Trump's Potential CHIPS Reversal, Tech Faces Tariff Volatility
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Live from New York, I'm Caroline Hyde.

And I'm Jacqui Davalos in Washington. This is Bloomberg Technology. We get straight to the markets because we currently see a market that braces for possible changes, Jacqui, to the tariffs on Canada and Mexico. All of this being suggested by Commerce Secretary Howard Lutnick in a Bloomberg interview with Bloomberg Television. We are basically being bounced around by the latest headlines.

We have got so much to debate when it comes to the market and indeed the earnings with CrowdStrike looking worse than the market had braced for and CrowdStrike currently trading off significantly by some 8% off as much as 12% at one point as once again that hit.

And that hit to the entire global breakdown in software that we saw back in last summer, shares still having an effect as we saw worse than expected earnings outlook for this company. Let's dig into all of this with Bloomberg's Isabel Lee because we have whiplash on our hands, whether or not it's about the latest announcement for semiconductor support here in the United States, whether it's whiplash ultimately and whether we will have tariffs remain in force or not. How does the market digest this moment?

I think that's why they're confused. Markets have been seesawing between gains and losses. Before I came here, I had a script in my head that stocks rallied because of the ISM beat. But now as I'm sitting here, they're actually edging lower. It's been a wild ride and options traders really predict more volatility to come. And on Friday, we have the big payrolls data. That's also going to add to the volatility. We have options traders predicting a move of 1.2% in either direction. And that's pretty significant. So it's really just if you take a step back, investors are on edge.

Even for us, on the terminal, you have headlines after headlines. You just really don't know what to expect. Some people argue that it's too much of a data-driven market, but it remains to be seen. Isabel, we're expecting some kind of guidance from Howard Lutnick later this afternoon. What subsectors within tech should we be on the lookout for?

There's automakers, there's also chip makers, but the thing is, tariffs itself isn't really bad. We have many analysts telling us that it's tariffs plus lingering growth fears plus the prospects of the Fed keeping interest rates higher, plus the higher stock valuations. Then if you have all of that, you question whether the markets should be this high. But other than that, even in Asia, we have Asian equities rallying, we have German stocks really in question after that really big stimulus that they're injecting.

All in all, we have recession probabilities rising. We have a JP Morgan implied probability of economic downturn rising to 31% on Thursday. That's up from 17% at the end of November. So now, again, we have a lot of investors predicting their own models of recession, but it's really just a tough market to digest. It's a tough market, a global market, for companies trying to sell at the moment. I think of Tesla once again dropping lower. We saw...

China, weakness yesterday in terms of the data. You saw it in France and then the latest shoe to drop is Germany. I mean, Elon Musk, is this his brand or is it ultimately about what's happening in terms of curtailing some of their output, some of their production? I think it could be both because

Tesla registration plummeted in Germany last month and a part of that is Elon Musk and his politicking. But then a part of that is also just really the car makers suspending out plans of its Model Y. Yeah. And then they have a factory outside of Berlin and that will lose out to several projections. I feel like it's just really the perfect storm or the perfect cocktail, everything moving together. But yes,

every headline in every part of the world is really something to watch out for. Public investors are trying to discern it, so are private investors, Isabel Lee, across the tape when it comes to what's happening in the public markets. But let's get back to what leaders are talking about in the private markets, too. We've had Bloomberg

business leaders across the board at the Invest Conference that we're hosting today in New York City. Earlier today, I spoke with iconic capital founder, Michael Anders. And we began with the changes in consumer sentiment at this moment in reaction to tariff threats and also the impact on AI. Take a listen. But I think in spending a lot of time with consumer CEOs lately, there is definitely an awareness that there's a sentiment shift. I think the consumer is beginning to start paying attention to

the uncertainty in terms of where tariffs are going to take us. And so I think that's a pause that people are feeling. From our standpoint, though, we actually like this environment. It makes you do the work. And I think if you've got the team, you've got the rigor, you've got the discipline, you've got the focus-- and going back to what I said earlier, this is a moment where picking the winners is so critically important.

And so I think right now in this AI journey we're in, it's been a long road. I mean, AI has been around for decades. Does generative AI become more relevant at this moment where companies are worrying about predicting the future, making sure that they're profitable? Are they even more galvanized to lean into this generative shift? I think in the last year or two, the awareness around gen AI

has gotten everybody sort of to the point where they know it's critically important, but it is such a complicated

and nuanced situation we're in right now that I think people are starting to really know the need, they need to pay more attention. And I think it's less about the predictive nature of it. I think that's kind of where we've just come from. And now we've gone to where these machines are able to think, they're able to reason, and pretty soon they're gonna be able to act. And I think the acting piece is what gets us very close to this AGI moment.

where machines are all-knowing.

That was Mike Anders of Iconic Capital. And Jackie, such an important voice at this moment. They have bet on the past winners. They bet on the snowflakes, on the data dogs, on the addends. They're now making big bets on the likes of Databricks. But they continue to invest in this moment, even though we've got this tipping point, this worried about geopolitics. They like this environment where you're having to do more work. And I think Mike putting money where the mouth is assured insurance technologies. They just committed more money to that particular Gen AI business just yesterday.

That's right, Caroline. Not always the covered names are a little bit underappreciated in tech, but crucial sectors to keep an eye on. Now let's go to the Bloomberg Invest Conference for a conversation with KKR co-CEO Joe Bay along with Bloomberg's Shanali Basik.

across Wall Street. And we're going to get to some of the things underpinning those goals. But first, we're going to start with a big view on where the world stands today. And as we've been talking about, Joe, in the U.S., investors are trying to shake off that tariff hangover that exists right now. The markets have been very jittery. Investors are digesting how these trade policies could be in the future. How do you view the impact from your seat?

Sure. I think it's obvious to everybody that we're in an environment right now where there's a lot of uncertainty around trade tariffs, but it's not necessarily new. Even with the first Trump administration, he was focused on tariffs and trade. Biden kept most of those tariffs in place. So I think in our business, you know, we're very long-term investors. We need to be thinking about these issues over time, not just in one administration. And what I'd say is, you know, we have

teams at KKR who focus on all these areas of macro risk, whether that's currency risk, tariff and trade, geopolitical risk, regulatory risk, in each of the different markets that we're investing in. I think this issue around supply chain security and resiliency, which relates to tariffs, is obviously front and center for all long-term investors, but people are trying to parse through what this all means. The final policies are not in place.

the actions of other countries and governments in reaction to what Trump may or may not do is still unknown. So it's very fluid at the moment, and I think that's obviously creating some uncertainty and volatility. - You know, it's interesting. In conversation with you, you had mentioned that this was a risk that you should have seen coming in a lot of ways. So from where I'm sitting, it looks like KKR has been preparing for this in a way that many investors

kind of very obviously have not been. So what have you been doing to prepare for all of this uncertainty knowing that there's even more of it ahead? Yeah, so I think we have over 150 companies in our private equity portfolio around the world. So again, supply chain resiliency, multiple sourcing avenues for our companies has always been a part of the risk mitigation approach.

And we spent a lot of time really over the last five, six, seven years understanding that risk and mitigating that risk. And when it comes to new investments, I think a big part of our job thematically is understanding the risk environment we're in and choosing those themes and sectors and opportunities that really have less exposure to tariff risk or trade risk.

So maybe a couple of examples of that is, you know, healthcare services are very domestic, whether it's in the US, Europe, or Asia. You know, that's an area where we feel like the tariff risk at least is not a pronounced risk. You could look at certain services businesses. We've made a number of investments in companies like home services, foundation inspection, maintenance companies in the US for an aging housing stock. You look at IT services and software investments in different countries. Again, very little tariff risk.

So you're able to really zero in and target those industries and sectors where you don't think this is going to be a big problem. When you think about the ripple effects that you might see from the tariff strategy, there are a lot of concerns about inflation, growth. How are you thinking about the economic headwinds that the U.S. is facing? Listen, I think that's one of the big uncertainties out there that people are trying to figure out. Tariffs are inflationary by design.

So I think if that leads to an escalated level of inflation in the U.S. economy, obviously that's going to slow GDP growth. It may put some pressure on the Fed, obviously, in a more tough economic environment to lower rates faster over time.

But we've always felt that the bigger trends happening in the world, whether that's energy transition, the massive investments into data, a lot of these things are inflationary by its nature, putting aside tariffs. So we have a higher resting heart rate for inflation globally today than we've had in the last decade. And you expect that to continue. And potentially even get higher.

inflation, right? If these tariffs and these trade wars continue, it's not an unreasonable expectation that in the near term you could see higher inflation. Well, doesn't that mean higher rates? Or do you think that the Fed is going to have to lower rates into the face of that? People are starting to use the word stagflation an awful lot these days. I think it's going to be different in different markets. And I think the Fed's going to have to be very nimble in how they navigate this risk.

Obviously, if the US is headed towards an economic downturn, cutting rates is probably going to be the policy response.

If rates are high and we're not headed down that recession path or deceleration of growth path, then rates could actually go a little bit higher in the near term. So let's look at this from a global perspective as well. I think one unique view you can bring from KKR is that you are very global in nature, so you see the way that the changes are happening in the tariff strategy, the way that

nations are kind of separating in their relationship to each other. You see that on the ground through your portfolio companies. What are then other areas of the world that are maybe even more attractive to you than the United States right now?

Well, you know, I think it's not a secret you had it up on the slide. We're big fans right now of Japan. We think that is a really, really under-penetrated opportunity, especially among U.S. investors. They really haven't figured out how to get the exposure they want in a market like Japan, where they're coming out of two and a half decades of deflation. So finally, positive wage growth, pricing power, inflation is very modest, but positive inflation right now, and rates are actually increasing modestly in Japan.

that's a completely different macro picture than what we've seen in Japan for the last three decades. And a really exciting time when you marry that with shareholder reform, activism, corporate governance reform in that market. Outside of the United States today, Japan is the largest destination of our capital.

So it's interesting. In addition to Japan, KKR has maintained a commitment to China as well. In fact, there are big deals that are in the market that KKR may be involved with at this very moment. So a lot of other investors are very worried about China, the internal economics and the relationship that China has to the United States. Yeah. How do you view that dynamic? Yeah.

Yeah, listen, I think the geopolitical tensions right now obviously are front and center for us as we think about where to invest and how to invest. And in China in particular, you have to avoid those sectors that have sensitivity on both sides of the ocean, both the US government and the Chinese government. So we have not invested in some of these sensitive sectors like electric vehicles or semiconductors or AI. That's not the focus of our China investment strategy.

We're really focusing on super high quality domestic businesses that are around domestic consumption and services. So in our portfolio today we have one of the largest or the largest Chinese pet food company. Again, geopolitically not sensitive. We own one of the largest pharmacy chains in China. We own the largest white mushroom grower in China. All geared towards the domestic market, a growing middle class who wants higher quality goods and services and food.

You know, and I think that's the sweet spot of where we're focused in the market today. That's interesting because even if you're focused on the Chinese consumer, that might be a little more insulated to, let's say, the global macro challenges. There are a lot of concerns about the Chinese economy. Why are you seeing through them? Yeah, listen, I think the overall long-term trend in China is the middle class is growing.

And the expectations of the middle class are really for higher quality goods and services, safer food, safer services. And that's what these companies that we're investing behind are really catering towards. No doubt the macro growth in China has slowed from a decade ago. You were talking about a country growing at double digits GDP.

they're targeting 4% to 5% growth today. So there has been a slowdown. There's clearly challenges in terms of the real estate market in China. And you have to factor all that in, in terms of the growth rate you're underwriting and largely the entry multiple. The Chinese stock market today is one of the most interesting value markets in the world in terms of the multiples. So if you know what you're looking for, the type of risk you're trying to mitigate against, you can still find some interesting opportunities. You know, yesterday I asked the question,

Is American exceptionalism dead? In addition to that, I ask you, is globalization a diversification play? Is it a safety trade? How do you think about it? Well, we are a very, very global firm, and we have a lot of different ways to participate in those opportunities. Private equity, real estate, private credit, and infrastructure.

So in really volatile periods like we're in right now, having that flexibility of capital, we could partner with companies, management teams, as a provider of anything from senior investment grade debt, right, to non-investment grade debt, to structured credit solutions, structured equity solutions, growth equity capital, to buyout capital. So, you know, today it's an interesting market when volatility spikes,

That usually leads to really, really interesting deployment opportunities for our firm. You need to be nimble. You need to have the local reach in all these different markets. But we're excited, quite frankly, about 2025. There are going to be hiccups. There's going to be some headwinds in terms of some of these macro policies. But our ability to deploy scaled capital around the world, we think, is quite high. I will still ask you, if not dead, then is American exceptionalism then overblown?

No, listen, I think this notion that the U.S. is going to win alone has never been the case. I think the strength of the United States is really the resiliency of the economy, the strength of our capital markets to mobilize capital to support companies in the private sector, and labor productivity. When you think about why the U.S. has grown faster than Europe or faster than Japan, it's really about labor productivity in the United States. A lot of that is technology-driven and innovation-driven.

But a lot of that is our unique mobility of labor in this country. You think about Japan, which is going through this resurgence. Structurally, they've done the best job of any country in terms of women participation in the workforce, people working longer in Japan. They've got real demographic challenges. They've done an excellent job around automation and robotics in their industrial base. But they're not getting the labor productivity because the mobility of labor in Japan is quite constrained. And their investment in software and tech

is a fraction of what you see in the United States. So the real superpower of the United States is labor productivity at the end of the day.

I do want to spend the remaining time here switching gears, talking about the future of KKR because it's been fascinating to watch the change from an iconic private equity company to what you are today. There was a full acquisition of your insurance company last year, Global Atlantic, and it's made KKR look more and more like Berkshire Hathaway. And there's one part of your business that's far less understood that I think makes you look like the

the most like Berkshire Hathaway, and that's your strategic holdings business. Many people don't know that KKR owns 18 companies on your own balance sheet at KKR. What is this business going to be in maybe 10 years, and why is it valuable to you? - Sure, so when you think about KKR as a business, we really have three core strategic parts of our business strategy.

Asset management, I think, is well understood. It's what we're known for for the last 50 years. So that's our third party private equity, again, real estate and infrastructure, private credit business. And that's the $650 billion business that you mentioned at the start. The second big pillar of our business today is Global Atlantic. It's a 100% owned insurance company in the life and annuity space, roughly $190 billion of AUM there.

And again, playing into all of these trends around retirement savings, retirement security, and being able to offer individuals compelling products for their own long-term savings. The third piece of it is a segment that we introduced last year at our investor day, but it's been a segment we've been incubating for well over a decade now at KKR, and that's strategic holdings.

So what we're trying to build in strategic holdings is, in some ways, a mini Berkshire Hathaway. These are companies where we own large stakes, sometimes controlling stakes, sometimes not.

but businesses that we think we could own literally forever businesses that have the potential to compound in mid-teens over a very very long period of time very defensive in nature so we have 18 companies in that portfolio today we're going to continue to redeploy our free cash flow at kkr to invest in more of these types of businesses and it's not just private equity over time it's going to include certain platforms probably in infrastructure and real assets

maybe certain build-ups that we're going to do in different sectors. When Scott Nuttall and I, my co-CEO, joined KKR back in 1996, Berkshire Hathaway had a market cap of $40 billion and roughly NAV balance sheet of $40 billion. You fast forward 28 years, they have a trillion dollar market cap on the back of long-term compounding of their balance sheet and their investments.

Some version of that is what we're going to be doing with strategic holdings, but leveraging all of the skills and expertise we have in our private equity teams, our infrastructure teams around the world. So what's an interesting parallel here? If you think about Berkshire Hathaway, is it almost like Global Atlantic is your own Geico and these future infrastructure holdings will be your BNSF and your private equity holdings would be kind of like your stock portfolio?

Yes, it's an imperfect analogy, but directionally you are absolutely right. I think, listen, strategic holdings for us, you've got to think about it as a way, how do we think about redeploying our free cash flow as a business back into the most attractive areas? Some of that might be in our traditional, you know, third-party asset management business, right? We find great ways to deploy capital across those investments. We'll deploy that capital. A lot of the capital is reinvested back into Global Atlantic, right?

We acquired our first controlling stake in Global Atlantic in 2020, and GA at that time had around $70 billion of AUM. Four years later, it has $190 billion of AUM. So we've supported that growth with more investment. And then this third segment of strategic holdings, obviously, which is what we're super excited about, is one where we're going to be continuing to invest a lot more of our free cash flow as a business. So our guidance to the street today is by 2026,

That portfolio will be generating around $350-plus million of after-tax dividends for us.

That's growing to $700 million by 2028 and $1.1 billion by 2030. So it is a very, very visible, recurring, growing cash flow stream at KKR. So you essentially have a kind of a future unicorn of sorts being built inside of KKR. If you're bringing in a billion dollars over time in this business, do you think it's built into KKR's stock, that assumption yet? I think people are starting to appreciate what we're trying to build

But I think the bigger picture is when you look at our universe in the alt space, five years from now, 10 years from now, I think many of the public peers in this sector are going to actually take very different approaches to how do they grow their firms. I think the approach we have with third party asset management, insurance, and strategic holdings is quite differentiated and different than the way most of our peers are trying to grow their firms today.

Now, I want to spend a little time talking about not just institutional capital and how you are deploying capital in your own balance sheet. We've been talking so much about how there's been a massive push for retail when it comes to the world of private assets. Everyone is doing it differently. You have a relationship with Capital Group in order to make this available in a mutual fund form.

How available is it to invest in private assets from where you're sitting? What's the minimum amount you would need to put into a fund to start to get access to what you're offering? Sure. So the way to think about the bigger picture opportunity is, you know, for most of our history at KKR, we were founded in 1976. Our core client base was really large institutional investors, pension funds, insurance companies, sovereign wealth funds around the world.

The individual investors who participated with us were really ultra high net worth families and family offices who could allocate capital as part of their diversification as really LPs in our funds. They were willing, they were sophisticated investors willing to take that 10 or 12 year illiquidity risk just like a pension fund would. So that's a very small percent of the households obviously in the United States, but that's how they've accessed and partnered with us historically.

What's relatively new for us in the last two to three years is we've introduced a series of private wealth products for individual investors who are accredited investors. Okay, so those are investors with a net worth of call it one to five million dollars. These open-ended evergreen products have semi-liquidity features, so you're not locking up your capital for 10 to 12 years. You have the ability, if you need it, to redeem a portion of your capital every quarter.

So it's a slightly different format, but it's investing in exactly the same deals that our flagship funds are investing in. So we're trying to deliver that same institutional quality experience, the same portfolio, the same access to deal flow, whether that's in private equity, real estate, infrastructure, or private credit, to individual accredited investors in that $1 to $5 million of net worth.

That's around 10% of the households in the United States in those first two buckets, ultra high net worth and accredited investors, and roughly half the AUM in the individual channel. With Capital Group, we have an exciting new partnership which really addresses the next 90% of US households. These are mass affluent individual investors who probably wouldn't be buying our private wealth product and wouldn't be LPs in our traditional fund.

So we're creating hybrid products with Capital Group in a mutual fund format. We're starting with credit in the second quarter where we're going to be putting a portfolio together where Capital Group manages the public credit. We will manage the private credit allocation in that mutual fund.

and deliver a product to the mass affluent that looks very different from anything they've been able to buy before. You know, it feels like the Holy Grail for this industry is making private assets available in 401 plans. Yes. How soon do you think that happens? And if not that soon, what's the biggest barrier?

Listen, I think, again, at a high level, when you think about some of the societal challenges we have, a big part of that is securing your retirement, right? As you retire from work... KKR co-CEO Joe Bay, along with Bloomberg's Shinali Vasek from Bloomberg Invest. This is Bloomberg Technology. Bloomberg.

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And I'm Jackie DeVallis in Washington. Let's just talk about more of the politicking that's affecting the market right now. And we want to think about what's happening in terms of President Trump and how he touched on, in his address to Congress yesterday, in particular, the focus on chips, which included a call, of course, to end the bipartisan $52 billion Chips Act. Take a listen. Your Chips Act is a horrible, horrible thing. We give hundreds of billions of dollars, and it doesn't mean a thing. They take our money and they don't spend it.

All that meant to them, we're giving them no money. All that was important to them was they didn't want to pay the tariffs. So they came in their building and many other companies are coming. We don't have to give them money. We just want to protect our businesses and our people. And they will come because they won't have to pay tariffs if they build in America. So it's very amazing. You should get rid of the CHIP Act.

Once again, investors try to digest what this means for market capitalizations, for the potential of buying publicly traded stocks. Have a look at what the reaction has been ultimately on the chip sector. We have been moving between gains and losses on the SOX, the semiconductor index. We're off by four-tenths percent. Intel drags us lower, a big recipient, of course, of potential loans and grants coming from the chip sector. We're off by 4.3 percent. But TSMC saying that they're going to be laying the groundwork here in the United States, is that the tariff?

that brings us here, the potential concerns there. TSMC up by 1.24%, Broadcom up by three-tenths of a percent. Mike Sheppard joins us to really discern the devil that is in the detail here. Investors trying to understand really what this means. Would ever any grants or loans be taken away from a company that's already been given it?

Well, our reporting right now indicates that there will not be any clawbacks that actually take place. So if a check has been written to a company in cash, nobody is coming knocking on their door saying, hey, we want Uncle Sam's money back to put some other priority under the new administration. But at the same time, Carol, it does raise a question about money that has been committed

but not yet disbursed. Would there be any delays in that or a possible effort by the president through Congress or through the Commerce Department, which oversees this program, to either stall or maybe try to redirect the money? Now, even that is kind of a remote prospect. And when the president said that he should just

have Congress get rid of the CHIPS Act, he turned right around and looked at Mike Johnson. It was one of those moments during his address, and that really put the ball, in essence, in Congress's court more than anything else. We have seen a few changes, though, in this CHIPS Act office, Carol. And one of them is that the Doge-driven cuts led by Elon Musk, they have gone through that office with the loss of as many as 40 employees who would oversee the

deployment and disbursement of that money. So we are seeing some disruption to the program no matter what. One difference you highlighted between TSMC and Intel was in the share price. And part of that reflects that Intel is struggling to find customers that would sustain those big new plants that the government is helping in part to build. TSMC, on the other hand, heard from both AMD and NVIDIA on Monday that, hey, we're ready to buy those chips you guys are going to be making for us there.

Mike, where does this leave President Trump's vision for boosting domestic production of these critical chips and just broadly our competitiveness with China? This program was kind of supposed to put us in the lead, keep us there. What other levers does he have to pull now?

Well, we know the favorite lever of Donald Trump, and that is a word that he refers to constantly as the most beautiful word perhaps in the dictionary, and that is tariffs. And he sees that as the driver in getting TSMC to make its decision to move to the U.S. And he also invoked that a week ago when Apple announced

announced a $500 billion plan to invest in the U.S. over four years and hire as many as 20,000 new employees here on American soil. Trump said that the threat of tariffs had prompted Apple to make that decision. And he sees it as a way much more than subsidy programs

to effectively bring companies to make their investments here. And he's also promised regulatory relief on permitting for any companies that want to invest more than a billion dollars here in the U.S. So it is a combination of tariff threats and regulatory relief. And he talked about regulatory relief as well during his speech last night.

That's Bloomberg's Mike Shepherd. Thanks so much for joining us. Let's dig in more to the impact of Trump's comments on the CHIPS Act and tariffs. We're joined by Liza Tobin, Managing Director of Garneau Global. Liza, there is a lot to digest last night, but I want to start with the potential repeal of the CHIPS Act. This was really supposed to cement our position in the AI competitive landscape. Does this put us at risk of falling behind?

Yes, the comments that Trump made in his speech last night were not new. He's on the record of complaining about subsidies. And what's really at the heart of his concerns

is not wanting to be subsidizing other countries. And so he's, you know, in his first term and now, he's putting pressure to get our allies to reimburse us. He really feels like it's unfair that TSMC, a Taiwanese company, has gotten subsidies. And so you've seen this ratcheting up of pressure on TSMC that resulted in the $100 billion announcement that TSMC will put even more

investment into the United States. The $65 billion already announced before in the Biden administration was already the largest foreign direct investment in U.S. history. And so by adding another $100 billion to that, it really tops the chart. So it kind of remains to be seen if that will be enough to kind of satisfy him that he's been reimbursed by Taiwan and TSMC for these subsidies. But that's really at the heart of his concerns.

How then can a local player like an Intel be reimbursed? Liza, talk us through what you think the carrot and the stick situation is for local players who have been promised local US money.

Yeah, that's a good way to put it, Caroline. I mean, the stick, of course, is tariffs. And I agree with your previous commentator that his favorite tool, his kind of Swiss army knife policy tool, is the tariff. And so that was the stick.

that we heard about. But there were also some kind of promising carrots sprinkled through his speech. He talked about tax cuts for manufacturers to buy more equipment. That would be a positive thing. He also talked about high-skilled talent. So the attention has gone to his proposed gold card idea, where high net worth individuals could pay $5 million to get a green card. But also buried in the speech was an allusion to the issue of

of high-skilled graduates from U.S. universities having to leave the United States and not being able to stay and get a green card. And so it sounds like President Trump wants to change that, and that's something that many companies complain about as being the number one constraint to setting up

companies and manufacturing plants in the United States is a lack of skilled workforce. Let's talk more about that talent pipeline because the CHIPS Act was not only providing money for the manufacturing of plants but also to agencies like the National Science Foundation which really develops a lot of these master's degree, doctorate level students that eventually end up in the private sector. By yanking that funding away, what does that do to that pipeline of talent longer term?

Yeah, I think here there are a couple parts of President Trump's agenda that are working cross-purposes. On the one hand, his instincts are that we need to attract the best and the brightest to the United States, but on the other hand, you have...

Doge kind of firing workers across the federal workforce and trying to cut funding. So if that starts cutting things like federally funded R&D and other support for science, you know, there's a very strong track record of that kind of federal investment in R&D paying off over the long term economically and in terms of moonshot programs. And so here I think Trump's agenda is kind of fighting

a fighting within itself and it remains to be seen how that fight will be resolved. Liza, we bring you on time and time again to the show because of your Chinese expertise here, whether it is previously at the Special Competitive Studies Project, you're now of course with Garneau Global thinking about geopolitical risk. In 30 seconds, is the new policy, the new administration, setting the US up better or worse versus China?

So what's interesting is China has been a bit on the back burner in President Trump's first six weeks. He's not talking about China as much. It only came up very briefly a couple of times in his speech last night, kind of in passing.

But we know that over on the other side of the Pacific, Beijing is opening up its National People's Congress today. Their premier made comments kind of reinforcing their desire to annex Taiwan. And, you know, they're ratcheting up the pressure in the Taiwan Strait. So it's only a matter of time before China kind of forces itself back onto the front burner of Trump's agenda.

Eliza Tobin, always great to catch up. Managing Director at Garnaut Global. Thanks for joining us. Coming up, bringing AI to consumer applications. Axel's Ben Quazzo is with us, talking about the opportunities in that consumer space. This is Bloomberg Technology.

Time now for VC Spotlight. There are a growing number of opportunities for applied AI to transform your and my products, the consumer. That's creating new openings for investors. Ben Quazzo is a partner at Accel, joining us for more. And Ben, when I think of your career, I think of AI and enterprise, but you're really leaning in here to thinking about how it's going to affect my life. What are some of the bets that you've been making?

That's right. So we recently led a $78 million Series C into an AI-powered language learning app called Speak. And so specifically, Speak teaches its learners how to communicate, how to have conversations through voice and audio. And this is kind of in contrast to the historical industry driven by memorization and grammar-centric techniques. So we're really excited to back the leader in AI and kind of the language learning ecosystem.

Ben, where are we now when it comes to consumer technology? Because there was quite the heyday in the mid-2000s, but today in the era of AI, the biggest checks are being written for a lot of enterprise-focused companies. What's left? What opportunities are you seeing to really bring back that consumer space?

Yeah, look, I think it's been a tough decade for consumer on the whole, but AI unlocks a whole new opportunity. And we're actually seeing a little bit of a blend of both the B2B application side of the house with the consumer side of the house. You know, at Accel, we're trying to back teams and products that are bringing 5 to 10x better user experiences to its users.

And within the consumer world, that can come in the form of language learning, it can come in the form of music and health and wellness. So yeah, I think there's a lot of opportunity and frankly, the foundation that AI provides for a lot of these application layer businesses are what's the real game changer here. - What do you make of valuations right now in the market? AI seems to be an outlier, still getting those huge valuations even before a company has started generating revenue. Do you think some of that will start to soften?

It's hard to predict the future. We're going to go through a lot of local maximums, local minimums. I think at Accel, we're focused on what the next decade is going to drive from an enterprise value perspective. And so if we're backing the right products and the right teams who are laser focused on those missions, the valuations hopefully we'll look back on and

and won't feel too scared about our entry points. But there's no doubt there's a lot of excitement here, and I think you have to be disciplined on where you're placing your bets. But Ben, is some of that fluff coming out? I was speaking with Mike Anders over at Iconic earlier today at Bloomberg Invest, and he's saying naturally this disrupt

this consumer sentiment shift, maybe that's a better environment for his company at least to start writing checks in because we do get rid of the froth, the FOMO a little bit. I mean, our valuation is coming down in the private sector when we're off by 23% compared to Nvidia's high a little bit earlier in the year.

Yeah, I think the tough part about looking at public valuations is they're changing on a daily basis. And we're thinking about where these companies settle five to ten years from now. And so while, yes, we'll see, you know, medium shifts week to week, month to month, the truth is our underwrite really has to be what can this company be five years from now, ten years from now. And that's a challenge, but it's not necessarily correlated to the day-to-day price movements in the public markets.

What do you make of the humane kind of disaster there? It didn't really take off the AI pin. It was really the first intersection of generative AI and hardware. Do you guys look at those types of opportunities when you're going out and looking at, you know, how can we really bring this from a more consumer standpoint?

Yeah, look, I think it's always easy to poke holes in somewhat failed missions. Hindsight's 20/20. But the truth is, consumer is such a big opportunity that you have to take these big swings. And so I have a lot of respect for that team. I have a lot of respect for teams that are chasing massive end markets like audio or like fitness or like health and wellness.

I don't imagine they're going to be the only one. However, I also think we're going to wake up in 2035 with a whole slew of new products that we use every single day. And not all of those are going to be created by the Apples and Amazons of the world.

That's Ben Quazo, partner at Excel. Thanks so much for joining us. The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and Microsoft Azure.

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It is the startup aiming to bring back extinct species, like the dodo bird, like the woolly mammoth. And it says it's achieved a first step towards those goals. Colossal Biosciences has created a woolly mouse. Scientists modified the mice using DNA and genomics technologies, giving the animals longer, thicker hair and an altered metabolism. Ben Lamb, Colossal's co-founder and CEO, is back on the show. Ben, thanks so much for being here.

How big a step is this? Because they look really cute, but they don't look that different from other mice.

Well, I think they look significantly cuter than mice. One article actually yesterday said they're the most adorable mice that have ever been created. They did say it was an accident, which isn't true. It's been very, very targeted. And some people have already asked, will the woolly mice increase the speed at which we get to a mammoth? And the answer is no. I've been on the show before, and we've been editing our Asian elephant cells with mammoth alleles now for about two and a half years. But what the woolly mouse does is it proves that our end-to-end process

of understanding computational biology from this ancient DNA, making the edits, and then screening the embryos so that they're healthy. And we produce living, healthy animals works. And it would also work in one month. So we started the project in September. In October, we had our first mice. And they had exactly the number of edits we targeted with 100% efficiency. And the exact phenotypes are physical attributes that we're looking for, which is a validation of all the edits we're making in the mammoth already. This is pace then.

What is the next step? Where do we get to see the next innovations for this particular mouse? Yeah, so right now, you know, it's obviously clear that we can see the hair floofiness or wooliness, as we like to call it, in terms of the texture, the thickness, and the different ways it grows. We can also see they're slightly fatter and a little bit larger, so that goes into the lipid metabolism genes that we've edited from the mouse.

mammoths. And then we can also see obviously the color, which is the color that mammoths are when you pull them from the permafrost and clean all the permafrost muck off of them. But what's really interesting is over the next six to 12 months, once we get approval from our ethics board and our IACUC board, we'll actually start to do behavioral tests versus wild type mice with feeding them different diets,

increasing the temperature just a little bit to see how they behave in these different environments, to see if they do prefer cold tolerance. And that'll be another signal that we're on the right track with some of our mammoth edits that we're making in the Asian elephant genome. Ben, I asked you it last time, and I sort of returned to it at this moment of geopolitical anxiety. A man

who has built generative, well, you've built AI companies, you've thought about defense, you've thought about space, but now is the time you're thinking about woolly mammoths and potentially extinct animals coming back. Push us forward as to why again, why we're doing this.

So we're going to lose up to 50% of biodiversity between now and 2050 if we don't do anything about it, right? We know conservation works. It just doesn't work at the speed of which we're eradicating species and changing the planet, right? So we need new tools and technologies in that. And what's amazing about this project is it gives us an opportunity to build new tools and technologies which can help humans, which we're monetizing. It also builds opportunity to build technologies that can help conservation, which we're giving to the world for free. We've launched our foundation last year with a 50%

$50 million seed investment in it. And it also gives us an opportunity to inspire the next generation. So I'm really glad that I'm not dealing with defense or some of the other geopolitical issues. I think everyone generally agrees on both sides of the aisle and all over the world that losing species is bad. And we should do everything we can to protect what's here and build new technologies for conservation. And that takes money. And boy, have you raised it, more than $435 million of it. Ben, the next stage is how expensive is it? How much more might you need to raise?

We're a technology startup that's also innovating new technologies for human healthcare and other industrial use cases. Like we spun out Breaking last year, which is our plastic degradation company. We spun out FormBio, our computational biology company for human healthcare. We have another one that may or may not be coming out at the end of this year. And so we will continue to raise money as long as there's investor interest and sentiment and they're excited about the mission. But I think genetic proof cases where we can identify genes

and make 100% of precision edits using multiplex editing, making all these edits, these edits weren't stacked, they were made all at one time with 100% efficiency.

That's just not something that we see in genome engineering, right? And I'd say that leading the charge in genetic multiplex engineering is probably a pretty large market long term. So we will continue to raise more capital in the years to come. The woolly mouse, the stepping stone to the woolly mammoth. Thanks so much for bringing us the cute pictures and your expertise, Ben Lam, co-founder and CEO of Colossal Biosciences. Now that does it for this edition of Bloomberg Technology.

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