 12 (33:31):
Now a teriffs first, tax cuts, the regulation and energy
and those may be a great start, but they also
need to be kind of leaning into these more structural.
Speaker 2 (33:41):
Issues suddenly if they want to make iPhones in the
United States. Pizeitoven, managing director of Ghano Global, was great
to have you join us. Thank you now Federal is
a bank of New York President John Williams. He expects
slow economic growth, high unemployment, and a pickup in inflation,
all of this due to the US tarris policy and
reduced immigration. Take listen to what he had to say
(34:02):
just moments ago.
Speaker 3 (34:03):
Well uncertainly about the economic outlook reflects many factors. Effects
of tariffs and trade policy and the economy are certainly
at the top of the list. For example, my business
in financial market contacts highlight that this has made it
more difficult to plan for investments and for hiring.
Speaker 4 (34:43):
Let's get right back to financial markets. It's Friday, at
the end of a long week. Basically flat on the
Nasdaq one hundred, but up more than five percent over
the course of the week. Basically flat on the Philadelphia
Semiconductor Index, down to tens percent, but up more than
seven percent on the course of the week. And Cara,
if you allow me to there was a really important
headline overnight that I think our audience needs to understand,
(35:04):
and it came from China's semiconductor industry body, basically citing
customs regulators that how are they going to define the
point of origin of a semiconductor right think about global
supply chains. And in the market right now you see
names like in video higher and Vidia doesn't manufacture its
own chips, names like Intel and Texas instruments that do
(35:26):
significantly lower. Here's what they said. The point of origin
for a chip in deciding whether to apply tariffs or
not will be the point it is taped out. And
what that means is when an American company, for example,
is done designing its chip in San Diego or here
in the Bay Area, it then needs to send the
designs to a contract manufacturer. We're talking TSMC and Korean
(35:47):
names like Samsung, but that happens locally, and so they're saying,
that's how we decide where your chip comes from. You
tell me the big story that we've learned in the
last two years about all these American chip makers. What
are they actually not?
Speaker 2 (36:01):
Well, they're not makers of chips, but some of them
are trying to be. Some of them trying to be
contract makers of chips. Intel, for one, which is actually
expanding its presence of making chips in the United States.
Speaker 9 (36:12):
What does that mean in terms of business model?
Speaker 2 (36:13):
You've just got to take out China from the equation
and on the flip side. Of course, domestic chip makers
in China rallied hard. You saw the CSI three hundred
index up more than thirty percent on the day. This
had real tailwinds for Chinese local players and of cause
pressure on some of the local makers here in the
United States.
Speaker 4 (36:29):
Said yeah, And the one thing I would say is
that it all comes back to the end market. What
does China do. It makes most electronics high end or
low end, And so that's why I've tracking this so closely.
But you're exactly right. But in some of the names
you've just mentioned, analysts are paying attention for other reasons.
Speaker 9 (36:47):
They certainly are.
Speaker 2 (36:48):
Let's get to one of those analysts calls because likes
of Aanamon Devices or Texas Instruments, as you say, pressure today.
But City named actually those two companies, and it's top
semiconductive picks amid tar of pressures and recession fears. Like
City manager director and semiconductor analyst Chris Stanley writing, high
end analog companies such as ADI and TXN have outperformed
during downturns. We would expect the same to occur in
(37:10):
a recession, with ADI performing best given higher margins. Nimas
rym Vstella can can break down some of the moves
on Semi got a fair few downgrades in terms of
price targets today as well on Semi meant to feel
more of headwind versus some of these players.
Speaker 13 (37:23):
According to City, absolutely, I think people are still really
struggling to kind of figure out what this environment is
going to be like for different chip makers, depending on
their in market, depending on their manufacturing systems, their supply chains.
It's all very uncertain, very up in the air at
the moment. So beyond the naming TI on one of
its top picks, City also said it was taken out
(37:44):
the lawnmower. Those are exact words, cutting estimates by twenty
percent on average across the board for chip makers. That
just speaks to how much uncertainty there is when it
comes to this sector at this point in time.
Speaker 4 (37:56):
They the firm City had this estimate a while ago
that the socks the index would drop twenty percent if
there were to be a recession, and I think I'm
right in saying that they now assume a recession is
a firm there's a lot happening in the market. You
also wrote about the takes out point of origin story
yourself this morning, just go back to explain some of
(38:18):
the moves of the market in the here and now.
Speaker 13 (38:21):
Yeah, so absolutely, like you were saying before, companies like TI, Intel,
Global Foundries, Microchip, all these have sort of domestic manufacturing
plants for their products, and these are the stocks that
are really falling today. Other ones that do most of
their manufacturing are Broad Taiwan, Simi, Vidia, AMD, Qualcom, BROCM
(38:42):
all those names. They're probably higher in the morning. It's
obviously a very volatile situation. There's a lot of cross
currents going on right now, but certainly we are seeing
Texas instruments in particular weaker today, Intel particularly weaker today,
whereas companies like Nvidia are higher.
Speaker 2 (38:58):
Let's go to Nvidia for a moment, because for an
analyst over at City has actually been downgrading in video
as well. Their key concern is that these hyperscalers, meta
alphabet you name them, are going to actually start to
curtail they're spending on AI data centers.
Speaker 9 (39:14):
How much of an overhang is that for names.
Speaker 2 (39:16):
Like whether you're a fablus or fab kind of a
chip maker.
Speaker 13 (39:20):
Well, for Nvidia in particular, I had to go and
look but I think forty percent or so of their
revenue comes from just four companies, which is Microsoft, Meta, Alphabet,
and Amazon. So to the extent those companies pull back,
and I'll say Alphabet a couple of days ago it
had a bigger cloud conference and it did affirm its
CAPEX plans. Microsoft, you know, it affirmed its own plans
earlier this year. So right now, it seems like maybe
(39:41):
for the next twelve months, all those spending plants are
pretty intact. But if we get to twelve months from now,
and maybe especially if we're not seeing a huge ROI
on all this AI spending, especially if the cost picture
has changed dramatically due to tariffs, if the whole picture
has just changed because of weaker economic growth, all these
other kind of factors, it would not be super surprising
under those circumstances if these companies started pulling back on
(40:04):
their CAPEX, especially as it retains to their AI infrastructure,
which is at this point a lot of Nvidia products,
and what that means for them in terms of their growth,
in terms of their profitability. While just given its customer concentration,
that would be a pretty dramatic hit a company like
it in video.
Speaker 4 (40:21):
Blimbo's Ryan vlastatica terrific, Thank you very much.
Speaker 14 (40:32):
A single shipyard in China now produces more ships every
year than all of the American shipyards combined. Think of that,
and it was a business that we used to dominate.
Speaker 9 (40:44):
President Trump.
Speaker 2 (40:44):
There now one startup looking to manufacture ships in the
United States.
Speaker 9 (40:48):
It's blue Water Autonomy, preparing.
Speaker 2 (40:50):
To build large vessels able to travel between San Francisco
and Hawaii without a captain or a crew. Rdan Hamilton
as the CEO co founder of blue Water. Rather, you're
coming out of stell fourteen million dollars in the bank.
You've got vcs that batch your prior really successful companies.
You were in warehouse automation prior to this. How much
(41:11):
is the time now to be making automated ships? Suddenly
far more prevalent when we've got us China tensions.
Speaker 15 (41:18):
The time is definitely now. If we hear the current administration,
they're talking about shipbuilding, shipbuilding and shipbuilding, and we're designing
and building autonomous ships. And when you make them autonomous,
you can remove the bridge, the birthing, the galley, the showers,
so you can make them a lot smaller. And because
they're smaller, you don't have to build them at the
big navy shipyards. So we should continue to build the
(41:39):
big warships, the guided missile destroyers, the aircraft carriers, the
submarines as quickly as possible. But our ship can be
built at all these mid tier shipyards that have capacity today.
Speaker 2 (41:49):
Why is now the right time from a technology perspective
as well, what is going into making automation far more
easy or certainly not easy, but far more able to
enact ry now?
Speaker 6 (42:00):
Well, this is a hard problem.
Speaker 15 (42:01):
This is not easy because for designing ships that can
operate across the open ocean, and the last thing our
Navy needs is for these ships to be dead in
the water of the mill the ocean, and the ocean
is extreme. You're thinking about extreme temperatures and salt water.
In fact, ships get hit by lightning, and so we
need to build a very It happens as we did
research for this and we talked to the chief engineers
on some of the sort of workboats that operate around.
Speaker 6 (42:23):
The United States.
Speaker 15 (42:24):
They said, yeah, last week my ship got hit by
lightning and a fried all the electronics. And so there's
a ton of challenges to do this. But we feel
we have the team to do this because we've been
at some of the most successful robotic companies in the
United States, and two of my co founders include myself.
We were also in the Navy.
Speaker 4 (42:43):
Ryland. The big picture is to modernize the maritime industry,
but this is a Navy application. As you just point out,
American dynamism, this big emphasis on the private sector's relationship
with the military industrial complex. What is it you actually
want the president to do to allow for you to
make this a success.
Speaker 15 (43:04):
So we want to move fast, and we'll move as
fast as the Navy wants us to move. And so
we definitely want the president to continue to focus on
shipbuilding and innovation, especially around autonomous systems. And there are autonomous
systems that are in the air, that are on the surface,
and that are underwater. Our focus is on these autonomous
ships that can operate on the surface of the water
and have high endurance and range, the range that you
(43:25):
need for the Pacific Ocean.
Speaker 4 (43:27):
Anderill picked Ohio for its skilled labor and for its
history and aviation. For example, where is your Ohio? Where
do you think you need to build these ships?
Speaker 15 (43:38):
So we'll have more to announce later this year. But
we've definitely been looking for the perfect place to go
build these ships, and there are a lot of really
good options, whether it's on the East coast or the
West coast or sort of in the Gulf, and so
we'll make an announcement later this year.
Speaker 2 (43:51):
You were early leader in Amazon Robotics. When you are
building six river systems. How good is US at manufacturing? Now?
Speaker 9 (43:58):
Can we bring back what we want to bring that?
Speaker 15 (44:00):
Yeah, so the US is actually really good at advanced manufacturing.
So early in my career I was at Amazon Robotics
when there are a couple thousand robots.
Speaker 6 (44:07):
In the field.
Speaker 15 (44:08):
They're now over a million robots in Amazon warehouses throughout
the world. That is amazing what that company has done
over the last ten years. So when it comes to
complex systems where you need to take sort of commercial
off the shelf components and put them together and then
write the software on top, we're amazing at that.
Speaker 4 (44:25):
Rylan Hamilinson, CEO, co founder of blue Water Autonomy, you
have to come back when you announce the location rights.
That's how it works. That does it for this distion
of Bloomberg Technology. What a week? This is what markets
look like Caroline. I mean, it's kind of odd in
a way to give a snapshot of a session in
the moment and now's that one hundred higher by modestly
right pressure on US listed shares of Chinese names. Take
(44:48):
it away, what are you seeing.
Speaker 2 (44:49):
What's extraordinary is we had a week where we're actually
more than five percent higher, but what a volatile five days.
The bond market has seen extraordinary moves, and then over
the course of the month that now's back, it's lower ed.
Speaker 4 (45:03):
Happy weekend everyone, This is Bloomberg.
Speaker 6 (45:08):
H
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