Alphabet Fights Effort to Break Up Google, Netflix’s “Recession-Proof” Appeal
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Live from New York, this is Bloomberg Technology. Coming up, Google heads back to court to take on the Department of Justice over a search monopoly fix. Plus, in an era of tariffs, Netflix stands out. Why Wall Street sees the stock as recession-proof.

And TSMC warns there will be challenges limiting China from its AI chips. Details this hour, but first we check in on the markets which once again are under pressure. The Nasdaq bears the brunt with Nasdaq 100 off by more than 2.3, let's call it 2.4% on the day. We are worried about the macro, about the future of Jay Powell at the Fed, and we see the impact on the Magnificent Seven. Not though on

on crypto. We see Bitcoin bounce. That is gold gets once again that desire to get into a haven trade. So too, there's a shorter end of the treasuries. But Bitcoin up 3.7%, the highest that we've seen since the beginning of March, 88,000. Move on and have a look at some individual stocks because

Tesla on the downside, we're off by more than 6%. One of the key contributors in terms of points. Apple's falling, Nvidia is falling, but Tesla too. We'll dig into why we're concerned ahead of all important earnings this week come Tuesday. Remember, we've got a whole raft of earnings, but we've already got a little bit of sentiment check

On what seems to be resilient in the face of macro pressure, Netflix up 2.8%, the best performer on the NASDAQ 100 from a points perspective. But let's get to Ryan Vlastelica, who can join us now on the weight that Mag7 is feeling today. Seems to be a macro one, seems to be one of the Fed, but there are some standouts when it comes to earnings.

Hey, good morning. Thanks for having me. Yes, there's still a lot of uncertainty out there and the new news surrounding, you know, is Powell potentially at risk? That is just adding to the level of uncertainty out there. There's so much policy uncertainty and this broader sense that maybe the U.S. isn't the sort of safe haven economy that it has been viewed as really for decades. So that is a massive shift out

there and causing a lot of uncertainty. Netflix is, from an equity perspective, deemed a haven. We are going to hear from so many CEOs this week, whether it's, well, some that have to face the court, but also have to face earnings. I mean, we know that we're going to be hearing from the CEO of Google in that capacity, that being Alphabet 2, but also you've got Intel, you've got IBM, you've got Texas Instruments. There's a lot that we can take a gauge of, Ryan.

Yeah, absolutely. So Netflix is maybe a little bit of an anomaly compared to those other names you mentioned. Not quite as subject to the tariff risk as some of the chip makers and hardware companies out there, which have really been driving a lot of the selling this year. It is also seen as a recession resistant company, given the idea that, you know, if people are pulling back, by which I mean consumers,

they're not likely to cut their Netflix subscription in the way that they might be pulling back on other kinds of discretionary spending. So it seems like it has both offensive and defensive characteristics. That's what one of the analyst notes I read this morning said. So obviously a pretty positive company, a pretty positive earnings report, and the stock has been doing well this year, especially relative to the rest of the Mag 7, the old Fangs, just the broader market.

Certainly. At the moment, only five names on the NASDAQ 100 are in the green. One of them, MicroStrategy. The other, Netflix. Key, Ryan Vestelica. We thank you so much. Let's get more on the tech market, sell off more broadly. Scott Ladner's with us. Horizon Investments. And just at this moment, Scott, within this uncertainty from a macro perspective, do you want to be buying into some of this weakness in tech?

Hey, Caroline. Yeah, I think you actually do. I mean, I think this is one place where you can start putting some money to work and some new money to work. Probably got to be a little careful, you know, as you guys are just talking about. It's probably not the time for the chips because of all the tariff uncertainty. But, you know, something more like an equal weight sort of tech play, you know, catch on the themes with AI. You know, like if you remember, you know, the starting place before all the tariff stuff, we were all talking about AI still because it was still a really big deal.

It will continue to be a big deal. It's just being overshadowed currently. And so, you know, this is probably a pretty good time to start putting money to work towards that sector and towards that theme. But if it's not chips, how are you thinking about the AI opportunity? Yeah, look, I think it's a little bit more nuanced right now. You know, this is you can think about the AI trade as being or, you know, the AI investments broadly as following a couple of different phases. You know, we've been in mostly the sort of the infrastructure phase. And that's and that's dominated, obviously, by chips, by the hard work.

kinds of things, just like routers dominated the first part of the internet cycle. We're getting now into more of the prove-it stage of AI, which is where companies are going to have to figure out and prove to the market that, hey, I'm using this stuff. I know how to use it in my company to drive productivity, drive processes, and to get higher margins.

ultimately, which is really the name of the game for this. And so, you know, finding those companies that can help deliver that type of margin expansion through productivity growth using AI is really what we think is kind of the next trade. And so that's why that more equal weight treatment we think is probably a better play. When we think about this week, though, Scott, and the amount of guidance we might get

from earnings from CEOs whether it's the telecom sector that comes thick and fast whether you've got some of those chip names whether it's Intel or Texas Instruments are you expecting the guidance to be lower we expect the guidance to be completely fuzzy like look I'm not sure who's gonna believe guidance you know we had United Airlines come out you know last we can say well here's our guidance for a recession here's our guidance for non-recession like that's not guidance I mean it's actually it's just fairly useless and so you know what we're

really going to be focusing on is like how are companies thinking about operating? So, you know, in terms of the guidance, like the numbers aren't really going to mean anything. Nobody's going to believe them. But in terms of like philosophically, like how are you operating in this environment through this uncertainty? How are you thinking about CapEx? What sort of contingency plans do you have in place? It's really going to be those types of things that people are going to be looking for. It's going to be, you know, kind of a tip of the cap towards good management. You know, good management and thoughtful management will probably, you know, get a premium through this kind of cycle. Yeah.

But it's going to be really those types of more squishy, qualitative things that folks are looking for rather than focusing on the hard numbers this quarter. Let's go to the squishy CapEx then, Scott, because what are you expecting in terms of companies' commitment to continue to spend? We're all questioning it from the hyperscalers when it comes to NVIDIA investment, for example.

You know, I think it's going to be a time scale type of argument. So, you know, I don't think, like, nobody's very confident in the next few months. Like, nobody has any visibility into what these policies are actually going to look like, what these tariffs are actually going to look like. What we're really focusing on is, like, what are folks thinking about for the next two to three years? And are they actually being, are they going to start executing on some of those plans? So, you know, again, it's just a tip towards the management, towards the, you know, towards the

You know, teams that are proven that they can think through some of the short term issues, manage through some of the short term issues and really focus more on the medium term stuff that will like, you know, that can have the benefits accrued to them through time. It's, you know, again, it's not going to be an easy charge. I mean, this is not going to be an easy earning season to to figure out and sort of bottom line for folks. It's really going to be kind of a company by company hand to hand battle.

What about global exposure versus domestic exposure? I think of the telecoms names and they've weathered relatively resiliently because they're focused on a consumer here in the US. How do you think about opportunities to invest abroad or companies that have exposure abroad right now, Scott?

Yeah, I mean, look, if you're thinking about investing abroad, it's really about two things right now for us. One is we do think the dollar downtrend is going to be fairly strong and fairly persistent for the next couple of years. That in and of itself gives you a pretty good tailwind if you're an international investor or investing in international equities. So that's a starting place. And so you've got to get the dollar part right for that.

And we do think that dollar trend is lower. The other thing, though, is importantly, the fiscal expansion, the fiscal thrust is now the realm of internationals, not the realm of the United States companies or United States governments, sorry.

And the market definitely rewards fiscal expansion. We saw that through COVID. We've seen that over the last 10 years, really. And so the dual thing of fiscal expansion internationally versus the US and the dollar trending lower against most major trading partners, we think those two tailwinds are going to really be to the benefit of international equity investing for the next probably year or so. Most major trading partners, I don't know if you count China as one of them anymore, Scott, but what about

China's investment, the fiscal stimulus, and whether or not you want to be in some of these Chinese internet names, for example. Yeah, Karen, that's obviously a pretty tricky one. You know, China, we think, is going to get, it's kind of getting bullied, just like Europe is kind of getting bullied into doing the fiscal expansion thing. We think China's going to get bullied a little bit by Trump into doing sort of counter-cyclical fiscal expansion, counter-cyclical policies, which they've really been resistant to for the last couple of years. You know, one thing that we think is pretty important, especially for Chinese tech,

though, is Premier Xi, he's dropped the common prosperity language. We've not heard common prosperity come out of his mouth or in written form for many months now. And when that common prosperity language started to take hold, it was really the death note towards Chinese equities and Chinese tech in particular. And so that language being dropped we think is important.

And so the combination of that language being dropped, so he's signaling a change in his mindset towards capitalism, changes in mindset towards those Chinese tech companies. Plus what we think is going to have to be some sort of fiscal counter cyclical response by the Chinese governments. It makes those probably OK to invest in. But man, that is a tricky one. Scott Ladner, Horizon Investments. Thanks so much for joining us today. Coming up, Alphabet heads to court as the government continues its push to split up Google.

This is Blue Mag Technology. Possibility surrounds us in digital innovation, evolving markets and disruptive ideas. And while promises can inspire dreams, proof is the catalyst for transformation.

At EY Consulting, technology unlocks value. It's data that sharpens your competitive edge, and it's our deep sector insights that can navigate a pathway to real outcomes. This is high-value transformation that drives real change and challenges competitors to keep up. With EY Consulting, it's about proof, not promises. The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But

But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge. But here's the best part.

You can build with confidence, knowing that Microsoft's security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on your craft. And with Azure AI Foundry, you can build your way. The future is yours to build, no strings attached. From ready-to-code tools to full flexibility, it's all in one place. The future's in your hands. So learn more at developer.microsoft.com.ai. ♪

Today, Alphabet's Google, well, it's in court over a U.S. government proposal to split up the company. It follows a ruling last year that Google has an illegal monopoly in web search. Bloomberg's Michael Shepard has the details from Washington. And last week, it was all about that landmark ad tech monopoly ruling. This week, we're reminded of the search ruling. What are the remedies that are likely to be discussed, Shep?

Well, Carol, you're right that this is another front in a broader antitrust push against Alphabet and a number of other tech companies. But here we're talking about search. And what the government is saying is that, look, Google has this illegal monopoly per a judge's ruling back in August.

And these are the remedies that we would like to see. This is the so-called penalty or remedy phase. And before the same judge who made that ruling back in August, they are calling for a couple of big changes. One is that Google should sell off its Chrome browser. Another is that it should be licensing more data to its competitors. And then finally, it should stop making all those billions of dollars in payments to companies like Apple and others.

to guarantee a good position on those platforms for its search engine, something that the judge found signaled anti-competitive behavior. Now, Google has countered with saying that, look, making changes like this will hinder innovation. It will put us at risk, put the US, that is, at risk

of losing a competitive edge on the global stage. In essence, they are saying that, look, the Justice Department's proposed fixes would seek to break something that doesn't need fixing. What's really interesting is just the time that it's been, more than 40 years since we got the breakup of Mar-a-Bell, AT&T. It's been 25 years since Microsoft was under the microscope. Shep, what do we think will actually be an outcome in any sort of time horizon here?

Well, they're talking about perhaps August to actually learn what the judge's decision as far as a remedy goes. But this will go on for years to come. This case is not over now or in August. No matter what happens, either a ruling in favor of the government or against the government, it will head to the Supreme Court for an appeal. Both sides have a lot at stake here. And the U.S. government is not showing any signs of letting up in its antitrust push.

against the major tech companies. We saw the meta trial being pushed in the case being pushed by the Federal Trade Commission proceeding last week with testimony from Mark Zuckerberg and Sheryl Sandberg about the company's alleged anti-competitive behavior there. And then here in Google, as we were talking at the top about the two front push there from the government against Alphabet. And then there are other companies as well.

Apple, for instance, and Amazon are also under pressure over competitive practices that the government has singled out as potentially harmful to the market, Carol.

Not to mention what the EU's been looking at too. Bloomberg's Michael Shepard with all things from Washington. Let's discuss this further. The former Nebraska Attorney General, Doug Peterson with us, currently at Keating O'Gara. And Doug, it's really interesting as to how much you, with AG in Nebraska, pushed forward on this particular case or many others that surround Alphabet at the moment. And it was under the previous Trump administration that first kicked off in 2020.

What impact, remind us, does this have on the consumer, on the tech industry at large, this sort of form of control? I think the biggest issue that, as Attorney General said, we had concern about was that big tech was accumulating so much personal data and that data...

really presented the consumer almost as the product because the data was what fed search, it's what feeds AI, and really we felt as AGs that we needed to step forward because their privacy and the use of their data for profit was a big concern.

Let's talk about, therefore, the consumer in this scenario, because Google would counter that this is going to hurt the consumer. If you separate, for example, Chrome off, suddenly that seamless approach, if you're an Android user, if you're a Chrome user, disintegrates. Does that ultimately hold firm in your mind?

You know, I don't think so. I think one of the biggest concerns we had was that what Google did in maintaining, and this is in the judge's August opinion, in maintaining its monopoly, it basically created this ecosystem where they entered into exclusionary contracts with all the important players, had some revenue sharing with those which were very important, and then as a result, they create this, basically, this feedback loop that keeps everything contained within Google. And the result of that is...

It disincentivized anyone from the outside actually being able to get any capital to challenge with a certain type of search engine that may be a better product, may better protect privacy. All of that is pretty much locked out because investors weren't going to invest in someone who's going to go up against Google. And second of all, all the players within that loop that...

they had through these exclusionary contracts, you know, were disincentivized to look at working with any other technology. So frankly, I think it's put a 10-year hold on really developing better search technology. Interesting. I mean, AnyQ is going to be giving evidence from Apple. They get about $26 billion a year in terms of payments to be offering that exclusive nature of Google as a search option. But there are other companies out there, other search organizations,

that actually get money from Google too. What do you think we'll hear in terms of some of the evidence given this week?

Well, I think there's several things. One, I think the court in its August opinion made some really important findings about the effects of these revenue sharing contracts. I think the court also realized the importance of scale because having that data and Google being able to acquire so much of that just builds a scale that actually makes it very difficult for any competition to occur.

So I think we're going to once again see evidence about how companies who wanted to develop products in general search and also in the area of search advertising, text advertising, will see evidence of how they've been kept out of the market and how it's necessary, including the divestiture of Chrome, as an important element to balance out competition in the market.

Alphabet shares currently at session lows of by 2.5%. They've got their earnings later this week, so Sunil Pichai is a busy guy. Doug, I'm interested, though, in what the countering nature from Google also is. This is backward-looking. We suddenly got a lot more competition in the search space because OpenAI is there and all perplexity, these other generative AI forms of search. Is that an interesting argument? Is the timing wrong here?

Well, no, actually, I think the timing's really important because I think we both, the Department of Justice and the state attorneys general, recognize that technology is moving so quickly. AI is moving very quickly. But what's the fuel of all of that, once again, is data.

And so we think actually part of what we're asking for in the remedy is to ask the court to keep a monitoring process going so that we can follow this as we go into the AI world development. Because really from a Venn diagram, there's a lot of overlap. And so having an ongoing monitoring ability by the court will allow us to address some of the new technology challenges that might come forward.

Back in private practice, but of course, the former Nebraska Attorney General, Doug Peterson. Wonderful to have some time with you. Thank you.

Taking a look at Tesla shares, they're off by more than 7%. Worst day since April 10th for the stock. The company's biggest bulls, one of them at least, sent a start warning to investors. Wedbush analyst Dan Ives saying that this is code red, this moment for Tesla, and that Elon Musk needs to pivot his focus from the Department of Government Efficiency to avoid lasting brand damage. New Merck's David Welch joins us now. We've heard this from Ives before, but earnings come Tuesday. It's an important moment.

That's right. And I think investors, obviously Dan Ives among them, he's an analyst, of course, but want to hear that Elon's going to come back. They want to hear that there's a focus, again, on getting sales going, that you're going to see a lower-priced EV coming out. And I think the big thing, too, that's kind of kept the narrative going before this sort of politically-related thing

route that they've had is what's going on with the autonomous vehicle. The whole AI and AV business that Elon talked about a while back. And with him focused in the government on cutting government costs with Doge,

Investors aren't seeing a lot of that. This is the sort of thing that goes back years, right? When investors were worried Elon was spending too much time at SpaceX or with the boring company and not enough time at Tesla. And here he's basically spending most of his time with the government and they want to see that the guy who built the company and who has steered it and made a lot of people a lot of money is back and focused on Tesla.

And on innovation, many looking towards other EVs, particularly in China, that are speeding up with charging and CATL maybe having charges that bring us to five minutes or less to full charge, David. Just move us away from also where areas that cars are being impacted right now. I'm looking at Hertz, a big investment coming into Hertz. Interestingly, they made a poor decision around Tesla investments in the past, but now it looks as though Pershing Square like what they're doing now.

That's right. And remember, in the fourth quarter, Hertz said that they were done selling down this Tesla bet that really caused like $2.9 billion worth of losses last year. So if that's behind them and the market still isn't rewarding them for that, it was trading down below $4 a share before Ackman bought in, it doesn't take too much in terms of operating improvements for Hertz to really start to move the needle and get things going again in the right direction.

assuming that there's no more of a wicked tale here from the Tesla bet. And Ackman mentioned that in his letter, and the other thing too he's looking at is could this be a tariff bet here? If tariffs drive up the prices of new cars, it always has an impact, brings up the price of used cars as well.

Hertz has hundreds of thousands of them in their fleets, and if they sell them at a better price than they bought them for, that's just good for the company, and it'll help them pay down some of their debt. So there are some potential tailwinds here and some potential operating improvements for Hertz, and Ackman's betting that the Tesla damage is behind the company, and it's all at least some kind of improvement going forward. It's a 19% bet. David Welch, thanks so much. And all things EVs and autos.

Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York. A quick check on these markets that are once again on a downdraft. We're seeing the Nasdaq 100 feeling the brunt of the sell-off right now. We're off by two and three quarters of a percent. In fact, on the Nasdaq 100, only five stocks are actually in the green, everything in the red. We move from the micro anxiety of chip stocks, of worries about

earnings, but also to the macro perspective. What of Jay Powell? What of his future? We're currently on the downside. Move on to some of the individual movers that we're keeping an eye on. Nvidia is one of the key that is on the downside from a points perspective. We're currently seeing off by more than 5%. For three straight days, we've seen losses. It's wiped out almost $400 billion worth of market cap in those three days. I'm also looking, though, at TSMC off by 3.3%. They're putting

They're putting out a warning in an annual report saying that maybe we're going to find it very hard to ensure that the end users of our chips aren't Chinese. Let's talk about that a little bit more with Ian King, who joins us now. And this is TSMC saying, look, we hear you, U.S. government. We understand you want to be limiting some of the exports to certain Chinese entities. We don't always know where they're going.

Yeah, I mean, this is obviously an attempt by them to try to sort of shift the blame or shift the focus. They're saying, look, hey, we just make these things. You know, the companies that design them, the companies that sell them, they're the ones that kind of should know where they're going. They're the ones that are sort of more directly involved. And then maybe it's the computer makers who actually take them and then put them in computers or cell phones or whatever. So this is, as you say, there's a heightened environment of like, look,

How are these chips getting to China? We need to know. And this is TSMC saying, hey, it wasn't us. What's interesting is TSMC itself has been trying to appease the administration. More investment into the United States. I've just come back from Arizona. It's all about the investment they're making in that state, but it's costing them more, Ian.

Yeah, it is. I mean, this is the whole point behind the CHIPS Act was to say, look, we need to make the price of doing business in the U.S., of building these giant, massively expensive factories equivalent to what it would be to make them in Taiwan or make them in South Korea or China for that matter. And the...

Delta has always been government support. That's the chips act. That's what TSMC wants more of. But frankly, whether that's absolutely the case, whether it can still get the same level of economics, that's still a challenge.

Ian King, always brilliant to have you. Thank you. More on the semiconductor sector now amid this geopolitical uncertainty. Welcome back to the show, Michelle Guider, Krak Institute for Tech Diplomacy at Purdue, CEO there. Michelle, always great to have your voice. Let's just talk about what you're hearing from semiconductor companies at the moment. Are we still seeing the administration getting what it wants?

I think we are seeing a tightening of export controls, which has been the trajectory for the past few years. And I think it speaks to the strategic nature of semiconductors because they're powering consumer technologies and they're also powering defense tech at the same time. So if you look at American chip companies like NVIDIA, like AMD, or

allied chip companies like TSMC, they have a very strategic role to play. They're at the front lines of geopolitical competition. And so they're not passive, but active players in making sure that the U.S. and the free world maintains technological leadership. And so these increasing export controls are a reflection of that.

When TSMC puts out an annual report saying, we're going to struggle with this, when they're trying to own the fact that they perhaps don't always understand the exact end user. Of course, there was reports that TSMC chips ended up in Huawei products. How do you rate that acknowledgement from a company?

Well, I'd say the great opportunity for a company like TSMC is the fact that TSMC produces 90% of the world's most advanced semiconductors. And so if you look at the leverage that they have, if they were to issue guidance requiring more disclosure, more transparency and understanding downstream who the end users are of the chips that they're making, I think they would see that their customers would be highly responsive to that because of the leadership role that they play. And that's an important thing here.

Companies can't just be passive bystanders waiting for governments to issue regulations and then comply. There's actually a leadership opportunity here for companies who are on the ground, who are operating in this environment to play a key role in shaping what the disclosures need to look like. So we all make sure that these chips don't end up in the hands of our adversaries.

Disclosure is the one thing, but designing new types of chips to abide by changing rules is another. And Nvidia has been trying to do that. Every time the rules have changed, they've designed a different type of chip that China is allowed to access. And now the crackdown on the H20. How do you think Jensen Huang has navigated this thus far?

Well, I think it's worth taking a step back and looking at the bigger picture here, which is if you have to modify your product so that a totalitarian customer isn't using it to undermine your country's national security, something's wrong.

So how do you take a look at what the overall business strategy is and national security strategy is and start to think about what is a long game here? And for American chip companies in China, it's not going to be a long game because China has declared that it wants to be self-sufficient in critical technology. Semiconductors is one of them. In all critical technologies by 2035. And so the clock is ticking on American chip companies right now and whether it is the company leaving the market on its own terms

or it's the U.S. government issuing new export control regulations, or ultimately China creating its own national champions like Huawei and then ousting American companies, the opportunities for a business leader to decide now whether they want to get out on their own terms or have it be dictated by China. But then, Jensen Huang, as the crackdown on H20s happened, goes to Beijing, is in China, reconfirming his commitment to the country. How did you...

assess that particular level of diplomacy from the company? Well, I think it was equally important that he also went to Japan thereafter. And look, China's a significant market for NVIDIA and for other chip companies. I think it's their fourth largest by sales. So not surprising that he went there. But at the end of the day,

we've got to make sure that American companies, not just chip companies, but companies in all critical tech sectors are working with trusted partners and trusted allies in order to advance our collective national and international security. And the fact that he was in Japan emphasizing the need for increased energy and resources, Japan's been a trusted partner in technology.

those types of conversations, that type of tech diplomacy is really important. And you see Vice President Vance is in India today as well. Working with Democratic partners like that is going to be even more better news for US national security. When we have the idea, though, that necessity is the mother of all invention, or indeed innovation, Michelle, are we just pushing China to go and build it themselves at a faster rate?

They're going to do it anyway. So, you know, the alternative would be, well, let's hand them our critical technologies and save them some time. The argument doesn't really stand. America's got to be focused on innovating faster and smarter and better and being the leader in all critical areas of technology and addressing what competitors and adversaries like China or Russia or Iran are doing in these sectors. But

The imperative for the United States is to focus on innovation first and make sure we maintain a global leadership position. China is going to continue doing that on its own. So the more that we focus on winning what we do best, which is innovation and enterprise, the better off we'll be. Michelle, it's great to have you back. Thank you, Michelle Guida of the Krak Institute for Tech Diplomacy.

Now coming up, Netflix's record profit is giving investors something to cling to amid all this economic uncertainty and challenges for traditional TV and movie businesses. We'll have more on that next. This is Bluebird Technology. Possibility surrounds us in digital innovation, evolving markets and disruptive ideas. And while promises can inspire dreams, proof is the catalyst for transformation.

At EY Consulting, technology unlocks value. It's data that sharpens your competitive edge, and it's our deep sector insights that can navigate a pathway to real outcomes. This is high-value transformation that drives real change and challenges competitors to keep up. With EY Consulting, it's about proof, not promises. The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But

But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge. But here's the best part. You

You can build with confidence, knowing that Microsoft's security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on your craft. And with Azure AI Foundry, you can build your way. The future is yours to build, no strings attached. From ready-to-code tools to full flexibility, it's all in one place. The future's in your hands. So learn more at developer.microsoft.com.ai.

Quick check in on Netflix shares because they had been holding on to gains. And in fact, one of the only stocks in the green on the Nasdaq 100 were up 2.8 percent after the streaming giant reported a record profit to start the year. Analysts see the company business as resilient amid a tougher macro environment. Bloomberg's Lucas Shaw can break it down first. We got the numbers on Thursday evening. And of course, then the markets went on holiday. So today they react, Lucas, and they like it.

They like it a lot. I mean, there had been a belief among investors, analysts, and I think everyone that Netflix was a company that was not particularly at risk because of the current uncertainty, trade war and the like. And it's also just a company that continues to operate on all cylinders, right? It is excelling internationally.

Even if there are some people who think that it slowed down in terms of subscribers in the first quarter of the year, at least in the U.S. and Canada, the numbers that it is now reporting revenue and profit both look really good. I mean, the thing where Netflix has continued to over-deliver for investors has been its free cash flow and its profit over the last couple of years. It's kind of crazy to think that there was a time in which people were worried that they might collapse under debt or never make any money.

The fact that first quarter earnings are up 25%, the fact that they're talking about resiliency in the face of potentially weakened consumer, Lucas. Are they continuing though to double down on their commitment to produce abroad, to continue to roll out with new movies, new content?

Yeah, I mean, they actually had a whole section in their letter to shareholders last week talking about the investment they're making in international production. I think they said they're now producing in something like 50 countries. It might be even north of that. You know, they have started to increase their programming budget after it being flat for a couple of years. I think they're up to $18 billion a year. They still produce and release more programming than any streaming service by a mile.

And yeah, they see an opportunity. I mean, if people do get more cost conscious and look to cut their streaming services, every service would experience a higher cancellation rate, what's known in the industry as churn. But Netflix has the industry best and I think would continue to because of all that you get for it, right? Whereas there are other services that if you only watch one or two shows, you might say, I can cut this for a month. I think it's a lot harder for the average person to cut Netflix. Yeah.

Lucas Shaw on all things earnings. Thanks so much for that. And let's just stick a little bit longer with Netflix. Bring in Rich Greenfield of Lightshed. You really pointed to the fact that they're producing content in so many countries. Does that help with the weakening dollar?

I mean, look, I think, well, first of all, you know, having production resources all over the world, I mean, more than anything else, Carolyn, it makes it cheaper to make content. You know, the cost of making an hour drama in the U.S., I mean, can run, you know, you look at something like, you know, take a Yellowstone or an 1883, like those can cost 25 plus million dollars an episode. When you're producing overseas, you're taking advantage of generally far lower cost production environments,

but you're also creating content that caters very much to local tastes. And so what Netflix has been really unique about is not just creating great content in the U.S. that's exported around the world, but creating great content all around the world. I mean, whether it's a Squid Game or a Lupin in France, like really figuring out how to produce at scale all around the world. And I think that's becoming an increasing advantage.

versus the peer set, nobody else is producing the way Netflix is producing around the world. And I think it's becoming a bigger and bigger advantage, especially as you have, you know, you just listened to Lucas talk about, you know, sort of the pressure that everyone's going to be facing from a weakening economy. You know, if you think about the way a lot of these big media companies, legacy media companies are pulling back on their spending, really retrenching, focusing on just their top projects, it's giving Netflix a greater advantage versus the peer set.

And interestingly, they're catering to more than 700 million users worldwide. They get Korean viewers for Squid Games, but also it becomes an international hit too. Is that going to be the recipe for the future? Look, you know...

There's no perfect formula for how you get a hit. But I will say when you look at Netflix, whether it's a Squid Game from Korea, look at Adolescence. It's a four episode. It's a few hours of content. It's a global sensation out of the UK. You need to take shots on goal.

to have successes. I mean, there's no doubt, you know, the successes overall, I'd say, you know, huge pieces of content are fewer and further between now for everybody. But you need to take shots on goal. And Netflix is taking more shots on goal by a pretty wide margin than everybody else. And I think that is sort of been the key advantage is nobody is spending on this much content the way Netflix is. And you can see it. I mean, every quarter, basically every, certainly every six months,

it feels like there's one big show that sort of breaks out on Netflix. The other services are just struggling to make really big hits. And part of it is they don't have enough users. Like, they don't have enough daily engagement. Netflix wants you on Netflix every single day. And so there's always something new bringing you back to the service. And again, that point of making it so you have reason, A, to pay more and B, not to churn. I'm rich.

Shots on goal. Now, tell me, have the shots been on goal when it comes to live content? Because yes, from a brand perspective, everyone's loving WWE Raw, but sometimes just the technology hasn't been there to service the amount, scale of demand to watch all at the same time.

Look, there's no doubt that live streaming of content with mass audiences is not an exact science. You saw that with the Tyson fight, the Tyson-Paul fight last year. I think if you were to look at, you know, the NFL on Christmas Day, it worked incredibly well. The WWE has not had problems. But I mean, look, you've seen YouTube TV and Hulu Live. Those things have certainly gone out at, you know, at specific moments. You've seen every one of these services have problems at scale. Live streaming is hard.

i think netflix has learned a tremendous amount over the last year is getting better and better at it but i don't think anybody who is in the live sports streaming where there is massive instantaneous demand and the you're ever gonna see perfection it's the internet it is fallible it has problems

But I do think that Netflix is building up very strong muscle skills in understanding how to do it. But I also don't think, Carolyn, I don't think sports is ever going to be the core of Netflix. I think they really see it as a global entertainment service where sports has a place.

and the live has a place, especially as they build out the advertising side of the equation. But I'd be surprised if sports became critical the way sports is critical to a peacock or critical, obviously, to an ESPN. I don't think sports is going to be the win or lose for Netflix any time over the course of the next five plus years. What becomes the win for the shares right now, Rich? Because we're up, as we can see on the screen, more than 11% over the course of year to date. We're up

close to record highs for the stock in this macro environment, are we going to be able to juice any further?

Look, the big growth from here, it really comes from two things. I mean, obviously, having pricing power in the U.S., there's no doubt that whether that's from driving the subscription price higher or whether it's actually being able to put the right ad to the right person at the right time and driving the advertising revenue from the increasingly large base of advertising-supported subscribers on the platform. But the real win, Caroline, as you look at over the next five years, is going to be Asia. You know, they're still relatively small. They've stopped reporting subscriber numbers recently.

But we know that the Asia-Pacific numbers are still small when you look at the scale. You know, they could 10x the size of their subscriber base in Asia and still not be fully penetrated. So there is massive room to run. And I think the story over the next five to ten years is going to be how they execute and build in Asia the way they've been successful in the U.S., Latin America, and Europe. Rich, it's always great to check in with you. Thanks so much, Rich Greenfield of LightShed on all things Netflix.

Chatbot Arena, the crowdsourced site ranking AI models, but it's officially becoming a company. I think there's big business in benchmarking. For more, Bloomberg's Rachel Metz joins us now. And before, this has been sort of the passion project of academics, and now it's becoming formal. Yeah, I mean, this was a project formed by academics at UC Berkeley. And

And they had been working on this. It had gotten super popular. A lot of companies use it to test new and unreleased models. A lot of people use it to try out the latest and hopefully greatest models. And they wanted to make it more than just an academic project. They wanted to scale up. To do that, you need to get money. To do that, you often need to be a company. So, yeah, it's growing up in a sense. Growing up, and more and more people are using it. You've got on this graphic 2.8 million user votes. How amazing.

people approaching it and making the most of the recommendations that it offers? So people, I think, who are individuals are using it to try things out, get a sense of what they like, what they don't. I mean, really, this is sort of a vibes-based ranking, I guess I would say. One of the key things that you can do on this website is try two different chatbots and

you are not knowing what they are, you type in a prompt and then you rate which answer you like better. And based on that, the chatbots will go up or they will go down on the leaderboard there. I think companies increasingly see this as a really important marker of how well users like their models. And so that could be really valuable to them, this kind of data. Typically, this data is actually really hard for companies to

to get on their own. So having it be available publicly is quite useful. OpenAI, I think, GPT-4.0, it released it on the arena before it went out more broadly, right?

So what some companies are doing is they will put models on there and they'll have code names. So you won't know exactly what they are, perhaps. I mean, you might be able to guess pretty well. I mean, there have been some that I've seen on there that I'm like, I know where you're coming from. But yeah, it's really increasingly valuable. And OpenAI has done this a number of times, put up models that are unreleased and people can try them out. They might not know where they're coming from, but they might be from OpenAI. Okay.

- And just tell us about the people at UC Berkeley that are behind this and whether they become the executives in now what will be a company, a formal one.

Yeah, so this was a project out of Jan Stojka's Sky Computing Lab at UC Berkeley and a bunch of graduate students worked on it and undergraduate students helped with it as well. And a number of the graduate students along with Jan are going to be the co-founders of it. And I think they're still trying to figure out who's going to have what role in the company. But yeah, some of them will have C-level titles.

Rachel Metz, it's a great story. Thanks for bringing it to us on all things generative AI. And that does it for this edition of Bloomberg Technology. Let's just...

Keep our eyes on these markets, though, because it is once again another down day for the Nasdaq 100. We're off by more than 3% now. We're hitting session lows. Nearly every stock is in the red. Tesla in particular off by more than 7%. Earnings coming out Tuesday. Remember, we're thick and fast with earnings throughout the week. We've got Alphabet coming Thursday. We've got Texas Instruments. We've got Intel, IBM. Much to be digested from these CEOs and executives. But Tesla on the downside. We've got Bitcoin up, though, 3.4%. 88,000, hitting the highest since March.

This as we see a move into havens such as gold, maybe digital gold is being seen as the haven of choice when it comes to Bitcoin. And indeed, you're seeing money move into short term treasuries. So the two year gets the bid, the 10 year still being sold off. But do check out our Bloomberg Technology podcast as well. You can find it on the terminal as well as online on Apple, Spotify and iHeart. From New York, this is Bloomberg Technology. Developers like you are building the future.

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