Arm Disappoints with Outlook, Vanguard Slashes Fees
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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, ARM shares are down after a conservative forecast. We get the CEO's take on the strength of smartphone and AI demand. Plus, Roblox shares slump after users and engagement slide. We dissect the worst sell-off since May. And the CEO of Vanguard joins to discuss the company's record fee cuts for dozens of mutual funds and ETS. But first, we look at these broader markets right now. We're wobbly

We're wobbling around gains and losses on the NASDAQ 100 more broadly. Muted, we're up just about a tenth of a percent. There are some big moves when you look underneath the hood. Nvidia on a points upside here. On the downside, we're a little bit anxious about Tesla. We'll get into that later. But move on to see what the individual moves are from an earnings perspective.

Qualcomm off by 4.8%, one of the biggest points drags to the downside. Look, they managed to beat in terms of earnings, they beat in terms of forecast, but the outlook for the smartphone market is where it dials into investor anxiety. Are we flatlining, only seeing flat to single digit growth there? That, of course, smartphone anxiety does feed in a little bit to arm holdings as well. Key chip designer out there, of course, down some 4%. Look, they too beat the

You beat the street on earnings and earnings for share basis. You look at revenue dialing up almost 20%. But again, it's a conservative forecast. And what this means not only for smartphones, but what it means for AI demand as well. We've got to get to it with Arms CEO, Rene Haas, who joins us now. And I put it to you, you've been...

everywhere at the moment. There's deals being done, of course, with SoftBank and OpenAI that we'll dig into. But what about this forecast and what it signals for your business? Is it just you being conservative as a newly public company?

Thanks, Caroline, and appreciate you having me on this morning. I don't know if I agree with the dialogue muted forecast. We beat our projections for Q3, and we actually raised guidance for Q4 and for the year. And we're looking at about $4 billion of annual revenue, which is about a 25% increase over the last year. So we're super happy with the trajectory of the business and super happy with the performance.

Maybe just investors are too exuberant. They're too exuberant around the fact that you've already said your compute platform is going to help OpenAI and SoftBank make good on their advanced enterprise AI. The optimism around your AI future as well as how integral you are to smartphones. So is it that? Are people too excited about the AI opportunity here?

You know, I'm going to try to decouple what the market is saying about our results and just talk about the results in general, of which we are, again, incredibly pleased by. We are seeing extremely strong demand for our products across the board. We had record royalties. We were up 23% year on year.

Our version 9 compute subsystems, which drive higher world tier rates, were just growing faster than the market, which is what we told investors when we went public back in analyst day a year and a half ago plus. So, yeah, we're not seeing any slowdown in demand, quite frankly, Caroline. In fact, we're seeing an acceleration in it, particularly driven by all things around artificial intelligence.

Renee, speaking of future growth, one of the things that Arm is also banking on is its high profile partnership in Stargate. And you're a big player in that. Could you kind of tell us what investors can expect this year to gain from that venture?

I can say broadly speaking, the way you think about Stargate is it's an infrastructure project unlike any other. $500 billion, $100 billion was spent initially, and these are to build out the world's largest AI data centers for training and inference.

We are the key technology partner around CPU. We're the only CPU technology partner that was named, which is terrific, obviously, for us. One can imagine going forward a lot of opportunity for technology innovation there. But in the near term, we'll be linked with the Grace Blackwell chip using the Grace CPU, which is ARM-based, and the Blackwell GPU, which is NVIDIA-based.

But these large frontier models are going to require, Jackie, a huge amount of power for training and inference. And we're just so excited about being involved in this. It's going to be fantastic. Well, at the same time, this project also kind of puts you in the middle of this US-China tech rivalry. You're at the front lines of it being the top supplier to American AI companies. And I'm curious if you think that perhaps tying your fortunes so closely to OpenAI is a risk.

I'm not sure I think about it quite that way. OpenAI is a fantastic partner. Arguably, they're the leader at the moment in terms of adoption of ChatGPT and their APIs and their enterprise suite. We work with everyone, though. We work very closely with Google. We work closely with Meta, AWS, all the partners. But we're very thrilled to be involved with OpenAI. They have phenomenal technology.

Renee, we're going to lean into that China-US story. Deep-seek, extraordinary, the push and pull it has in the narratives. Can you explain as to whether you think we are going to need as much compute as we all foresaw before? Oh, I think unquestionably, Caroline. And in fact, I think even more than we probably have been thought about. So why is that?

Well, if you look at what DeepSeq has done, which is an amazing, by the way, piece of work, they've done what's called distillation. And distillation is building on top of an existing frontier model, which takes lots of power and lots of compute to generate. If you think about GPT-4, which was hundreds of megawatts, GPT-5, 6, 7, these are in the gigawatts. So even though you may have models that can distill or build upon the frontier models, the

the Frontier models still need a lot of power. And then with that, that drives a huge demand for inference, which is really where the larger use loads are. And more efficient inference means you can drive AI to much smaller devices, to smartphones, earbuds, devices that don't have a lot of capability for power.

It's great for ARM because that's where we are today, it's where we exist, and now you can run those AI workloads on the CPU. So I think actually what DeepSeq proves is that we're just going to see an even more accelerant towards compute. Well, on that front, you have a significant business in China. Are you concerned at all about perhaps how the slowing smartphone business might affect ARM's future growth?

It's a great question. And, you know, again, what we've seen in smartphones, which are at single digits type of growth, we're in the double digits growth in terms of royalties, in some cases 20% growth. And why is that? We're putting more technology into these phones. Our version 9, our compute subsystems drive higher royalty rates.

So we're just growing faster than the market and particularly in the premium segment, which requires more and more compute. So while the units have been slowed in some areas, it actually hasn't impacted us very much. Just look at our record royalties to have this kind of number in a market where people think things are slowing down. Just phenomenal. Record royalties, upside in licensing. I would just want to get to the litigation, if I may, Renee, and briefly, perhaps it hasn't gone in the way that you thought with Qualcomm. What does it mean for the future earnings?

Really, there's no impact on future earnings, Caroline. The trial was a mistrial on one of the verdicts, so the dispute is still open. But to your question in terms of future forecast, yeah, no impact whatsoever. Renee Ha, CEO of Arm. Thank you for joining us. Coming up, more with tech earnings with Ayako Yoshioka from Wealth Enhanced. My group, Caroline.

Let's have a quick check on some other earnings that we've had on deck. Peloton is one of them. Look, I'm afraid revenue is down, but profitability is better. A new management team managed to lift the optimism around this name. We're at 14% higher, but it's only trading at $8.68. From New York and San Francisco, this is Bloomberg Technology.

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Back to earnings with Roblox out this morning and reporting daily active users for the fourth quarter that fell short of estimates. Let's bring in Bloomberg's Cecilia D'Anastasio to break down the numbers. Cecilia, break it down for us. What went wrong here that ultimately spooked investors?

After many quarters of growth in daily active users, Roblox unfortunately reported a disappointing decline in how many people are accessing the platform in the last quarter. And in an earnings call today, Roblox's chief financial officer partially attributed that decline to Roblox's ban in Turkey over concerns over child safety.

And what's interesting is child safety affecting Turkey, of course, the key country here. But it wasn't long ago that Hindenburg Research accused Roblox of also inflating user numbers and time played. Is there any hint at that read across in these numbers, Cecilia?

Lots of analysts have cast doubt on those allegations against Roblox's user number inflation. Unfortunately, I don't have anything original to report on that currently. But Roblox's growth has been pretty consistent for a long time. People are very disappointed by these results. Cecilia, what's competition looking like in this space?

Sure. So right now, growth in the games industry broadly is very challenged. The cost of developing AAA games, your Spider-Mans, your Overwatches, is skyrocketing. And at the same time, a lot of investors are seeing potential in user-generated games, like the ones that people create on Roblox. These games are often created by amateurs or by very small teams using tools that the companies themselves provide. Epic Games, which makes Fortnite, has its own platform along these lines as well.

And some of them get sold for an awful lot of money. Cecilia D'Anastasio, it's great to have you. Thank you for running us through Roblox. Let's get more earnings takeaways with Ayoko Yoshioka, who's with us, portfolio manager at the Wealth Enhancement Group. And there's been so much to digest. One theme that seems to be running through is AI anxiety and smartphone anxiety. And I just want to bring up with what we're seeing with Qualcomm and Arm today and a worry about smartphones flatlining and what that means for some of these chip providers.

What do you make of it, Ayako? I know you don't hold Qualcomm on your arm, but what would you make about the read-across? Sure. So, hi, Caroline. You know, in terms of

the overall AI environment. I think we're focused on both the short term and the long term, right? In the short term for companies like Qualcomm, you know, they're really impacted by the handset slowdown. However, you know, I think if you look out longer term and where they're going to play is really in that, you know, inference side or, you know, where the chips will be able to be in smaller devices as the Arm CEO talked about.

and things like new form factors with like met as Ray-Ban glasses. These are going to be where Qualcomm might have additional exposure to, which would be a positive for Qualcomm. It's interesting. The best points contributor on the day is Nvidia. And there's a note out of JP Morgan saying, actually,

Like these deep-seek moves, this less compute necessary is actually going to win out for them from an inference perspective. So where have you come out on this whole divide as to whether companies should be spending a lot on AI infrastructure? So I think the arms race is on and that most companies are going to spend in order to make sure that they have all the

all the primary models set, all the frontier models that Arm talked about. And then it's going to be how best to access, you know, all the efficiencies that DeepSeek brought are going to be, you know, explored by many companies. And so I think there's a lot of ways to play AI. And, you know, we're still trying to figure out what the landscape is really going to look like

And it's accelerating. It's just moving so quickly. You know, every month there's something new. On the cloud computing front, we've already seen some mixed numbers coming from the hyperscalers, Alphabet, Microsoft. What are you expecting when Amazon reports later today?

Sure. So I think everybody's focused, again, on what the CapEx guide might be, any sort of color commentary on CapEx. You know, everybody's looking at that CapEx trajectory to see, you know, is everybody getting that return on that spend? But, you know, I think the demand for cloud computing continues to increase. And so it makes sense from a long-term perspective for many of these hyperscalers to continue to spend on increasing capacity in the cloud.

Speaking of demand, one of the things that always surprised me about Alphabet's cloud unit is that it had a good chunk of business coming from smaller, more nimble AI startups. And with some of the numbers that it put out, I'm curious if you are thinking if that kind of demand, if that vector of growth has kind of run its course.

I don't think so. I think AI is still so relatively new that I think there's going to be new innovative players that are going to want to access that AI platform through Google or through Microsoft or AWS. I think there's going to be different companies that explore different platforms just to see what's best for them. What's so interesting is Amazon...

has been making its own chips. And so too, Alphabet actually, even though its shares fell on its earnings, Broadcom soared because of the capex spending and what it means for chip makers for some of these cloud computing companies. What do you make of how they're getting into the vertically AI focus?

In terms of the overall spend, I think it's just going to continue. That spend going to a lot of these companies

chip makers. So whether it's Nvidia or Broadcom, eventually it will come to Qualcomm as well. But I think it's going to continue. There's so many ways to access AI and build it out. I think it's going to continue to develop over the long term.

The thing that everyone's trying to wrestle with is the valuations. So with all this optimism, arm trades at 100 times future earnings. Maybe that's why it pulls back from the day on what the market says is slightly muted forecasts. What do you make of the valuation levels since the sell-off from DeepSeek on Nvidia, for example? Well, and I

Well, and I think that's why Qualcomm's valuation is pretty interesting here. You know, it's still in the, you know, mid-teens, low double digits. And, you know, I think that if you look out far enough, you'll see that there's potentially, you know, a lot more growth coming for Qualcomm in the future.

However, you have to look at the valuations both in the near term. NVIDIA does trade at high valuations as well. But again, if the build-out continues, if you're really going to need to continue to spend so much, both Broadcom and NVIDIA, probably the earnings are going to grow and catch up with the multiple. Ayako Yoshioka from the Wealth Enhancement Group, thank you for joining us.

Elon Musk, who of course leads President Trump's government cost-cutting efforts, will determine himself if there are conflicts of interest between his work reviewing federal spending and his overlapping empire of six companies. It's all according to the White House. Let's bring in Bloomberg News' reporter and co-host of the Elon Inc. podcast, Max Chafkin. So he's going to be his own policeman.

He's going to be his own policeman. And, you know, while this is news, because we've been wondering all along, what is the plan here? I mean, Musk has six companies. He is somebody who is his empire is rife with conflicts of interest. So it was kind of interesting to see how the White House is going to handle this. And we're learning basically they're not going to handle it. They're going to let Elon take

use his judgment, which I think was the plan all along. And I think even listening to things that President Trump said when he was on the campaign trail made clear that part of the point here is the fact that Elon Musk has these conflicts of interest. You know, Trump talked all about Mars, that that is a thing that would necessarily involve some of Elon Musk's companies. So yeah, we're sort of learning something that I think was pretty clear, but we didn't know for sure.

Max, I want to talk about the tech because Elon Musk has said that he wants to use AI to find cost savings and he's already mining for Medicare and Medicaid data in search of fraud and abuse. Do we know if this is something he could use his own company, XAI, to do?

We don't know what software they're using. It would not surprise me at all if he was using some modified version of Grok or some software that he has developed or is somehow associated with another one of his companies. Musk has done this all the time. We've seen SpaceX engineers shuttled into Twitter. We're seeing people from his

business empire now attached in various ways to this Doge effort. So yes, and of course that raises interesting questions. Where is this data being stored? Are they taking the proper precautions? We've definitely seen critics, including government employees as well as some of their unions, raise questions about this, saying basically, is Elon Musk taking enough care of our private data?

I wonder if investors are wondering whether they're taking enough care of his fiduciary responsibility to Tesla. It's currently down almost 10% on the beginning of the year. We're trading the lowest since December.

And meanwhile, you've got BYD in China announcing that it's getting into autonomous vehicles potentially and Tesla takes another hit. Well, so you have two things that are definitely true. One is that Elon Musk for sure is distracted. I mean, you know, I understand that he has like an endless amount of attention span. He's able to be very good at video games while running six companies. But if you look,

He has spent a ton of time in Washington. He's essentially been parked there in recent weeks. He's tweeting all day and all night about Doge. That said, so in that sense, you might say, wow, he's really distracted. He's taking his eye off the ball. On the other hand, there are clear ways that his companies can benefit from this partnership. And I think most investors understand that. And if you turn back the clock on that stock chart to the beginning of November,

you'll see that the stock is still way up. So I think, yeah, some of the enthusiasm, some of the sense that, oh my God, this Trump trade is like a home run has worn off, although there are definitely still people who see this as beneficial to Musk and his companies.

That's Bloomberg's Matt Chafkin. Thanks for joining us. Now, today's Tech In-Depth newsletter takes a look at two different approaches in Silicon Valley on defense and war in Europe. Bloomberg's Mark Bergen has more. Mark, how are these conversations different in defense tech between the U.S. and Europe?

Yeah, I mean, I was sort of jumping off. We saw a really interesting hire this week from Andreessen, their American Dynamism Fund, which is their tech defense fund. They hired Daniel Penny, who's perhaps most famous as he was involved in that choking incident in the subway. He was cleared of homicide, but kind of became this cause celebre and

As far as I know, he's a Marine veteran, didn't have a track record as an investor, but clearly something that we saw Vice President JD Vance tweet about his excitement about this hire. It's a signal for that firm, which has been kind of really leading the vanguard of the Name the Fund American dynamism, that they're leaning in on this new era

of reforming the Pentagon, this proximity between the Pentagon and Silicon Valley. And in many ways, this is something that's very different than what's operated in the past where the Silicon Valley and venture capitalists didn't really think about global borders.

It's interesting, David, I interviewed a few weeks ago, Catherine Boyle also leading that over at A16Z, and they have been leaning into defense side, Anduril, for example. They're looking at nuclear security. What's interesting, though, is last time I saw her, A16Z was pulling out of London and its office space there. So what does that mean in terms of looking at bringing this across the Atlantic?

Yeah, so I mean, to be clear, they shut down their office, their first and only outside the U.S. That was a crypto investing arm. They still are making some investments in Europe. They have a big position in Mistral, the French AI company. As far as I know, though, they haven't made any investments on the defense side here, where you've seen others like General Catalyst, even Sequoia, we've reported, has been looking. General Catalyst has been fairly aggressive in defense in Europe.

I mean, it's really interesting where Europe is in the middle of this war with Russia. You go to these events in Europe, you hear constantly about Russia and the need to defend itself. And then you have events in the U.S. and I think the focus has been shifted to China and Taiwan.

And meanwhile, Palantir's own sales internationally were lower in weakness in Europe. Mark Bergen, it's great to have you. Go read his tech in-depth newsletter. It's, of course, from Bloomberg's journalists around the world. You can subscribe at Bloomberg.com slash newsletters.

Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York. Now, Vanguard has slashed the fees for dozens of its mutual funds and ETFs this week in a record move that sent a shockwave through the asset management industry. The reduction is the largest Vanguard has ever undertaken. For more now on the impact on BlackRock, on Invesco, Bloomberg's Katie Greifeld is standing by for more. Katie.

We welcome now our TV and radio audiences worldwide. I'm pleased to say we're joined by Vanguard CEO Salim Ramji in an exclusive conversation. Salim, great to have you with us. So we all saw the ripple effects. Great to be here, Katie. Thank you. We saw the ripple effects from Monday's move, and your average fee now is just seven basis points across your lineup. The industry average for Context, 44 basis points. Set the scene for us. Why now?

Well, you know, in one sense, I will say Monday was a pretty joyous day here at Vanguard. And it was joyous because it really is a reaffirmation of our business model. We're owned by our clients.

And so as a result, as we gain scale economies here at the company, we share those back with our clients. And that's not just been true since Monday. It's been true since 1975, since when we founded the company. And so this was continuing on a 2,000 price cuts, I think, by our tally as of last week. Now it's 2,168 price cuts.

And that's been part of the proposition that investors have had with Vanguard for decades. And so, Saleem, I think I'm asking on part of your competitors, but also investors as well, when I ask, how low can fees go? You're at seven basis points right now. Where is the possible floor here?

Well, you know, we don't price products as loss leaders. We're not looking to price abnormally low in order to get somebody into a higher cost other service. And so we really look at it across the board in terms of our scale economies. We want to deliver great quality and great performance.

And I think that the thing that sometimes gets lost in the mix, obviously index prices have been coming down for quite some time, led by us over the past several decades. But sometimes it gets confused that we're all about index. We're actually about active and index. And really, if you go back to our origins, what Bogle was against was high fees.

And so active management at a low fee can really outperform over the long term if delivered with the right quality. That was Bogle's hypothesis in the 70s and 80s. And if you look at our track record, even just in something like active fixed income,

the empirical evidence backs up that hypothesis that he had way back then. 91% of our active fixed income outperforms its peers over the past 10 years. And one of the reasons why is because we price it at just over 10 basis points. And so at a very low fee. And when you speak to our fixed income team, to Sarah Devereaux, our CIO, and our teams who run our active fixed income,

Part of the reason they're able to outperform is they have a much lower headwind from higher fees and so they're able to take risks in a much better and more disciplined way. And so what this is really about is not just about delivering high quality index management,

But it's really about delivering high-quality investment management at a very low fee. And I think whether you're looking at active fixed income or whether you're looking at index fixed income or index equities, that's really what we've been about. Right. Well, Salim, you make the point that a lot of people probably think of Vanguard and they don't think of active.

and you do have, of course, active funds out there, but it's a pretty small percentage of your overall lineup, especially if you take a look at the ETF side of things. Should we expect to see more active fund launches from you?

Yeah, you know, our active management, the first Vanguard funds were actually active funds. If you go back to the 70s and both, we manage our active fixed income within Vanguard. We have a whole range of partners, sub-advisors that we work with for our fundamental active equities. And they're unified by the principle of being high quality at a low price.

And yeah, Katie, you already have seen us doing a lot more in active ETFs. And I think you've seen that pick up over the past several months. And I hope and expect that that will continue over the next, you know, this year and next year. All right. So we'll keep an eye out.

for that. You were talking a little bit about, of course, how the ownership structure works at Vanguard, how basically all the, a lot of the extra cash, the extra assets that you generate are funneled towards these fee cuts. But I'm curious from where you sit, how do you balance lowering fees versus investing in the business? What does that decision tree look like?

Yeah, it's something we do very carefully here. And this week is all about our fee cuts and giving back to our clients in the form of lower fees. We've also stepped up our investments in things like technology. That's something that really began about two, three years ago and is continuing this year and next year. Because we're always trying to balance making sure that we've got high quality products at a low cost

and we're delivering the right level of service to clients. We're investing in newer technologies to make our investing even more efficient, to make our client interfaces even more efficient. So that's always a balancing act here at Vanguard, just like it is at many companies in terms of how do we think for the near term

and how do we think for the medium to longer term. But I'd say one of the beauties of Vanguard, I think part of the original genius of Vanguard, is that when we've got a surplus after we've looked at the important investments we need to make back in things like technology,

the way we give back to our owners is through lower fees. And I think that's the vanguard effect that you've been seeing for decades all across the company. Yeah, that vanguard effect, obviously a good news story for your investors, maybe not for your competitors, but I do want to talk about the future and I want to talk specifically about private markets and alts. One of the

big take stories that we have on the terminal right now is about PIMCO and fears that PIMCO might be falling behind in alts because you take a look at the industry right now and a lot of your peers have invested heavily in alts, in privates to scale up there. What is your plan when it comes to those areas? And do you fear that you're a little bit behind right now?

Well, one of the, again, one of the great benefits of our business model, if you go back to the origin, we had sub-advisors. You know, for example, at our beginning, we were, we are and are still sub-advised by Wellington Management, which is still our largest sub-advisor today. And so where we don't have capabilities within kind of Vanguard, we're

we've long had an ability to partner with other firms. To date, we've generally done that in fundamental active equities, but we can do it in things like private markets. And there's lots of discussions and explorations we have underway to see what's possible.

But our North Star is always about what's right for our clients. And it's making sure that whatever it is we do inactive, in index, ourselves or with others, that we keep in mind that we're about simplicity, we're about low cost and we're about long term returns. And I think that there are constructs that will allow private markets to fit in that.

But that's really part of the exploration that we're doing, because whatever it is we do, we want to do it the Vanguard way. And we want to do it in a way that's well suited to our client base, which is really looking to us for a certain set of things that we've consistently delivered over the years. All right, Salim, got to leave it there. Really appreciate you taking the time. That is Vanguard CEO Salim Ramji. Back to you.

Katie, we get a quick check on these markets. Great interview. Let's dig into what's happening in technology right now because Nasdaq just clinging on to gains only by about a tenth of a percent. On the higher side, Nvidia powers us up from a points perspective as maybe JP Morgan weighs in and says, hey, maybe these open source deep seek models aren't as bad as we thought. But you move on to what's happening on the downside.

And Qualcomm, a key significant drawdown in a points perspective. We're off almost 5%. This is the worst day since November the 20th for the stock. Even as they managed to beat expectations when they come for their earnings in revenue and in earnings per share, revenue up some 18%. But we're worried about the future of the smartphone market to which Qualcomm, of course, is so exposed. Skyworks also on the downside after we see its...

issues around iPhone representing 85% of its business more broadly and they're having to reduce the content loss that they're seeing at the moment. iPhone content loss for Skyworks, roughly 24%. Jackie. Coming up, as demand for China's deep-seek and other open source AI models skyrocket, national security concerns emerge. We speak to Ben Harburg of Core Values Alpha. 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.

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The rise of AI chatbots and what they can bring to productivity is spurring enthusiasm across global industries. Bloomberg spoke with Reid Hoffman of Greylock Partners. Here's what he had to say about utilizing AI in the workforce.

I actually think programming jobs aren't going out the door. I think there's human amplification, but I think it's also human amplification of EQ as well. So the fact that you have a, for example, say a medical assistant that can help you with something or a coach that might be able to talk to something doesn't mean you don't want a human coach.

It's more coaches, the better.

Overseer, Greater China Growth ETF. So we're here for all of your expertise. And ultimately, was DeepSeek a Sputnik moment? I think it was. I think it challenged this hubris and this impenetrability of American AI leadership. And the scary thing was we already saw the Chinese kind of taking global market share when it came to...

all the kind of next generation technologies, be it electric vehicles, drones, solar panels. And this was really the last holdout. And so with that bubble being pierced, I think we need to now put our foot on the gas and re-examine our own capabilities and how do we continue to lead in that market.

Ben, what's the starting point here? What should companies be focused on in the wake of DeepSeek? We're hearing a lot of talk about expanding infrastructure. You saw OpenAI unveil new models just a couple days after the news hit. What should be the focus for AI startups in the U.S.?

I think a space race is great for competition and it's great for American innovation. And so I hope we don't take this as a slight and instead use it as a motivator. Obviously, AI is a discipline that requires a huge interdisciplinary kind of collaboration across energy, talent, technology, regulatory availability.

availability and the open source nature of models. And so my view is that this has to be a whole country effort. We should be looking at this more as a Manhattan Project 2.0, where we bring all those factors to bear. And I think the new Trump administration is really looking hard, particularly at the regulatory front. How do we stimulate that and support on the energy front? You heard this $100 billion number coming out of OpenAI,

and others. So I think we need to bring all those together and to put our foot on the gas. You were pretty heavily involved in the Trump campaign. Are they asking you for advice? I've done my best. So I certainly believe that in the current environment, we need to put our foot on the gas when it comes to extending American technology leadership. And that is an interdisciplinary process that requires that we bring together immigration, energy, rethinking education,

of course permitting and regulatory reform and subsidies and technology. And so we have to bring all these things to bear. And so my advice to them has to be kind of draw down these walls of bureaucracy and siloed different departments and instead kind of get interdisciplinary interagency working groups together. We don't just need a czar for AI and crypto. We need czars for shipbuilding, drones, hypersonic missiles, et cetera. What's so interesting about the Greater China Growth ETF?

The tagline, if you go on to have a look, is accessing China alpha without compromising American national security or American values. How do you invest in a BYD when suddenly news of potentially BYD having autonomous vehicles sends Tesla shares down and the biggest points drag on the day?

Yeah, so our strapline from a year and a half ago, which I think we preempted the market a bit, was America first equities investing. We know people still wanted to access China, and we knew one of the things that was scaring them away from China was a fear that they would be investing in companies that might show up on a blacklist or a graylist. We also identified their biggest competitor, K-Web, was CCP-owned. So it's owned by CICC, which is an SOE asset manager of the Chinese government. And so we first determined that we could be an American-owned entity, and so we wouldn't have any influence from the Chinese government. Second, we'd filter our equities.

by looking at what was coming out of Congress, what was coming out of Treasury and Commerce in terms of entities lists, gray lists. And then we would even go a step further and bring in former government officials to kind of vet these names and ensure that they weren't compromising American national security or values. So working with the PLA, working with organizations that were involved in slave labor or some other form of anti-American values.

Ben, let's stick with your point about access to China. Do you expect this administration to take a tougher stance on curtailing VC's ability to invest in Chinese companies? I think it will. So they call that the Overseas Investment Program, the OIP, coming out of Treasury.

I think that that program needs to be expanded and be made more concrete. Over the Biden administration, it was more of a reporting mechanism, certainly something that dissuaded a lot of capital but didn't specifically restrict it. I do believe that American money should be used to develop American innovation. And so to the extent that we can keep money at home and use it to build the next generation of open AIs, the next generation of

electric vehicles and drone companies of next-generation military defense that's that's a critical use of that capital so i hope to see that program made more concrete and expanded uh... at the same time i think i and i think they're going to be uh... in better kind of collaboration when it comes to just day-to-day business dynamics uh... because there's a lot of the intractable issues and fears that were uh... kind of getting in the way in wedging during the the the the but last administration are no longer there this is much more dollars and cents conversation

Well, sticking with policy here, immigration and H-1B visas are also a bit up in the air as it relates to AI. AI depends a lot on those two things to be able to fuel its pipeline of talent. A lot of this talent is coming from outside the U.S. Do you think that the administration's position could actually undercut our efforts to stay in the lead in AI?

There's clearly a bit of a split here and we saw that battle a few weeks ago that really played out over Twitter and the president I think reaffirmed his commitment to the H1B1 program. I think we need to look at that as a stop gap. Clearly one of America's greatest advantages is that we attracted the world's best minds to our shores through our university system.

education as a whole in america needs to be reformed we need to look at maybe for instance the german model of trade schools whole shul is gymnasiums worry split kids off much earlier and send them to uh... trade schools where they can learn a lot of those tooling and and mechanic type roles that can be brought to bear in these next generation technologies be a defense american kind of smart manufacturing center and so

I think we need to look deeply at education as a whole and not just rely on foreign talent as a stopgap, but think about how we start training American-born citizens for next-generation technology-enabled roles. What's interesting is when you were

saying you foresaw almost this America first idea of investing in China. You understood what was potentially going to end up on a gray list or a blacklist. But you love Tencent and Tencent was put on a blacklist. Do sometimes we throw babies out with bathwater when we're looking at what is really a Chinese military challenge?

to the United States? There are certainly companies that have dual use technologies and that have very broad array of different disciplines. So for instance, Alibaba, while it's known as an e-commerce player, also has their own cloud business that bumps up against the likes of Amazon. Tencent has cloud. Some of them have geospatial and other kind of forms of engineering. And so this is a constantly evolving process. And that's exactly why we think you need an

management because you can't sit on an index and just trade these equities so we've got to be able to move in and out of them as we see things coming out of DOD, Congress, etc. Natis, you might have been exposed if de minimis was something you'd been depending on for some of these e-commerce players in China.

Are we likely to see barriers put up to Chinese trade ever more, but even just me as a consumer trying to access cheaper goods? Well, I think the de minimis kind of tax loophole was something that needed to be closed. She and obviously Timu and others are really putting a lot of American companies out of business or eating their market share, be it Amazon or the likes of the dollar in general. I think Amazon's doing okay, though.

right? They're doing fine, but even some of these smaller offline stores, I think, are having some of that market share now eaten by the likes of Timu, and they're building their own fulfilled by Amazon model. So definitely we want to favor or have a level playing field. And so this affects Amazon as well. I think a lot of the impact that was already baked in, the actual numbers coming out of Timu aren't necessarily included in PDD's kind of projections, I think. And so our view is that PDD is still a strong name, even in spite of these new de minimis regulations.

That's Ben Harburg of Core Values Alpha. Thanks for joining us. Looking ahead to after the closing bell today, Amazon is slated to report its earnings and is expected to report that revenue grew 10% in the fourth quarter. Bloomberg's Ryan Westelica joins us now for more. Ryan, AWS is the cloud computing titan. What are investors expecting to see from that unit today?

Hey, thanks for having me. I think people are expecting a pretty strong quarter, but it does come in the wake of disappointments from both Microsoft and Alphabet, which are number two and three in the sector. So certainly a little bit of a more cautious lead up going into these results. It's interesting that they're likely to have committed more than $70 billion in capex for this year and even more going forward. Are we comfortable with the amount they're spending on AI build-outs?

Well, we've seen so many other companies come out and really lift their targets. Alphabet earlier in the week, Meta not too long ago, Microsoft. These are all the major cloud hyperscalers. And it wouldn't be surprising to see Amazon do a similar kind of boost, although some of these were like 50% more than people were expecting. Whether we see something like that, I think would be pretty shocking, but it wouldn't be surprising to see them bring up their capex at least somewhat. We were just talking to Ben Harburg about

de minimis and the impact on Chinese competition for Amazon from an e-commerce perspective. Briefly, Ryan, will we hear about how it will impact the business, the duties on Chinese rivals?

I'm very curious to see that. So far, we haven't seen too much reaction in the stock to the idea of a trade war or tariffs against China or something like that. But certainly to the extent that we see less competition from these lower-priced rivals, that's certainly a good thing for Amazon and its e-commerce market share, where it is, of course, still a major player here in the States. Bloomberg's Ryan Vlastelica, great to have you on. Thank you. Thank you. Now, 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. And tune in to the earnings after the bell. Amazon across the deck. This is Bloomberg Technology.

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