US-China Tariff Tensions' Impact on Tech Sector
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Live from New York and San Francisco, this is Bloomberg Technology. The trade war between the U.S. and China, it continues. China raising its own tariffs on all U.S. goods from 84% to 125% starting tomorrow after the U.S. raised tariffs to 145% on China. China saying, your tariffs are a joke, United States. It's no joke to investors. What an extraordinary week we have had. We are currently up

almost 6% over the course of the past five trading days, Ed, on the Nasdaq. But it really doesn't paint the picture of the extent of the whiplash that we've seen throughout that week as we pull back on tariffs towards other nations. Look at what we've done on the month, though. This context is needed. Sure, we're up on the week. On the downside for the course of April, the trading month, we're off 5% on the Nasdaq 100. Dig into the details, Ed.

Yeah, I'm looking at the chip sector and across semiconductors there's divergence in the session between fab-less names, those American companies that design chips but don't make them, and those with domestic operations in the US. Buried among the headlines overnight was the Chinese regulator and industry body saying, by the way, when we think about tariffs on US goods imposed by China, this is how we'll define it. You and I are going to get into that throughout the course of the show. We have to talk about...

I feel like Bloomberg Technology as a show was early to this discussion on Monday. Will the US build an iPhone in the future? Five days were higher, but it's been so volatile and the analysis from different corners of the market is so different. I think we should get into it, Karen.

We should, because we've been debating time and time again. A made-in-America iPhone is the goal that President Trump believes could be a reality, Ed, but replicating China's advanced supply chain, its skilled labor in the United States, would prove nigh on impossible for the tech giant. Anurag Rana of Bloomberg Intelligence joins us. You've got a new note out just talking about the implications of tariffs on the margin of Apple. But what would it do to the margin of Apple if they ever brought production for the iPhone to the United States, Anurag?

See, I think a lot would depend on the raw materials that go there, the component cost, the labor cost. And I think it will be very hard for Apple to, you know, let's say, raise the price of the phone to 2X and then make it in the U.S. It has to be done in a way.

That actually keeps the cost down and at that point, I mean, keeps their margins. The reason why Apple shines compared to any other consumer electronics company is because it has very high gross margins compared to, you know, let's say somebody who just sells an Android phone in Asia, for example.

But those margins are under threat. Team, let's bring up Anurag's research that published, I think, about 30 minutes ago, 20 minutes ago. I'm just going to read it. Our analysis suggests a margin impact of 100 to 170 basis points for every 10% tariff increase on China-manufactured products. Apple could mitigate some of the impact through price increases. You've been talking about price increases all week. The key question seems to be where, and you think that will be on the services side, not on the handsets.

Because as I said, it's very difficult to take a $1,000 phone and double it up to $2,000, but it's slightly easier to take a $299 iCloud plan and let's say make it up to $5 or $7. And also remember, some of those, you know,

Revenue streams, when it comes to the services business, especially cloud services, they have very high incremental margins. These are products with 75%, 80% gross margins, much, much more than the product side of it, and it doesn't really pinch the consumer that much. And they could phrase it as it's only going to be done over the next six months or the time period when the tariffs are, and then they can scale it back.

I think from a consumer point of view, it is less, you know, it hurts them less. But again, you know, that's just one service I talk about. There could be others as well. But I feel very strongly that I don't think they can raise the price of a phone up by, you know, 50, 60 percent, maybe slightly, maybe 5 percent, 10 percent or so. But anything above that, you know, I think destructs demand.

Anurag Rana, Bloomberg Intelligence. Thank you very much. So stick with Apple and the impact of tariffs on technology. Tony Wong, T. Rowe Price, Science and Tech Equity Portfolio Manager joins us now.

Apple, the number one holding of T. Rowe Price's science and tech fund that Tony oversees. Tony, when I was learning about the technology industry and the markets and making my way through Bloomberg Television's newsroom, I was always told that Apple and names like it had an entrenched market position, strong balance sheet. And in crises or recession, that's where they would survive and thrive.

But I think right now you can't necessarily look back at history and precedent. How on earth are you modeling the future of this company?

Yeah, well, it's a great question, obviously. It's historically been kind of a ballasting name just that could weather a real kind of stock market storm. I'd say here, you know, I think that there is a lot of fear in the market and concerns around trade war and what deglobalization could possibly do to kind of Apple's manufacturing advantage in China. And so, you know, when I take a step back, they do have diversified supply chains. I think they are...

they do have the ability to move around and they do produce iPhones in India. And when you think about the U.S., the consumption of iPhones is roughly 25 to 30%. And so I expect that there's probably some flexibility to move some of that production to India more and therefore diversify that risk a bit. And, you know, at the end of the day, I think that it is about like, you know, how much of a staple the iPhone is. And so there's price differences

you know, kind of sensitivity among the customer to actually, you know, pay up for the iPhone. I think that actually could be bullish for the stock that just demonstrates it's more of a staple than people appreciate. But here, I do think that there is a lot of fear there. And so generally, you know, historically, you've been rewarded for leaning into weakness.

Then in this weakness, Tony, yes, on the day Apple is trading somewhat higher, on the week it is too, but on the course of the month it's down 14%. Have you been adding to your number one holding? Has it at any point looked attractive to get back in with more addition?

I think, you know, the company's still really well positioned over the long term. You look at, like, the ecosystem they've built, the quality of their product, and then potentially you also have an iPhone upgrade cycle coming. And, you know, the replacement cycle has been elongated. And if you get a new form factor, I think that could be, like, really attractive. And, you know, at the end of the day, like, the valuation has become more attractive, especially at these levels versus where they were before.

six or nine months ago. In addition, it is one of the Mac 7 that hasn't been spending a ton on large language models. So the capital intensity and the free cash flow quality of the company is still very, very high quality.

Go there, Tony, for a moment, because people were wringing their hands about Apple before the trade war because of a lack of urgency on AI, the implementation within Siri, this distraction that tariffs cause. Does it set them back even further about upgrading the product from an AI perspective?

Well, I think that they are constantly optimizing their supply chains. Obviously, it's additional work on their plate, but I don't think that they are standing still on the AI front. I think they are investing more, actually, if you see that some news of them purchasing more GPUs. And when I think about

there's just a lot of things evolving. And what we thought a year ago has kind of changed in a lot of ways in terms of, you know, who can participate in AI and, like, what these large language models can cost and which one is the best. So every time, like, it feels like every month there's a new headline of who is in the lead. And so it could be prudent of Apple to kind of, you know, focus on what they're really good at, what their competitive advantage is, which is designing really high-quality products that, you know,

fit into our lives that can be incorporated elegantly and at the end they do own that kind of ecosystem and you know over time i think they can uh you know drive value from that uh for their shareholders tony let's end this conversation on apple with a yes or no does apple manufacture and assemble an iphone in the united states in the future

I think it's possible in the very kind of long-term future. I think in the near term, you look at kind of what it takes to manufacture an iPhone. I mean, you know, there's thousands of people that are living at the factory that can be woken up at any time of the hour to make a change. And so, you know, I think that in the long term, that could be possible with additional advancements in robotics and AI. But I don't think it's going to be a next year kind of thing. Right.

I saw a headline overnight that we think is critical, right, which is China Semiconductor Industry Association issued this emergency notice. And they clarified that in the context of tariffs, they define point of origin where a semiconductor is taped out. In other words, where the electronic instruction set is formulated before it goes to the fab.

And if you think about the fabulous U.S. names, many of which you have big holdings in, they use TSMC or maybe Samsung. So the tape out happens in those countries as well. How much insulation do you think that gives them from the heavy China tariffs on U.S. products? Yeah, well, I think that if you take a step back, right, like the two countries have been trying to disentangle each other from major kind of supply chains and, you

you know, areas of where if you could substitute a domestic product, that would be preferred. And that's nothing new over the past few years. And I think that, you know, this kind of the latest piece of news is further kind of a step in that direction where, you know, it doesn't make sense to hurt yourself by, you

kind of tariffing the only source that you have. And so like in terms of stuff made in TSMC, like both countries need that. So it makes a little bit less sense to put a high tariff on that when it's sole source. So that's kind of my perspective as a continuation of industrial policy that kind of makes sense.

Let's talk about the others, though, that are exposed. Now, I'm interested as to whether you have holdings in those that are manufacturing in the United States or looking to even more with, of course, money coming from federal government wanting them made in the U.S. and what that does to the business model if they ship to Asia, to China specifically, Tony. Do you have to get out of Intel's and Texas Instruments?

Well, I think that over the long term, it's more about the technology and the differentiation and what you can, the value add that you can. So if you have leadership products, I think that's still number one.

You know, I think number two, I think that diversified supply chains like serving the local industry that it's based out of or the region is probably going to be, you know, a good thing. And so at the end of the day, I think it's those two things, like some flexibility in manufacturing, but like the main thing is the product leadership and the sector trends that a company is kind of, you know, kind of positioned to capitalize on.

Tony, like all technology investors, you have had to digest and understand communication from policymakers. How would you rate and rank what you've heard from the president,

Treasury Secretary Besson and others? Well, I'm a tech investor, so geopolitics is above my pay grade, obviously. But at the end of the day, I think that the U.S. administration and the leaders that we elected, they will do what's best for the country, for our companies here in the U.S. So I think that we trust them and they do, I think they are

trying their best. And, you know, at the end of the day, I think that they will protect American interests. And what's most important is keeping U.S. technology at the forefront. And, you know, that's what I look for as an investor. Tony Wang, thank you so much of T. Rowe Price. So important to have the investor take today and after one long week.

Chinese social media giant ByteDance. It saw its revenue jump 29% last year. It was driven by the global expansion of, you guessed it, TikTok. International sales grew $39 billion, contributing about a quarter of the company's revenue. It's all according to people briefed on the numbers. Now that, as the Chinese business, slowed. Now, of course, tensions between Washington and Beijing expanded.

to impact both the global economy, possible sale of TikTok in the United States. We've got to get to it all. Mitchell Green, founder, managing partner of Lead Edge Capital, longtime investor in names like ByteDance is with us. Mitchell, have you been adding to ByteDance? What do you make of where we stand in terms of TikTok in the United States? Yeah, hey, Caroline, thanks so much for having me on. What do I think? We can talk about that for a while.

The company continues to obviously do very well, as we've said in the past, in the grand scheme of things. Uncertainty kills deals. I wish I could tell you exactly where things stand in this negotiation between the White House, White Dance, the Chinese government, discussions around tariffs.

Look, we've always had, frankly, questions on the U.S. TikTok. You know, again, as I've mentioned in the past, we model out TikTok USA to be worth zero. I suspect something will come of it. I don't know if it's in a month from now, three months from now, six months from now. We shall see.

It is obviously a very valuable business that a lot of constituents want to figure out. Not only board members and shareholders and the CEO of ByteDance, but we now have this giant tariff war going on between the U.S. and China, so it's all going to get dragged into it and play out together. Mitchell, you've been on the secondary market picking up ByteDance in recent months. Would you want exposure to U.S. TikTok if it was indeed extricated out of ByteDance and had U.S. ownership?

Absolutely. And we have also not bought any ByteDance shares, uh, this year. Uh, there's been some, there's been some changes with CFIUS. A lot of people don't know about this publicly known that CFIUS came out and put some, uh, restrictions on what kinds of companies you could buy globally related to if the AI model speed was fast enough or not. It's a questionable area if ByteDance falls into this or not, but in order to just stay conservative and be on the right side, um,

We have not bought any more over the last several months. Would I like to own TikTok USA? Absolutely. If they allow existing investors, and again, about 60% of investors in the company are non-Chinese investors. If we could add to our position, obviously it depends on price, we could be quite interested.

Mitchell, starting Monday night into Tuesday morning, I started getting phone calls that there was quite a lot of activity on the secondaries market for ByteDance. Valuation range 280 to 320 billion, depending on the offer lot size right. But to your point, what I was told is a lot of that activity was

was from Asia, right? China, maybe Singapore. But it followed the president on Sunday night. You may have seen the clip on Air Force One saying that if it weren't for tariffs that he put in place, they had a deal. How do you interpret that trading? You know, if the outlook for the deal is poor, but you see private market investors in Asia trying to get more of a foothold?

The Chinese business is doing phenomenally well, which is actually incredible, given I don't think the Chinese economy is, like, roaring right now. I don't know if it's falling apart, but, I mean, it's been weak, and you can look at some of the other e-commerce businesses across China. And so, actually, how the performance in ByteGance is doing in China is strong. I wouldn't read into... I have no clue if a deal is almost done or close to done or whatever. I have... When it comes to politics, I...

tend to just listen and not really make opinions and i don't really know but yeah we'll see again again there's a handful of people that need to be involved chi the president of the united states and the ceo of bite dance and i can't say any of them are good friends of mine so if they do telephone you let us know i'll let you know if she calls me this afternoon

There is a technology conversation here, right? I go back to when I was at CES and at GTC very recently, and Jensen Wong's point, the CEO of Nvidia, that basically more than 50% of all the computer scientists in the world working on artificial intelligence are doing so in China or they are from China. What kind of future is there to sort of work with that country on technology and founding new companies?

I strongly believe, whether it's technology transfer, technology exports, imports, like the trade, trade is global. We all need to figure out how to work together. China plus the U.S. working together is a good thing. I am a strong believer in the education system in China, the entrepreneurship in China. I

as well as in the United States as well. But again, for instance, I've talked about this on Bloomberg and other sessions. Chinese regulate social media. In the United States, kids go on TikTok and post ridiculous videos about all kinds of stupid stuff. In China, they learn about science and math on TikTok.

I think maybe we should ask, should we be regulating this stuff more? Should we be repealing some of these laws that don't hold social media companies accountable? By the way, TikTok already does it in China. And so I think there are things that we should be learning out of some of those things that are happening in China and applying to the United States.

Interesting take, Mitchell. And I want to go there because you have exposure not just to China. We bring you on because you've been so long in the names like Alibaba, you're in Ant, you're in ByteDance, long-term investor understanding that economy. We look at the rest of your portfolio, you know well US exposure too, Uber, Bumble, you know Europe with Spotify. How difficult is it to remain committed to China right now when CFIUS is changing up the rules, when you are unable to commit capital in the way you'd like to?

It's complicated. And again, most of our business is actually North America and Western Europe. We have a team of 18 associates that are 22 to 24 years old that speak to about 9,000 companies a year. And we might speak to 10 to 20 companies all across Asia. So what we've done in China is a very handful of some of the largest businesses over there where they are effectively public companies. They just happen to be private.

We tend to like to be contrarian, you know, and it was funny.

A year ago, nine months ago, nobody liked, wanted to invest anything in China. Yet then you saw stocks like Alibaba go from $60, $70 a share to like $130, $140. Now people were liking China again because they saw Qi and Jack Ma, I think, at some conference together. And I don't know where Alibaba is today. Maybe it's back at $100 a share. So this stuff is so volatile. But we find that you buy China when the rest of the world hates it. You can tend to make lots of money. But again, most of the stuff we invest in,

is right back in the United States. And right now, look, I think in the tariff situation, I can have an opinion of it today. It'll probably change in a week, a month, in six months. But uncertainty is what actually slows down the economy, right? And our portfolio is mainly high-margin software companies that don't have direct inputs coming overseas and things being shipped in. But that being said, if you sell airline software online,

or you sell software to manufacturing companies and those companies are nervous about what's going to happen to their businesses, they might start to pull back on spending. And the whole thing kind of like unravels on itself. And if there's cuts to R&D in...

healthcare research and you're in a name like Benchling, which is all about community of scientists. I'm really interested, Mitchell, ultimately how difficult this environment is when some of the companies that we thought were going to go public now can't or don't want to. How is that impacting the way in which you raise the next fund, for example? Yeah, so we were very... We don't talk about performance on public media or anything like that. But, you know, we believe...

Investor funds that took advantage of getting liquidity and what's called DPI. It's how much money you've given back on a net basis to your investors over the last few years, the last five years is really going to matter for funds as they go forward raising money. We are in and we are going to everybody thought 2006 2025 was going to be the year of the IPO. There was maybe this giant IPO. Well, that's dead. That's not happening.

Now, again, I think these companies could go public. It's just a question of what valuation could they and will they then go public? And your guess is as good as mine. But I think this liquidity drought is going to continue.

And I think as a result of liquidity drought, you're going to have a lot of endowments and foundations and other big institutional investors that are over-allocated to private equity, venture capital, growth equity, real estate, private equity, everything, that are going to unlock the secondary market. And the secondary market has already been busy. It is about to... If this continues...

call it six months, nine months, or 12 months, you are about to see a huge amount of institutions that are going to be massively over-allocated to private equity. They are going to need to turn to the secondary markets and sell things.

That, for us, will create a great opportunity because you want to be buying from sellers that are forced to sell. Mitchell Green, Lead Edge Capital. Thank you. Really appreciate the conversation. Caroline, what you got? It's time for Talking Tech, Ed. And first up, Logitech. It withdrew its full year 2026 outlook due to, quote, continuing uncertainties of the tariff environment. Now, Wonderville analysts say this is a sensible move, but...

But the company's margins will certainly be challenged when you saw the impact on the shares. Plus, Tesla, it stopped taking orders in China for its Model S sedans, its Model X sport utility vehicles, both of which are imported from the United States. That's after the countries raised tariffs on one another, of course. This could be a setback to the company's already shaky position in the Chinese market.

Meanwhile, Alibaba co-founder Jack Ma, he's warned that AI shouldn't replace humans, but work instead to meet their every need. The Chinese billionaire who once likened AI to love, he argued that the technology should protect livelihoods and make lives better.

OK, coming up, analogue devices, Texas Instruments, big declines. We take a deep dive into two of Citi's top semiconductor picks. The timing of that call, very different from where the stocks are heading right now. This is Bloomberg Technology.

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And I'm Ed Ludlow in San Francisco. San Francisco's Mayor Daniel Lurie is pledging an economic and tech revival, aiming to restore the city's status as a global innovation hub. I sat down with the Mayor to discuss his growth strategy in the face of tariffs.

First off, we're the most beautiful city in the world. Second, the horsepower is here. The intellectual horsepower is here. We have great universities, including UCSF, around here. And young people want to be in college.

urban environments. They want to be in San Francisco. That's been proven true throughout history, and we're going to prove that again. We have great arts and culture institutions. We were just named the culinary capital of the country. So we have so much to be proud of, and we know that workers want to be here. Our CEOs who we're talking to, they know

that their employees want to be in San Francisco. No offense to my friends down in the peninsula, but people live in San Francisco and we want them to work here and we do have to get competitive. But it starts with safe and clean streets. Our property crime situation

Rates have dropped 35%. Our violent crime has dropped 15%. Car break-ins in February, the lowest in 22 years. This is a safe American city, and we want everybody coming back to work here, to play here, and to live here. Mr. Lurie, how is the White House and its tariffs policy going to impact your ability to do what you've just outlined, bring more of the technology industry to the city?

Well, listen, we are all and you all are reporting on it.

- Minute by minute, the uncertainty is impacting everybody around the globe. And so we have to plan for that here at City Hall. We're working with our department heads. We have a big budget deficit. We inherited one of the largest deficits in our city's history. So we're working day and night to make sure that we tighten our belts. We deliver core services to our taxpayers and to our residents, making sure that we focus on public safety.

focus on the behavioral health crisis and the drug crisis that is causing people to feel the disorder on our streets. But that is all starting to improve. And so we can only control what we can control here in San Francisco. And that's our $15.9 billion budget. We have a $1.1 billion budget deficit over the next two years.

We're going to get that under control. We're going to fix our structural budget deficit. And I'm telling you, we're then going to be off to the races. Databricks knows it. They just secured an office space, 150,000 square feet, open AI, just opened new headquarters by Chase Center. We are on the cusp of liftoff here in San Francisco, and we want everybody to come be a part of it.

So that was my conversation with San Francisco Mayor Daniel Lurie. And Caro, like the pitch to the technology industry seems to be San Francisco is beautiful and it's full of nerds. And that's not really a policy platform. But if you think about how the history of Silicon Valley has worked, right, there are many tech people here in the city. And what do they do each day, right? Where are all the big tech companies that they go to work at?

they're not in SF. They reverse commute out to the valley. But also what I wonder about is when we've got an economic quandary coming from the United States, when advertising dollars might be pulled back, when we've already got a meta, for example, that has been laying off people, how does that affect an SF economy going forward?

We'll have to debate that a little bit more in terms of what's happening over in San Francisco, but we also want a little bit more context about what the global tech policies look like in this current context that Meta has to navigate, that Alphabet has to navigate, that these SF giants have to navigate. Liza Tobin's with us, Managing Director at Garnot Global.

And Liza, I'm so interested in just your take right now on where we stand in this so-called tit for tat that today China's leader came out and said, it's a joke. We're going to stop raising to meet you. But we stand at 100, more than 100%, 125% tariff on US goods. The US has 145% tariff on Chinese goods. Where do we go from here?

Yeah, so of course about a week and a half ago President Trump declared a trade war on the entire world and then over the last couple of days it seems to have kind of slipped into an isolate China strategy. Clearly the president is torn between his deal-making and his decoupling instincts. He's hoping for a phone call with Xi Jinping but what we've learned really over the last 20 years of U.S.-China relations is that U.S. trade negotiators are

always disappointed with what Beijing brings to the table. And I'm seeing things play out this week that remind me of when I was in the White House in 2020. And that, of course, was when President Trump got his phase one trade deal with the Chinese. And then a couple of months later, he started getting seriously disappointed and blaming Xi Jinping for COVID, which, of course, tanked the global economy. And he felt ruined his electoral prospects.

And so in some of the president's comments just a few days ago in his speech, he's talking about Xi. He's hoping for a phone call. But he's referring back to COVID and saying, I like Xi Jinping. We get along great. But COVID, that was a bridge too far. That's what the president is saying. So he seems to be remembering the disappointment and the anger from 2020. And he seems to be shifting from dealmaking to decoupling.

We go to you because of your depth of expertise when you've worked with the CIA, when you've done the U.S. Indo-Pacific Command analysis for them as well, Liza, not to mention what you've done over at the, when you were at SCSP, CP, SCSP, I should call it, of course. And I'm interested, Liza, therefore, on where you go from who has the upper hand, whether TikTok's involved in this negotiation. Just take us forward as to what plays out next if we are seeing a U.S. president getting more and more involved

triggered by what happened in 2020.

Right. So I think we could potentially see some kind of a deal. Clearly, the president still would like a deal, perhaps involving some tariff concessions, maybe Americanizing TikTok, although he's already conceded that Beijing will retain the algorithm, which is really the brain that controls TikTok and controls Americans' media diet. So we may or may not see that. But I want to remind your audience not to over-index.

on the strategic importance of a deal, because we've always been disappointed by how China actually implements that deal. So I think if folks are looking for some kind of grand bargain that really makes some, you know, goes beyond symbolism and short-term measures and really addresses the fundamental imbalances of Chinese economy, this massive trade surplus, unfair trade

practices, they're going to be disappointed by that. So markets will react and go up and down on news or rumors of a potential deal. But a true grand bargain is really off the table, I think.

Liza, I'd like to hold you to account on two points that you've made, or at least debate them. One, isolate China as an accidental strategy. And then the data that you just flagged, the deficit between the United States and China. So this is the ECTR function on the Bloomberg terminal. It's 2023 data showing the deficit with China, $260 billion. But I think I'm right in saying prelim data showed the deficit growing in 2021.

Materially, when we think about technology, what we're talking about is a country that dominates the manufacturing of most of the world's consumer electronics and other things. So forget numbers and tariffs and markets and trade. Do you see the White House ever resulting this policy in more of that stuff happening in America?

The president certainly wants to, and he and his advisors are constantly talking about reindustrialization. I mean, the problem is the devil's in the details here. And it does—it's unclear if President Trump really understands the details and the extreme intricacies of these supply chains and what it actually takes to reindustrialize. And, of course, there's big structural challenges like, do we have the workforce for this?

The administration talks about manufacturing jobs coming back. Well, that's great, but actually we have a shortage of skilled manufacturing workforce. And advanced manufacturing is now a knowledge industry. This is a highly skilled profession. It's more like software coding and applying AI to the factory floor. And it's not yet clear to me if that kind of advanced manufacturing is front and center

on the administration's agenda. It's very much right now a tariffs first, tax cuts, deregulation and energy. And those may be a great start, but they also need to be kind of leaning into these more structural issues.

Certainly if they want to make iPhones in the United States. Liza Tobin, managing director of Garneau Global, it was great to have you join us. Thank you. Now, Federal Reserve Bank of New York president John Williams, he expects slower economic growth, higher unemployment and a pickup in inflation. All of this due to the U.S. tariff policy and reduced immigration. Take a listen to what he had to say just moments ago.

While uncertainty by the economic outlook reflects many factors, the effects of tariffs and trade policy on the economy are certainly at the top of the list. For example, my business and financial market contacts highlight that this has made it more difficult to plan for investments and for hiring.

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Let's get right back to financial markets. It's Friday at the end of a long week, basically flat on the Nasdaq 100, but up more than 5% over the course of the week. Basically flat on the Philadelphia Semiconductor Index, down 0.2%, but up more than 7% on the course of the week. And Cara, if you'll allow me to, there was a really important headline overnight that I think our audience needs to understand. And it came from China's semiconductor industry body.

basically citing customs regulators that how are they going to define the point of origin of a semiconductor, right? Think about global supply chains. And in the market right now, you see names like NVIDIA higher. NVIDIA doesn't manufacture its own chips. Names like Intel and Texas Instruments that do significantly lower. Here's what they said.

The point of origin for a chip in deciding whether to apply tariffs or not will be at the point it is taped out. And what that means is when an American company, for example, is done designing its chip in San Diego or here in the Bay Area, it then needs to send the designs to a contract manufacturer. We're talking TSMC and...

Korean names like Samsung, but that happens locally. And so they're saying, that's how we decide where your chip comes from. You tell me the big story that we've learned in the last two years about all these American chip makers. What are they actually not?

Well, they're not makers of chips. But some of them are trying to be. Some of them are trying to be contract makers of chips. Intel, for one, which is actually expanding its presence of making chips in the United States. What does that mean in terms of business model? You've just got to take out China from the equation. And on the flip side, of course, Domestic,

chip makers in China rallied hard. You saw the CSI 300 index up more than 3% on the day. This had real tailwinds for Chinese local players and of course pressure on some of the local makers here in the United States Ed. Yeah and the one thing I would say is that it all comes back to the end market. What does China do? It makes most electronics high-end or low-end and so that's why I was tracking this so closely but you're exactly right. But

But in some of the names you've just mentioned, analysts are paying attention for other reasons. They certainly are. Let's get to one of those analyst calls, because likes of Analog Devices or Texas Instruments, as you say, pressure today. But Citi named actually those two companies in its top semiconductor picks amid tariff pressures and recession fears. Look, Citi Managing Director and Semiconductor Analyst Chris Danley writing,

and analog companies such as ADI and TXN have outperformed during downturns. We would expect the same to occur in a recession with ADI performing best given higher margins. Blue Moves' Ryan Vlastella can break down some of the moves. On Semi, got a fair few downgrades in terms of price targets today as well. On Semi, meant to feel more of headwind versus some of these players according to Citi.

Absolutely. I think people are still really struggling to kind of figure out what this environment is going to be like for different chip makers, depending on their end market, depending on their manufacturing systems, their supply chains. It's all very uncertain, very up in the air at the moment. So beyond the naming TI among one of its top picks, Citi also said it was taking out the lawnmower. Those are exact words.

cutting estimates by 20% on average across the board for chip makers. That just speaks to how much uncertainty there is when it comes to this sector at this point in time.

The firm Citi had this estimate a while ago that the SOX, the index, would drop 20% if there were to be a recession. And I think I'm right in saying that they now assume a recession as a firm. There's a lot happening in the market. You also wrote about the taped out point of origin story yourself this morning. Just go back to explain some of the moves of the market in the here and now.

Yeah, so absolutely. Like you were saying before, companies like TI, Intel, Global Foundries, Microchip, all these have sort of domestic manufacturing plants for their products. And these are the stocks that are really falling today. Other ones that do most of their manufacturing abroad, Taiwan Semi, NVIDIA, AMD, Qualcomm, Bracom, all those names,

they're probably higher in the morning. It's obviously a very volatile situation. There's a lot of cross currents going on right now, but certainly we are seeing Texas instruments in particular weaker today, Intel particularly weaker today, whereas companies like Nvidia are higher.

Let's go to Nvidia for a moment because a different analyst over at Citi has actually been downgrading Nvidia as well. Their key concern is that these hyperscalers, Meta, Alphabet, you name them, are going to actually start to curtail their spending on AI data centers. How much of an overhang is that for names like whether you're a Fabless or Fab kind of a chip maker?

Well, for NVIDIA in particular, I had to go and look, but I think 40% or so of their revenue comes from just four companies, which is Microsoft, Meta, Alphabet, and Amazon. So to the extent those companies pull back, and I'll say Alphabet a couple of days ago, it had a big cloud conference and it did affirm its CapEx plans. Microsoft, you know, it affirmed its own plans earlier this year. So right now it seems like maybe for the next 12 months, all those spending plans are pretty intact.

But if we get to 12 months from now, and maybe especially if we're not seeing a huge ROI on all this AI spending, especially if the cost picture has changed dramatically due to tariffs, if the whole picture has just changed because of weaker economic growth, all these other kind of factors, it would not be super surprising under those circumstances if these companies started pulling back on their CapEx, especially as it pertains to their AI infrastructure, which is at this point a lot

of Nvidia products and what that means for them in terms of their growth, in terms of their profitability. Well, just given its customer concentration, that would be a pretty dramatic hit to a company like Nvidia. Bloomberg's Ryan Vlastadica, terrific. Thank you very much. A single shipyard in China now produces more ships every year than all of the American shipyards combined. Think of that. And it was a business that we used to dominate.

President Trump there, now one startup looking to manufacture ships in the United States. It's Blue Water Autonomy, preparing to build large vessels able to travel between San Francisco and Hawaii without a captain or a crew. Rylan Hamilton is the CEO, co-founder of Blue Water. Rylan, you're coming out of stealth, $14 million in the bank. You've got VCs that backed your prior really successful companies. You were in warehouse automation prior to this.

How much is the time now to be making automated ships suddenly far more prevalent when we've got US-China tensions? The time is definitely now. If we hear the current administration, they're talking about shipbuilding, shipbuilding and shipbuilding. And we're designing and building autonomous ships. And when you make them autonomous, you can remove the bridge, the berthing, the galley, the showers. So you can make them a lot smaller. And because they're smaller, you don't have to build them at the big Navy shipyards.

So we should continue to build the big warships, the guided missile destroyers, the aircraft carriers, the submarines as quickly as possible. But our ship can be built at all these mid-tier shipyards that have capacity today. Why is now the right time from a technology perspective as well? What is going into making automation far more easy or certainly not easy, but far more able to enact right now? Yeah, well, this is a hard problem.

This is not easy because we're designing ships that can operate across the open ocean. And the last thing our Navy needs is for these ships to be dead in the water of the middle of the ocean. And the ocean is extreme. You're thinking about extreme temperatures and saltwater. In fact, ships get hit by lightning. And so we need to build a very... It happens. As we did research for this, we talked to the chief engineers on some of the sort of workboats that operate around the United States. They said, yeah, last week my ship got hit by lightning and it fried all the electronics.

And so there's a ton of challenges to do this, but we feel we have the team to do this because we've been at some of the most successful robotic companies in the United States and two of my co-founders, including myself, we were also in the Navy.

Rylan, the big picture is to modernize the maritime industry, but this is a Navy application, as you just point out. American dynamism, this big emphasis on the private sector's relationship with the military-industrial complex. What is it you actually want the president to do to allow for you to make this a success?

So we want to move fast and we'll move as fast as the Navy wants us to move. And so we definitely want the President to continue to focus on shipbuilding and innovation, especially around autonomous systems. And they're autonomous systems that are in the air, that are on the surface and that are underwater. Our focus is on these autonomous ships that can operate on the surface of the water and have high endurance and range, the range that you need for the Pacific Ocean. Anduril picked Ohio for its skilled labor.

and for its history in aviation, for example. Where is your Ohio? Where do you think you need to build these ships? So we'll have more to announce later this year, but we've definitely been looking for the perfect place to go build these ships. And there are a lot of really good options, whether it's on the East Coast or the West Coast or sort of in the Gulf. And so we'll make an announcement later this year. You were early leader in Amazon Robotics when you were building Six River Systems. How good is U.S. at manufacturing now? Can we bring back what we want to bring back?

Yeah, so the US is actually really good at advanced manufacturing. So early in my career, I was at Amazon Robotics when there were a couple thousand robots in the field. There are now over a million robots in Amazon warehouses throughout the world. That is amazing what that company has done over the last 10 years. So when it comes to complex systems where you need to take sort of commercial off-the-shelf components and put them together and then write the software on top, we're amazing at that.

Rylan Hamilton, CEO, co-founder of Blue Water Autonomy. You have to come back when you announce the location, right? That's how it works. That does it for this edition of Bloomberg Technology. What a week. This is what markets look like, Caroline. I mean, it's kind of odd in a way.

to give a snapshot of a session in the moment. NASDAQ 100 higher by modestly, right? Pressure on US listed shares of Chinese names. Take it away. What are you seeing? What's extraordinary is we've had a week where we're actually more than 5% higher. But what a volatile five days. The bond market has seen extraordinary moves. And then over the course of the month, that NASDAQ is lower, Ed. Happy weekend, everyone. This is Bloomberg.

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