January 13, 2026 • 44 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss Meta’s plans to double the output of its Ray-Ban AI-glasses as it pivots away from the metaverse. Plus, Microsoft pledges to pay electricity rates that will cover costs for its data centers, seeking to quell consumer anxiety over power prices. And, Klarna CEO Sebastian Siemiatkowski weighs in on President Trump’s call for a one-year 10% interest rate cap on credit cards.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
You allocation, right, we've been obsessed about GPUs and AI
accelerated cards, but you need to have an equivalent, if
not greater number of CPU in the design of the server.
And that's an area that into on amb have done
well to some market share where videas trying to dominate
the whole system. And clearly two big moves our size
moves almost carrot for an analyst upgrade, but Intel in
(00:29):
particular soaring high at the moment.
Speaker 1 (00:31):
Yeah, wants to watch big points contributors, and let's just
flip gears a little bit and talk about, well, where's
one out on some of their investments of late hedge
fund investors, Well, they haven't had it this good since
the aftermath of the financial crisis. Data compiled by industry
tracker Hedge Fund Research showing them back in twenty twenty five,
the industry posted its best year since two thousand and nine.
Gains are about top point six percent on average, but
(00:52):
some scrowing much higher than that. Bloomberg hedge fund reporter
Hemma Palmer joins us now, and we like to think
about the way in which they've all embraced AI and
the quant funds doing well. But who really shone in
twenty five and why Yes?
Speaker 3 (01:03):
So you know, it's such an interesting year because funds
across strategies, across sizes generally did very, very well. And
when you look at the big winners, you're looking at
some of the tech focus firms.
Speaker 1 (01:14):
If you look a.
Speaker 3 (01:14):
Whale Walk, they did quite well. If you look at
light Street, they got over their high watermark from the
really difficult twenty two to twenty three period. You're seeing
some of the best returns over at Bridgewater. If we
look at Macro MAI percents exactly excellent numbers. So kind
of across strategies, you're seeing winners across pretty much every strategy.
(01:35):
D E Shaw over twenty percent and the multi strat strategy.
So pretty interesting and good news for investors and hedge funds.
Speaker 4 (01:44):
Yeah, Hammer, when I was growing up in the Bloomberg
school of hedge funds ten years ago on the TV desk,
that's what hedge funds do, make cash out of chaos.
Speaker 2 (01:54):
Isn't that the whole point? Is there anything unique in
this bucket of data that we've got about what they're
doing different diferently AI playing a role talent stepping up
and delivering big performance.
Speaker 3 (02:05):
Yes, So what makes the year interesting is the volatility
that we're seeing is the kind that goes in and
out pretty frequently and provides great times to get in
on different types of trading opportunities. So AI has been
a great lifter for a lot of the tech focused funds.
But if you look, for example, at Viking Global, which
Viking doesn't do as much tech and AI as say
(02:28):
other funds like other Tiger cubs CO two for example,
they didn't do as well. They were only up about
eight point six percent, putting them lower in the pack
of tech funds. Tiger Global, which we typically think of
as a tech investor, they did well in their long book,
but their short positions eight into those gains, putting them
(02:48):
also lower in the pack more than seven percent gains.
So you know, everyone made money, but the real question
is who made the double digita games?
Speaker 1 (02:57):
And you see would.
Speaker 3 (02:58):
Likes to read good return from a lot of those
sort of popular names.
Speaker 2 (03:03):
Bloomberg's Tamma Palmer with the hedge fund breakdown, Thank you
very much now. JP Morgan kicked off a week of
big bank earnings today. One area of focus the impact
AI could have on spending at those banks. CEO Jamie
Diamond insisting the bank will be spending on AI to
drive efficiencies but also keep up with competitors. There was
a surprise in the expenses number for JP Morgan of
(03:25):
the year, nine billion, above what the streets saw, and
they wanted to know if AI was to blame. Let's
bring in Alexandra and miss Visita. She's co CEO and
co founder of Evident, a platform that benchmarks and tracks
AI adoption across the financial services sector.
Speaker 5 (03:39):
Was really interesting earnings call.
Speaker 2 (03:41):
Often it's with Jamie Diamond, but this was Wells Fargo's
Mike Mayo basically saying like, hey, those expenses seem very high,
and you've been talking up AI a lot of JP Morgan.
Is that directly correlated? And Jamie Diamond's point was kind
of like, we will be spending, it's just not as
much as you think we have to because everyone is.
(04:02):
Is JP Morgan ahead in this AI implementation race in
the banks?
Speaker 6 (04:07):
Yeah, well, thank you, thank you.
Speaker 5 (04:09):
Yeah.
Speaker 7 (04:09):
It was interesting to see the discussions today, but sort
of stepping back and overall, as you know, we map
the biggest banks in North America and Europe on their
AI deployment, and JP Morgan is very much leading.
Speaker 6 (04:22):
They're out number one.
Speaker 7 (04:24):
Three and a half years in a row, so they
are leading on AI deployment.
Speaker 6 (04:29):
They are leading on.
Speaker 7 (04:32):
Deploying and embedding AI throughout the bank. They do also
spend a lot on tech and a growing proportion of
that is on AI precisely to be able to take
over time some of.
Speaker 6 (04:43):
These costs out.
Speaker 7 (04:45):
A lot of the deployment we do see is in
those are in those internal processes and to create the
efficiency gains but also someone revenue uplift.
Speaker 1 (04:55):
Alexandra, A lot of this question is about when those
efficiency gains come, Have they come, Are they coming in
twenty six or is it more still longer term from
your perspective.
Speaker 7 (05:05):
Yeah, I mean it's interesting right because we're three years
into the GENAI journey and that was a journey with
that started with a lot of excitement and testing and
now use cases moving into production. But there seems to
be a real sort of shift in the tectonic plates
now where it's looking at fully embedding it across the
banks and every across the bank in every function and
(05:27):
line of business, and with that you need to have
platform architecture that's built for scale. And what we are
definitely seeing is some return on investment coming through on
the efficiency side, so automation of KYC processes and you know,
going into the asset management side, the investment banking and
(05:47):
so on and so forth, so really across the entirety
of the bank. So it's still early days in terms
of the actual sort of return and the ROI. I
still think that there's some years to it will take
with us to really fully come through. And then we've
also got a gentic Ai use cases coming, you know
and going into production, and that's where I believe we're
(06:08):
going to see the real impact. But it is going
to take another three to four years for Argentic and
fully autonomous Urgentic use cases to be fully embedded and
to see that you know, really fundamental and sizable ROI
that we know is coming, but it is going to
take a couple of years for the gen AI to
fully come through and maybe three to four years for
(06:30):
gentic Ai impact to fully come through.
Speaker 1 (06:32):
It was interesting that basically that question about AI from
Mike Mayo was at the tail end of the call.
Before that there was Myriada questions for Jamie Diamond around
the Apple onboarding with the credit cards there, but are
also talking more broadly about their investment banking this and
indeed credit cards by Alexandra and push us forward. We've
got a whole host of other earnings coming thick and fast.
Where will they be talking about AI most abundantly?
Speaker 7 (06:57):
Well, so you know, it's it's a time with a
lot of things going on, so AI might not be
front and centered this time. It has been over the
years some of the questions that have been asked in
the earning schools. There's a lot of shareholder pressure to
understand where the bank is. We've definitely seen a shift
in terms of banks being much more clear that it
(07:17):
is a high priority, that it is part of the
senior leadership team and the CEOs. Are you fully understanding
that it has to be embedded across the bank and has.
Speaker 6 (07:26):
To be core.
Speaker 7 (07:27):
So I expect that there will continue to be not
only in the earning scores, but as we've seen throughout
the year and investment days and investor days and and
you know, press releases when partnerships and so on are
getting produced by the banks. The discussion on AI is.
Speaker 6 (07:43):
An ongoing one and throughout the.
Speaker 7 (07:45):
Year, but we've got some earning scores coming through from
the big banks, you know. Goldmesas has also made a
big announcement late last year about their one GS three
point three point zero program, which is really about fully
transforming the bank end to end, top down, bottom up
for fully embedding AI. So it's going to be really
(08:08):
exciting to see what numbers might be associated with that
the leading banks are going to be talking about ROI.
I believe there has been a lot of talk with
numbers associated with within the last year. I think that
these numbers are probably tip of the iceberg, and we're
going to see these being updated and upgraded in twenty twenty.
Speaker 5 (08:28):
Six, Alesandra, we just have thirty seconds.
Speaker 2 (08:31):
But how competitive is JP Morgan in attracting and paying
top talent in AI?
Speaker 7 (08:37):
Very Yeah, it's very good at getting top talent. It
is a place that is known for putting AI first.
Jamie Diamond was very clear about that all the way
back in twenty seventeen where he said we're going to
be an AI first enterprise. They are able to attract
top talent. They're in competition with the tech sector. Everyone's
looking for that top talent that really do the difficult
(09:01):
systems wethink everyone's thinking about the shark tanking taking talent
from tech companies that can rethink the processes end to
end and completely change the system. Remember, the technology here
is just ten percent of the problem. Ninety percent of
the problem lies in the sort of rethinking of the
processes entirely. You almost have to build a digital twin.
(09:24):
We think the process and put it back in. That
talent is what JP Morgan can attract.
Speaker 1 (09:31):
Thanks was a visit A always great to catch up
with you, co CEO, co founder of Evident. We thank
you coming up and bringing room mags exclusive conversation with
a bid CFO Henry Hay on the US China race
from New York for San Francisco. It's a room ed Tech.
(09:59):
Defense Secretary Pete Hegseth lamented the defense industry's risk averse
culture and praised Enol Musk during a visit to the
SpaceX Star based launch site that was last night. Hexath
announced plans to integrate Musk's Groqui platform into the Defense
departments system and to make the US military a quote
AI first war fighting force. Take a listen we need to.
Speaker 5 (10:20):
Be blind here.
Speaker 8 (10:20):
We can no longer afford to wait a decade for
our legacy prime contractors to deliver the next perfect system,
only to find that it's delivered years behind schedule and
cost ten times what it should. Winning requires a new playbook.
Elon wrote it with his algorithm, question every requirement, delete
(10:45):
the dumb ones, and accelerate like hell.
Speaker 2 (10:49):
No care of people saying why is Hegseth at SpaceX
or SpaceX has four billion dollars in government contracts alone
just for development, but one of few carriers, Falcon nine
Falcon he that's authorized to take Pentagon's sensitive satellites to orbit.
Speaker 1 (11:04):
It's also interesting timing regarding GROC, right. I mean, already
Google AI is integrated with the Defense Department, but to
add GROC at this moment when there has been a
lot of concern about what it has been producing in
terms of imagery, and they're like a notable step forward
in that respect, in that relationship and deepening.
Speaker 5 (11:21):
At least a.
Speaker 2 (11:22):
Week ago, the President put on true social that he
wanted to cap salaries of defense companies who weren't performing
for their CEOs. Today we have news that the government
is taking a significant stake in a top five defense
contractor EL three Harris.
Speaker 5 (11:35):
What do we need to know?
Speaker 1 (11:36):
Yeah, and the idea that they're going to be spinning
off an IPO of the unit, the missile solutions business
they're going to and REL three Horris is going to
train control in the missile solutions business. But second half
of twenty twenty six they're looking at spinning it off.
And we understand the Department of Defense is set to
invest one billion dollars in convertible preferred security. I mean
it's lifted the shares up two percent up to six
percent at one point end.
Speaker 2 (11:56):
Meanwhile, in Asia, by do CFO Henry Hir spoke with
Bloomberg Steven Angle about that company's AI spending of over
fourteen billion dollars listen to listen.
Speaker 5 (12:05):
To view.
Speaker 9 (12:07):
In the November earning call last year, we actually disclosed
one numbers. Since earning came out back in twenty twenty three,
we have invested over one hundred billion R and B
in terms of AI investment, which is a huge investment
just on the web site.
Speaker 5 (12:21):
On the end, we do see a great return on that.
Speaker 9 (12:24):
For example, right now, our cloud revenue increasing about twenty
eight percent on a wildlire basis in Q three for
the AI cloud. And also we are seeing over kind
of two hundred percent growth.
Speaker 5 (12:35):
On the AI search transformation.
Speaker 9 (12:38):
So for example, last year we only have three percent
of the contents are generating for the AI for traditional search,
but right now this number is increasing about eighteen percent,
and we're seeing kind of three digits increasing on the
traditional search to the AI news search. And also for
the robot taxi, as I mentioned, it's actually delivered over
a quarter million drives every week and we're seeing that
(12:59):
number is on accelerated at gross pass. So I think
the investment, we are seeing the good trends of the
Montadasia and the company on the return, how do.
Speaker 10 (13:07):
You see the difference between how AI is evolving in
China versus you know what we've all been following very
closely in the MAGS seven and what's happening Open AI
and others in the United States. Essentially, there are concerns
about this allocation of capital and not getting the kinds
of return, so there could be potentially a bubble China.
There bubble concerns as well, but there's a bifurcated AI
(13:32):
space in China as well the big boys like you
and Tencent and Bite Dance in Ali Baba. And then
there are new up and comers that are hitting the
market in Hong Kong like Mini Max and others, those
lms that are starting to make a dent. But you
guys have the capital base. Is there a bubble forming
as well in the investment in China because of the
(13:55):
over investment.
Speaker 9 (13:57):
I want to call it two tails of the city. Usually,
I think if you want to decompose the drivers, I
think there are four things, right, the data model, computing power.
Speaker 5 (14:08):
As well as applications.
Speaker 9 (14:10):
Right, So I think if you analyze these four different things,
US China does have a lot of different contexts.
Speaker 11 (14:15):
Right.
Speaker 9 (14:15):
For example, right now in the US as a lot
of investment on infrastructures. But today if you look at electricity,
cable network in China's already being built in the past
few years. So if you really want to compare on
IOI or IRO or on infrastructure, site that's in China
does have certain advantage on that. And also in the
past ten years of the mobile internet age in China,
(14:36):
there's a huge accumulation of data and data become important
for today's influences because a few years ago everyone is
competing for foundation model, right, So true question.
Speaker 5 (14:45):
I think in my view, any company.
Speaker 9 (14:48):
Have a close loop or full stack of the computing power,
data and ownership of application user cases will be sustainable
on AI.
Speaker 1 (14:57):
I do CFO Henry Hay there talking a full stack.
We're going to talk about alphabet next. Coming up, Dan
Ives and Webbush joining us to talk about that deal,
the impact of Apple choosing Google's AI to power Serri.
That's next. This is bluebg Tech new research out today
(15:20):
on Apple's plan to use Google's AI to power Serie
voice assistant and much more from meg Intelligence, writing that
the deal highlights the cost advantages of Google's tens of
chips of arrivals. Analysts also welcome confirmation in the news
which Blomberg reported late last year. Remember now, when Bush
reaffirmed its three hundred fifty dollars price target. It's the
highest on the street for Apple after the deal the
price to welcome Dan Ives, manager director senior equity analyst
(15:42):
at Webush who has that number. So let's talk about
the benefits for Apple first, Why the reinformation of three
hundred and fifty? Why is this good? For them in
Apple Intelligence.
Speaker 11 (15:52):
Look, they've had an invisible AI strategy. I mean, if
you go back to the last wwdc's you felt, like
Michael J. Fox back to the future, there was really
nothing there talking about AI. Finally, this is a huge
step forward and it's not going to happen internally. Had
to happen from Google Gemini. Looking, it comes down to like,
if they never win the adjsuit, this doesn't happen. So
(16:15):
it speaks to just brick by brick, they're finally building it,
and I think this is going to be instrumental to
the valuation for Apple this year.
Speaker 1 (16:24):
If you look at the statement that was put out,
it was very much for the time being, this is
going to be embedded in Apple foundation models. The idea
is that they pull away, they are able to get
a grip on their own foundational models and indeed Siri
becoming actually useful. Do you think they will distance themselves
from Google over time?
Speaker 11 (16:41):
Look, I think there's a better chance in me playing
NFL playoffs than Apple doing something internally. At this point.
The reality is this is also a game of a
high stakes poker negotiation that's going on too. In terms
of a broader deal with Google that I think they're
ultimately going to have to do. I think this will
be exclusive, and because my view is that there's gonna
(17:01):
be some sort of subscription service freemium, you also need
a platform for developers. And it comes down to, like
the AI revolution, like Apple's watching from the sidelines. From
the stands, they need to get into the game. And
that's why we talked about seventy five hundred dollars per share,
that this adds to the story as they execute on
the consumer AI revolution. Finally, going through Koupertino.
Speaker 2 (17:25):
Dan, you you had advocated on more than one occasion
that Apple bi perplexity. With this confirmation of Gemini being
the underpinning of Sirie, is such a transaction still necessary
to your mind?
Speaker 11 (17:40):
Yeah, and Ed it's a great point. But a lot
of that was based on as the dog suit was
going on with Google. There was a sort of period
there where Apple needed to do something. Now, obviously perplexity
came and went they're clearly not going to do that.
But once Google won the dog suit, that was sort
of I green light lights on and now it's sort
(18:03):
of good time for big tech. And I think that
speaks why Apple did this deal. And look, you look
at Google Gemini, what they've done, you go back a
year ago, it's phenomenal. And I think Apple is making
that bet. It's gonna be a much different twenty twenty
six and twenty twenty five relative to Apple when it comes.
Speaker 5 (18:22):
To AI again.
Speaker 2 (18:24):
Charriage just made the point that Apple was very careful
in the statement to explain which parts of series functionality
would be underpinned by by Gemini. The other way looking
at is to say, have they still got a lot
of work to do to make serious sort of all
encompassing AI assistant.
Speaker 11 (18:43):
I mean, look, it's a it's an Everest like our
pill battle, because the reality is they've lost so many developers,
they've lost so much talent. You've seen a odd changing
look and you know it as well as anyone like
the DNA of Cooper Tino. Why that is supposed to
come internally, and I think Cook recognized look riding on
the wall. It speaks to my point that like Cook
(19:04):
is not going to leave his CEO and leave this
sort of in transition, he has to get the AI
strategy sorted out. It's going to be a work in progress,
but two point four billion iOS vices, one point five
billion iPhones. It's my view that the consumer AI revolution
ultimately comes through Cooper Tino, and this is a first
step in that direction. We'll obviously see more about it
(19:26):
in the spring, and of course more WWDC.
Speaker 1 (19:29):
Some might say it's incredibly savvy to be AI liked
to not have to make all the investments in the
data centers, to be able to say, look, privacy first,
we're going to lean much more on EDGAI. Is that
actually going to be a winning formula for Apple in
the future and as models and sophistication develops.
Speaker 2 (19:47):
Yeah.
Speaker 11 (19:47):
Look, but also Apple is in a much different situation
because of the unrivaled install base, because of where they
play in the consumer That's why, like from a CAPEX perspective,
they're not Microsoft, Google, you know many other big tech plays.
But I think they finally hit the point Ruber met
the road. They need to do something. They're going to
have to incrementally spend, but they're basically going to rely
(20:09):
on Google as a partner because you cannot have the
Fourth Industrial Revolution, biggest tech transition in the last forty years,
come and go and they don't monetize. And I think
that's something that they recognize front and center, and it's
key to the stock. I mean realistically, like a year
from now stocks three fifty or lower from here. It's
all based on AI and them monetizing it.
Speaker 2 (20:33):
Dan, I'm spanishing director at Webbush. We have the street
high price target three fifty on Apple. So that does
it for this edition of Bloomberg Tech Era and one
edition it was it.
Speaker 1 (20:42):
Was I mean, we started when that's the techn that's
told us about how this really shows Alphabet's prowess. Then
we finished on how it's Apple's future. Don't forget to
check out our podcast. You can find it on the
terminal as well as online on Apple and who, Spotify
and I have listen Blomberg. Bloomberg Tech is a live
(21:03):
from Coast to coast with Caroline Hide in New York
and ever Low in sentrances.
Speaker 2 (21:09):
Go this is Bloomberg Tech coming up, Meta and esslor
Luxorika cub double production capacity for AI powered smart glasses
by the end of this year based on growing demand.
Speaker 1 (21:22):
Plus, Microsoft seeks to quell consumer anxiety of a power
price impact of data centers, pledging to pay utility rates
that will cover the company's costs we discuss.
Speaker 2 (21:33):
And Clana CEO Sebastian Schomakowski weighs in on President Trump's
call for a ten percent interest rate cap on credit
cards for the year.
Speaker 1 (21:41):
First, we turn our attention to the markets that despite
that coler inflation prints CPI coming in with two point
six percent. We're looking at markets under pressure at naturally
erasing yesterday's games. We're off by two percent on the
Nasdaq one hundred. These aren't massive moves when we are
still seeing some risk aversion amid the geopolitical turmil and
whether or not we do indeed get any sort of
(22:02):
fed pause with seems as though the rate cut has
been put to the back burner by the markets at
the moment.
Speaker 5 (22:07):
Ed a lot of meta news this morning.
Speaker 2 (22:10):
The latest from Bloomberg is that talks with Esselo Luxodica
are around doubling capacity for RayBan Metas to twenty to
out million units from ten million units current in stall capacity.
Speaker 5 (22:23):
If demand's good.
Speaker 2 (22:24):
They're talking about maybe, according to our sources, thirty million
units in the year now. That drove shares of essel
Or Luxotica up in Paris. Meta to the downside. With
other news, the confirmation of recent reporting that they're going
to be trimming headcount from the metaverse Carrow. Then there's
the Microsoft piece of news. Microsoft has a five point
plan to basically take responsibility for the cost of electricity
(22:47):
associated with data centers. The main one is to cover
its costs, but other parts of that are pieces of
transparency with the communities where those data centers might impact pricing.
And we've done so much reporting that here at Bloomberg.
Let's get out to Bloomberg's Tech an industrial policy reporter
Maggie Easton, who's in DC. You were there at the
Microsoft presentation. What do they have to say and what
(23:09):
are those five points in the plan?
Speaker 12 (23:12):
Yes, so Brad Smith of Microsoft was in Washington this
morning talking about this five point plan. So I think
the largest piece of this is, of course, the electricity costs.
Speaker 1 (23:22):
So they've said that.
Speaker 12 (23:23):
They're going to work with these local power utilities to
ensure that Microsoft is paying for any increase in costs
that they're responsible for. Now, of course, the caveat there
is they're not ensuring bills won't go up due to.
Speaker 1 (23:35):
Inflation or other causes.
Speaker 5 (23:37):
But what they're.
Speaker 12 (23:38):
Saying in accordance with what President Trump asked for yesterday
is that if the cost is due to Microsoft coming
in with the data center, they're going to ensure that
they're paying for that.
Speaker 1 (23:49):
Yeah, President Trump, and as Truy's social saying that they
don't want consumers to pick up the tab. Where else
is the tab potentially going to fall because this isn't
just all about electricity prices. There's other resources that are
likely to be stretched, definitely.
Speaker 12 (24:04):
So another thing that Microsoft was talking about just this
morning is the local tax space. So historically, when these
data center projects come in, Microsoft and other hyperscalers have
received some sort of local incentive, and Microsoft is now
saying they're moving away from that and they want to
make sure that they're increasing the tax space in these
local communities.
Speaker 5 (24:22):
To support the schools.
Speaker 12 (24:24):
And yeah, just making sure that they're not accepting local
incentives in some cases, even though they are still open
to state and federal incentives.
Speaker 1 (24:32):
Maggie's and with the latest from that Microsoft event, we
so appreciate it. Now let's turn to the business side
of the equation. That's the tangles with our ceocio of
lafentangle their investments and look, when you're thinking about the exposure,
you have to Microsoft and these data send to build outs.
More broadly, how much they need to factor in the voter,
the consumer right now.
Speaker 13 (24:52):
Well, I think it's super smart for them to get
ahead of this. I'm sure they let the president announce
it first, but Microsoft has always and good at anticipating
under Nadella. And I think being a good citizen in
the community is important.
Speaker 6 (25:08):
But it's not the first time we've heard resistance.
Speaker 13 (25:10):
Tesla got a lot of pushback when they moved to Texas.
They took over a city, you know, they bought people's homes.
Speaker 6 (25:17):
It was It was disruptive, and I think we're seeing
the same thing.
Speaker 13 (25:22):
I would argue to a lesser extent with data centers,
but importantly, you know, this is what happens.
Speaker 6 (25:28):
In the transformative economy.
Speaker 13 (25:30):
We saw it also with the clean energy push windmills,
you know, solar panels.
Speaker 6 (25:36):
People don't like that in their backyard.
Speaker 13 (25:39):
So the fact that they're getting ahead of it, having
a good will tour, taking on some of the costs,
helping the community, I think that's very important.
Speaker 1 (25:47):
It's interesting that it comes the day after Meta went
all in with metacompute, hiring new talent. Thinking about the
way in which they're going to navigate the need for
compute from a sober perspective, from a need perspective. But Nancy,
how much do you think that we are seeing companies
dive in on this opportunity? Enough for all we in
some sort of bubble territory and it can thinks about
(26:08):
the buildout I don't think.
Speaker 6 (26:11):
We are in bubble Caroline.
Speaker 13 (26:12):
I mean, if you just look at technology stocks in
general in nineteen ninety nine, it was something between seventy
and ninety percent lived above the two hundred day moving average.
And I know you're asking about the build out stocks
as well, but in this environment, we're at sixty two percent,
which is below the S and P and certainly below
bubble territory.
Speaker 6 (26:33):
So there's still a lot of skepticism.
Speaker 13 (26:36):
We own a lot of the nuclear names, the build
out names, and we think there's I mean, the backlogs
are incredible, so I don't think that we're in a
bubble in that regard.
Speaker 2 (26:47):
Yeah, the big story that we're tracking, Nancy, is meta
and before I give the details, I just transparency, as
you know, as important to the program. You have a
very very small meta position. But it's fair to say
you've been bearish or Meta and in particular Mark Zrockerberg
relative to the other tech companies that you're focused on.
But they're cutting jobs a portion of the Metaverse team
(27:09):
and then shifting the focus to data center, but also
to the Raybam metaglasses right, which is the modus Operandivo,
which many now interact with Meta's voice based AI.
Speaker 5 (27:21):
Your thoughts on.
Speaker 6 (27:22):
That, well, I think it's the sooner.
Speaker 13 (27:27):
Zuckerberg gets Metaverse out of the vocabulary in the headlines,
the better off it is for the company. So I
think it's a good move overall. I am not probably
the target market for the glasses. Maybe I'm wrong about that.
I used to say, why would anyone want a camera
in their cell phone? So that was about thirty years ago,
so I could be wrong about that. But I do
(27:49):
think they've obviously identified a market. The demand is there,
that's where they should be focused. I never really understood
the pivot to the Metaverse, and that was, frankly one
of the reasons we exited the stock because it seemed
highly distracting.
Speaker 6 (28:03):
And I couldn't you know, the commercial value was not clear.
Speaker 13 (28:07):
So I think he's doing the right things, and he
should he should pull the band aid off and be
done with it, because the metaverse, I don't think is
the future of the company.
Speaker 2 (28:17):
The details which Bloomberg reported are that Esselo Luxotica, who
make the rayvan metters, have installed capacity of ten million
units and they're in talks to double that twenty million
units and if the demand is there this year, thirty
million units. But again it's these things. These are just
normal glasses or these things. You know, as an investor
that wants to leverage what's coming out of AI development,
(28:40):
do you have a clearer sense now of how more
widespread human beings actually use an either voice based or
text based AI assistant.
Speaker 6 (28:49):
Yeah, it's hard to measure ed.
Speaker 13 (28:51):
You know, one of the things that we don't capture
in GDP is free stuff, and for a lot of consumers,
AI is free if you're using Google. So what we're
looking at is the commercial cases. I think the adaption
is much quicker than most people understand. I think we'll
start to hear about that in earnings. You know, I've
hung my hat on productivity growth. We got it again
(29:13):
last quarter at four point nine percent, which was above
GDP at four point three So we are seeing improvements
in productivity, which will allow a sort of tepid job
market to still be I think a disinflationary force, but
also will not put further stress on the consumer. Remember too,
(29:33):
nobody's talking about the fact that new job applications, new business, sorry,
applications have skyrocketed. So if I'm a coder that's now
out of business and I start a company that has
exponential value, it's different than when we gutted the industrial
belt of the Midwest. So I'm really optimistic on what
these gadgets. And the announcement from Apple with Google, I
(29:57):
think that's super important.
Speaker 6 (29:58):
It validates Google as the leader.
Speaker 13 (30:00):
Google's one of our twelve best ideas, so we've owned
it for a long time. We added it to our
value portfolio in August of twenty twenty four. It was
a value stock if you remember, and now it's probably
the leader in AI.
Speaker 1 (30:14):
I like that you go there because we've got a
new four trillion dollar player to add to the pack
that is Alphabet Nancy. But I love the way that
you push us forward to six best ideas. For example,
the twenty twenty six Walmart among them, they're entering the
NASZAC and of course they're going all in on AI.
What are some of the other key bets you're making.
We're looking at them now.
Speaker 13 (30:33):
Oh, thanks for bringing that up, Caroline. So Walmart's been
a winner so far. AMD is another one of our members, CrowdStrike.
We think AI tailwinds are going to drive growth in
that company even and the Signal acquisition was important. Tesla's
in that group. Brother Dr Horton. We made a bet
on Housing, which has worked so far this year because
(30:54):
we thought the administration would jump in. And then Quanta,
which is building out the grid and has an involvement
in data centers. So we like all those names for
this year. Last year's portfolio was up about twenty three percent,
even with Service now in the portfolio, which was down
twenty seven percent.
Speaker 2 (31:11):
So Nancy Tegler Lafetanglo Investments going through the news of
the day with us.
Speaker 5 (31:16):
Thank you very much.
Speaker 2 (31:17):
Now coming up, the Trump administration is sent to near
a trade deal with Taiwan, a move that could boost
its US chips production.
Speaker 5 (31:25):
More on that next, This is Bloomberg Tech.
Speaker 1 (31:40):
The Trump administration, well, it's said to be close to
a trade deal with Taiwan, move that could lower tariff
on goods and expand to t SMC's plan investments in
chip production by here in the United States. It's all
according to sources here are The latest is Bloomberg Senior
Tech editor Mike Sheppard, who can fill in the dots
because this is part of a geopolitical puzzle that we
continue to try and solve.
Speaker 14 (32:02):
What really is in Carol, Let's start with some of
those dots and what the deal taking shape looks like.
And it is an important copyright to put in there
that it is not yet a done deal. But what
we know so far is that tariffs and goods from
Taiwan to the US would drop to fifteen percent from
the current twenty percent level, and that would put the
(32:22):
shipments from Taiwan on par with goods from South Korea
and Japan, which are similar trading partners in areas of
things like electronics, which are of such close interest to US.
What we would also see importantly as an increase in
investment by TSMC on US soil. TSMC would agree to
build four additional manufacturing plants in Arizona sometime by the
(32:47):
twenty thirties, and that would come on top of this
six manufacturing plants and two advanced packaging facilities that they
have already agreed to build. And this is significant because
TSMC is such a focus for the US. It's the
world's leading maker of AI chips, the world's leading chip
maker overall when you think about it, with all the
work it does for AMD and Nvidia in producing those
(33:09):
AI chips. But it's also been a focus of geopolitics
because of the risk of China that is looming over
the Taiwan Strait and it's threatened to take the island
back by force if needed.
Speaker 2 (33:22):
So we have details of a US Taiwan trade deal,
but you're exactly right, shep. You also have what the
US is doing with Venezuela and then a US interaction
or threat with Iran. Different countries, but it actually comes
right back to America's relationship with China.
Speaker 14 (33:40):
And it really does. In a trade deal with Taiwan
would risk antagonizing China and upsetting the very delicate trade
trups that took months to reach. That was the one
that reopened the spigot of rare Earth's minerals and rare
roots magnets to the US and to other trading partners
around the world. Those are such key components and inputs
(34:02):
for consumer electronics, for military hardware, and for the auto industry,
and the threat of a shutoff had really upset the
global economy and really threatened to hurt supply chains around
the world. Now you add in the US moving to
take over the oil supply in Venezuela, you add in
the threat of US intervention in Iran, the threat of
(34:25):
tariffs on Iranian goods against countries that are taking in
those Iranian goods. That really is something, especially considering how
Iran is a top buyer of Iranian and Venezuela and oil.
Would certainly strain relations with Beijing at a crucial moment.
Speaker 2 (34:42):
Ed Bloombergs Mike Shephard, who leads our coverage at the
intersection of politics and technology in DC, Thank you very much, Carrie.
Plenty more news headlines out there today, and.
Speaker 1 (34:50):
There's a time for talking tech and on that intersection.
First up, President Trump is calling on Elo Musk's Starling
to help restore communications in Iran as protests continue and
a nationwide internet shutdown enters its fifth day. Nwaronian authorities
have declared starlink terminals illegal for the military, actively jamming
signals and pursuing users. Plus, Malaysia is taking legal action
(35:12):
against Enlo Musk's x and Xai, accusing them of failing
to protect users now. The move comes days after the
country banned grock of as sexually explicit content, including AI
generated images of women and children. Meanwhile, sk Heinez says
it plans to spend twelve point nine billion dollars to
build an advanced chip packaging facility amid rising amount AI
(35:34):
and high performance semiconductors.
Speaker 5 (35:35):
Now.
Speaker 1 (35:35):
The South Korean company is set to begin construction in
April and aims to finish by twenty twenty seven.
Speaker 2 (35:42):
Okay, coming up, we're going to speak with klan a
CEO Sebastian Schimiolkowski. As President Trump calls for a proposed
ten percent interest rate cat on credit cards for one year.
Speaker 5 (35:53):
That's next. This is Blueberg Tech.
Speaker 2 (36:09):
President Trump's proposed one year ten percent cap on credit
card interest rates has sparked pushback from the financial industry,
but Klana's CEO says the plan could level the playing field.
In a post on x, Sebastian Schimikowski defended by now
pay Later Lending, saying it delivers lower losses and zero
interest credit compared with traditional cards, He joins us. Now,
(36:34):
thank you for your times passion. It's great to have
you back on Bloomberg Tech. Let's just start simply with
your general reaction on the proposal a ten percent one
year cap on credit card interest.
Speaker 5 (36:45):
Please.
Speaker 15 (36:46):
Yeah, well, look, I think the President is right. You know,
the Americans are being ripped off. I mean one hundred
and sixty billion dollars in INTERSHA interest charges last year,
thirty one billion in fees. That is not a financial
service industry. It's an extraction machine. So we've seen in
the Europe that putting interchange regulation and interest rate caps
in place work work really well.
Speaker 2 (37:07):
Right, especially in Klana has a credit card. That credit
card has an APR of twenty nine percent outside of
the purchases that are made in pay for plans will
buy now, pay later plans. So you do have a
credit card that is at the levels the president's talking about, right,
are you going to reduce the APR therefore, based on
(37:30):
what the President has directed or proposed.
Speaker 5 (37:34):
Absolutely.
Speaker 15 (37:35):
And the thing is, obviously we need to follow regulation
as everyone else. But the truth is, if you look
at Clana's business model, those rates are very uncommon, and
the majority of our business is built around the buy now,
pay later model, which actually charges only immerchant fees and
offers interest free credit for consumers, and that is in
huge demand in the US. I mean, I think it's
(37:56):
it's quite interesting. If you look at fed's own data,
it shows that credit card rewards redistribute fifteen billion dollars
annually from the poor to the wealthy, and that high
fycle consumers gained two hundred dollars a year. Subrank consumers
lose fifty five dollars. That isn't financial product, it's a
regressive tax with airline miles, right, So I think that
this is something that's starting to become apparent in the US,
(38:18):
and I think that all regulation that makes it for
better competition, but more fairer competition is good.
Speaker 1 (38:25):
Why have that credit card at all with that sort
of level of interest rate, then, Sebastian, most people are
using your other offerings.
Speaker 15 (38:31):
Well, we you know, that's exactly the challenge for us, right,
We're competing with an industry that, basically, by charging so
high interest rates, is offering very attractive reward systems and
so forth, and so we obviously need to adopt to
the market, and we're you know, we're adopting offerings to
that market as well. But what we have seen is
that we also have a debit card that offers premium benefits,
(38:53):
and so we have afore our products and the majority
of our products our interest free and much more of
egg favorable with the customer, more you know, appreciated by
the customer.
Speaker 6 (39:06):
Sorry.
Speaker 1 (39:07):
What's interesting is you reference the Fed Zone data when
you're looking at some of the other areas of data.
I'm looking at the World Bank, Fed Bank of Illinois.
There's academics in Oregon or Arkansas who have looked into
if you cut down interest rate levels, the argument goes,
you cut off access to finance, writ large, you get
loan sharks doing better. So Astian, how much do you
(39:29):
think people would turn instead to buy now, pay later
if they can't have that sort of credit card availability,
if it was shut down because they didn't have thirty
percent levels anymore.
Speaker 15 (39:40):
Well, the thing is right if you I mean, if
you look at our average outstanding balance for US, it's
about one hundred dollars, while on a credit card is
five three hundred. And the whole credit card was constructed
in a way that it's trying to get you to
revolve every month. That's what all of your spending is
on credit, and then it's trying to get you to
revolve at that thirty percent interest. We don't offer a
revolving We do installment based because it's safer and better
(40:00):
for the consumer.
Speaker 5 (40:01):
So the point is that if you have a whole.
Speaker 15 (40:03):
Industry built on the idea of maximizing out depth, that's
also where the majority of that revenue flows from. And
what we've proven is that if you offer credit that
is more affordable, that's better for the consumer. Losses are
actually significantly lower as well. Our charge of rate is
zero point four percent. You know banks are four point two,
so this is quite obviously their devastation is maybe they're
(40:25):
worried about isn't for the consumers They need those high
interest rates to be able to lend that kind of
money if they're having those kind of losses. So our
experiences that no, if you're willing to be an affordable lender,
there is a huge market opportunity there, and consumers show
appreciation for that model. So that doesn't have to lend,
you know, it doesn't have to mean that you can't
(40:46):
offer credit to everyone, but at some point of time,
when you start moving above the thirty percent interest, question
is should anyone borrow at that rate? And I'm not
sure the answer.
Speaker 5 (40:57):
Is yes, Sebastian.
Speaker 2 (40:59):
Who you speak speaking to within the Trump administration, if
anyone at all, who do you hope to speak to
to understand the plan from this point? From the administration's perspective.
Speaker 15 (41:11):
Well, we're as curious as everyone else on how the
implementation of this is going to do due to generally speaking,
those caps have been implemented on state level in the
US right, so we're reading eagerly to find out how
exactly this is going to go about. But again, I
think that our experience from Europe is that interchange regulation
as well as inter rased caps are actually a quite
(41:33):
quite effective way and feels like a fairer way for
the American population.
Speaker 2 (41:40):
Paige Smith, who covers you, guys, our colleague and the newsroom,
made a really interesting point yesterday, which is how many
people actually know what the APR and their credit card is?
Could you reflect on any data that's crossed your desk
this morning on inquiries that you've had, has the reaction
from the consumer to this been. I had no idea
I was paying thirty percent on a credit card.
Speaker 15 (42:03):
Well, I think that's the whole construct of the product, right,
I mean, they're attracting you with high rewards, they're attracting
you with low interest rate, and then it changes over time.
The point is in the US, there was a McKinsey
study in twenty fifteen and identified a group of Americans
called the self aware of voids that are about twenty
percent of the population. Those are people that have been
tricked by the credit cards. They found themselves in more
(42:24):
depth than they wanted, but they paid it back. Their
annual household income is twenty percent long higher than the
low income households. Actually, and this is the group that's
using Klana primarily. This is a group that is again
self aware of voids. I sorry to recommend something else,
but I would actually go and go to Netflix and
what credit cards explain and you see all the tricks
that banks have applied to trick people to borrow more
(42:46):
than they need to smash.
Speaker 1 (42:48):
Briefly, your global perspective, where in Europe have they put
caps on and how has it worked?
Speaker 15 (42:53):
Briefly, So it's different across different different jurisdictions, but basically
Germany as among the lowest cap France has caps, So
the German cap, if I remember correct, is around fourteen
fifteen percent. In France it's a cross to eighteen nineteen is.
So those are caps that are quite effective. There's also
other things that people do. It's real time pooling of
(43:15):
loan to kind of look at your total exposure to
all banks. So there's a number of I would argue,
pretty effective ways to help people avoid the most negative
type of borrowing.
Speaker 1 (43:30):
Sebastian. Great to have you back on the show. Thank you, Bastian.
Shimi and Kowski, co founder CEO of Klana, coming up
and talk a bit more about banks but their earnings
what it means for that AI adoption as a bluebg Tech.
Speaker 5 (43:53):
Welcome back to Bloomberg Tech.
Speaker 2 (43:54):
There are two big movies in the markets this morning,
and it's in the chip space. To take a look
at Intel, which is now trading at its highest level
since January twenty twenty four, highest level in about two years,
and AMD also up five percent, both on the same
analyst update. Keybank basically pointing out that in the data
center context, both are sold out of their CPU
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
You allocation, right, we've been obsessed about GPUs and AI
accelerated cards, but you need to have an equivalent, if
not greater number of CPU in the design of the server.
And that's an area that into on amb have done
well to some market share where videas trying to dominate
the whole system. And clearly two big moves our size
moves almost carrot for an analyst upgrade, but Intel in
(00:29):
particular soaring high at the moment.
Speaker 1 (00:31):
Yeah, wants to watch big points contributors, and let's just
flip gears a little bit and talk about, well, where's
one out on some of their investments of late hedge
fund investors, Well, they haven't had it this good since
the aftermath of the financial crisis. Data compiled by industry
tracker Hedge Fund Research showing them back in twenty twenty five,
the industry posted its best year since two thousand and nine.
Gains are about top point six percent on average, but
(00:52):
some scrowing much higher than that. Bloomberg hedge fund reporter
Hemma Palmer joins us now, and we like to think
about the way in which they've all embraced AI and
the quant funds doing well. But who really shone in
twenty five and why Yes?
Speaker 3 (01:03):
So you know, it's such an interesting year because funds
across strategies, across sizes generally did very, very well. And
when you look at the big winners, you're looking at
some of the tech focus firms.
Speaker 1 (01:14):
If you look a.
Speaker 3 (01:14):
Whale Walk, they did quite well. If you look at
light Street, they got over their high watermark from the
really difficult twenty two to twenty three period. You're seeing
some of the best returns over at Bridgewater. If we
look at Macro MAI percents exactly excellent numbers. So kind
of across strategies, you're seeing winners across pretty much every strategy.
(01:35):
D E Shaw over twenty percent and the multi strat strategy.
So pretty interesting and good news for investors and hedge funds.
Speaker 4 (01:44):
Yeah, Hammer, when I was growing up in the Bloomberg
school of hedge funds ten years ago on the TV desk,
that's what hedge funds do, make cash out of chaos.
Speaker 2 (01:54):
Isn't that the whole point? Is there anything unique in
this bucket of data that we've got about what they're
doing different diferently AI playing a role talent stepping up
and delivering big performance.
Speaker 3 (02:05):
Yes, So what makes the year interesting is the volatility
that we're seeing is the kind that goes in and
out pretty frequently and provides great times to get in
on different types of trading opportunities. So AI has been
a great lifter for a lot of the tech focused funds.
But if you look, for example, at Viking Global, which
Viking doesn't do as much tech and AI as say
(02:28):
other funds like other Tiger cubs CO two for example,
they didn't do as well. They were only up about
eight point six percent, putting them lower in the pack
of tech funds. Tiger Global, which we typically think of
as a tech investor, they did well in their long book,
but their short positions eight into those gains, putting them
(02:48):
also lower in the pack more than seven percent gains.
So you know, everyone made money, but the real question
is who made the double digita games?
Speaker 1 (02:57):
And you see would.
Speaker 3 (02:58):
Likes to read good return from a lot of those
sort of popular names.
Speaker 2 (03:03):
Bloomberg's Tamma Palmer with the hedge fund breakdown, Thank you
very much now. JP Morgan kicked off a week of
big bank earnings today. One area of focus the impact
AI could have on spending at those banks. CEO Jamie
Diamond insisting the bank will be spending on AI to
drive efficiencies but also keep up with competitors. There was
a surprise in the expenses number for JP Morgan of
(03:25):
the year, nine billion, above what the streets saw, and
they wanted to know if AI was to blame. Let's
bring in Alexandra and miss Visita. She's co CEO and
co founder of Evident, a platform that benchmarks and tracks
AI adoption across the financial services sector.
Speaker 5 (03:39):
Was really interesting earnings call.
Speaker 2 (03:41):
Often it's with Jamie Diamond, but this was Wells Fargo's
Mike Mayo basically saying like, hey, those expenses seem very high,
and you've been talking up AI a lot of JP Morgan.
Is that directly correlated? And Jamie Diamond's point was kind
of like, we will be spending, it's just not as
much as you think we have to because everyone is.
(04:02):
Is JP Morgan ahead in this AI implementation race in
the banks?
Speaker 6 (04:07):
Yeah, well, thank you, thank you.
Speaker 5 (04:09):
Yeah.
Speaker 7 (04:09):
It was interesting to see the discussions today, but sort
of stepping back and overall, as you know, we map
the biggest banks in North America and Europe on their
AI deployment, and JP Morgan is very much leading.
Speaker 6 (04:22):
They're out number one.
Speaker 7 (04:24):
Three and a half years in a row, so they
are leading on AI deployment.
Speaker 6 (04:29):
They are leading on.
Speaker 7 (04:32):
Deploying and embedding AI throughout the bank. They do also
spend a lot on tech and a growing proportion of
that is on AI precisely to be able to take
over time some of.
Speaker 6 (04:43):
These costs out.
Speaker 7 (04:45):
A lot of the deployment we do see is in
those are in those internal processes and to create the
efficiency gains but also someone revenue uplift.
Speaker 1 (04:55):
Alexandra, A lot of this question is about when those
efficiency gains come, Have they come, Are they coming in
twenty six or is it more still longer term from
your perspective.
Speaker 7 (05:05):
Yeah, I mean it's interesting right because we're three years
into the GENAI journey and that was a journey with
that started with a lot of excitement and testing and
now use cases moving into production. But there seems to
be a real sort of shift in the tectonic plates
now where it's looking at fully embedding it across the
banks and every across the bank in every function and
(05:27):
line of business, and with that you need to have
platform architecture that's built for scale. And what we are
definitely seeing is some return on investment coming through on
the efficiency side, so automation of KYC processes and you know,
going into the asset management side, the investment banking and
(05:47):
so on and so forth, so really across the entirety
of the bank. So it's still early days in terms
of the actual sort of return and the ROI. I
still think that there's some years to it will take
with us to really fully come through. And then we've
also got a gentic Ai use cases coming, you know
and going into production, and that's where I believe we're
(06:08):
going to see the real impact. But it is going
to take another three to four years for Argentic and
fully autonomous Urgentic use cases to be fully embedded and
to see that you know, really fundamental and sizable ROI
that we know is coming, but it is going to
take a couple of years for the gen AI to
fully come through and maybe three to four years for
(06:30):
gentic Ai impact to fully come through.
Speaker 1 (06:32):
It was interesting that basically that question about AI from
Mike Mayo was at the tail end of the call.
Before that there was Myriada questions for Jamie Diamond around
the Apple onboarding with the credit cards there, but are
also talking more broadly about their investment banking this and
indeed credit cards by Alexandra and push us forward. We've
got a whole host of other earnings coming thick and fast.
Where will they be talking about AI most abundantly?
Speaker 7 (06:57):
Well, so you know, it's it's a time with a
lot of things going on, so AI might not be
front and centered this time. It has been over the
years some of the questions that have been asked in
the earning schools. There's a lot of shareholder pressure to
understand where the bank is. We've definitely seen a shift
in terms of banks being much more clear that it
(07:17):
is a high priority, that it is part of the
senior leadership team and the CEOs. Are you fully understanding
that it has to be embedded across the bank and has.
Speaker 6 (07:26):
To be core.
Speaker 7 (07:27):
So I expect that there will continue to be not
only in the earning scores, but as we've seen throughout
the year and investment days and investor days and and
you know, press releases when partnerships and so on are
getting produced by the banks. The discussion on AI is.
Speaker 6 (07:43):
An ongoing one and throughout the.
Speaker 7 (07:45):
Year, but we've got some earning scores coming through from
the big banks, you know. Goldmesas has also made a
big announcement late last year about their one GS three
point three point zero program, which is really about fully
transforming the bank end to end, top down, bottom up
for fully embedding AI. So it's going to be really
(08:08):
exciting to see what numbers might be associated with that
the leading banks are going to be talking about ROI.
I believe there has been a lot of talk with
numbers associated with within the last year. I think that
these numbers are probably tip of the iceberg, and we're
going to see these being updated and upgraded in twenty twenty.
Speaker 5 (08:28):
Six, Alesandra, we just have thirty seconds.
Speaker 2 (08:31):
But how competitive is JP Morgan in attracting and paying
top talent in AI?
Speaker 7 (08:37):
Very Yeah, it's very good at getting top talent. It
is a place that is known for putting AI first.
Jamie Diamond was very clear about that all the way
back in twenty seventeen where he said we're going to
be an AI first enterprise. They are able to attract
top talent. They're in competition with the tech sector. Everyone's
looking for that top talent that really do the difficult
(09:01):
systems wethink everyone's thinking about the shark tanking taking talent
from tech companies that can rethink the processes end to
end and completely change the system. Remember, the technology here
is just ten percent of the problem. Ninety percent of
the problem lies in the sort of rethinking of the
processes entirely. You almost have to build a digital twin.
(09:24):
We think the process and put it back in. That
talent is what JP Morgan can attract.
Speaker 1 (09:31):
Thanks was a visit A always great to catch up
with you, co CEO, co founder of Evident. We thank
you coming up and bringing room mags exclusive conversation with
a bid CFO Henry Hay on the US China race
from New York for San Francisco. It's a room ed Tech.
(09:59):
Defense Secretary Pete Hegseth lamented the defense industry's risk averse
culture and praised Enol Musk during a visit to the
SpaceX Star based launch site that was last night. Hexath
announced plans to integrate Musk's Groqui platform into the Defense
departments system and to make the US military a quote
AI first war fighting force. Take a listen we need to.
Speaker 5 (10:20):
Be blind here.
Speaker 8 (10:20):
We can no longer afford to wait a decade for
our legacy prime contractors to deliver the next perfect system,
only to find that it's delivered years behind schedule and
cost ten times what it should. Winning requires a new playbook.
Elon wrote it with his algorithm, question every requirement, delete
(10:45):
the dumb ones, and accelerate like hell.
Speaker 2 (10:49):
No care of people saying why is Hegseth at SpaceX
or SpaceX has four billion dollars in government contracts alone
just for development, but one of few carriers, Falcon nine
Falcon he that's authorized to take Pentagon's sensitive satellites to orbit.
Speaker 1 (11:04):
It's also interesting timing regarding GROC, right. I mean, already
Google AI is integrated with the Defense Department, but to
add GROC at this moment when there has been a
lot of concern about what it has been producing in
terms of imagery, and they're like a notable step forward
in that respect, in that relationship and deepening.
Speaker 5 (11:21):
At least a.
Speaker 2 (11:22):
Week ago, the President put on true social that he
wanted to cap salaries of defense companies who weren't performing
for their CEOs. Today we have news that the government
is taking a significant stake in a top five defense
contractor EL three Harris.
Speaker 5 (11:35):
What do we need to know?
Speaker 1 (11:36):
Yeah, and the idea that they're going to be spinning
off an IPO of the unit, the missile solutions business
they're going to and REL three Horris is going to
train control in the missile solutions business. But second half
of twenty twenty six they're looking at spinning it off.
And we understand the Department of Defense is set to
invest one billion dollars in convertible preferred security. I mean
it's lifted the shares up two percent up to six
percent at one point end.
Speaker 2 (11:56):
Meanwhile, in Asia, by do CFO Henry Hir spoke with
Bloomberg Steven Angle about that company's AI spending of over
fourteen billion dollars listen to listen.
Speaker 5 (12:05):
To view.
Speaker 9 (12:07):
In the November earning call last year, we actually disclosed
one numbers. Since earning came out back in twenty twenty three,
we have invested over one hundred billion R and B
in terms of AI investment, which is a huge investment
just on the web site.
Speaker 5 (12:21):
On the end, we do see a great return on that.
Speaker 9 (12:24):
For example, right now, our cloud revenue increasing about twenty
eight percent on a wildlire basis in Q three for
the AI cloud. And also we are seeing over kind
of two hundred percent growth.
Speaker 5 (12:35):
On the AI search transformation.
Speaker 9 (12:38):
So for example, last year we only have three percent
of the contents are generating for the AI for traditional search,
but right now this number is increasing about eighteen percent,
and we're seeing kind of three digits increasing on the
traditional search to the AI news search. And also for
the robot taxi, as I mentioned, it's actually delivered over
a quarter million drives every week and we're seeing that
(12:59):
number is on accelerated at gross pass. So I think
the investment, we are seeing the good trends of the
Montadasia and the company on the return, how do.
Speaker 10 (13:07):
You see the difference between how AI is evolving in
China versus you know what we've all been following very
closely in the MAGS seven and what's happening Open AI
and others in the United States. Essentially, there are concerns
about this allocation of capital and not getting the kinds
of return, so there could be potentially a bubble China.
There bubble concerns as well, but there's a bifurcated AI
(13:32):
space in China as well the big boys like you
and Tencent and Bite Dance in Ali Baba. And then
there are new up and comers that are hitting the
market in Hong Kong like Mini Max and others, those
lms that are starting to make a dent. But you
guys have the capital base. Is there a bubble forming
as well in the investment in China because of the
(13:55):
over investment.
Speaker 9 (13:57):
I want to call it two tails of the city. Usually,
I think if you want to decompose the drivers, I
think there are four things, right, the data model, computing power.
Speaker 5 (14:08):
As well as applications.
Speaker 9 (14:10):
Right, So I think if you analyze these four different things,
US China does have a lot of different contexts.
Speaker 11 (14:15):
Right.
Speaker 9 (14:15):
For example, right now in the US as a lot
of investment on infrastructures. But today if you look at electricity,
cable network in China's already being built in the past
few years. So if you really want to compare on
IOI or IRO or on infrastructure, site that's in China
does have certain advantage on that. And also in the
past ten years of the mobile internet age in China,
(14:36):
there's a huge accumulation of data and data become important
for today's influences because a few years ago everyone is
competing for foundation model, right, So true question.
Speaker 5 (14:45):
I think in my view, any company.
Speaker 9 (14:48):
Have a close loop or full stack of the computing power,
data and ownership of application user cases will be sustainable
on AI.
Speaker 1 (14:57):
I do CFO Henry Hay there talking a full stack.
We're going to talk about alphabet next. Coming up, Dan
Ives and Webbush joining us to talk about that deal,
the impact of Apple choosing Google's AI to power Serri.
That's next. This is bluebg Tech new research out today
(15:20):
on Apple's plan to use Google's AI to power Serie
voice assistant and much more from meg Intelligence, writing that
the deal highlights the cost advantages of Google's tens of
chips of arrivals. Analysts also welcome confirmation in the news
which Blomberg reported late last year. Remember now, when Bush
reaffirmed its three hundred fifty dollars price target. It's the
highest on the street for Apple after the deal the
price to welcome Dan Ives, manager director senior equity analyst
(15:42):
at Webush who has that number. So let's talk about
the benefits for Apple first, Why the reinformation of three
hundred and fifty? Why is this good? For them in
Apple Intelligence.
Speaker 11 (15:52):
Look, they've had an invisible AI strategy. I mean, if
you go back to the last wwdc's you felt, like
Michael J. Fox back to the future, there was really
nothing there talking about AI. Finally, this is a huge
step forward and it's not going to happen internally. Had
to happen from Google Gemini. Looking, it comes down to like,
if they never win the adjsuit, this doesn't happen. So
(16:15):
it speaks to just brick by brick, they're finally building it,
and I think this is going to be instrumental to
the valuation for Apple this year.
Speaker 1 (16:24):
If you look at the statement that was put out,
it was very much for the time being, this is
going to be embedded in Apple foundation models. The idea
is that they pull away, they are able to get
a grip on their own foundational models and indeed Siri
becoming actually useful. Do you think they will distance themselves
from Google over time?
Speaker 11 (16:41):
Look, I think there's a better chance in me playing
NFL playoffs than Apple doing something internally. At this point.
The reality is this is also a game of a
high stakes poker negotiation that's going on too. In terms
of a broader deal with Google that I think they're
ultimately going to have to do. I think this will
be exclusive, and because my view is that there's gonna
(17:01):
be some sort of subscription service freemium, you also need
a platform for developers. And it comes down to, like
the AI revolution, like Apple's watching from the sidelines. From
the stands, they need to get into the game. And
that's why we talked about seventy five hundred dollars per share,
that this adds to the story as they execute on
the consumer AI revolution. Finally, going through Koupertino.
Speaker 2 (17:25):
Dan, you you had advocated on more than one occasion
that Apple bi perplexity. With this confirmation of Gemini being
the underpinning of Sirie, is such a transaction still necessary
to your mind?
Speaker 11 (17:40):
Yeah, and Ed it's a great point. But a lot
of that was based on as the dog suit was
going on with Google. There was a sort of period
there where Apple needed to do something. Now, obviously perplexity
came and went they're clearly not going to do that.
But once Google won the dog suit, that was sort
of I green light lights on and now it's sort
(18:03):
of good time for big tech. And I think that
speaks why Apple did this deal. And look, you look
at Google Gemini, what they've done, you go back a
year ago, it's phenomenal. And I think Apple is making
that bet. It's gonna be a much different twenty twenty
six and twenty twenty five relative to Apple when it comes.
Speaker 5 (18:22):
To AI again.
Speaker 2 (18:24):
Charriage just made the point that Apple was very careful
in the statement to explain which parts of series functionality
would be underpinned by by Gemini. The other way looking
at is to say, have they still got a lot
of work to do to make serious sort of all
encompassing AI assistant.
Speaker 11 (18:43):
I mean, look, it's a it's an Everest like our
pill battle, because the reality is they've lost so many developers,
they've lost so much talent. You've seen a odd changing
look and you know it as well as anyone like
the DNA of Cooper Tino. Why that is supposed to
come internally, and I think Cook recognized look riding on
the wall. It speaks to my point that like Cook
(19:04):
is not going to leave his CEO and leave this
sort of in transition, he has to get the AI
strategy sorted out. It's going to be a work in progress,
but two point four billion iOS vices, one point five
billion iPhones. It's my view that the consumer AI revolution
ultimately comes through Cooper Tino, and this is a first
step in that direction. We'll obviously see more about it
(19:26):
in the spring, and of course more WWDC.
Speaker 1 (19:29):
Some might say it's incredibly savvy to be AI liked
to not have to make all the investments in the
data centers, to be able to say, look, privacy first,
we're going to lean much more on EDGAI. Is that
actually going to be a winning formula for Apple in
the future and as models and sophistication develops.
Speaker 2 (19:47):
Yeah.
Speaker 11 (19:47):
Look, but also Apple is in a much different situation
because of the unrivaled install base, because of where they
play in the consumer That's why, like from a CAPEX perspective,
they're not Microsoft, Google, you know many other big tech plays.
But I think they finally hit the point Ruber met
the road. They need to do something. They're going to
have to incrementally spend, but they're basically going to rely
(20:09):
on Google as a partner because you cannot have the
Fourth Industrial Revolution, biggest tech transition in the last forty years,
come and go and they don't monetize. And I think
that's something that they recognize front and center, and it's
key to the stock. I mean realistically, like a year
from now stocks three fifty or lower from here. It's
all based on AI and them monetizing it.
Speaker 2 (20:33):
Dan, I'm spanishing director at Webbush. We have the street
high price target three fifty on Apple. So that does
it for this edition of Bloomberg Tech Era and one
edition it was it.
Speaker 1 (20:42):
Was I mean, we started when that's the techn that's
told us about how this really shows Alphabet's prowess. Then
we finished on how it's Apple's future. Don't forget to
check out our podcast. You can find it on the
terminal as well as online on Apple and who, Spotify
and I have listen Blomberg. Bloomberg Tech is a live
(21:03):
from Coast to coast with Caroline Hide in New York
and ever Low in sentrances.
Speaker 2 (21:09):
Go this is Bloomberg Tech coming up, Meta and esslor
Luxorika cub double production capacity for AI powered smart glasses
by the end of this year based on growing demand.
Speaker 1 (21:22):
Plus, Microsoft seeks to quell consumer anxiety of a power
price impact of data centers, pledging to pay utility rates
that will cover the company's costs we discuss.
Speaker 2 (21:33):
And Clana CEO Sebastian Schomakowski weighs in on President Trump's
call for a ten percent interest rate cap on credit
cards for the year.
Speaker 1 (21:41):
First, we turn our attention to the markets that despite
that coler inflation prints CPI coming in with two point
six percent. We're looking at markets under pressure at naturally
erasing yesterday's games. We're off by two percent on the
Nasdaq one hundred. These aren't massive moves when we are
still seeing some risk aversion amid the geopolitical turmil and
whether or not we do indeed get any sort of
(22:02):
fed pause with seems as though the rate cut has
been put to the back burner by the markets at
the moment.
Speaker 5 (22:07):
Ed a lot of meta news this morning.
Speaker 2 (22:10):
The latest from Bloomberg is that talks with Esselo Luxodica
are around doubling capacity for RayBan Metas to twenty to
out million units from ten million units current in stall capacity.
Speaker 5 (22:23):
If demand's good.
Speaker 2 (22:24):
They're talking about maybe, according to our sources, thirty million
units in the year now. That drove shares of essel
Or Luxotica up in Paris. Meta to the downside. With
other news, the confirmation of recent reporting that they're going
to be trimming headcount from the metaverse Carrow. Then there's
the Microsoft piece of news. Microsoft has a five point
plan to basically take responsibility for the cost of electricity
(22:47):
associated with data centers. The main one is to cover
its costs, but other parts of that are pieces of
transparency with the communities where those data centers might impact pricing.
And we've done so much reporting that here at Bloomberg.
Let's get out to Bloomberg's Tech an industrial policy reporter
Maggie Easton, who's in DC. You were there at the
Microsoft presentation. What do they have to say and what
(23:09):
are those five points in the plan?
Speaker 12 (23:12):
Yes, so Brad Smith of Microsoft was in Washington this
morning talking about this five point plan. So I think
the largest piece of this is, of course, the electricity costs.
Speaker 1 (23:22):
So they've said that.
Speaker 12 (23:23):
They're going to work with these local power utilities to
ensure that Microsoft is paying for any increase in costs
that they're responsible for. Now, of course, the caveat there
is they're not ensuring bills won't go up due to.
Speaker 1 (23:35):
Inflation or other causes.
Speaker 5 (23:37):
But what they're.
Speaker 12 (23:38):
Saying in accordance with what President Trump asked for yesterday
is that if the cost is due to Microsoft coming
in with the data center, they're going to ensure that
they're paying for that.
Speaker 1 (23:49):
Yeah, President Trump, and as Truy's social saying that they
don't want consumers to pick up the tab. Where else
is the tab potentially going to fall because this isn't
just all about electricity prices. There's other resources that are
likely to be stretched, definitely.
Speaker 12 (24:04):
So another thing that Microsoft was talking about just this
morning is the local tax space. So historically, when these
data center projects come in, Microsoft and other hyperscalers have
received some sort of local incentive, and Microsoft is now
saying they're moving away from that and they want to
make sure that they're increasing the tax space in these
local communities.
Speaker 5 (24:22):
To support the schools.
Speaker 12 (24:24):
And yeah, just making sure that they're not accepting local
incentives in some cases, even though they are still open
to state and federal incentives.
Speaker 1 (24:32):
Maggie's and with the latest from that Microsoft event, we
so appreciate it. Now let's turn to the business side
of the equation. That's the tangles with our ceocio of
lafentangle their investments and look, when you're thinking about the exposure,
you have to Microsoft and these data send to build outs.
More broadly, how much they need to factor in the voter,
the consumer right now.
Speaker 13 (24:52):
Well, I think it's super smart for them to get
ahead of this. I'm sure they let the president announce
it first, but Microsoft has always and good at anticipating
under Nadella. And I think being a good citizen in
the community is important.
Speaker 6 (25:08):
But it's not the first time we've heard resistance.
Speaker 13 (25:10):
Tesla got a lot of pushback when they moved to Texas.
They took over a city, you know, they bought people's homes.
Speaker 6 (25:17):
It was It was disruptive, and I think we're seeing
the same thing.
Speaker 13 (25:22):
I would argue to a lesser extent with data centers,
but importantly, you know, this is what happens.
Speaker 6 (25:28):
In the transformative economy.
Speaker 13 (25:30):
We saw it also with the clean energy push windmills,
you know, solar panels.
Speaker 6 (25:36):
People don't like that in their backyard.
Speaker 13 (25:39):
So the fact that they're getting ahead of it, having
a good will tour, taking on some of the costs,
helping the community, I think that's very important.
Speaker 1 (25:47):
It's interesting that it comes the day after Meta went
all in with metacompute, hiring new talent. Thinking about the
way in which they're going to navigate the need for
compute from a sober perspective, from a need perspective. But Nancy,
how much do you think that we are seeing companies
dive in on this opportunity? Enough for all we in
some sort of bubble territory and it can thinks about
(26:08):
the buildout I don't think.
Speaker 6 (26:11):
We are in bubble Caroline.
Speaker 13 (26:12):
I mean, if you just look at technology stocks in
general in nineteen ninety nine, it was something between seventy
and ninety percent lived above the two hundred day moving average.
And I know you're asking about the build out stocks
as well, but in this environment, we're at sixty two percent,
which is below the S and P and certainly below
bubble territory.
Speaker 6 (26:33):
So there's still a lot of skepticism.
Speaker 13 (26:36):
We own a lot of the nuclear names, the build
out names, and we think there's I mean, the backlogs
are incredible, so I don't think that we're in a
bubble in that regard.
Speaker 2 (26:47):
Yeah, the big story that we're tracking, Nancy, is meta
and before I give the details, I just transparency, as
you know, as important to the program. You have a
very very small meta position. But it's fair to say
you've been bearish or Meta and in particular Mark Zrockerberg
relative to the other tech companies that you're focused on.
But they're cutting jobs a portion of the Metaverse team
(27:09):
and then shifting the focus to data center, but also
to the Raybam metaglasses right, which is the modus Operandivo,
which many now interact with Meta's voice based AI.
Speaker 5 (27:21):
Your thoughts on.
Speaker 6 (27:22):
That, well, I think it's the sooner.
Speaker 13 (27:27):
Zuckerberg gets Metaverse out of the vocabulary in the headlines,
the better off it is for the company. So I
think it's a good move overall. I am not probably
the target market for the glasses. Maybe I'm wrong about that.
I used to say, why would anyone want a camera
in their cell phone? So that was about thirty years ago,
so I could be wrong about that. But I do
(27:49):
think they've obviously identified a market. The demand is there,
that's where they should be focused. I never really understood
the pivot to the Metaverse, and that was, frankly one
of the reasons we exited the stock because it seemed
highly distracting.
Speaker 6 (28:03):
And I couldn't you know, the commercial value was not clear.
Speaker 13 (28:07):
So I think he's doing the right things, and he
should he should pull the band aid off and be
done with it, because the metaverse, I don't think is
the future of the company.
Speaker 2 (28:17):
The details which Bloomberg reported are that Esselo Luxotica, who
make the rayvan metters, have installed capacity of ten million
units and they're in talks to double that twenty million
units and if the demand is there this year, thirty
million units. But again it's these things. These are just
normal glasses or these things. You know, as an investor
that wants to leverage what's coming out of AI development,
(28:40):
do you have a clearer sense now of how more
widespread human beings actually use an either voice based or
text based AI assistant.
Speaker 6 (28:49):
Yeah, it's hard to measure ed.
Speaker 13 (28:51):
You know, one of the things that we don't capture
in GDP is free stuff, and for a lot of consumers,
AI is free if you're using Google. So what we're
looking at is the commercial cases. I think the adaption
is much quicker than most people understand. I think we'll
start to hear about that in earnings. You know, I've
hung my hat on productivity growth. We got it again
(29:13):
last quarter at four point nine percent, which was above
GDP at four point three So we are seeing improvements
in productivity, which will allow a sort of tepid job
market to still be I think a disinflationary force, but
also will not put further stress on the consumer. Remember too,
(29:33):
nobody's talking about the fact that new job applications, new business, sorry,
applications have skyrocketed. So if I'm a coder that's now
out of business and I start a company that has
exponential value, it's different than when we gutted the industrial
belt of the Midwest. So I'm really optimistic on what
these gadgets. And the announcement from Apple with Google, I
(29:57):
think that's super important.
Speaker 6 (29:58):
It validates Google as the leader.
Speaker 13 (30:00):
Google's one of our twelve best ideas, so we've owned
it for a long time. We added it to our
value portfolio in August of twenty twenty four. It was
a value stock if you remember, and now it's probably
the leader in AI.
Speaker 1 (30:14):
I like that you go there because we've got a
new four trillion dollar player to add to the pack
that is Alphabet Nancy. But I love the way that
you push us forward to six best ideas. For example,
the twenty twenty six Walmart among them, they're entering the
NASZAC and of course they're going all in on AI.
What are some of the other key bets you're making.
We're looking at them now.
Speaker 13 (30:33):
Oh, thanks for bringing that up, Caroline. So Walmart's been
a winner so far. AMD is another one of our members, CrowdStrike.
We think AI tailwinds are going to drive growth in
that company even and the Signal acquisition was important. Tesla's
in that group. Brother Dr Horton. We made a bet
on Housing, which has worked so far this year because
(30:54):
we thought the administration would jump in. And then Quanta,
which is building out the grid and has an involvement
in data centers. So we like all those names for
this year. Last year's portfolio was up about twenty three percent,
even with Service now in the portfolio, which was down
twenty seven percent.
Speaker 2 (31:11):
So Nancy Tegler Lafetanglo Investments going through the news of
the day with us.
Speaker 5 (31:16):
Thank you very much.
Speaker 2 (31:17):
Now coming up, the Trump administration is sent to near
a trade deal with Taiwan, a move that could boost
its US chips production.
Speaker 5 (31:25):
More on that next, This is Bloomberg Tech.
Speaker 1 (31:40):
The Trump administration, well, it's said to be close to
a trade deal with Taiwan, move that could lower tariff
on goods and expand to t SMC's plan investments in
chip production by here in the United States. It's all
according to sources here are The latest is Bloomberg Senior
Tech editor Mike Sheppard, who can fill in the dots
because this is part of a geopolitical puzzle that we
continue to try and solve.
Speaker 14 (32:02):
What really is in Carol, Let's start with some of
those dots and what the deal taking shape looks like.
And it is an important copyright to put in there
that it is not yet a done deal. But what
we know so far is that tariffs and goods from
Taiwan to the US would drop to fifteen percent from
the current twenty percent level, and that would put the
(32:22):
shipments from Taiwan on par with goods from South Korea
and Japan, which are similar trading partners in areas of
things like electronics, which are of such close interest to US.
What we would also see importantly as an increase in
investment by TSMC on US soil. TSMC would agree to
build four additional manufacturing plants in Arizona sometime by the
(32:47):
twenty thirties, and that would come on top of this
six manufacturing plants and two advanced packaging facilities that they
have already agreed to build. And this is significant because
TSMC is such a focus for the US. It's the
world's leading maker of AI chips, the world's leading chip
maker overall when you think about it, with all the
work it does for AMD and Nvidia in producing those
(33:09):
AI chips. But it's also been a focus of geopolitics
because of the risk of China that is looming over
the Taiwan Strait and it's threatened to take the island
back by force if needed.
Speaker 2 (33:22):
So we have details of a US Taiwan trade deal,
but you're exactly right, shep. You also have what the
US is doing with Venezuela and then a US interaction
or threat with Iran. Different countries, but it actually comes
right back to America's relationship with China.
Speaker 14 (33:40):
And it really does. In a trade deal with Taiwan
would risk antagonizing China and upsetting the very delicate trade
trups that took months to reach. That was the one
that reopened the spigot of rare Earth's minerals and rare
roots magnets to the US and to other trading partners
around the world. Those are such key components and inputs
(34:02):
for consumer electronics, for military hardware, and for the auto industry,
and the threat of a shutoff had really upset the
global economy and really threatened to hurt supply chains around
the world. Now you add in the US moving to
take over the oil supply in Venezuela, you add in
the threat of US intervention in Iran, the threat of
(34:25):
tariffs on Iranian goods against countries that are taking in
those Iranian goods. That really is something, especially considering how
Iran is a top buyer of Iranian and Venezuela and oil.
Would certainly strain relations with Beijing at a crucial moment.
Speaker 2 (34:42):
Ed Bloombergs Mike Shephard, who leads our coverage at the
intersection of politics and technology in DC, Thank you very much, Carrie.
Plenty more news headlines out there today, and.
Speaker 1 (34:50):
There's a time for talking tech and on that intersection.
First up, President Trump is calling on Elo Musk's Starling
to help restore communications in Iran as protests continue and
a nationwide internet shutdown enters its fifth day. Nwaronian authorities
have declared starlink terminals illegal for the military, actively jamming
signals and pursuing users. Plus, Malaysia is taking legal action
(35:12):
against Enlo Musk's x and Xai, accusing them of failing
to protect users now. The move comes days after the
country banned grock of as sexually explicit content, including AI
generated images of women and children. Meanwhile, sk Heinez says
it plans to spend twelve point nine billion dollars to
build an advanced chip packaging facility amid rising amount AI
(35:34):
and high performance semiconductors.
Speaker 5 (35:35):
Now.
Speaker 1 (35:35):
The South Korean company is set to begin construction in
April and aims to finish by twenty twenty seven.
Speaker 2 (35:42):
Okay, coming up, we're going to speak with klan a
CEO Sebastian Schimiolkowski. As President Trump calls for a proposed
ten percent interest rate cat on credit cards for one year.
Speaker 5 (35:53):
That's next. This is Blueberg Tech.
Speaker 2 (36:09):
President Trump's proposed one year ten percent cap on credit
card interest rates has sparked pushback from the financial industry,
but Klana's CEO says the plan could level the playing field.
In a post on x, Sebastian Schimikowski defended by now
pay Later Lending, saying it delivers lower losses and zero
interest credit compared with traditional cards, He joins us. Now,
(36:34):
thank you for your times passion. It's great to have
you back on Bloomberg Tech. Let's just start simply with
your general reaction on the proposal a ten percent one
year cap on credit card interest.
Speaker 5 (36:45):
Please.
Speaker 15 (36:46):
Yeah, well, look, I think the President is right. You know,
the Americans are being ripped off. I mean one hundred
and sixty billion dollars in INTERSHA interest charges last year,
thirty one billion in fees. That is not a financial
service industry. It's an extraction machine. So we've seen in
the Europe that putting interchange regulation and interest rate caps
in place work work really well.
Speaker 2 (37:07):
Right, especially in Klana has a credit card. That credit
card has an APR of twenty nine percent outside of
the purchases that are made in pay for plans will
buy now, pay later plans. So you do have a
credit card that is at the levels the president's talking about, right,
are you going to reduce the APR therefore, based on
(37:30):
what the President has directed or proposed.
Speaker 5 (37:34):
Absolutely.
Speaker 15 (37:35):
And the thing is, obviously we need to follow regulation
as everyone else. But the truth is, if you look
at Clana's business model, those rates are very uncommon, and
the majority of our business is built around the buy now,
pay later model, which actually charges only immerchant fees and
offers interest free credit for consumers, and that is in
huge demand in the US. I mean, I think it's
(37:56):
it's quite interesting. If you look at fed's own data,
it shows that credit card rewards redistribute fifteen billion dollars
annually from the poor to the wealthy, and that high
fycle consumers gained two hundred dollars a year. Subrank consumers
lose fifty five dollars. That isn't financial product, it's a
regressive tax with airline miles, right, So I think that
this is something that's starting to become apparent in the US,
(38:18):
and I think that all regulation that makes it for
better competition, but more fairer competition is good.
Speaker 1 (38:25):
Why have that credit card at all with that sort
of level of interest rate, then, Sebastian, most people are
using your other offerings.
Speaker 15 (38:31):
Well, we you know, that's exactly the challenge for us, right,
We're competing with an industry that, basically, by charging so
high interest rates, is offering very attractive reward systems and
so forth, and so we obviously need to adopt to
the market, and we're you know, we're adopting offerings to
that market as well. But what we have seen is
that we also have a debit card that offers premium benefits,
(38:53):
and so we have afore our products and the majority
of our products our interest free and much more of
egg favorable with the customer, more you know, appreciated by
the customer.
Speaker 6 (39:06):
Sorry.
Speaker 1 (39:07):
What's interesting is you reference the Fed Zone data when
you're looking at some of the other areas of data.
I'm looking at the World Bank, Fed Bank of Illinois.
There's academics in Oregon or Arkansas who have looked into
if you cut down interest rate levels, the argument goes,
you cut off access to finance, writ large, you get
loan sharks doing better. So Astian, how much do you
(39:29):
think people would turn instead to buy now, pay later
if they can't have that sort of credit card availability,
if it was shut down because they didn't have thirty
percent levels anymore.
Speaker 15 (39:40):
Well, the thing is right if you I mean, if
you look at our average outstanding balance for US, it's
about one hundred dollars, while on a credit card is
five three hundred. And the whole credit card was constructed
in a way that it's trying to get you to
revolve every month. That's what all of your spending is
on credit, and then it's trying to get you to
revolve at that thirty percent interest. We don't offer a
revolving We do installment based because it's safer and better
(40:00):
for the consumer.
Speaker 5 (40:01):
So the point is that if you have a whole.
Speaker 15 (40:03):
Industry built on the idea of maximizing out depth, that's
also where the majority of that revenue flows from. And
what we've proven is that if you offer credit that
is more affordable, that's better for the consumer. Losses are
actually significantly lower as well. Our charge of rate is
zero point four percent. You know banks are four point two,
so this is quite obviously their devastation is maybe they're
(40:25):
worried about isn't for the consumers They need those high
interest rates to be able to lend that kind of
money if they're having those kind of losses. So our
experiences that no, if you're willing to be an affordable lender,
there is a huge market opportunity there, and consumers show
appreciation for that model. So that doesn't have to lend,
you know, it doesn't have to mean that you can't
(40:46):
offer credit to everyone, but at some point of time,
when you start moving above the thirty percent interest, question
is should anyone borrow at that rate? And I'm not
sure the answer.
Speaker 5 (40:57):
Is yes, Sebastian.
Speaker 2 (40:59):
Who you speak speaking to within the Trump administration, if
anyone at all, who do you hope to speak to
to understand the plan from this point? From the administration's perspective.
Speaker 15 (41:11):
Well, we're as curious as everyone else on how the
implementation of this is going to do due to generally speaking,
those caps have been implemented on state level in the
US right, so we're reading eagerly to find out how
exactly this is going to go about. But again, I
think that our experience from Europe is that interchange regulation
as well as inter rased caps are actually a quite
(41:33):
quite effective way and feels like a fairer way for
the American population.
Speaker 2 (41:40):
Paige Smith, who covers you, guys, our colleague and the newsroom,
made a really interesting point yesterday, which is how many
people actually know what the APR and their credit card is?
Could you reflect on any data that's crossed your desk
this morning on inquiries that you've had, has the reaction
from the consumer to this been. I had no idea
I was paying thirty percent on a credit card.
Speaker 15 (42:03):
Well, I think that's the whole construct of the product, right,
I mean, they're attracting you with high rewards, they're attracting
you with low interest rate, and then it changes over time.
The point is in the US, there was a McKinsey
study in twenty fifteen and identified a group of Americans
called the self aware of voids that are about twenty
percent of the population. Those are people that have been
tricked by the credit cards. They found themselves in more
(42:24):
depth than they wanted, but they paid it back. Their
annual household income is twenty percent long higher than the
low income households. Actually, and this is the group that's
using Klana primarily. This is a group that is again
self aware of voids. I sorry to recommend something else,
but I would actually go and go to Netflix and
what credit cards explain and you see all the tricks
that banks have applied to trick people to borrow more
(42:46):
than they need to smash.
Speaker 1 (42:48):
Briefly, your global perspective, where in Europe have they put
caps on and how has it worked?
Speaker 15 (42:53):
Briefly, So it's different across different different jurisdictions, but basically
Germany as among the lowest cap France has caps, So
the German cap, if I remember correct, is around fourteen
fifteen percent. In France it's a cross to eighteen nineteen is.
So those are caps that are quite effective. There's also
other things that people do. It's real time pooling of
(43:15):
loan to kind of look at your total exposure to
all banks. So there's a number of I would argue,
pretty effective ways to help people avoid the most negative
type of borrowing.
Speaker 1 (43:30):
Sebastian. Great to have you back on the show. Thank you, Bastian.
Shimi and Kowski, co founder CEO of Klana, coming up
and talk a bit more about banks but their earnings
what it means for that AI adoption as a bluebg Tech.
Speaker 5 (43:53):
Welcome back to Bloomberg Tech.
Speaker 2 (43:54):
There are two big movies in the markets this morning,
and it's in the chip space. To take a look
at Intel, which is now trading at its highest level
since January twenty twenty four, highest level in about two years,
and AMD also up five percent, both on the same
analyst update. Keybank basically pointing out that in the data
center context, both are sold out of their CPU
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