Intel Soars on Potential Deals, Musk says Grok-3 is "Smartest AI"
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Live from New York, I'm Tim Stenevek.

And I'm Jackie DeVallis in San Francisco. This is Bloomberg Technology. Coming up, Intel shares are soaring on reports that both TSMC and Broadcom are mulling potential deals that would split the U.S. chip-making giant in two. Plus, Elon Musk's artificial intelligence startup XAI showcases its updated Grok 3 model in a fresh challenge to OpenAI.

And we'll dive into concerns around AI safety as companies and governments appear to change their attitudes on how to make the technology safer. But first, let's look at markets. Tim, what are you looking at? I'm looking at the NASDAQ 100, searching for a little bit of direction. You can see down, not even.

half of one not even one-tenth of one percent bouncing between gains and losses throughout the session so far traders watching the latest geopolitical developments all eyes are what's happening in eastern europe this is the us and russia agreed to more talks on resolving the war in ukraine but set no date for a summit meeting between donald trump and vladimir putin ukraine's vladimir zelinski canceling his visit to saudi arabia so we'll bring you updates on that as we do get them i am watching shares of intel though

up about 10% as we speak, surging after the Wall Street Journal reported that both TSMC and Broadcom are mulling separate potential deals that would split Intel into two. Now, the Journal is reporting that Broadcom would be interested in the chip design and market business. Well, TSMC is apparently interested in Intel's chip plants. Today's surge, though, does come after Intel had its best week

all the way going back to the year 2000. Shares rose more than 20% last week on reports that the U.S. government is possibly getting involved with a plan that involves both Intel and TSMC. Jackie? Let's get right to it with Bloomberg's Ryan Blastellica. Ryan, let's talk about those chip plans, which Intel is operating currently at a loss. What could a potential deal with TSMC mean for that business?

Hey, good afternoon. Thanks for having me. So yeah, so a lot remains unclear right now, but certainly this has been a real drag on Intel for quite an extended period of time. Obviously, the previous CEO invested heavily in the foundry business, billions of dollars, didn't really see too much of a return on that. It is well behind TSMC and Samsung. So people are really looking to see if there is any kind of sort of rescue for the foundry business that is really

expected to really support Intel if there is some kind of deal coming to fruition. Ryan, what would be left of Intel if TSMC and Broadcom were to succeed in this, as reported by the Journal?

Yeah, that's a great question. Again, so many details are still up in the air, not yet confirmed. I mean, there is such a focus on domestic manufacturing. Intel got a lot of money from the CHIPS Act. It was building out a factory in Ohio, for example. So there is certainly a geopolitical aspect

to this. People want to see more domestic chip manufacturing and if TSMC is able to work with Intel in some capacity, obviously that would probably be good for TSMC to have more of a domestic presence here. Certainly good for Intel, but again we really don't know what any of this is going to end up looking like if anything does come to fruition.

Ryan, let's talk about some other non-sexy names in tech like IBM and Cisco. You wrote this morning that they're kind of seeing a run-up and showing themselves to be AI contenders. What's leading this enthusiasm?

Yeah, so Cisco last week gave a pretty positive revenue forecast talking about the demand it is seeing related to all the AI infrastructure that is being built out. IBM earlier this year had a pretty strong forecast of its own, gave some strong long-term sales targets. These are two companies that were sort of forgotten by a lot of investors. They are nowhere near, like you said, their sexy heydays like Cisco.

still below its dot-com era peak from 2000. But as it's starting to see a little bit more of a growth narrative, especially related to AI, people are taking another look. These are stocks that are trading at pretty considerable discounts to the MAC-7 names. They have pretty strong dividend yields.

in a period of time when people are maybe wondering, have the MAC-7 gone too far? Is this story already priced in? Having some new AI stocks in there, especially mature companies with pretty solid cash flow and dividends and so forth, trading at lower multiples, you can see why people might be taking another look at them.

Well, let's stick with the MAG7. Bloomberg's Ryan Veselica joining us from Chicago. Always good to see you, Ryan. For more, I do want to bring in Dana Dioria. She's Group President over at InvestNet Solutions, also Co-Chief Investment Officer at InvestNet. Dana, we heard Ryan just now talking about the MAG7. It's more than 30% of the makeup of the S&P 500, those seven stocks. How are your clients diversifying away from the MAG7? Are they overinvested in them?

Well, I mean, so beauty is in the eye of the holder, right? So there's a lot of research that suggests, look, if you are invested in the market, the market's determination is this is what these stocks are worth, and they're invested where they should be. I think a lot of our clients, though, are looking at that. And obviously, on InvestNet, we're talking about retail clients with advisors managing their assets.

And they look to diversify in other places. They look to have an overall globally allocated portfolio that has international investments that perhaps leans a little bit into small caps. But let's be honest, if you are, you know, more than 50 cents on the dollar that goes into our platform goes into passive assets. So if you're there, you've got a ton of, you said it yourself, it's 30% right of the S&P.

But even if you're in an actively managed strategy, it's very hard at this point to have a ton of tracking error to the passive index because it's performed so well in the last several years. Dana, there's a couple of different ways that we can look at tech companies now. You have software, hardware, enterprise, and then the consumer focus. How are you thinking about how to bucket these sorts of investments going forward and the sorts of catalysts you're looking from each bucket?

Well, so I think for the average client on the platform, it's more about the sector and it's more about where is the sector from a market cap weighted perspective within the indexes. And then if you're in, say, a Russell 1000 growth actively managed strategy, how is that manager doing that bucketing? How are they thinking about

playing the AI trade, for example? Is it a question of, you know, do I diversify away from, say, NVIDIA, right? And this has been a big struggle for them because, you know, you have to meet 40-act rules around diversification in a lot of cases, and it's hard to do when you have more than 50% of, say, the Russell 1000 growth.

you know, invested in these Mag7. And so I think that bucketing helps where a good active manager who's able to look at the tech sector and say, okay,

I see opportunity sets maybe in some of these suppliers to the Mag7, right? And these different parts of the market where I can still kind of take that growthy bet on AI and tech, but not necessarily be so heavily focused on the Mag7 and not meeting those diversification goals. So I think that's something that these managers struggle with. And every time we see sort of a dip, right?

It's a question, is it a buying opportunity to kind of lag more into those types of things as opposed to actually diversifying? That's kind of the question.

Where can we find certainty? And I know that's asking a lot given these days, but when we think about where we can see the tangible return, you have concerns around infrastructure capacity, and then at the same time in consumer, you just don't really know how these sorts of features are going to be monetized. Which one do you think holds more certainty for investors?

Well, I mean, I think the energy theme has been a huge one. It comes across and, you know, so we sit at the junction of hundreds of asset managers. So we kind of get a good sense of where, you know, the zeitgeist is sort of leaning. And I would say to you that the secular trend in energy has definitely been a theme. I

I also think people understand that this administration is probably going to be not only pro-growth, but helpful in terms of energy centers, helping the energy sector in general here in the U.S. And I have a view that we're going to have to meet the energy demands over the next several years and into the next decade.

decade, et cetera, you're going to have energy sources from everywhere. It just is what it is. So sustainable, yes. You know, more traditional incumbent, yes. We're just not there yet to kind of transition over to sustainable. So I think energy is a play that probably a lot of investors have focused on for this. And, you know, particularly with this administration, they see the opportunity set there, you know, even before AI, right?

our energy needs were going to increase. Just looking at demographic trends, population growth, parts of the world that are moving into a better standard of living, which is what we obviously want to see. But all of that is going to create energy demands even before you get to the AI trade. Growth versus value. It's a debate that I've been having with guests since I started doing this. Is this finally the year? I mean, growth is one every year I've been doing this. Is this finally the year that we see value outperform?

It is so hard to be a value manager.

You know, here's what I would say. January effect is interesting. It's not statistically significant, but, you know, there's a little signal in there. January did see outperformance of value. I think, look, the notion that we are higher for longer on interest rates, traditionally speaking, that should benefit value, right? Because more of those cash flows are coming earlier. And so when you have a higher discount rate, the growth stocks should theoretically be impacted worse by that because they have more

longer dated cash flows, more years that you have to discount by a higher number. So, yeah, theoretically, there's some makings for that there. But we all know the AI trade can just, you know, and or other secular trends can just blow that out of the water. So it's very hard, I think, in the short run to say what will win, what won't win. I will say, you know,

I think at the end of the day, valuation will always still matter. It matters more for medium-term expected return to try to trade on it in the short run. It doesn't have a good track record for that. There's hope yet for value investors. Dana Doria from InvestNet, thanks for joining us.

Elon Musk's XAI has debuted its latest Grok 3 model, promising advanced reasoning and even a new smart search feature. This comes just days after Musk made an unsolicited bid to buy Sam Altman's OpenAI, which was ultimately rejected. For more, Bloomberg Intelligence Analyst Mandeep Singh joins us now. Mandeep, what do you make of this model? How does it stack up to XAI rivals?

Yeah, look, I think what they have showed is another reasoning model that can do well on certain benchmarks and clearly was trained on one of the biggest clusters out there when you think about the number of GPUs they use for this model. So is there anything groundbreaking?

I don't think so. But at the same time, what they're showing is all these LLMs are narrowing the capability gap they had with OpenAI. And I still think OpenAI is the preferred model when it comes to the usage and the distribution they have created for themselves.

It would be interesting to see how much upsell XAI can have on their own platform, Twitter, and whether users are willing to pay a subscription. That will be the real test, but clearly I think it scores well on all the benchmarks. Mandeep, is the market big enough now and in the future for Cloud, for ChatGPT, for whatever comes next that's being worked on right now? Is it smart enough?

for Gemini? Is it big enough for Gemini? Do we need all of these? Yeah, look, I mean, we just got off the earnings season in the past one month, and it's very obvious that everyone is doubling down when it comes to their CapEx investments. So the market is big enough to answer your question.

At the same time, our view is that the field is narrowing when it comes to the foundational model players. And that's where only the ones with deep pockets, your hyperscalers or XAI for that matter, that can spend on these billion-dollar training runs will be the ones who would have the foundational models and they'll try to roll it out for all the applications to use.

Bloomberg Intelligence Analyst, Mandeep Singh, joining us here in New York. Mandeep, thanks so much. Well, sticking with AI, meanwhile, OpenAI co-founder Ilya Tsutskiver is looking to raise more than $1 billion for his startup, Safe Superintelligence. It could value the company at over $30 billion.

According to sources, San Francisco-based VC firm GreenOaks Capital Partners is leading the deal. For more, Bloomberg's Kate Clark joins us now here in New York. So where does this company sit in the AI world?

Well, this company is brand new. It was founded in June of last year, which makes its valuation even more incredible. The company is trying to create a safe super intelligence. So it's all in the name, but otherwise we don't know very much about this company. It is very secretive. It is very much under the radar and it's just getting started. Kate, what do we know about why investors are interested? As you mentioned, it's super new. It's not really generating much revenue.

And you add on to the fact that kind of the word safety is almost coming out of vogue this year amid a new administration that doesn't really seem to put too much importance on responsible AI. What do you make of that? Like, what's kind of the hook here for a VC that's investing in this company? There's one huge clear hook, and that's the founder, Ilya Tsitskiver, which as you both know, is a co-founder of OpenAI, longtime chief scientist, and a chief architect of those AI models.

People really truly believe that he is a singular force and that whatever he builds will be a massive, massive success. The company has zero revenue and we won't see a product for years most likely as it seeks to create this safe super intelligence. So truly it is all about the founder in this one and that is what's justifying this $30 billion valuation which by the way makes this one of the most highly valued companies in the world.

And I don't have the statistics in front of me, but I think having zero dollars in revenue and a valuation that high is pretty rare. I feel like you're sort of emphasizing the fact that this company doesn't have a product at this point. It's all on the founder. And it could be worth billions of dollars at this point. Can we say froth or is he saying froth?

VCs are saying froth. VCs are also saying this is a once in a generation moment and they want to get on board with people like Ilya because they do believe that someone like him can create the next trillion dollar company. So if you believe that, then sure, it's a great moment. But I think outside of maybe Ilya is a unique person who really will create that super intelligence, but you're seeing tens of billions of dollars go into one-year-old, two-year-old companies.

It'll take five to 10 years before we know how much money venture capitalists will lose, but they will lose a lot of money. That's Bloomberg's Kate Clark. Thanks for joining us. Coming up, we speak to Cato Network CEO Shlomo Kramer as the company sees a big revenue boost in 2024. This is Bloomberg. ♪♪♪

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Elon Musk's Doge team is said to be attempting to gain access to a broad range of taxpayer data, raising concern from Democratic lawmakers over privacy concerns. Strict U.S. laws prohibit the disclosure of taxpayer data, with some exceptions for law enforcement. According to sources, the team is seeking the data, but has not yet accessed it. Jackie?

Cybersecurity firm Cato Network says they surpassed $250 million in annual recurring revenue for 2024. That's a jump of 46% compared to the year prior. Here with us is Cato Network CEO Shlomo Kramer. Shlomo, at a time when companies are really on the hook to show that they can deliver, can you tell us where this demand is coming from?

The demand is coming from all sizes of organization that faces increased complexity of point solution and are looking for a platform to deliver their network security with operational efficiency and business agility. So it's all about digitally transforming IT security to serve the digital business.

Shlomo, are you seeing a decline in demand in terms of total spent on this sector due to investment in AI, or are you seeing investment grow here? We are seeing consistent increase in spending on IT security. Actually, in the four years following COVID, spend of IT security out of IT budget has grown 40%.

while we are not more secure now than we were four years ago. So actually, this is actually the increase in spend is the core problem that platforms such as Cato solve. So how do we get more secure? If people and companies are spending more money but they're not seeing the results when it comes to security, how do we get more secure? We replace the 50-point products

that an average CISO has with three, four core platforms. A platform on the endpoint, a platform on the cloud, a Kato on the network side, all integrated together. It's much more manageable. It's much more agile. You can say yes to the business and you can fit it within the budget and talent that you have.

Let's talk about venture capital investors. They're pretty excited about cybersecurity startups. They raised a bunch of money in 2024. You last raised around, in 2023, $238 million. I mean, is an IPO next for you this year? As a growth company, we have many different options, both public and private. And the real goal here is to build a long-term leader in this new category called SASE,

platform for network security. Do you see that being as a possibility this year, though? I mean, if you were to perhaps speculate on who potential buyers could be, perhaps not just for your company, but kind of in the space in general as we see M&A tick up, what are you seeing? We are really heads down on building Cato, and I won't speculate on any

in financing or M&A events this year. What would be the next financial benchmark though? You did say you've surpassed $250 million in ARR for 2024. What's the next benchmark? So, you know, Gartner assesses the market as growing 26% year-over-year to $28 billion in less than four years.

We, last year we grew much more than that and we fully expect to grow this year also more than the market and take market share and continue to build the company. - What would you say is the market size

It's a huge market. You know, essentially, SASE, our category, is the third generation of network security. It replaces the second generation, which are the appliances. These are many tens of billions of dollars that are going to be re-architected. And five to seven years from now, 80 to 90% of appliances are going to be replaced today.

by SASE cloud implementation. So there's a huge potential and we are just in the beginning. Less than 15% of enterprises have started implementing SASE and more than almost 50% of enterprises are saying that they are going to implement SASE in the next three years. So this is really the money time of this category.

Shlomo Kramer, CEO of Cato Networks, thanks so much for joining us. Do appreciate it. Welcome back to Bloomberg Technology. I'm Tim Stenevek in New York.

And I'm Jackie DeVallis in San Francisco. Let's get a check on the markets. I do want to take a look at shares of Supermicro, which are just surging. Look at that, up 13%. It's extending gains for a fourth session in a row. This after the totally beat-up chipmaker issued an aggressive long-term revenue outlook and pledged to meet a NASDAQ deadline to file audited financial results. Supermicro has rallied almost 90% this month, putting it on track for the best month going back to May of 2023.

And it looks like it finally could happen. Meta Platforms, the parent company of Facebook, Instagram, WhatsApp, and more halting that 20-day winning streak. Shares adding more than 20% over that record run, though. Shares down about 2.3% in today's session.

Well, creators of a new AI chatbot often claim their model is the best. The website Chatbot Arena puts those claims to the test, allowing users to test and rank these programs. And fans of the site likely knew that DeepSeq's R1 model would challenge US-built rivals. Bloomberg's Seth Figerman is here to tell us more about Chatbot Arena. What happens on this site?

Well, it seems fitting that the fate and the temperature of a billion dollar industry is being largely shaped by a bunch of students at UC Berkeley. It's basically a blind test. People can try out, I think, something like 200 different models on the site and pit two of them against each other. They don't know what they are, and they'll ask a question and see which one does better, and then they'll vote it up or down. And based on that, crowdsource ranking will see which models are at the top of the leaderboard. So DeepSeek rose up pretty high for months leading up to the launch that captivated everyone.

And today, as we speak, Grok 3 is riding high there too. So it's become a real bragging right for some of the industry. But Seth, talk to us about some of the risks of some of these crowdsourced platforms that allow us to benchmark how well one model is versus another. What can go wrong? Yeah, it's a great question. I mean, first off, it's not definitive. It seems definitive, but these are systems that could be rigged. And they're certainly not being tested for every different use case. I think the real point here is that, one, there are not

that many really agreed upon benchmarks right now for AI systems. And as these systems get better, there's even fewer. I think you're seeing hyperbolic named things like humanities last exam, for example, as a model to test it with. And I think also, at the end of the day, a lot of this is vibes. These systems are all kind of similarly competitive right now. So what might feel good for one person may feel different for another. Always the vibes. Bloomberg, Seth Feigerman, thanks for joining us.

Concerns around AI safety appear to be shifting and companies and governments are starting to change the language they use to talk about the topic. Dr. Margaret Mitchell is the chief ethics scientist for Hugging Face, an open source platform for building and training AI.

Margaret, talk to us about the shift in tone that we're seeing, not just from lawmakers, but also from companies as they're starting to really reckon with the fact that we're in a completely different era as it relates to AI safety.

Yeah, so in the US we've seen a shift with US companies, so like Meta and Google, removing some of the language that they had in their various terms of use and sort of responsible practices. So it's less focused on things like accountability,

less focused on not participating in surveillance, that sort of thing, and less of a focus on this general concept of safety. And there was recently this AI Action Summit where J.D. Vance came and spoke and said that he thinks that the focus should now be on opportunity, and it seems like the larger tech companies are following suit on that. Margaret, if the large tech companies aren't necessarily the ones who put the framework into place when it comes to

rules, regulations. Does the government need to step in? What's your view there? Yeah, so my view of the role of government, and people have different views here, is that the government should be set up to protect the people.

not to protect companies, creating a marketplace of ideas that companies can sort of thrive in, but ultimately stepping in where companies can't step in, in order to make sure that there's a level playing field, that everyone can do the responsible thing within the context of market dynamics where you might accidentally destroy your company if you're trying to do all

the things that are the best for the people, right? Like companies exist to make money. And so there needs to be a counterbalance that sort of thinks about, well, what if we're not making money? What if we care about people? And what can we put in place for all companies to abide by and then change the marketplace dynamics in light of that leveled playing field? Well, David Sachs is crypto and AI czar. Are you confident that the Trump administration will put into place policies that will protect people?

I think the jury's still out on that. There definitely is interest in growing the economy, so they've spoken a lot about creating healthy competition, that sort of thing. I haven't seen as much of their

thoughts on protecting people and what that is. I think right now there's sort of a reactionary force. So there's always pendulum swings in ethics. People care a lot about ethics and safety and things like that. And then people absolutely do not

I think we're having a little bit of a pendulum swing right now back to not being as concerned about foreseeable risks. But hopefully the government will listen to the will of the people and step in where no one else will help them. Margaret, just a couple years ago, we had companies and just a wide swath of the AI community coming out and highlighting the existential risks. Some of these AI safety groups kind of dubbed as doomer types, if you will.

Elon Musk has a growing influence in Washington, and he's been one of those at the forefront of kind of highlighting these existential risks as he's building his own AI technology. What do you make of his influence, but also the existential risks that have been raised before?

Yeah, so there's a lot to unpack there. This is a really big discussion in ethics circles. There's a little bit of an issue where people who focus on existential risk tend to drown out the concerns about current discrimination. So that causes a little bit of tension in ethical discussions. Elon Musk in particular, I'm pretty concerned about the role he has throughout the government right now.

But within the context of AI in particular, he doesn't seem to be someone who would really stand up for making sure technology is not discriminatory or doesn't disproportionately harm some subpopulations. So there's a pretty big risk there. Existential risk is now less of an issue. Within the past few months, we've seen some stepping down from that as part of these pendulum swings.

And so one would hope that that would mean that the immediate and current harms of AI would have more of a center stage. But as it seems to be right now, neither current harms nor foreseeable harms are really much of the focus.

Even coming out of the Paris AI Action Summit, so much of the language shifted from safety to security. The UK Safety Institute being rebranded as the UK Security Institute. Who should we look to as a leader for how to build not just innovative technology, but also responsible AI technology? Yeah.

So there's a bunch of different ways to kind of approach this. One is via governments and one is via different companies. So like the company I work for, Hugging Face, takes an approach of being transparent and open because that's a way of making yourself accountable to people. So even in marketplace dynamics where you're sort of going for profit, you also have to show your work and that you're doing responsible things. So this is an area where openness

openness can really be helpful in helping drive forward responsible practices. And then, you know, there's also been a lot of really nice work in the EU on legislation. The EU and the US are not currently fully aligned on what to prioritize. But I've definitely appreciated a lot of their work on legislation that looks at foreseeable harms and risks as well as benefits. Margaret, what are the stakes here? Like, what could go wrong if we don't get this right as a society?

Yeah, so we're in a situation right now where there's a large centralization of power for the AI companies and the larger ones. And they're accruing a lot of wealth while a lot of other people are losing their jobs. And so there's more and more of a divide between the have-nots and the have-yots.

as Trudeau said recently. So you're really seeing that the wealthy people are getting wealthier and people who are just struggling by are losing their jobs or having their data used in these AI systems that then the larger tech companies are benefiting from while they can't even get a basic income. So this massive divide is happening right now.

There has been some discussion about UBI, like universal basic income, but I haven't seen that really moving forward in the AI world, despite the great idea there. And so that's happening now. And then that also means that people who are disempowered are going to be more subject to things like surveillance, more subject to non-consensual usage of their content in a way that it can be used to further harm them, not give them the benefits

medical benefits they need, this sort of thing, because of something they had said on social media. You can get into really nasty territory in terms of the rights to the general public, the rights that people have. Hugging faces, chief ethics scientist, Margaret Mitchell. Thanks so much for joining us, Margaret. Do appreciate it. Well, now, Carson Block, founder and CEO of short seller Muddy Waters, sat down with Bloomberg's Haslinda Amin to discuss Elon Musk's empire and Tesla's future in particular. Check it out.

It's one thing to ask whether you bet on Elon Musk, but I would not bet against him. So I don't count the capital structure arbitrage trade as betting against him because it was pretty hedged. Maybe that's me being intellectually disingenuous, but I wouldn't bet against him. Now, in terms of the robo-taxis, literally, I think he's been saying that Tesla's robo-taxi capability is imminent. I think he's been saying that since...

2016. So, you know, take that with a grain of salt. And you do see in the U.S., Waymo is offering robo-taxi services where I live in Austin. It won't drive on the freeways. My understanding is that Tesla's technology, because they won't use LiDAR, is not up to par with Waymo or even with Cruise. So...

Yeah, I'd be skeptical of that. I mean, do they find a pliable local or state government somewhere in the U.S. that says, okay, you can run this service here? Yeah, maybe, but I don't think it's, you know, I mean, even Waymo is not ready for prime time if you're not driving on the freeway. So, Carson, would you be a buyer of Tesla then or not? Well, I'll check with the quantitative screen that we have and let you know. As it stands to know, as it stands to know,

I mean, given where he is with Trump, given his relationship with Trump, given the chances of him being able to influence regulation, for instance, how does it play into your calculation? Well, that's really a double-edged sword. One of the things that I was just marveling over on the 16-and-a-half-hour flight here was –

When you look at how Elon Musk has really changed his positioning politically over the years, he used to be a darling of the left, right? You know, pounding the table that, oh, we need to electrify the economy, we need electric cars, or else we're going to die as a civilization, we're killing ourselves with CO2 emissions, etc.,

I mean, politically we know that he's totally switched poles. But, I mean, he's allied himself very closely with the no, let's be realistic here about energy transition. If we're going to transition, we need natural gas, we need nuclear, and, you know, electrification is a pipe dream. We don't have the battery technology. I mean, that's what the smarter people on the right, and I happen to agree with those views, that's what they're saying. So Elon Musk is now...

aligned with them. So my question is, with all the focus that he's putting, all the energy he's putting into Doge, which by the way, ahead of the election, I had no idea whether this was really just him trying to be a provocateur or whether he was serious. He's serious. He's really focusing on this Doge. And I think he's actually doing some very interesting things there. But my question then is, in his head,

Has he basically, has he admitted to himself that Tesla is, it's never going to be, it's, that electric vehicles are a long, long way away from supplanting ICEs and that it's really a niche product and that it's, you know, and has he convinced himself that, no, we shouldn't be pushing, you know, running head, you know, head first into trying to electrify Tesla?

the grid or trying to electrify our economy. I wonder if he's, I suspect he has switched views on a macro level, but especially with how he thinks about Tesla. That would be a little bit embarrassing for him to say publicly. So yeah, maybe just banging the table about, oh, AI, AI and robo taxis is how he tries to cover up that sentiment shift internally.

That was Muddy Waters founder and CEO Carson Block along with Bloomberg's Heslinda Amin. Coming up, big tech's big pullback from DEI. The CEO of inclusion benchmarking platform Paradigm joins us next. This is Bloomberg.

Well, following the lead of the Trump administration, some tech companies, including Google, Meta, and Amazon, are scrapping or rolling back DEI, diversity, equity, and inclusion programs. For more on what this change of direction could mean, we're joined by Joelle Emerson. She's the co-founder and CEO of Paradigm. It's a platform that helps companies improve and benchmark inclusion efforts. Joelle, good to see you.

I'm curious, I would imagine you kind of have a problem with the premise of the question here because you argue that these companies are not in fact rolling back their DEI programs, but I gotta tell you, that's what it looks like to me.

You know, I think it's a moment of evolution. Definitely the legal, political, social landscapes are changing. But what I see, especially from the companies that we work with, is this desire to refocus efforts on programs that create fair and inclusive cultures for everyone. And the good news is that that's a goal that's pretty universally popular.

And I think, you know, that's going to require some evolution. It's going to look like a shift away from maybe some of the more performative or high visibility, but less impactful to employees types of programs that companies might have been focused on the last several years. And I don't I don't think that's necessarily a bad thing.

Joelle, for some of the people that this might affect, the underrepresented groups, people of color, women, it's somewhat emboldening when you see companies really taking a stand and making their stance known publicly. What are some of the drawbacks, though, of perhaps pulling some of this language back, even while some of these programs are still going on behind the scenes?

I think the risk is that companies are going to signal in some of their messaging that they no longer care about casting a wide net for talent. They no longer care about building cultures where people from all backgrounds and all identities can come together and do their best work and thrive, which, you know, communicating that you care about those things is actually pretty essential to building a future ready company. It's the type of thing that attracts people.

the best employees. It's the type of thing that unlocks engagement and performance when you feel like you belong, when you believe your company cares about these things. So I think what companies should do if they truly do still care about those goals but just don't want to be associated with this now highly charged acronym DEI is communicate more precisely about what it is they're actually going to be doing. So maybe they are no longer going to be tying executive compensation to hitting targets

which by the way is the type of thing we haven't seen be all that impactful. It's focused on sort of one of the most lagging indicators of whether you're building an equitable, inclusive culture. And instead talking about how are we gonna build a culture for everyone? How are we gonna take a look at what's happening in our hiring process and make sure that people from all backgrounds have a fair shot at getting hired here? How are we gonna make sure that we're looking at things like who gets promoted or who stays and who leaves? And if we're consistently looking at those things,

and we're addressing any problems that we identify, I think that'll help employees understand that the acronym wasn't really what mattered. What mattered is are we actually doing the things that make our culture more diverse, more fair, more inclusive? And those are actually the types of things that by and large I see companies continuing to focus on. - I imagine that you have data that shows that there's a business case for doing this. If that is indeed the case, then why doesn't the free market solve this? Or do you think that the free market could solve this?

I actually think the free market does solve this to some extent, which is why I'm not that concerned that companies are going to stop doing the things that help them compete for the best talent, that help them build cultures that unlock performance. But I think the business case is complicated. It's not true that you just make your team somewhat marginally more diverse and magic happens and your share price goes up.

I think what actually tends to unlock performance, what actually tends to drive better business outcomes is some of the hard work of building a healthy and inclusive culture. Cultures where people are going to speak up if they have an idea that might diverge from the norm. Cultures where people who are different from each other, which is increasingly true as workplaces just become more diverse because the population is becoming more diverse. Creating a culture where people who are different from one another...

can come together and collaborate effectively and communicate effectively. These things really do matter to company performance. And I don't always think it's so obvious whether you're doing that or whether you're not. Companies are pretty complex. It's not always...

obvious which things are contributing to which outcomes. So I think it's important to continue to remind companies that a lot of the things that formerly might have been categorized under the bucket of DEI are actually pretty universally popular and uncontroversial. Things like making sure that you're opening up access to your company, to people from different backgrounds, like veterans who might not have known about the technology industry. Things like robust parental leave policies. So

that caregivers can return to work and continue their careers after taking time off to have a child.

things like promotion practices that make sure that we're applying the same standards to everyone. So it's the actual best person and not just the person who's closest friends with the manager who has an opportunity to grow. The vast majority of things that we categorize previously under this bucket of DEI, they help companies perform better. They make organizations more fair. And the vast majority of people think they're a good idea. And those are the types of things that I just don't see companies shifting away from. That's Joelle Emerson, CEO of Paradigm. Thanks for joining us.

Coming up, we'll discuss what to expect from Apple's event tomorrow. This is Bloomberg.

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Apple CEO Tim Cook teasing last week the arrival of, quote, the newest member of our family. Bloomberg Intelligence Analyst Anurag Rana joins us now with more. Anurag, what can we expect next week?

It's really looking forward to the cheapest phone that they have, the iPhone SE, coming up with a big bang. Mark Gurman's already told us about it in terms of the faster processor and the larger screen. I think this is a good thing for Apple because they're really struggling to really break the market share both in China and India and Brazil in terms of getting a bigger piece of that pie. And a cheaper phone can really help them do that.

That's Bloomberg Intelligence's Anna Agrana. Thanks for joining us. And 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. Apple, Spotify, and iHeart. This is Bloomberg. Switch to Verizon Business and get more from your internet without paying more for your internet. Get LTE Business Internet starting at $39 a month when paired with a Business Unlimited smartphone plan. That's unlimited data. And with it, you can get more from your internet.

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