Apple Pulls UK Cloud Encryption; CrowdStrike-Carahsoft Deal Under Scrutiny
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Live from New York, I'm Caroline Hyde. And I'm Jackie Davalos in San Francisco. This is Bloomberg Technology. Coming up, Apple fights back in the UK, removing its most advanced end-to-end encrypted security feature. Plus, President Trump is expected to sign tariffs to counter digital services taxes despised by US tech giants.

And Coinbase says the SEC has agreed to drop its lawsuit that accused it of running an illegal exchange. But first, a check in on these markets. And we're pulled lower. Once again, U.S. economic data showing slower activity. And there's also higher inflation expectations. The Nasdaq 100 off by five tenths of a percent. The key drags down from a points perspective. Amazon, Tesla. But we get to a key move on the day. Apple.

removing its most advanced end-to-end encrypted security feature. It's for cloud data, but it's to the UK user base. It's a completely stunning development that we're seeing after, of course, the reports that the UK government ordered Apple to build a

a backdoor into customer data globally. The person who helps break it all down, Bloomberg's Mark Gurman, who sat with me in New York. This is quite the fight back from a political perspective. This is a stunning development. So just to give some context here, like you said, the UK Parliament ordered Apple to build a backdoor to give it access to user data, not only for users who live in the UK, but users globally.

And so Apple essentially had an option, either build that back door and continue to offer services like advanced data protection, continue to offer iCloud in the region. But what they decided to do instead is simply remove their upgraded end-to-end encryption feature that's called advanced data protection. Gives you extra security, right?

for iCloud data, iCloud backups, text message backups, notes, reminders. They have an app called Freeform, Safari web bookmarks, right? So they're removing that. So now in the UK, you're only getting standard encryption for those features, but you still will get end-to-end encryption for iMessage, FaceTime, and a few other things like passwords and health data. So that is a stunning development. They have not removed advanced data protection in any other region, and it remains available globally elsewhere.

Mark, the security of Apple's products is a huge part of its brand, as you know. Where does this leave UK consumers? With relation to other products that are on the market, does it mean that they're going to be substantially less protected? Yeah, I mean, end-to-end encryption is really the gold standard. It means that nobody can access that data unless you're on what Apple calls those trusted devices, so your own Apple ID logged in, iPhone, iPad, Mac, watch, other products.

So you're not going to get that full end-to-end encryption on your text message backups, on your notes, on your reminders, things like that. And so that is a new privacy concern in the UK. But the other option was removing all protection entirely and building that backdoor in for the UK government. So from a compromise standpoint, it is a big compromise Apple is making, but it is also clear rebuke against the UK government because they are not building that backdoor, so they say.

Give us the historical context here. How often does Apple react in this regional manner? Well, in terms of regions, right, in China, that is the poster child for these compromises. iCloud in China is operated by a local provider, right, not Apple servers. And there are talks that this local provider in China for iCloud is actually a state-backed entity, right, with connections to the Communist Party in China, right? So that means they probably have full access

access, unfettered access to the user data there. In China, to bring Apple intelligence there, they're essentially building what amounts to a censorship engine, right, in partnership with Alibaba. So they'll be able to go in, the Chinese government, and basically monitor the output of the AI on iPhones in China and have, via Alibaba, Apple make tweaks to that engine.

That's Bloomberg's Mark Gurman. Thanks for joining us. Meanwhile, President Trump is expected to sign a memorandum today that could allow tariffs in response to digital services taxes that some countries impose on U.S. giants like Alphabet and Meta. That's according to sources. Let's get more with Bloomberg's Mike Shepard. Mike, who does this memorandum direct to do, and what could those actions look like?

So what they're looking for, Jackie, is a way to address one of President Donald Trump's and his administration's biggest bugaboos over the years. They even took a look at this back in 2014, these digital service taxes that hit big American technology companies like Alphabet Inc., like Meta Platforms, with fees in Europe and other countries that are charging for their services.

And the administration has outlined this program of possible reciprocal tariffs. It's unclear whether it would fit directly into that or be parallel to it. But the idea is that Trump and his team see these taxes imposed by France and about 30 other countries worldwide as unfair to American companies. The timing of this is fascinating, because we have the French president, Emmanuel Macron, coming to Washington.

already with an intense slate of discussions over Ukraine. Precisely. The timing around geopolitics, Russia, Ukraine, the timing around Macron coming to the U.S. Mike, also, just push us forward in terms of how we see this is what Meta had been setting out to do. We were reporting just yesterday that he was on Capitol Hill, Mark Zuckerberg, discussing some of his policy wishes. Is this exactly one of them?

Well, they have made clear for a long time that they object to these taxes. They see it as unfair. Now, on the other hand, in conversations with European officials, what we have heard and with members of other countries that charge these taxes, France, for instance, has a goods surplus with the U.S. It's a trade deficit from Donald Trump's perspective.

But France sees a services deficit with the U.S. So they are there from their point of view. This digital service tax is a way of evening that out and also charging for economic activity that they see happening in this country. It will make for a complicated round of discussions.

And the questions out there are many. One is, how soon could something like this go into effect? We've seen how quickly Donald Trump has tried to move with some of these other tariffs decisions. And also, what level they might set and how they would fit into other levies, whether they would be stacked on top of other measures, for instance. That's another open question.

Mike, we know that Mark Zuckerberg and other tech executives have been getting closer to President Trump. Has this been kind of one of the initiatives that they've been pushing forward? Net-net, where does it leave companies?

Well, that's a great question. On the regulation front overall, they had been pushing the administration to not only dial back rulemaking here in the U.S. that would hit them, but they also want the U.S. to be a better ambassador for their interests abroad, especially in Europe. And we heard

J.D. Vance, Vice President, articulating this at the Munich Security Conference and at the AI Summit in Paris that we followed so closely, articulating this vision that regulation is really impeding innovation and that levies like the digital services tax, which they have long opposed, are just the sort of thing that is standing in the way of them making breakthroughs and investments in those countries as well. Bloomberg's Mike Sheppard.

We thank you. Look, tariffs, just one of the many changes in the political landscape for big tech and indeed for startups. Bradley Tusk joins us now to discuss how companies should manage this fluid environment. Tusk, of course, just pivoted his own VC to offer advice in exchange for equity instead of cash. Bradley, you've got a wealth of political experience. Communications Director of Senator Chuck Schumer, a campaigner manager, of course, of Michael Bloomberg's 2009 mayoral race. Reminder to our audience, Michael Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

I just want to put to you, how does a company you advise manage to move and navigate in this ever-changing environment? Yeah, I mean, right now, I think first and foremost, there's really a lot of disappointment among startups because the venture market has been dead for the last four years. It was an absolute dearth of liquidity, both in terms of IPOs,

and M&A activity. And last fall, there was a tremendous amount of optimism that both between reduced interest rates and a change in regulators at the federal level, that market would really open up and we'd start to see a lot of growth, and all American innovation really relies upon that market being free and open. And that hasn't happened at all. We have both Chairman Powell signaling we might be done with rate cuts, but I think far more important

The markets are so much in turmoil. There's so much chaos out of Washington that a smooth, stable climate that would have paved the way for new tech IPOs, and there's literally over 1,000 S1s filed and waiting to go, and new M&A just hasn't happened. And so right now, I think you just have to basically sit tight. But I really do think that all the people in the venture community that supported President Trump right now are feeling some buyer's remorse.

If we do see President Trump being able to push back against the digital services tax, be able to push against European overreach as they see it by fighting fire with fire, is that not in term and long term? It doesn't help startups. It doesn't help VCs. It might help Meta. It might help Apple or someone like that. But the reality is when you have companies that are

worth anywhere from a million to a hundred million or even a billion dollars and have revenue from a million to a couple hundred million, they're not paying the digital service tax, right? They're usually not even profitable at this point. And so, and the problem is this, which is, you know, innovation ultimately happens because you have all of these founders sort of in a garage somewhere or the version of it who come up with crazy ideas and most of them fail, but once in a while, one of them succeeds, which is what we saw with when we mentioned Meta, Mark Zuckerberg or Apple, Steve Jobs.

If we don't have the new Zuckerbergs and Jobs and Bezos of the world coming up, then eventually we're going to have massive stagnation in our economy. And when there's no liquidity in the venture market, venture capital funds like mine can't really deploy as much new capital. LPs can't invest as much in venture funds. And as a result, startups either aren't being funded and they're not being created, or they're going out of business when they didn't necessarily have to. And so the ripple effect is severe.

Let's talk about artificial intelligence because that sector has gotten a lot of cash from venture capitalists. I don't think those startup founders are actually hanging out in a garage.

But let's talk about the regulation in this space. It's virtually nonexistent at the federal level, but there is movement at the state level. How do you see this shaking out, and how are you advising startups in this space to navigate it right now? Yeah, my advice is really exactly what you just said, which is we've really got to pay attention to the states. All we've seen on the federal level was one very kind of tepid executive order

from President Biden that's already been rescinded by President Trump. But last year, over 800 bills around AI were introduced in state government. There will probably be double by the time we're done with sessions this year. And some of them are very specific around things like deepfakes, but some of them are very comprehensive around how you regulate LOLs, how you regulate apps.

Right now, the problem with the lack of any sort of federal leadership is we're going to end up with a patchwork of 50 different states with different sets of regulation that companies have to try to comply with all of them. But at the moment, if you're one of my portfolio companies, it's let's focus on the states where legislation is the most likely to move. Let's focus on where those bills are going and make sure we have a seat at the table so that, A, it doesn't destroy us, and, B, if possible, it can help us build a regulatory moat.

What other sectors are you looking at that you think you can add value when it comes to this regulatory advice? I'm thinking autonomous vehicles, cannabis, startups and delivery. What are you seeing? Yep, all those for sure. A lot in digital health especially because healthcare is...

so big, so fragmented, so regulated, and quite frankly, so screwed up that there's so much room for improvement. That's a really big sector for us. Ed tech is another one. I'm excited about nuclear and what's happening around that. The gov tech sector has been growing a lot lately, so that's become interesting. Transportation, gaming. The good news for a business like mine where you're investing in and working with startups and regulated industries is government's reach, for better or worse, is very broad.

and the vast majority of industries are impacted by government one way or another, and so that gives us an opportunity to add value. - To add value, Bradley, you have just gone on to say that at the moment your industry, the VC industry, the startup industry, is feeling buyer's remorse around Trump. - Yes. - But we push back a little bit and say it's only February.

And ultimately, are we likely to see your advice going forward that things will change from a federal perspective and things might open up from an IPO perspective and companies can build the next Zuckerberg? We can see the next billion dollar, trillion dollar? I hope so because I have a lot of money at stake here as do a lot of other VCs. Look, my hope is, and what at least I'm telling myself when I'm up at three in the morning, is Trump came in with a burst of energy. That's who he is. They wanted to make a splash. They have.

And soon enough, things will calm down and the markets will sort of feel better and we'll start to see that. Markets are near record highs. Yeah, but it is not...

It's so far not resulting in tech companies sort of listing IPOs. So that's what we need to get to. And on one hand, it is possible because Trump, by the way, to his credit, just in terms of the work put in, had so much activity on opening day and in the first week that there was a lot. But as a result, they've also done a lot, too. So there might not be as much to keep doing going forward. On the other hand...

He operates in chaos, right? That is how he functions. And that's not necessarily what you want if you're trying to take, you know, young tech startups and either sell them to bigger companies or take them public. That's Tusk Venture CEO Bradley Tusk. Thanks so much for joining us. Thank you. Coming up next, Alibaba regains its spot as the number two company in China. More on that next. This is Bloomberg.

I'm Alpine skier Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there.

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Let's talk about Alibaba's stock rally. It has catapulted the Chinese tech darling back to the number two spot in the country. For more Bloomberg's Henry Ren joins us on this rally sustainability and indeed the breadth of the buying of China tech. Henry, just why are we seeing this sort of rally in Alibaba and can it sustain this number?

Yeah, so Alibaba is part of the China tech rally that we have been seeing for the past few weeks since DeepSeek's AI breakthrough. And the whole thesis is basically based on the optimism over the country's tech advancement, as evidenced by DeepSeek, of course. And then in the past few weeks, we have been seeing signs of more supportive stance toward the private sector by Beijing as well, evidenced by Xi Jinping, President Xi Jinping, embracing all those important tech leaders

in a real meeting in Beijing and basically the supportive stance toward the private sector as well as the tech breakthrough are all supporting the stocks and most importantly recently we have been having some companies reporting earnings including Alibaba yesterday reporting some recovery in its core business of domestic e-commerce as well as a growing cloud business so all those factors putting together are supporting China Tech's rally in the past few weeks.

Henry, what does this tell us about Beijing's stance on regulation in a sector that really saw it suffer from a crackdown? Does it mean that this pressure, the scrutiny is over? Yeah, interesting question. I felt

The fact that President Xi Jinping himself is inviting all those tech leaders to Beijing for a pep talk, this sign is pretty telling, isn't it? Because in the past two, three years, all the headlines, the top headlines we've been seeing about more scrutiny into all those companies, not just about those tech giants, but also the ride-hailing companies of Didi, but also the food delivery company of Meituan.

But this is important. This is a clear sign of pivot. However, we still need to caution a little bit here because the expectation is the scrutiny on those tech firms will continue. And the priority of Beijing is pretty clear as well because if you see the seat map of that meeting, Jack Ma

the co-founder of Alibaba, and Pony Ma, the CEO of Tencent, they're not sitting at the front row of facing President Xi Jinping. The tech darlings from Beijing's eyes are still about the hot tech, including Huawei as well as the EV maker BYD. So we have to keep that in mind. Henry, in just 30 seconds, it's interesting who's been buying some of these Chinese ADRs. Ryan Cohen, as reported by The Wall Street Journal. Who else has been winning?

Yeah, so lots of hedge fund trading activities these days. And apart from Ryan Coe and also billionaire investor David Tapper as well, famous for his buy everything China call, we're seeing more trading activities among onshore mainland traders as well these days. So all those factors boosting Chinese stocks. That's Bloomberg's Henry Ren. Thanks for joining us.

Investors are showing their renewed enthusiasm for quantum computing off the back of breakthroughs that indicate commercial applications for the technology could just be a few years away. Startup Quera has raised $230 million from backers including Google and SoftBank's Vision Fund.

The company's interim CEO, Andy Orry, joins us now for more. Andy, we just had Microsoft on the show this week unveiling their quantum computing chip, and it just feels like the field went from like an episode of Star Trek to all of a sudden real-world applications. You pulled together this funding fairly quickly. Talk to us about what happened over the last couple months that allowed this breakthrough to happen.

Well, it's an overnight success that takes about seven or eight years. It's just that everything's coming to fruition at once. And so from the investor point of view, you're seeing all these exciting activities and you're thinking it's all happening now, but it's been going on for a long time. We're all just now reaching the surface where people can see us.

We've been for about seven years, probably used 50, 60, $70 million to get to where we are. And now having sold quantum machines and pushing the boundaries of the technology, we're three to five years away from useful quantum computing as an industry, as a society, in my opinion.

And I think that we're going to be one of a small handful of companies that are going to demonstrate and deliver useful quantum computers. And that is going to be transformational. How much does the retail investor, the institutional investor, need to understand the differences in methodology here? Because people are doing it. Willow is different from what we've just seen from Microsoft.

Yes. So we call them modalities, but they're really approaches. They're underlying technological differences. Microsoft just announced a new one. So we'll say there's five different modalities or technological approaches that people are using to create a quantum computer. There is neutral atoms, there's superconducting, there's ions, there's photons, and there's the Microsoft topological qubit.

I think that you're probably going to see several different modalities focus on specific use cases initially. And so I don't think you're going to see one that's going to reign supreme. If I had to guess, I happen to think the neutral atom quantum supercomputing that we're building is likely the ticket that is going to win. But I think you're going to see... Yeah, well, it's funny how you like where you are.

But, you know, it's not just building the underlying quantum computer. It's the algorithms that are required so that you can do something useful with them. Yeah, so tell us about the usefulness here, Andy, because we had a great discussion with Microsoft really talking about how we could end forever chemicals, for example. Where are your applications about to work in that three to five year time frame you talk of?

Yeah, well, it's going to be baby steps. I mean, you know, one way to think about it are things like life science, material science, drug discovery, new materials, superconducting materials at room temperature, new forms of encryption. These are applications. The methodologies are simulation, optimization, and machine learning. These are the things, the techniques that quantum computers can, with unique power, bring to bear to solve those kinds of problems.

I think initially, three to five years from now, you're going to see the very beginning of quantum supremacy where very small niche-based problems are going to be solved that classical computers are never, ever, ever going to be able to solve. And then very quickly, in a handful of years after that, you're going to see whole industries start to be transformed. That's Andy Orre, interim CEO of QAERA. Thanks so much for joining us. Welcome back to Blue Mag Technology. I'm Caroline Hyde in New York.

And I'm Jackie Davalos in San Francisco. Let's go to a quick check on these markets, Jackie, because we are down on the week. We're off by 0.4% over the last five trading days. If you look at the Nasdaq 100 on the day, what tugs us lower? The likes of Tesla, interestingly, one of the points drags. I want to go to one of the most talked about stories today.

Today when it comes to tech and EVs Nissan has been spiraling higher if you're looking at its ADLs were up 6% Tesla on the downside by 2.4% now this is we get a pushback to an FT report that Japan is Courting Tesla on a Nissan investment in exchange for US factories now someone who is involved in the report

well, who denies any involvement in the reporting, is someone who used to be on the Tesla board, Hiromichi Mizuno, a former board member of Tesla, denying that report by the FT that he's leading a Japanese group that aims to persuade the EV maker to invest in Nissan. This one is going to roll on as we see Tesla off by 2%. Interestingly, in the EV sector, we're up by more than 3% for Rivian. Why? They're warning about its first annual sales decline. Policy risks, of course, EV tax credits may be coming to an end. Regulatory policies that could weigh on sales more broadly.

So keep an eye on the EV and auto space. It's a busy one. Let's switch gears now because US prosecutors and regulators are investigating a $32 million deal between CrowdStrike and tech distributor Carosoft to provide cybersecurity tools to the IRS. Now, it's all according to sources and a document seen by Bloomberg News. Jake Blyberg joins us, who has been reporting out this story since October. Basically, your reporting has spurred this investigation. So what do we know?

So what we know is that last fall, following our report, SEC investigators and DOJ investigators began interviewing people who used to work for CrowdStrike and who worked for the IRS, asking them what happened with this deal, because something sort of curious took place after CrowdStrike closed it. The IRS didn't ultimately buy the software subscriptions that the deal was for.

Jake, what's at stake here? What does this mean for CrowdStrike? Could it impact their revenue? Fill us in on what the company has said about the investigation thus far.

So what the company has said is that they stand by the accounting or their accounting of this deal. And what to say for them is scrutiny on a transaction that came at a pretty important time for them, right at the close of a quarter back in 2023, and was big enough that it could have made the difference between them meeting or falling short of market expectations on a key metric

for that quarter. Although we should say that the company hasn't detailed just how it accounted for this deal. But again, they're saying they stand by what they did there.

That's Bloomberg's Jane Blindberg. Thanks so much for joining us. Now, U.S. crypto trading platform Coinbase says the SEC has agreed to drop its lawsuit that alleged it ran an illegal exchange. All this pending commissioner approval. Bloomberg's Shinali Basick is standing by with Coinbase's chief legal officer, Paul Grebel. Shinali. Thank you, Jackie. Paul, thank you for joining us today on the heels of this news. It's been a fight that you have been fighting for a while now. Now that you have

this agreement what does it free coinbase up to do

Good morning, Shanali. Today is a big day not just for Coinbase but for crypto and for the United States. With this case in our rearview mirror, Coinbase is going to be in a much stronger position to not only push for permanent legislation that we think will provide clarity to the markets, but also to double down, maybe even triple down on innovation in our own products and services that we think are going to serve our customers very, very well.

It's interesting to see you have this initial excitement around the agreement when it comes to your stock performance. You're actually now seeing your stock at the moment down on the day. Was a lot of this baked in? One question I have for you is what this means for investors in Coinbase. Presumably, you've been spending a lot of money on legal fees. How much have you been spending through the course of this fight? And what is it for you up to now spend on instead?

Well, the last four years of the Gary Gensler regime and his war on crypto have been nothing short of a disaster for American crypto writ large. In Coinbase's case, we've had to spend over $50 million just on outside law firms and other advisors alone. That doesn't even include the cost internally. That doesn't even include the tax on innovation that Gary Gensler's misguided campaign imposed. So with all of that

now lifted, we're able to focus on the future. As I said, I think legislation in the Congress on market structure and stablecoins is going to be critically important. And then, of course, there's the whole point of legislation as well as rulemaking at the SEC, which is to bring new listings to our platform, to develop new products and services that provide a real alternative in terms of financial services, and ultimately

to provide a foundation for innovations that go well beyond speculation, investing and financial services that we think are going to be tremendously important to the US economy. One question is what this means in terms of unlocking new products, in terms of unlocking token listings. There has been a lot of dispute around what is allowed in terms of bringing to market on the Coinbase exchange. Do you think that this could unlock a further wave of listings?

Well, I think that we are going to see an acceleration in listings on the platform going forward. Our approach to listings has actually remained remarkably consistent over many years, which is to look at the state of the law, to understand where the courts are, and frankly, to understand where the courts are likely to go if and when issues are brought before them. But I think that with this resolution, we can consign to the ash heap of history the SEC's misguided view of

that somehow every digital asset other than perhaps Bitcoin was a security. That was the view of the SEC during the Gary Gensler regime, and that view has now been firmly rejected by the new leadership in charge.

What does this mean in terms of the types of investments you're going to make in the future? You mentioned $50 million over a span of years. When it came to legal costs, hiring outside lawyers, does that $50 million translate to $50 million in the future to new engineers and other talents at Coinbase?

Well, I think actually it translates to an even bigger investment going forward in software development, in technology, in basic science to support the advancement of cryptocurrency and crypto and digital assets more generally all over the world. The Gensler regime may have been great for lawyers like me, but it's been an absolute disaster for innovation in the United States.

Fortunately, with the new leadership at the SEC turning the page, we think we're going to be able to look forward and focus much more on building and much less on litigating. Paul, you mentioned rulemaking being a critical part of the push moving forward. How soon do you expect more rules that would clarify a lot of uncertainties in the crypto industry, particularly when it comes to registrations with the SEC, when it comes to listings and otherwise?

Well, Coinbase has been focused on regulatory clarity and especially rulemaking for years. It's one of the reasons why even as we were defending ourselves against this bogus, meritless case by the SEC, we actually sued the SEC ourselves to get rules for crypto in place.

I'm very confident that with acting Chair Ueda and Commissioner Peirce's leadership and the announcement recently of a crypto task force at the SEC, we're going to see rules that will allow companies like Coinbase, but also many others, to come in and register, to be allowed to list crypto asset securities transactions appropriately on our platform, and then move past this

phase, an era where these decisions were made in courtrooms rather than as part of a deliberative process between industry, regulators, and other stakeholders. Paul, we thank you for your time. That's Paul Graywell, Coinbase's Chief Legal Officer. Jackie, back to you. Thanks, Shanali. Coming up, X's Fortune Facelift, how the once-struggling social media platform is seeing improved financials. This is Bloomberg.

I'm Alpine skier Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there.

At Stiefel, we invest everything into our advisors so they can invest everything into their clients. That means direct access to one of the industry's largest equity research franchises and a leading middle market investment bank. And it's why Stiefel has won the J.D. Power Award for Employee Advisor Satisfaction two years in a row.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc., member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award. The average time to hire for most organizations is 30 to 45 days. Are you tired of a costly and lengthy hiring process? Simplify and speed up your recruitment by using the experts at Express Employment Professionals.

Thank you.

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Let's take a look at the social media platform X. Of course, we know it's in talks with investors for a fresh equity fundraising, valuing at $44 billion. But it's still mired in debt. Its improved fortunes are really due to heavily adjusted financials and investors' potential fear of missing out. Bloomberg's Max Chafkin joins us on...

some of the opacity that Moody's calls it that undermines the reliability of this financial information that we've ultimately been drip fed via reports here. Yeah, absolutely. So Elon Musk and X, really for almost since Elon Musk has bought X, has been trying to tell this story that the finances are improving, that things are getting better. We've seen lots of reasons to doubt that, although there have been over the last few months some sort of

positive signs. Maybe some advertisers perhaps coming back partly because they want to keep somebody who's a close advisor to President Trump happy. And in this fundraising, you see some of the ways that they're trying to sort of cover up the advertising losses or what most of us believe are huge advertising losses. So these include

deals with XAI, which is Elon Musk's AI company, ownership stake in XAI, a deal with chips that were provided from X to XAI. And what we're seeing is this kind of inner party transaction, which, you know, for most investors would probably be a bit of a red flag or at least a yellow flag. But for Elon Musk, it's just sort of part of how he does business. He's always done this with his companies, kind of combined them and done it in ways that are not necessarily conventional.

Max, just looking at a simple figure, how much revenue the company generated, it's still substantially less than what it was generating prior to Musk coming in. Why are investors still so confident? The story points it out, but I think a lot of it is just FOMO. It's this sense that fear of missing out, the sense that Elon Musk is in a hot place. He is at the arm of the most powerful person in the world.

And that is driving at least some of this excitement. We've seen similar run-ups in value at Tesla and at Musk's other companies where people just sort of are thinking, hey, this is going to work out one way or another. And then you also have the kind of AI angle. Of course, there's a lot of hype around AI,

X has or is related to this chatbot thing called Grok, which is inside of X. So I think it's a bet on that, it's a bet on Musk. And I think a lot of, anytime you're seeing investors wanting to do business with a Musk company, you gotta think about the larger Elon Musk empire.

You know, SpaceX one day or Starlink, one of Musk's companies is going to have an IPO. Lots of these guys are going to want in on that. There are lots of, there are reasons to stay close to Elon Musk, even if you're not necessarily a true believer in any particular deal. That's Bloomberg's Max Chafkin. Thanks so much for joining us.

The Doge staffer who resigned after a report linked him to racism and eugenics has been reinstated at the Social Security Administration, according to a source. Marco Ales, who reportedly advocated for a, quote, "eugenic immigration policy" and argued against mixed-race relationships in posts on X, had received support from Musk, President Trump and Vice President J.D. Vance after his departure earlier this month. Caroline.

Let's just talk more about what's happening around the world with nonprofits that target online extremism and authoritarian propaganda. They're slashing operations. They're laying off employees. This is after the government cost-cutting push led by Elon Musk and President Trump put a stop to some vital U.S. support for many. This is according to nearly a dozen sources who spoke with Bloomberg. Jeff Stone is one of the reporters on this lengthy piece.

And we perhaps are unsurprised that this is what the repercussions are when you start to pull away at fact checking. We should be unsurprised. A significant, a small but significant portion of U.S. foreign aid has for years been dedicated to projects that are often independent media projects, but what they do is fight extremism online. They flag and refute Russian propaganda, particularly in countries like

US allied countries that are thinking about closer relationships with the Kremlin. So these are small organizations that have a really vital part of the way that people around the world are consuming media. A lot of them are thinking about cutting back on staff and pausing a lot of their projects.

Jeff, what recourse do these organizations have? Is there any other place that they can kind of fill in the gap in funding that they were previously receiving that's now being cut? It really depends on the organization, Jackie. Some of them are closing entirely. Some of them are laying off staff. Others, most of them are scrambling to find different sources of funding, whether that be

asking their other investors for more cash, but a lot of them are really trying to figure that out now. The short answer is there's not an immediate path to sustainability. But it's not all about money. They might be pulling back from anti-disinformation for other reasons, right? That's right, Caroline.

Disinformation has become an incredibly loaded word, obviously. A lot of the right-wing side of things has often conflated it with censorship. These organizations are a little bit different. What they do is flag extremism and they will flag threats, often potentially violent threats to law enforcement around the world. So under that political aspect of disinformation, these other projects are also folding.

That's Bloomberg's Jeff Stone. Thanks for joining us.

At a time when DEI has fallen out of favor in Washington and with some big tech firms, Stacey Brown Philpott's new fund is targeting diverse founders. The former TaskRabbit CEO has raised $172 million for under-invested startups. She's here to tell us more about Cherry Rock Capital. Stacey, thanks so much for coming in. Tell us more about the company's investment philosophy and how you managed to bring investors

institutional investors especially that now is the time to bet big on underrepresented founders. Well thank you for having me. Cherry Rock Capital is focused on investing at the series A, series B stage in underinvested founders where we see a gap in the market which is an opportunity to generate outsized returns. As you just said, we have institutional investors like MassMutual,

JP Morgan, Goldman Sachs, top-tier capital partners, Pivotal Ventures, and they all want to see great returns. So what we see is a real opportunity to do just that by focusing on underinvested founders who generally lack access to capital. Did this anti-DEI climate, especially over the last couple of weeks, which has a

it really intensified. Did that affect your ability to fundraise? Because it just closed in January, right? We did. We just closed in January, but you can see the names of LPs that we have. Our limited partners are focused on generating returns. This is something we're doing for the long term. I'm building an enduring institution that will last for more than 20 years. And they see the opportunity over that duration to generate outsized returns, not just for them, but also for our founders. So the current backdrop didn't really affect us at all.

So, Stacey, where do you think in particular sector points are the areas that are likely to bring these outsized returns?

Well, we're focused on five sectors right now. Our first investment was in a company called Coactive, which is an enterprise multimodal AI company that helps businesses organize and analyze audio, video, and image data. We think that sector is very exciting. We also invested in Vitable Health, which is a digital health company that provides health insurance to small businesses who employ hourly workers. We think that sector is very exciting, and we're close to some investments in the future of work in fintech sectors as well.

You were a founding... Sorry, you go, Jackie. You were a founding member of SoftBank's Opportunity Fund, which had a similar mission. What did you learn from there, investing in similar startups, that you would do differently here with Cherry Rock?

Well, we learned that focus brings clarity. We didn't have a pipeline problem of finding under-invested entrepreneurs with the SoftBank Opportunity Fund, which is now called the Open Opportunity Fund. But we decided to focus just on Series A and Series B, where we see a big opportunity to generate alpha. And all our LPs want to see us generate great returns. And the way to do that is through alpha. Stacey, talk to us about the conversations you've been having with the founders of Coactive AI, of Vitable Health.

When you're seeking them out, what is their environment like to raise funds at the moment? Are they actually quietly seeing more support in this environment or less?

We love the founders at Co-Active, Cody and Will and Joseph over at Vitable. They're focused on scaling and growing their businesses, their go-to-market strategy, hiring the best people. And they chose to work with Cherry Rock Capital because we help them do just that. We co-invested in Co-Active alongside Emerson Collective. We joined Andreessen Horowitz and Bessemer Venture Partners on the cap table. With Vitable, we joined First Round Capital and Cities Impact Fund on the cap table.

So they were looking for a great set of investors and bringing Cherry Rock Capital in was really about helping them scale, which is what I did when I was the CEO of TaskRabbit. So the founders that we're looking for have found early product market fit. They've got a few million dollars in revenue and now they're looking for help like we bring over 60 years of operating experience to scale their businesses.

Let's talk about what LPs want to see as well, because there haven't been that many IPOs over the last couple years. What catalyst do you think the market needs in VC to really kind of catalyze the trough that we've been in?

Well, timing is everything. I think this is a great time to invest. When you look at the economic cycle for venture, the 2024 and 2025 vintage is a great vintage. So I think we have raised our $172 million at a great time. Our LPs also want us to create differentiation.

When we go out and we win deals, we come in at the best valuation we can come in because that really determines our exit and our returns. And so we're very disciplined in our diligence process, and they want to make sure that we are disciplined so that we can generate the best possible return for them.

Stacey Brown-Philpot, it's been great speaking with you, founder of Cherry Rock Capital, on the fundraise. Now, let's bring you some breaking news, because we understand that post-Tim Cook meeting with President Trump, Trump is currently saying that Apple will build plants in the United States and not in Mexico. He's saying that Apple is shifting his plants because of the tariffs that he's been imposing. And Trump is saying that we're going to have a lot of chip makers as well coming to the United States.

President Trump speaking after, of course, he met with Tim Cook yesterday. Apple currently still remaining up four-tenths of a percent. But there is a lot to navigate when it comes to the White House and doing business here in the United States for technology giants such as Apple and the like. Now, from New York and San Francisco, that does it for this edition of Bloomberg Technology. You do not want to forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify and iHeart. From New York, San Francisco, this is Bloomberg.

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