Anticipating More Trump Tariffs, DOGE's Tesla Impact
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Live from New York, I'm Caroline Hyde and this is Bloomberg Technology. Coming up, the Nasdaq whipsawing ahead of President Trump's tariffs this week. We'll discuss the global tech impact. Plus, Elon Musk admits his role with Doge is taxing him and impacting his job as CEO of Tesla. And SpaceX and a crew of four passengers are set to embark on a journey around Earth's poles. It's the first time humans have flown such a mission.

But first, a check-in on these markets, which are under pressure once again. In sell-off mode, as you'll see, we're off by 1.6% off of our lows for the day on the NASDAQ 100. From a points perspective, though, it is the Magnificent Seven that drag us the most. Apple is one name in the green, but otherwise, it's Nvidia, Microsoft, Amazon, Tesla, as well as Meta and Alphabet. Drill into the individual moves that push us a little bit lower, and we've got to shine a light on what's happening with Tesla once again. Analysts really...

shining a light on the fact that this is politically entwined in many ways. The consumer reaction to one Elon Musk were off by 5.5%. Again, they had outperformed when we first got those hints of auto tariffs and how EVs, in particular Tesla, might be hurt less than competitors. But once again today, in risk of sentiment, it's off by 5.5%. And actually, here's Elon Musk over the weekend speaking at a town hall in Wisconsin about the Doge impact on Tesla's share price.

It's costing me a lot to be in this job. What they're trying to do is put massive pressure on me and Tesla, I guess, to, you know, I don't know, stop doing this. But, you know, my Tesla stock and the stock of everyone who holds Tesla has gone, went roughly in half. I mean, it's a big deal. Let's get your analysis. Bloomberg's Max Chafkin joins us now, host of Elon Inc. podcast and just intertwined with his movements.

And it was interesting that at a political rally, he's admitting some of the knock-on effects here. Yeah, I mean, well, it's been pretty dramatic. We've seen these huge drops in sales in Europe, where, of course, Elon Musk has also been stirring the pot politically, to say the least. And we've seen sales declines going on for some time now. And those declines are colliding with a business that also has all these other struggles. So you throw

Elon Musk's kind of controversial branding, these kind of provocations that he's been doing almost on the daily with actual struggles with the business, as well as all the uncertainty around tariffs and the economy in general. And it's really like a perfect storm. It's a bunch of things that are all kind of working together to hurt what had been just a company that had been soaring even a couple months ago.

Soaring on vibes, many would say, often this stock is not related to fundamentals of the business. Even when earnings disappoint, sales disappoint, we've actually seen sales shares push higher.

Can he restore vibes or do we start to look at the fundamental issues of the business? Well, that's the thing. I mean, the vibes were based on this idea that Elon Musk is this kind of amazing business superhero. He can do things that nobody else can do. And so much of that brand was built on Elon Musk as an innovator.

as somebody who invents new products, particularly new products that are involved with alternative energy and that kind of flatter the sensibilities of a certain kind of consumer. Now, what we've seen over the last couple of years and in a much more intense way over the past couple of months is just Elon Musk subverting that brand, taking that brand and essentially throwing it out the window and presenting a new brand, which is Elon Musk

as a cost cutter, as this vehicle of trolling austerity. It is very, very different from the story that he had been telling before. And I think that is going to make it harder to right the ship.

But does that give a new source of demand? For those that loathe the new version, many love it. Many like the fact that there's a rebalancing and austerity, that perhaps there's a new source of buyer who wants to get out there in Tesla who hadn't automatically looked at it from an EV environmental perspective. Well, this is something we've heard from some people who have defended some of these moves, as well.

as if you kind of squint, you could see, well, he's trying to sell pickup trucks, so maybe it makes sense to signal more to the right. What we've seen from Elon Musk, I'd say, goes way beyond signaling to the right. I mean, he's saying things that are racially tinged. He's making gestures that to many people look like he's saluting Hitler at a Trump rally.

These are not things that even Republicans, even a lot of Trump supporters are not necessarily going to be comfortable with these moves. So I think that's one issue. The other issue is the Cybertruck has just not performed as a pickup. It is not competing well with the likes of the Ford F-150. I think sales have really disappointed. It's become a great way to signal your support of Donald Trump, not necessarily winning fans in the kind of truck driving class.

Always great to catch up with Max Trafkin. Go listen to all things Elon Inc. as well. Meanwhile, let's stick with Elon Musk. His artificial intelligence startup, XAI, well, it's just purchased the social media platform X in an all-stock deal that values the combined businesses at $100 billion. For more, let's bring in Kurt Wagner, Elon Musk's very busy man, and one of his startups buying another one. And there's a big, well, buoying for the X shareholders, equity or debt in many ways.

I think so. I think they're the biggest winners in this whole thing, right? I mean, because you think about what happened over the last two and a half years since Elon walked in the Twitter offices with that sync, right? There's been a ton of uncertainty. We've seen advertisers flee. We've seen users flee. We've seen the value of that company by some extent.

measures basically cut in half if not more and so if you are an ex-investor today a week ago you were owning shares in this very struggling social networking business with a small advertising arm now you own shares in an ai startup that's worth you know double the price and and growing and so i think this is a big win for them more so than than pretty much anybody else there was

initial analyst reactions saying this makes sense wolf research for example immediately putting out feeling that the combination makes strategic sense but many also questioning why they needed to do it at all already grok was deeply infused with in x why do they need to make the tie up and other more questions than answers in many ways yeah i mean this is my biggest question here is that

On paper, yes, this makes sense, right? An AI company buying a social network like X, getting exclusive access to that proprietary data, getting the distribution of a grok to millions of people via X, right? Like all those things make sense on paper.

But the difference here is that Elon already owns both companies, right? So there was no fear that X was going to go out and strike some exclusive deal with a competitor. You know, they were already using X's data to train Grok and work on their AI models. So, like, they had the relationship there.

sort of already. And so that's why I don't really understand why they needed to spend, you know, $33 billion or $45 billion, including debt, to buy this company that they pretty much had all of what they needed from it already.

A key question mark for me as well, Kurt, not only who leads X going forward and what Linda Yaccarino's future looks like, but is how he got an $80 billion valuation on XAI. There was no new funding here. It seems to be a number that was kind of plucked out of the air.

Exactly. And so the last time XAI had a funding round was in November. I believe it was valued right around $50 billion at that time. There's been no new raise for XAI since then until this deal. And suddenly XAI is worth $80 billion, right? And so this is what happens, Caroline, when you have

two privately held companies, they're owned by the same person, they're represented by the same bank, right? Like he is able to essentially, you know, make up these valuations and say, you know, I think X is worth this. And that means that XAI is now worth that. And voila, that's done, right? As long as shareholders are not, you know, essentially revolting at these decisions, I think

Elon has a lot of sort of latitude here to, you know, value these things where he wants them to be valued. Number go up. Kurt Wagner, thanks so much for joining us. Coming up, preparing for Trump's reciprocal tariffs. More on the global tariff impact on the tech sector. That's next. This is Bloomberg Technology.

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where money means more. Markets, they are in sell-off mode ahead of President Trump's reciprocal tariffs set to begin this Wednesday. Now, this, of course, is he says he's prepared to enact secondary tariffs on buyers of Russian oil if Putin refuses a ceasefire, as with Ukraine. For more, Bloomberg's Kayleigh Lyons joins us with a macro focus, and we want to whittle it a bit more down to technology. But Kayleigh, there's a lot of angst, quite evidently so today.

Yeah, a lot of angst because there's a lot of uncertainty, Caroline. Frankly, at this point, two days ahead of this so-called Liberation Day announcement the president is planning to make, there is a real lack of clarity as to what exactly these reciprocal tariffs are going to look like, what the rates will be, who it will be placed on, and whether

or not there will be any exemptions and what it will take to get those exemptions. The president over the weekend told reporters that this will initially start out with all countries. That does throw a little bit of cold water on the idea that he may have made some exceptions right from the jump, that he also is suggesting that it's not so much about

10 or 15 countries. He said he hadn't heard that rumor, even though that is actually something that was floated by his very own Treasury Secretary Scott Besson, who suggested there is a dirty 15. And according to Bloomberg Economics analysts analysis of what those 15 countries actually are, nine of them that have the largest trade deficits with the U.S.

are in Asia. A lot of components like semiconductors, for example, could be impacted. And that is just keeping in mind that whatever reciprocal levies are put on, there is always the chance that even more tariffs are layered on top of that. The president has floated semiconductor specific tariffs at some point in the future, as well as on things

like pharmaceuticals. It's just unclear what exactly that timeline will be and how all of these work in conjunction as he's also talking about, as you mentioned, Caroline, secondary tariffs on purchasers of Russian oil. If he doesn't like the way Vladimir Putin is conducting ceasefire negotiations.

between the US and, of course, Ukraine. And the big buyers of Russian oil, at least right now, are China and India, both of which, of course, in China's case, already have tariffs in place. And India could be very threatened given the high levies it has on US imports with higher reciprocal tariff rates as well. Kayleigh, you point us towards the semiconductor effect. We've also got to take into account the deadline that comes at the end of this week around TikTok as well. That too embroiled in this geopolitics right now.

Yeah, it absolutely is. When the president was asked about this last week, Caroline, the deadline coming up, he actually suggested that if China and the Chinese Communist Party would agree to acquiesce to a sale of TikTok's U.S. operations, that that actually could result potentially in a lower tariff rate, suggesting once again he sees trade policy as a mechanism for negotiating really unrelated things. And he also said that if that can't be done by Saturday, which of course is the deadline, April 5th, that he could always

just extended as we saw him do at the very beginning of his term extending it 75 days which is why the deadline is this weekend rather than being back in January but as for the actual details of what a deal could look like who that ultimate purchaser could be and how much control they have over not just the operations but the algorithm specifically very much remains in question we only have a few days to go here Caroline. Katie Lyons bringing us up to speed thank you so much meanwhile we've just had some breaking news as you can see across your screens

More ECB, European Central Bank officials, appear ready to accept an April rate pause.

ending the cutting cycle that we have currently seen. It's partly to do with the fears around the fallout from tariffs, the inflationary effects. Let's just go more deeply into the global tariff impact right now. Ben Harburg is with us, Novo Capital Managing Partner and Core Values Alpha Portfolio Manager. Novo Capital, look, it's a private fund managing over more than 2 billion assets and under management. Your core values, that brings particular exposure to Chinese companies. You're the perfect voice, Ben.

Are you struggling with a lack of clarity or do you feel that you can invest in this moment? Well, I think from a Chinese perspective, actually, the country is pretty well positioned. China has been bearing the brunt of U.S. tariffs for and threats of tariffs for years now across both administrations. And so China started much earlier than any of

other American trade partners and starting to think about offshoring, friendshoring, nearshoring. Investors were threatened with 60 percent tariffs prior to Trump's election. And so actually a lot of those kind of very high noise numbers are already baked into people's estimations. And so I think you've seen actually the Chinese market outperforming this year relative to its U.S. counterparts.

It's also been outperforming in large part because of the generative AI wave of news, the fact that innovation seems to be back front and center. Is that something you've been betting on too, Ben? Innovation was always there. I think the issue was that global investors, particularly Western investors, didn't price it correctly. The Chinese market was fundamentally undervalued for the last few years. Chinese equivalents of their American companies valued at many multiples lower. And I think some of these more visceral things

understandable concrete actions like the deep-seek kind of Sputnik moment, I think awakened global investors to really reevaluating these businesses on their fundamentals. And they recognized that actually there was huge amounts of innovation going on in China, particularly in the AI space where China was always neck and neck with the US. And it's not just deep-seek, it's Alibaba, it's Tencent. And so I think people kind of woke up out of their sleep and recognized that the market was fundamentally undervalued.

Well, then what about innovation in the United States as we see tariffs take an impact? Is it hurt? I don't think so. I mean, the American innovative spirit remains intact. Global top minds still flock to the United States and are integrated through our universities into the American workforce, most of them becoming green card holders or U.S. citizens.

This same kind of query was asked of the Chinese when they were kind of taking their steps to kind of rein in entrepreneurs a couple years ago, when we saw the antitrust measures taken against, say, Alibaba and Meituan. It was a similar narrative. Was innovation and entrepreneurship being hurt? So I don't think that's the case. And if anything, America is going to put its foot on the gas on innovation over the Trump era. We will see a lowering of a

the red tape, the regulatory hindrances, bureaucracy that was getting in the way, more tax supports, more kind of integrated thinking across departments to support innovation. So I expect actually a boom in the U.S. innovation, not a decline. Ben, you are close to the administration. We understand that.

When you're trying to give advice to those currently over in Washington or any other investor trying to search for clarity right now, do you help people ultimately eat their vegetables with what might longer term be an innovation boost? There must be pressure on certain particular parts of innovation when it comes to robotics, when it comes to semiconductor access, for example.

Well, so first I think, you know, things aren't as volatile or unpredictable as people think. We're essentially doing what the president said he would do. So if you want to know where we're going, read what he said, watch what he said. This is not a huge surprise to anyone who was following him over the last, not just over the campaign trail, but over the last decades. And then, you know, certainly there is going to be short-term pain. A lot of the key inputs to our supply chain, be it automotive, robotics,

you know, the rare earth materials that come across all kinds of different core inputs. All of those are going to be hit in the short term, which will mean some pain. But ultimately, we have to find a way to wean ourselves off dependence on particularly, obviously, Chinese inputs. We need to either...

onshore those supply chains or nearshore or friendshore those with countries that we know we can rely on for decades to come. And I think this will ultimately serve to protect America's supply chains and ensure that it is not going to be vulnerable to a geopolitical adversary over the coming years. And what about some of the winners, 2023, 2024? NVIDIA comes to mind, of course, some of the key chipmakers which now

many are worried through regulation won't be able to access some of their end demand points. Geopolitics getting in the way of that too. Is that the sacrifice that's worth it? Well, that's not new. Again, I mean, you know, we were already seeing chip bans and coming particularly out of the Biden administration over the last four years, exporting those chips into China. And of course, many of the American chip manufacturers, NVIDIA aside, saw 30 to 40% of all their exports going into China. And China's obviously done incredibly well building

5G and ultimately 6G hardware, mobile handsets. It is a huge demand market for those consumers. What we have to find a way to do is continue to do business with China without giving them our most cutting edge chips, so ensure that Chinese consumption is still helping to underlie and fund American research and development and innovation, but make sure we're still

ahead on the kind of most cutting edge chips. And so that's where these chip bans come into effect. And we've got to ensure, obviously, that those aren't being circumvented by third party countries as well. Big investor in China, investor in innovation, investor in soccer as well, which I think is behind the background that we currently see with you at the moment, Ben. Ben Harburg of Novo Capital and many more. We thank you.

Time now for Talking Tech, and first up, France has fined Apple $162 million over iOS data consent rules. Now, antitrust regulators say Apple's app-tracking transparency system does not allow developers to comply with Europe's GDPR privacy rules. Instead, it forces apps to display multiple pop-ups. Apple said it was disappointed in the decision, while similar investigations are actually underway in Germany, Poland, Italy, and Romania.

Plus, Nokia and Amazon have settled a global patent dispute over its streaming technologies. Nokia had alleged that Amazon used its tech in streaming services and devices without authorization. The settlement resolves all patent litigations globally, though terms were not disclosed.

And Japan is preparing as much as $5.4 billion in additional aid for chip startup Rapidus. It's the latest move by the country to bolster its semiconductor industry during heightened US-China tensions. Now, that brings Japan's total public funding of advanced chips to nearly $11.5 billion.

And let's just now take a look at those US-China tensions. With a focus on Huawei, reporting a 9.5% rise in revenue in the December quarter, according to Bloomberg's calculations based on annual results. It's also posted a net loss of more than $40 million due to aggressive spending on research and development. Let's talk about it with Peter Elstrom. And the point here is China is all in on R&D, in large part because of the limitations to access to chips from the US.

Yeah, that's exactly right. This is a pretty remarkable financial report from Huawei. As you mentioned, Huawei's revenue grew almost 10% to about $38 billion. The company has been growing quite quickly recently. That's largely because of

big gains in their smartphone business, in particular in their cloud computing business. As you may recall, Huawei was largely out of the smartphone business because of this U.S. ban on them getting the access to the most advanced chips. They weren't able to compete with Apple and even their domestic competitors. They've now been able to get access to those, and the smartphone business is growing again. Cloud computing is growing again. But as you say, really the

The headline number here is the loss that they've got. They haven't lost money in a quarter for many years. They're pouring money into R&D in particular. Huawei has really become one of the leaders, the national champions for China in trying to make breakthroughs in these key technologies that are important to them strategically. So they've developed their own operating system to replace Android, for example, on smartphones, which was very common. They also

are pouring money into semiconductors in particular. They've come out with their own AI chip to compete with NVIDIA in the market because NVIDIA can't sell its highest-end chips into the market. Huawei is taking some of that business right now, and they're getting the kind of practice and business to be able to make some gains in terms of the sophistication. They're still quite a ways behind NVIDIA, but they are making progress. And briefly, Peter, this feeds into a moment where we're thinking generative AI,

is actually being upended by China because they can do more with less and less powerful chips. Does that counteract that a little?

Right. We've seen that the constraints that the U.S. has put on China and Chinese companies have actually led to some pretty creative innovations. We saw it with DeepSeek in particular, where they had access to some Nvidia chips, but not the most advanced. They still made progress. Now, Huawei is trying to feed into that also by providing some chips that are maybe not quite as sophisticated, but at least give some of these China startups an opportunity to be able to develop AI services.

Peter Elstrom, great to have you on the show as always with your Asia Focus. We thank you. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York. A quick check on these markets. We are bouncing off our lows when it comes to the NASDAQ 100. But look, we've been underwater throughout the trading day and indeed following on from Friday's anxiety too. We're off by 1.4%. Your leaders on the downside are the who's who of the Magnificent Seven. Nvidia, Microsoft, Amazon, Tesla, Meta, Alphabet,

In fact, it's really only Apple that's in the green at the moment. We're seeing the Magnificent Seven off by 2.4%, as I shine a light on NVIDIA, off by another 4% for what had been the star performer in 2023 and 2024. I also should just show what's happening to CoreWeave. After it went public last week, first day of trading was Friday. It didn't perform that well on Friday, and now we're below that initial price of $40. We're at $36.50.

no wonder in a risk-off attitude, but also as we continue to question the ultimate need for compute here. Let's discuss with a startup whose business overlaps with CoreWeave, Lambda. CEO Stephen Balaban, I'm very pleased to say, joins us now. Your business has breadth and it's not just about access to GPUs and data centers, but how do you feel the market is currently responding to the need for compute in the longer term?

Well, I think that a lot of the demand for compute in the future is already priced in. And what we're seeing in the short term is probably just general market fluctuations. But what I've been seeing with OpenAI's new image generation tools is that there's a lot more compute demand coming down the pipe.

I think that was where the tension lied for us, particularly on Friday when everyone's worried about too much exposure of a core weave to a few key hyperscalers. But then Sam Altman of OpenAI is saying that his GPUs are melting because everyone is so keen to play with his updated model. So can you square that?

that for us, how much will demand of generative AI ultimately push forward your business? Yes, so Sam's tweeting that they're seeing biblical demand for the image generation tools that they've launched recently. And a lot of the businesses that are publicly traded right now are being valued on a forward basis, which is to say that the projections that their management teams and everyone's been providing is how they're being valued. And so I think that...

There's a lot of, as they say, wood to chop to get to those run rates, which are the basis for the valuations. But these tools, it's a lot more than just anime image generation and memes. It doesn't feel like that when you're actually on X at the moment, but there is more to it. Right. And so the biggest leap here is that

These are the first generation of models that are basically perfect text rendering fidelity. And so what you're going to start to see a lot more of is instead of an AI generated image being an embed inside of a presentation, you're going to start to see the entire presentation slide is generated by a neural network. And what that means is I think we're getting closer and closer and closer to the future where nearly every pixel you see on a computer screen is going to be rendered by a neural network.

Therefore, that just means compute goes up and to the right as it weaves into our enterprise life, into our personal life. Every presentation, every piece of sales collateral, every advertisement, every video game, you're going to start to see more and more AI compute embedded in those things, which means that demand is going to continue to grow more than exponentially. Have we got the infrastructure ready for that?

Everybody is working really hard in our industry to keep up with the ongoing demand, even with all of the high expectations and ambition that OpenAI has, their servers are still on fire and they still probably have underestimated the amount of demand that they are seeing now. I mean, you're serving developers across the entire AI development cycle right now. What is it like at your business? How are you managing to scale to meet that level of demand? Yeah.

Yeah, I think that one way of looking at Lambda versus, let's say, CoreWeave, CoreWeave has a lot of customer base in, for example, OpenAI. And what we're doing is servicing kind of everybody else. A lot of hyperscalers and over 150,000 individual developers use Lambda Cloud to train their models and inference their models. And what we're going to see, especially with these new advances in image generation, is that OpenAI is going to have their time in the spotlight.

run away, continue to grow their market share, and then open source models are going to come in, and we're going to start to see a lot of that compute demand in clouds like the hyperscalers and Lambda. Will that open source winning come from China? How much are we going to see it being U.S.-made startup and AI models, or how much will this be a really global offer?

I think it's hard to predict. I think that my bet would be that we'll probably see a high quality Chinese model first, and then the rest of the world will continue to publish theirs.

I am generally bullish of open source internationally, whether it's in the United States, China, or elsewhere. So for those who are currently aware of the hype cycle, seeing the valuations skyrocket and then come back down, and still waiting for generative AI to affect their everyday working world, how soon will that come, do you think? How soon before every PowerPoint display we make is ultimately a neural network?

I think that what you're starting to see is that more and more of the productivity that you do is going to be coming from tools like ChatGPT. You might not actually end up seeing it embedded inside of PowerPoint. It may actually just be, "Hey,

Please generate this presentation for me. Here are the key talking points. And it perfectly renders a PDF for you at the end of it. I think that that's the big shift that's happening, is that neural networks are replacing more and more and more of the software that we use every day. Perhaps not particularly beautiful mood music for some of these publicly traded companies and their products that we so use often. Stephen Balavan, flown in for us, we so thank him, co-founder and CEO of Lambda.

Meanwhile, from AI data centers to compute for crypto, the Trump family is launching a Bitcoin mining-focused venture with Hut 8 called American Bitcoin, which will focus on Bitcoin mining and, quote, strategic Bitcoin reserve development. Eric Trump will serve as American Bitcoin's chief strategy officer. Bloomberg's Michael Regan has been helping edit the stories across this world at the moment and ever more.

the administration and family of the administration becoming intertwined with crypto. Yeah, that's right, Caroline. Obviously, this is the latest of several Trump family projects in the crypto space, World Liberty Financial being sort of the most high profile, a so-called DeFi platform launched by Trump and members of his circle. This was...

New news this morning that we did not know was coming, but Eric Trump and Donald Trump Jr. are investors in a company that is basically forming a joint venture with HUD-8. HUD-8 will be the majority owner of it, 80%. They are transferring all of their Bitcoin mining rigs to this new subsidiary, and it will be called American Bitcoin. Now, remember, on the campaign trail, President Trump made this promise

that he wanted all Bitcoin to be mined in the USA, which a lot of people in the industry were skeptical that he'd actually be able to fulfill that promise just because of the decentralized global nature of Bitcoin. And we haven't heard much from the president himself about how he plans to follow through on that plan. But we do know now that the Trump sons are a part of this plan.

this operation, this joint venture with HUD-8 to mine Bitcoin in America. And once again, it's all about Bitcoin. And you've been writing some great stories across your team about what's up with Ethereum at the moment, which is the number two player still, but DeFi just not translating in the way many had thought. Yeah, it's a really interesting story, Caroline. I mean, Ethereum had so much promise, so much potential,

years ago. I think if you look at it from its basic sense, there's sort of competition on both sides for Ethereum that is pretty fierce. Above it, if you're just an investor who just wants exposure to cryptocurrency, Bitcoin has really proven to be the token of choice for that. And I think a big part of that reason why is because of that famously limited supply of Bitcoin. There will only ever be 21 million Bitcoin in existence. Ethereum on the other hand

and doesn't have a cap on how many Ethereum tokens will be issued. And there are already about six times as many Ethereum tokens out there. So from an investor standpoint, it's clear that people looking for long-term exposure to the growth in prices of crypto are sticking with Ethereum

Bitcoin and the ETF flows have been really off the charts for Bitcoin and not so much for Ethereum. But then below Ethereum, the other competition on that sort of DeFi space is Solana. Ethereum's great innovation was that you could trade a lot more

than just the Ether tokens. Bitcoin exists, that blockchain exists basically just to trade Bitcoin. Ethereum opened up the world to the possibilities of NFTs and these other smart contracts that could be traded on crypto blockchains. Now, you can roll your eyes on NFTs, but for Wall Street that's hungry to tokenize real world assets, that was sort of the proof case of how that could be done. But

The problem now is Solana is just doing it at a cheaper, faster transaction speed and is really providing stiff competition for Ethereum. Moment of truth for Vitalik and a moment for Michael Regan. We thank you very much indeed. Coming up, we're going to be joined by Catherine Bracey, CEO of the tech advocacy group TechEquity, on her new book, Dissecting the Impact of Venture Capital on Society at Large. This is Blue Mag Technology.

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where money means more. Alphabet's AI-based drug discovery unit, Isomorphic Labs, just said it raised $600 million in its first external funding round. It was led by Thrive Capital with participation from Givi and Alphabet. The goal? Develop its AI drug design engine and support drug candidates into clinical testing.

Now, we're going to take a slightly different approach to the VC industry though. A new book says bad practices from venture capital are bleeding into all industries and damaging the economy. It's called World Eaters: How Venture Capital is Cannibalizing the Economy. Its author, Catherine Bracey, CEO of the advocacy group TechEquity, joins us now. And it's the word "cannibalizing" I'm really interested in with. Catherine, can you articulate briefly what the argument is here, the bad behavior?

Well, essentially it's that the power law is the venture capital has been chasing. It's become about chasing financial returns instead of chasing new technologies. And since there's so much money chasing a very few companies that can actually deliver venture scale returns,

the money has gone and sought out areas of the economy where it really shouldn't be. And that's why the book is called World Eaters, a play on Reid Hoffman's essay from 2011, Software is Eating the World. I don't think it's software that's eating the world. I think it's venture capital's business models that are eating the world.

Well, if you look at the latest funding round, the record one that's going to be up to $40 billion in new equity for now a $300 billion valuation OpenAI, surely a generative AI large language model that just would not have the money to continue unless it looked to VC or private funding, surely that is the right kind of business to get venture capital funding?

Well, maybe. Actually, I interviewed Sam Altman for the book, and he told me that the technology behind OpenAI is the kind of thing that government should be investing in. Same with his other big startup in nuclear, that government isn't doing it, so venture capital has to step in. And the reason he set up OpenAI as a nonprofit was to protect the technology from

from the mandates of venture capital as much as possible. We see how that has ended up and what it means for companies who are maybe pursuing these breakthroughs that have a lot of danger in the world to be really driven by the incentives of investors and not really the incentives of what's best for society.

Is there a way to realign incentives here at the moment? Because ultimately, the US government, for example, is trying to pull back on spending, turning ever more to the private markets, to private capital, to fund AI infrastructure, for example. We've got money going into at least generative AI, helping with health breakthroughs that we just reported from Alphabet. How do you realign at this moment, Catherine?

Well, I definitely think there's a role that government can play for market crafting. That is, you know, creating the incentives for venture capital to seek out the startups that aren't getting invested in. I think, you know, what I found in my research was that the bigger problem than VC investing in some companies is that they weren't investing in many others that could create a lot of great value. You know, companies that are hitting doubles or triples instead of grand slams. And right now, they just are not capital investing.

markets for them. So, you know, I think there's a lot that government could do to catalyze money going into those areas. But honestly, there's nothing that policy really has to change right now for the markets to change. Limited partners could decide that, you know, chasing returns through venture capital is not always the best outcome, that not every VC fund can be Sequoia or Andreessen Horowitz and not every limited partner is going to get into them. So why not take a bet on, you know, fund managers that are

putting their portfolios together around doubles and triples instead of chasing the elusive decacorn. And what do these doubles and triples need to fix? What are the areas that you think are being overlooked?

Well, the one I focus on in my book is housing. I think the housing market is a very clear opportunity. We need innovation there for sure, but there aren't that many software-based or venture-scale solutions to that software. Housing is obviously very infrastructure-heavy. There are long time cycles here. The regulatory burdens are high.

And so the way that a fund needs to be structured to pursue innovation in the housing market is just gonna be different. And I don't think there are that many fund managers thinking outside the box. How might you construct an innovation fund, an early stage risk capital fund to address solutions in the housing market that doesn't look like chasing power law returns at every angle?

Half embracing. So fascinating read. Thanks for coming on and talking about it. CEO of TechEquity and the author of the book, World Eaters.

SpaceX and Apple are fighting for space, literally. According to the Wall Street Journal, the two companies are competing for satellite spectrum rights, which are in limited supply. Now, the iPhone maker has been working to expand its satellite connectivity services in a direct competition with SpaceX's Starlink. The move would allow Apple to provide service in areas where regular cell services can't. Now, in response, SpaceX has pushed for federal regulators to stall Apple-funded satellite expansion efforts.

And let's just stick with SpaceX because the company is preparing to launch four passengers around Earth's poles in a first-of-its-kind mission. For more, let's bring in Bloomberg's Sana Prashankar. And joining us for more, the crew of four passengers are doing what has never been done before and going around the Earth's poles, right?

Yes, yes, exactly. So it's the first human space flight to fly over the Earth's polar regions, which is pretty interesting. So they'll take off from Florida and fly in a 90-degree circular orbit around the Earth. It's all being financed by a crypto billionaire. Why is he and the three that he has selected so keen on the poles?

Yeah, so they had a press conference last Friday, the FRAM2 mission. FRAM2 is based off a Norwegian polar expedition ship. And what Chun Wang, who is a cryptocurrency investor, said was that he had always, as a kid, always looked at the Earth's map and saw this white,

spot at the bottom of the pole and always wondered what was out there. So he's excited to view that from space and he's very into visiting different countries, being an explorer and going on different adventures is what he said. He's taking an extraordinary group with him of other pole-focused explorers. But they're offering their own bodies up to research here. They're taking on a lot of risk ultimately, Sana.

Yes, yes, definitely. And actually one of the things that they're doing on their mission is conducting research on the impacts of spaceflight on human health. So they're also teaching other people about what it's like to be up there while they're putting their own bodies at risk. And one of their...

projects will be capturing the first x-ray image of a human in space which will be definitely very interesting for the research community and the science community and the liftoff florida is this evening yes it's this evening they're targeting around 9 p.m but there's a couple different launch windows um if the 9 p.m one doesn't work out but for now um i think it's around 9 30 p.m sana pashanka thanks for following up for us we appreciate it

Also happening today right here on Earth, in Vegas at least, Intel is holding its two-day Intel Vision event. It's a conference which kind of showcases Intel's technologies and how they're being used to enable new solutions and drive business success, so they say, in the AI era. But of course, that success is all hinges on this guy, Intel's new CEO, Lit Bhutan. He's going to be speaking for the first time this afternoon since taking on the top job.

Let's ask Mandeep Singh from Bloomberg Intelligence what we think might be articulated because he's been out there talking to investors, writing letters, of course, also to his own workforce. Cuts, it seems.

Yeah, I mean, look, they've already peered back from the NAND business. So you can see, you know, the focus is shifting towards AI, hopefully. And that was one of the things that I think Pat Gelsinger didn't do very well was really hone in on AI, which is the growth market. I mean, when you look at all the hyperscalers increasing their CapEx by 50%, you would expect something would trickle down to Intel in terms of, you know, driving some revenue upside. And

I'm hoping that's the vision he articulates when he talks to investors is how Intel is really focused on AI. The foundry side, the government seems to be supportive to Intel to bring manufacturing onshore.

But that is a lengthier turnaround because one of the concerns for investors in Intel stock is the cash burn. You don't want to see cash burn. And the message here is we're really focused on AI opportunity and they somehow have to find a way to compete with NVIDIA. Well, they've got Gaudi. Look.

Is the offering right? Do they need to change up the talent they have? They've certainly been changing up the board talent, at least it seems. Well, I think there's a lot that they need to change at the product level. Clearly, the product didn't resonate very well with the market when it comes to the training and inferencing opportunity on the AI side. But look, this guy is coming from Cadence. So he has that software angle in terms of thinking about what is it

that Intel can do in terms of both the chip side as well as the software side. And I hope he articulates that vision.

There's got to be some optimism in there too, right? This is a stock that has been wiped out over the past year or so. Yeah, I mean, if you look at the valuation, this is like every pessimistic scenario is baked in the stock right now. So any hint of good news around AI from a vision perspective, and then he lays out clear markers, I think it's going to resonate with investors. Manneet Singh, going to be attuned to that.

talk coming from vegas senior bloomberg intelligence analyst also he's busy helping organize what is bloomberg intelligence's fourth generative ai conference it's happening on wednesday featuring some leading figures in the industry i'm lucky enough to be talking to a few of them meanwhile that does it for this edition of bloomberg technology don't 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 this is bloomberg technology

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