US Probes DeepSeek Chips
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Live from New York, I'm Caroline Hyde. And I'm Mike Shepard in San Francisco. This is Bloomberg Technology. Coming up, the U.S. probes whether DeepSeek bypassed U.S. restrictions to buy advanced NVIDIA chips through third parties in Singapore. Plus...

Plus, Apple gives a reassuring revenue forecast for the current quarter, though results show declining iPhone and Chinese sales over the holidays. And we sit down with the CEO of HPE over the DOJ suing to stop its $14 billion acquisition of Juniper Networks. But first, a check-in on these markets which have...

underperformed from a tech perspective in the last month, the most since 2016. A brilliant line coming from Bank of America's Michael Hartnett, who potentially thinks we are now seeing the dawn of the lag-nificent seven. He coined the phrase magnificent seven, Mike, and we're starting to question the overall

peak of AI spending. This is, of course, crucial in the context of this week. We started the week on deep-seek revelations. Do you need as much compute when you've got an R1 model that's brought to bear? The implications that that has for the GPU sellers such as NVIDIA. And today, we get that first official meeting between NVIDIA's CEO, Jensen Wang, and indeed President Donald Trump, that we understand that the meeting has been in the works for several weeks now. They plan to discuss AI policy, but that

policy just got so much more interesting following the revelations of R1. Caro, there is so much riding on this meeting for Jensen Wang. And you're right, we heard him say at CES that he was looking forward to a meeting with Donald Trump, but so much has happened since then. And all the other major tech leaders have had their chance in their sit-downs with Donald Trump. And the question now is whether it might be a

Case of too little, too late for Jensen Wang as he sits down with Trump with all the pressure growing on whether the U.S. should impose even more restrictions on AI chip sales to China, Cara. And of course, for many, the question still remains as to whether or not it was done with very high-powered NVIDIA chips or not. It all comes as U.S. officials, in fact, Mike, are probing whether DeepSeat bought advanced NVIDIA chips through third parties, perhaps in Singapore.

Here's what a representative, Raja Krishnamoorthy, had to say about the show of Balance and Power yesterday.

What I'm concerned about is, for instance, with DeepSeek, that they were able to stockpile a number of the highest-end chips before the export controls actually went into effect, namely the H100 chips. And then they bought a lot of these H800 chips. And so what we want to do is both strengthen the export controls and make sure that they're not porous. A leading lawmaker there on the

the policy implications of China and US. And we bring in Bloomberg's Jordan Robertson because there is much speculation as to whether or not DeepSeek achieved this with chips that it was allowed to purchase or chips that perhaps it circumvented some key policies here in the United States.

Yeah, thanks for having me. We reported today that U.S. officials are investigating whether DeepSeek achieved its breakthrough in AI chatbots through the acquisition of NVIDIA, advanced NVIDIA chips that it's not supposed to have. Now, I should point out that the timeline here, it's messy because DeepSeek has acknowledged that

using Nvidia chips in its network, that is not a secret. That is not something the company has tried to hide. The question is which chips has it used and when did it buy those chips and where did it buy those chips from? And our reporting is that American officials are looking at whether those acquisitions of chips included chips that were not supposed to be sold to China and that transited

from the U.S. to China via Singapore. Jordan, let's get blunt here. Are the export controls even working? Have they been able to stay ahead of what appears to be China's ability to leapfrog ahead or around them?

Yeah, that's the big question in a lot of the China revelations we've seen over the last, you know, especially 12 months, whether it's, you know, the chips used in Huawei phones or in this case, you know, the chips used to, you know, facilitate deep-seeks breakthroughs. You know, I think there's certainly a story to be told about creativity and ingenuity in...

rethinking how you do these AI large language models. That certainly is part of it. But at its core, you do need hardware, you do need software, you still do need the most advanced technology available, whether that's ASML hardware to make chips or, in this case, NVIDIA's GPUs to run these models. And again, DeepSeq has not hidden the fact that it uses NVIDIA chips. The question is which chips and when did it get them?

Maybe a classic example here of just fast follow the idea that if you curtail, you bring about innovation, Jordan. That innovation has got a lot of people in the US excited, the app being downloaded for deep seek. But you're reporting that actually we're having to prevent it being used by government, by companies.

Yeah, the Pentagon. I mean, we've had a number of stories come out in the past few days. One of them was that the Pentagon was kind of caught flat-footed on this. A number of Department of Defense employees and officials downloaded, connected their work computers to the Chinese DeepSeek servers and downloaded the code, the large language models. It was not blocked.

And they were downloading this code for several days before the Defense Information Systems Agency, which is essentially like the IT and cybersecurity department for the Pentagon, began blocking those links. And what we've also reported is that now there's an effort underway throughout the military to identify where DeepSeek's code has wound up on military networks and to remove it. So this was an example of

you know, the fast changing nature of technology and the fact that it's really hard to keep up with what the latest potential threats are. Bloomberg's Jordan Robertson, thank you. Coming up, Apple's holiday results show declines for China and the iPhone, but the company's forecast helped to reassure investors. We'll break down Apple's earnings after the break. This is the Bloomberg Businessweek Minute brought to you by Amazon Business. I'm Carol Masser. Greens

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If you look at our greater China revenue for the quarter, we were down 11% year over year. And over half of the decline that we experienced was driven by a change in channel inventory.

Apple CEO Tim Cook there, trying to perhaps comment on the sales decline in China, which was a key miss in the numbers. Apple's biggest market, well, is the US, but in large part, China is dominant too. It struggled to fend off competition from local brands. Let's get to Mark Gurman, who was trying to understand really what this inventory change really meant. What is it? How did it spawn an 11% decline in China sales?

Yeah, so whenever Apple has a shortfall these days, of course there were days where they didn't have these shortfalls, they have some color or I guess an excuse as to why that happened. And for China this time around, we're talking a $7 billion decline from a few years ago on the holiday quarter.

They're saying that they simply didn't have enough inventory. They're saying that they under-projected how many units they needed in the channel for the quarter. And by the end of the quarter, by the end of December, they simply ran out, which meant they weren't able to fulfill those orders, which led to a decrease in revenue. And he says about half of the 11% shortfall was due to that. So it makes sense, right? But clearly, you are anticipating a

shortfall to begin with if they under provided inventory and I think the response right this morning you see the stock prices up considerably despite the significant mess in China right and the 3% decline iPhone revenue I think one is the guidance right they're going to grow

again in the March quarter, which is a far cry from where they were just a year and a half ago, where there was a series of quarters in a row where they were declining. So that's positive. But I also think investors believe that because they missed those sales in China due to inventory in Q1, those sales will return in Q2. If you're an Apple customer and you want the new iPhone or iPad or watch or what have you,

and the Apple store doesn't have it and it's unavailable, you're not really going to give up in most cases, right? You're going to go back when it's in stock. And so I think investors and analysts believe that is going to happen, and we are going to see that trend of revenue actually come in and factor in into the March quarter. Mark, how much of a grace period are investors willing to give Apple, given some of the struggles that we've seen with Apple intelligence and also areas like wearables, too?

Yeah, no, both good points. So on Apple intelligence, I think investors are giving Apple a little bit of leeway. They've shown their ability to come into new categories slowly and improve the product over time. Obviously, AI is a different beast. Obviously, they have rivals both here and abroad that are

absolutely crushing them right now. But I think investors are going to give them a little bit of leeway. I would give them two more quarters, right? Analysts, I believe, will give them two more quarters before they start having real concerns about this technology and its ability to drive sales and from a fundamental perspective, how it works feature-wise. In terms of wearables, the new CFO, Kevin Perak, made an interesting point about

on the earnings call that there was a little bit of a tough compare. So typically, over the last few years or so, you've seen Apple roll out two or three new Apple Watch models. This past fall and September, they only released an Apple Watch Series 10. There was no new Apple Watch Ultra. That's coming later in the year this year. There'll be a new Apple Watch SE later in the year this year. So you...

We'll see a little bit of that momentum return to the wearables category. But clearly the Apple Vision Pro not driving anything material to grow that category, right? I mean, if you look at the big picture, Apple's first major new product category in years, $3,500 in revenue per piece at minimum. And it's not driving anything to that segment. That just tells you how few of these devices they're still selling.

Bloomberg's Mark Gurman, thanks for joining us. Let's get more with Gene Munster of Deepwater Asset Management. Gene, DeepSeek really shook up the markets earlier this week and caused so many reflections upon investment in AI and development of AI in this country. What sort of pressure does that put on Apple specifically with its Apple intelligence product?

It's probably put a relief on Apple because if DeepSeq does advance some of these third-party models and basically creates an environment where the primary models like GPT or Gemini will have to lower their price to compete with more of these open source,

That benefits Apple from two perspectives. First is that as you use Apple intelligence and it goes and taps into OpenAI, for example, there is a cost that comes to Apple for those tokens. That's how it's measured. The usage is measured and they sell tokens.

as the price of those comes down driven by deep seek, that's a positive for Apple. And separately is Apple's app developers who are building these AI tools need to be aware of the cost that these apps have in terms of pulling in the token cost and lowering the token costs will

should promote more AI development within the apps. And so that's why you saw Apple move up on the deep seek news. And I think that more broadly, I mean, this has been, I've been around tech for a while and what I've seen this week related to deep seek is I think captured in the concept that the market is now, the NASDAQ is now flat from where it closed on Friday.

And I think that essentially the commentary from Apple about how they can benefit from this to answer your question, Mike, specifically. They focus in a long way on end-to-end AI security. They talk up their chips. They talk up private servers. Is that going to be integral to a consumer when we're thinking about using Chinese apps when it comes to artificial intelligence?

So for US consumers and Western consumers, they're probably not going to want to use a model. I suspect most people will not want to use a model that's based in China. And part of it is because I think this data integrity question

That's something that matters more for people who are over 35 years old. Through our research, we've seen that younger demographics tend not to care. I think the whole TikTok example is a pretty clear example. People just want the content. And I think some of the potential downfall is to using some platforms. It's just not top of radar. But to answer your question is that Apple will...

brand around security, of course, with AI. And the benefit, I think, with DeepSeek or some other third party open source AI within China is that Apple really needs to fill that AI hole in terms of Apple intelligence, who is their partner in China.

Let's just talk about Apple intelligence that we just heard from Mark Gurman. I know you speak with him. He's been saying, look, you, the analyst community and the investor community will give Apple a two quarter grace period to get this intelligence side right. Is that the sort of length of time we need?

I think actually investors are going to give probably a little bit more room and probably give a pass largely on fiscal 2025. And if you look at the street numbers right now, after these adjustments last night, iPhone growth is going to be around 3%. It steps up to 8% in fiscal 26%.

And so I think that as long as that carrot is out there, and Apple did a good job of reminding investors that carrot's there because in markets that Apple intelligence is available, they said sales did better than in the other markets. As long as that carrot's out there, I think you're going to see this kind of this trend towards sales.

investors focused on what this breakout potentially could look like. And I would just say this, and Mark's done an incredible job of reporting on the features on Apple intelligence, the timing on all these, and from my perspective, I think that they still fall short of, well short of what needs to happen for these products to really get people excited and tell their friends to buy it. I think they're gonna get there. I'm an Apple shareholder, our firm owns it, I think they're gonna get there.

I think that the product needs not only more distribution over the next few quarters, but the feature set really needs to get pumped up. JOHN YANG: Gene, in China, we saw Apple report inventory issues there. But soon they're going to have some geopolitical ones, perhaps, thanks to tariffs that Donald Trump is threatening against the world's second-largest economy. How do you see Apple navigating that later this year, if that happens?

Well, just quickly on the tariff side, there was a second-to-last question on the call last night, and Cook just said we're monitoring the situation. So he basically sidestepped the question. I think most investors believe that there is just no risk to the tariffs, given what happened yesterday.

seven, eight years ago, they were able to navigate around that. So this probably is more of a risk to Apple stock, just given I think that most investors are complacent on what this potentially could mean. I think it's gonna be fine. I think they're gonna be able to navigate that. But I think there's something bigger going on in China, potentially something bigger going on. When you see Huawei, their phone sales up 15% in the December quarter, and Samsung and Apple, if you adjust for the channel inventory, down three, four, five, 6%.

It begs the question, is it about lack of AI features or is there some sort of shift that Chinese consumers, some sort of bias moving towards more homegrown products? And this goes beyond Apple and Samsung, but maybe think about how Tesla could be impacted. And the Chinese government does an amazing job of being able to kind of steer

how public sentiment is around some of these products. That's kind of in the back of my mind about what me, something else may be going on. This isn't just China economy's weak and a quarter-- - This is patriotism in a way. - Exactly, patriotism, well said. - I mean, with 30 seconds to go, give Marks out a 10 for this earning season this week with Tesla there, Meta 2.

I think the fundamentals were a 6 out of 10. It was okay, nothing. But I think what was most important as far as the A topic, deep seek, the commentary about how they feel AI is going to proceed and the spending around that, it was a 10 out of 10. Jim Munster at Deepwater Asset Management.

More earnings, more chips. Let's look at Samsung, chip maker, of course, on the downside by three-tenths of a cent. Its pivotal chip division has reported a smaller than expected profit. The company is fighting off arch rival SK Hynix, who itself has been on the downside after a four-day holiday over in South Korea and some worries post-Deep Seek and what it means for chips more broadly, Mike.

Caro, Intel posted better than expected fourth quarter results as the company saw a sales beat partly from Asia customer orders ahead of possible tariffs from the U.S. But the company says first quarter sales are expected to fall short of expectations on weaker demand and tougher competition. We're joined now by Wedbush analyst Matt Bryson, who's been writing that the results were, quote, nothing unexpected.

He maintains a neutral rating on the stock with a $20 price target, and he's with us now. Matt, we did hear a somewhat more realistic tone from the interim CEO about the prospects for maybe turning the company around in the short term. How did that land with you?

I think it's the right way to think about things in the sense that Intel under Pat Gelsinger was consistently being optimistic about where things were going to end up.

And at the end of the day, that ended up disappointing investors. So you start off with a more realistic bar and the hope is you're able to execute from there. Realistic looks pretty painful and the shares do drop on the back of all of this. No quick fixes, but what can be done in the interim when you get no news on a new CEO?

Yeah, so I think the big question is, what does Intel do from here? So under Pat, Intel's plan was, we're going to make Intel great again. So we're going to restore our fabs to competitiveness. That's going to bolster the entire operation. So now the real question is, when you bring in a new CEO, is that still the plan of record?

Or rather, do you do what AMD did, try to split the business up, look more like a Broadcom or a Marvell, be a chip design house, spin the fab out? And I think until we get an answer to that, it's going to be hard to kind of figure out what the future looks like for Intel.

Matt, what is your timeline nonetheless for Intel to be able to close the gap with rivals in critical areas like server chips for all those data centers that we're starting to see built across the country?

Yeah, so there's two things to think about there. One is, where are they with their fabs? They've told us that 18A is going to ship second half of this year. So I think it's really important as to what those new chips look like. If those chips are competitive, that's a huge victory for Intel. Their struggles really started almost a decade ago when they missed their fab upgrades.

So getting that right, I think would be a huge positive. But the next piece is what we're seeing is a whole lot more consumption of AI chips. So whether it's Nvidia or Broadcom or Marvell building for some of the large data centers or AMD, their growth has come from the AI side. Until there, they still really don't have a product. Gaudi disappointed. They just told us that their next product, Falcon Shores, is going to be more of a test product. So I think getting things right there

It is important, but we don't have a whole lot of insight into what exactly that roadmap is going to look like and how successful it's going to be. Matt, in 30 seconds, they're planning to spend $20 billion on new plants. Will the administration be supporting this long term? That is a great question. It seems like this administration goes from...

one place to another place, and you never quite know where it's going to go. So hopefully for Intel's sake, they will, but I'm not going to guess what the Trump administration is going to do. Matt Bryson of Wedbush, thanks so much for your time today. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York.

And I'm Mike Shepard in San Francisco. As we wrap up the week, let's look at these markets, because what a week it has been. The Monday anxiety. What does DeepSeek R1 model mean for the need for GPU, the need for AI infrastructure? The sell-off was hard on the Monday, but we've actually managed to grind our way higher on the NASDAQ over the last five days. On the NASDAQ 100, we are now up a tenth of a percent. Sure, it underperforms on an S&P level from a tech perspective versus the rest of the index, but on the NASDAQ,

we claw it higher. But that release of DeepSeek's R1 has perhaps forced some venture capitalists to rethink their strategy around investing in AI startups, particularly on the hardware side of things. But let's get the VC take. Joining us now is Josh Wolfe, co-founder of Lux Capital, which is an investor in Hugging Face and Andruil Industries and Databricks, to name but a few, Josh. And you actually have been more plowing into the application layer of generative AI rather than the models. But what do you make of this?

Well, I think there's two key takeaways from this past week and basically the entire trend of what's happening in AI. The first is on the capital side, and then the second is on the human capital side. On the capital side, I think that the people that have been investing in the large foundation models are a little bit shaken. The idea of putting tens of billions of dollars into something, even if it was partially replicated by China, and then having a $5 or $6 million overlay on top of that, I think has people shaken to their core, and rightly so.

But the other piece of this is thinking about the open source models. Those are things like you mentioned, Hugging Face, Together Compute, thinking about novel model architectures like Sakana out of Japan. This is where we've been investing over the past two or three years. And then also thinking about the next wave, which is going to be really in AI for the three-dimensional physical world, biology and robotics. And there, I think you're going to see a lot of great new companies

physical intelligence, evolutionary scale. Those are people that are not going to have the same kind of competition on the large language model scale. Josh, is there a third piece to this, though? Maybe geopolitics and the rivalry between the U.S. and China? How does DeepSeek fit into that? You're invested in Anduril and Palantir. Where do you see this as part of the pantheon of issues between the U.S. and China?

Mike, I think you nailed it. This is increasingly, you know, whether you think we are in Cold War 2.0 or not, the TikTok piece over the past year and now with President Trump coming in and maybe thwarting what I think is a grave national security threat is number one. Number two is deep seek with people saying, my gosh, this is not just made in China with U.S. things that are manufactured there like our iPhones, but actually created and invented there, even if it is copied.

I think the bigger thing is this human capital. We are at war for talent. We need a brain drain coming here. And let me give you three stats that shocked me to my core. And viewers are listening. 50% of undergraduates in AI around the world are coming from China. They are producing 50% of the undergraduate researchers in AI. Number two.

38% of American researchers are from China. 37% are Native Americans. So think about that. We're outnumbered in our own country. Now we want to get those people here and keep them here, but if they're going back to Chinese companies, it's a really bad thing. And number three, the U.S. used to be about 23%, 25% of international students that were coming here to our country. Today, it's only about 15%. So it underscores the need that we are in competition, not just for the hardware, but

and the physical capital, not just for the financial capital, but for the human capital. And we need to do something. I think this is a real big wake-up call. You should know, you're on trustee of the Santa Fe Institute. You think a lot about academia, Josh. I want to go back, though, to something you've been posting a lot on the national security front. I think of what you put on X, and you're talking about Chinese state-backed companies and not companies. They're arms of the government. They're designed to erode U.S. competitiveness. And you talk about TikTok, DJI, and Eye in the Sky, Deep Seek, Huawei.

I'm interested though, does it matter if China continues to fast follow? They need the compute power, the inference to actually get all of this innovation into people's hands. If you rate what just happened this week, is this really a concern or is this like US even more determination to remain ahead of the game and have to continue to invest in the overall AI infrastructure?

Well, as you said very well right now, if it is a wake-up call and people are now saying we need to compete, we need to be more aggressive, we cannot be complacent or lazy, then it's a win for America. We do not want the rest of the world relying on Chinese models, which will approach an asymptote of truth but never fully get there. Try searching for Uyghurs or Tiananmen Square or Taiwan. You're not going to get truth. You're going to get CCP censorship. We don't want the world or the world's companies developing on those models.

To the point about hardware infrastructure, you also nailed it in that we are seeing a shift from training where you need 100,000 clusters of H100 chips, the NVIDIA chips, to inference. And there's going to be a big fight on inference on two fronts. And I'll give you a sort of preview what I think is going to be the next big wave here. If you can do inference on device, I suspect that about 30% to 50% of your inference, your prompts, your queries will be on your chats, your cache emails, your photos, your health data. You don't need to go to the cloud for that.

And so the memory players and other chip makers are going to become dominant. And I think that the attention and the capital allocation is going to shift towards them. Maybe you're doing 50% to 70% of your inference in the cloud.

And you're going to perplexity or chat GPT with search or Google Gemini as you today would for Google for basic search. But that ecosystem is going to change. The other big thing, we're going to see the death of APIs. AI is going to bring in the death of APIs. And what I mean by that is all of the back channel software negotiation that happens between all of our applications today are going to be usurped.

by AI basically just acting like a user and navigating on your phone. And there's going to be big fights between Meta and Apple and some of the app layer people in that. So those are two big things to watch. - The agent fight. You, of course, are part of the Hill and Valley forum group. It's a private bipartisan community of lawmakers and business people.

about the national security focus of US versus China. And I just want to take your thought on whether the administration, current one, gets this. Because we've got Jensen Wang meeting Trump today.

You know, I think that they do. I think there's a lot of brilliant people that have gone into this administration. When you think about Jacob Helberg, you think about Scott Besson. These are both friends and people that I think are extraordinary service and highly competent. They feel very strongly about this issue. Now, TikTok has done a good job of flattering Trump because they know that flattery works to influence. I hope that the people around him recognize, particularly on the TikTok issue, how nefarious and dangerous and insidious TikTok is for the American public.

and the things that we believe. For the rest of the technological competitiveness, I think it is great to see things like Hill and Valley where you have cutting edge technologists, venture capitalists like us, and policymakers that are all working together. People used to warn about the military industrial complex, and rightly so back in the day. We went from 50 primes to five.

Now you're seeing Anduril and Saildrone and Hadrian and Varda, these neo-primes, these new emerging companies, getting the space and the speed pass to compete. I think that is absolutely critical against the civil-military fusion doctrine, where, as I said in my tweetstorm there, that every company is not an independent Chinese company. It is part of the government. They have to report everything that they do and all the information to the Chinese Communist Party and to Xi Jinping.

Josh, you stress the importance of research as fundamental to developing AI in this country. Do you have any concerns that the new administration may be taking a chillier or more hostile approach to science? You're a scientist yourself. What is your view?

I do. I feel very deeply that we should be funding basic science. If we knew the answer to questions, we would just go and pursue them. But you need fundamental research. You need funding. Can those things operate better? Yes. But the answer is not on the administrative side trying to cut things. The answer is giving more grants and more money, not less, to younger people, to younger researchers. And I know that sounds crazy, but most of the great breakthroughs happen from that crazy cocktail, that potent combination of ambition and naivete and

And people that question why wouldn't we try that, why not try, versus the old guard that often is set in their ways and sclerotic and solidified, and they are basically always saying, why try that? So instead, give more money to young people, but we should absolutely, as we're seeing from China and their competitive rise.

We should absolutely be giving more federal funding to basic science and undirected research to create the spontaneous breakthroughs that can change the world. We want the GLP-1s invented here. We want the GPUs invented here. TSMC itself should have been invented here instead of in Taiwan. So we want all these breakthroughs.

great breakthroughs, whether they're in chemistry, physics, material science. We dominated in software for the past two decades and for the past generation. We really want to dominate in the physical sciences, robots, space, rocketry. Thank gosh for SpaceX, even though I'm really critical of Elon, an amazing company and an amazing American company. So we need more of that, not less.

Josh Wolf, co-founder and managing partner at Lux Capital. Thank you for joining us. Coming up, we speak with Hewlett Packard Enterprise CEO Antonio Neri as the U.S. sues to block the company's acquisition of Juniper Networks. This is Bloomberg Technology. This is the Bloomberg Business Week Minute brought to you by Amazon Business. I'm Carol Masser.

Green stocks have had a rough few years as the industry has struggled due to high interest rates, which made it more costly for green companies to get financing, homeowners to buy solar panels and drivers to buy EVs. And on top of that, pandemic lockdowns and supply chain issues. And the S&P Global Clean Energy Index is down by almost two thirds since 2021.

And yet some green investors are finding a silver lining in the presidency of Donald Trump, despite his anti-green policies. And that's because of low market valuations and improving earnings outlook.

Investors single out battery producers as more electric grids install them to manage loads and store power when solar or wind installations are idle. Others say check out clean energy companies outside the U.S., noting China's strong support for green tech. That's the Bloomberg Businessweek Minute brought to you by Amazon Business, your partner for smart business buying.

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Let's take a quick look at shares of HPE and Juniper Networks. The DOJ yesterday announcing it's suing to stop the $14 billion acquisition of Juniper Networks, arguing the merger would harm competition in the market for enterprise wireless equipment. We're rallying off the back of some fools yesterday. Joining us now, Antonio Neri, HPE CEO. And you have fought back, saying the DOJ is ignoring key competitors here. Why are they doing that?

Well, good morning, Carol, and thank you for having me. We believe the thesis from the DOJ is flawed because they consider the market very narrow in the wireless line, only three competitors, when the reality there are eight. You know, even industry analysts came out yesterday, you know, stating that that's the case.

So as we go in through the process, we understood that that's going to be a challenge. But ultimately, we believe there is no case here. This is pro-competitive. We are bringing two complementary technologies together.

which also will enable us to compete outside the United States in the context of the previous conversation we had with Josh against Chinese vendors in the context of national security, particularly in cloud and the service provider space. So that's why we're going to fight this vigorously and we believe we're going to prevail through the process. Do your lawyers think you will prevail? It's interesting, of course, other regulators signed this off, so it must have been a surprise.

Yeah, it was a surprise because 14 of the 16 jurisdictions around the globe approved the deal pretty much by September last year, which was very, very quick, since the announcement was January 9, 2024. And that included the U.K. and the European Union. They never asked for a second request. Customer testimony was always in favor of the transaction.

And that's why, you know, since September we were pretty much substantially complete with the DOJ process. But obviously through the elections and the like, we took us to today. And then, you know, when I met with the DOJ on Tuesday, nothing new came out of that conversation. And therefore, you know, we are surprised and disappointed.

Ultimately, we believe this is pro-competitive and we believe this is the interest on the national security in alignment with the current administration agenda. And that's why from a pure antitrust perspective, we believe we have a case here for us.

Antonio, did you try in the course of those conversations with the Justice Department ahead of the lawsuit being filed to negotiate something or perhaps offer concessions? What might those have been and what did DOJ ask you for? No, it was not necessary and the DOJ never asked for any concessions whatsoever. They asked us through the process several extensions, but we never discussed remediation or any concessions as a part of the approval.

Are you a little surprised then by the current administration actually following through with this case? You pointed to its posture when it comes to competitiveness in the U.S. and trying to foster investment. How does this square with what the president, for instance, would be talking about when it comes to business?

Well, Mike, we don't have yet the permanent leaders, neither at the DOJ nor at the antitrust division. So we're looking forward to have them on board. We hope that they will take a second look at the case and realize that this transaction is core tech, not big tech.

Remember that both Juniper Networks and HP powers a lot of the United States infrastructure in the Department of Defense, Department of Energy, and many other administrations across the government. And so we're hopeful that when the new administration is in charge, they're going to look at this and take a second look and realize this is aligned correctly.

perfectly with the agenda that the president has, America first, building the United States. Let's remind ourselves a lot of the equipment that HP produces today for the United States government is building the United States and also outside the United States to compete with China. The reason why the market looks the way it looks in the United States, which is eight vendors, and this is data from the industry analysts,

which we provided, obviously, tremendous amount of documentation, is because Huawei is not allowed to play in the United States. But when you go outside the United States, there are actually nine vendors.

It does feel like China continues to be the bogeyman that a lot of companies are going to turn on to try and get things through. And ultimately, I put to you that James McHenry, who's the acting Attorney General at the moment in the US, probably wouldn't have pursued this unless he'd got some sort of sign-off from the new administration, a more pro-business administration. So do you think really this is going to land any differently with Pam Bondi? We don't know. I don't know.

I would not speculate on that. Excuse me for my voice. I would not speculate on that. You know, we have dealt with the Department of Energy antitrust division. We were very collaborative, constructive throughout the process.

And we hope that the new administration, when it's in charge, they're going to look at this and they will bring us back at the table. Otherwise, you know, we will pursue the actions through the court. They were the ones who decided to file the lawsuit to block the transaction. And we believe we have the right to defend ourselves there. And we believe that we can prevail through just the antitrust aspect of the case.

And then in addition to that, we hope that also the national security aspect of this are considered as well. HPE CEO Antonio Neri, thank you.

Here's the story we've got to get to, the future of H-1B visas and America's tech industry under the new administration. This is Trump's birthright citizenship order sparks fear in H-1B parents. Let's bring in Hiba Anwar from the Erickson Immigration Group. Hiba, the rhetoric from the White House and elsewhere in the administration about immigration has to be very troubling for a lot of your clients to digest. What are you hearing from them?

So what we're hearing is basically concerns resulting from some of the impacts of the birthright citizenship executive order. Namely that, for example, if an individual who's here on an H-1B visa has a baby in the United States, according to this executive order, that baby is no longer considered a U.S. citizen. So if that child is not a U.S. citizen at birth,

And if that child is not a citizen of the parent's home country at birth, then what this executive order does is essentially create a category of stateless children. And that is very, very concerning for a lot of the visa holders in the United States, inclusive of the H-1B visa.

And so a lot of the questions that we're getting stem from those concerns because a lot of these restrictionist policies are creating an environment that is seemingly hostile towards immigrants. So if the tech industry is about talent attraction and employee incentives, this really isn't going to help. - Hiba, I'm gonna make this personal. I came here with already one child and I gave birth to one in the United States and she automatically got US citizenship. I was on a temporary visa at the time.

I wasn't worried about coming here to have an American baby and it wasn't hard for me to get her UK citizenship afterwards. Who is it that is really concerned here? Because I imagine it's not developed nation to developed nation. Who of your clients really thinks that it's integral to have a child that is with birthright citizenship?

So the thing is that there are a lot of countries around the world where if the parents have a child born abroad, that child is not going to automatically get citizenship from the home country until the parents take some sort of affirmative steps to apply for that citizenship. Yeah, and I had to do that too, which wasn't hard.

Well, so essentially you have to look at it in the totality of the circumstances. We can't look at it in a vacuum. If the United States is going to have policies that are seemingly hostile towards immigrants or making it harder for immigrants to establish their families and their lives in the United States,

then irrespective of whether the citizenship of the home country is easy for the parent to obtain for their child, that visa holder in the United States is going to think twice about whether or not they want to settle in the United States long term. So then if you take a look at the companies that actually employ those individuals, those companies are going to find it more difficult to retain the top talent that they rely on

in order for them to be competitive on a global stage. So what I'm hopeful for is that whatever policy comes out of this administration continues to be very welcoming and creates that culture of welcome irrespective of whether the individuals have to deal with certain citizenship issues for their child or not. But we have to understand that birthright citizenship is enshrined in our Constitution. So one of the key issues here is the fact that there's a presidential action that is seeking to overturn

something in the Constitution outside the proper process. And that's also been concerning to a lot of individuals as well. Hiba, Trump has yet to alter the H-1B program itself. Let's home in there for a moment. Are you anticipating any changes from the administration or Congress to it?

I don't know if we're necessarily going to see something that directly impacts the H-1B program. However, there are a lot of executive orders that have come out since the inauguration that indirectly impact legal immigration in the United States. For example, this birthright citizenship executive order.

So, for example, if this executive order ends up being successful and if children that are born in the United States are not automatically U.S. citizens, then what that implies is that there's an additional number of individuals that are going to get included in the overall green card queue. Now, the backlogs for obtaining a green card in the United States are also, they're already very, very lengthy and long for a lot of individuals. So this is only going to increase their wait times.

So again, if you look at the totality of the circumstances, this is creating a little bit of like a discouraging environment for individuals that are seeking to live in the United States. Well said. I can tell you it took a long time to get a green card. Hiva Anva, really great to have you on the show from Ericsson Immigration Group. Now that does it for this edition of Bloomberg Technology, Mike. Do not forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify and iHeart. This is Bloomberg.

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