Bloomberg Technology 09/11/2023
>> FROM THE HEART OF WHERE INNOVATION, POWER AND MONEY COLLIDE IN SILICON VALLEY AND BEYOND, THIS IS "BLOOMBERG TECHNOLOGY" WITH CAROLINE HYDE AND ED LUDLOW. ♪ EMILY: I AM DEFINITELY -- ED: I'M ED LUDLOW, CAROLYN HYDE OFF TODAY. QUALCOMM AND APPLE EXTEND A SOME OF DR. AGREEMENT FOR THREE YEARS AND DECIDE THAT THE IN-HOUSE APPLE CHIPS ARE TAKING LONGER THAN EXPECTED. AND YOU FORMER CHIEF OF STAFF ALIBABA LEADING THE CLOUD DIVISION MONTHS AFTER AGREEING TO LEAD IT.
MORE ON CHANGES AND UNCERTAINTY FACING THE COMPANY AS IT ADVOCATES A COMPLICATED BREAKUP. INITIAL PUBLIC OFFERINGS AS INSTACART KICKS OFF THE ROADSHOW AND A VALUATION THAT IS A BIG DROP FROM THE PANDEMIC HEYDAY. THAT AND MORE. APPLE AND QUALCOMM, THIS IS ABOUT MODEMS THAT GO INTO THE IPHONE, CONNECTING THEM TO THE HIGH-SPEED 5G NETWORK. THIS IS BOOSTING QUALCOMM UP 3.5%. BLOOMBERG HAS REPORTED THAT APPLE HAS BEEN WORKING ON ITS OWN IN-HOUSE MODEM.
IN 24 HOURS, THEY WILL UNVEIL THE IPHONE 15. THE EXPECTATION WAS THAT WILL BE THE LAST ONE TO USE THE QUALCOMM MOTO BUT THAT IS NOT THE CASE. LET'S BRING IN OUR GUESTS. WHAT ARE THE TERMS OF THE
AGREEMENT AS WE UNDERSTAND IT? >> THEY DID NOT GIVE THE PRECISE DETAILS. THEY SAID IT IS THE SAME AS THE AGREEMENT WE HAVE IN PLACE AND IN TERMS OF TIMING, THAT IS OUT UNTIL THE 2026 MODEL. BASICALLY THE SAME DEAL THEY SIGNED IN 2019, EXCEPT IT IS GOING THREE YEARS LONGER THAN IT WAS SUPPOSED TO. ED: WHAT IS IT THAT QUALCOMM MAKES FOR SMARTPHONES AND APPLE? >> MRS. THE MODEM, THE CHIP THAT TAKES THE CELLULAR RADIO SIGNAL IN TERMS OF--TURNS IT INTO DATA AND A VOICE, IT IS A CRUCIAL COMPONENT THAT DETERMINES HOW WELL YOUR PHONE WORKS. ED: LET'S BRING YOU INTO THE
CONVERSATION. HAVE REPORTED THAT APPLE WAS DEVELOPING ITS OWN MODEM IN-HOUSE. THE STORY SEEMS TO BE THAT APPLE IS NOT AS FAR ALONG AS THEY HAD EXPECTED. >> THEY CERTAINLY ARE NOT AS FAR ALONG AS EXPECTED. IN 2018 THEY WERE HOPING TO GET THAT CHIP IN THE BEGINNING. IT GOT DELAYED THROUGH 2023. AND THEY SUPPLY AGREEMENT THEY
REACHED AS PART OF THE ROYALTY LAWSUIT SETTLEMENT. WITH THE ANTICIPATION WAS TO BEGIN GETTING THE MODEM AND FLEXIBLE IPHONES BY THE END OF THIS YEAR, EARLY NEXT YEAR. MY ANTICIPATION IS THEY WILL STILL BE ABLE TO ROLL OUT THAT MODEM AT THE BEGINNING OF 2025 IF NOT THE TAIL END. THEY WANTED TO GIVE THEMSELVES A LITTLE LEEWAY. APPLE HAS SEVERAL DEVICES, MANY SKEWS OF THE IPHONE AND THE IPAD, THE APPLE WATCH. THEY NEED TO GET THEIR OWN MODEM TO WORK AND IN ALL THOSE DIFFERENT DEVICES AND HAVE THEM CERTIFIED TO WORK ACROSS THE WORLD ON HUNDREDS OF CARRIERS AND HUNDREDS OF COUNTRIES AND DEAL WITH THE BUREAUCRACY, TESTING, DIFFERENT CONDITIONS. THEY HAVE TO HAVE IT WORK ON
3G, 4G AND 5G. THAT IS NOT SOMETHING THEY CAN DO IN ONE FELL SWOOP. I THINK THEY WILL BEGIN THE TRANSITION WITH ONE OR TWO MODELS IN 2025 AND GRADUALLY EXPAND ACROSS 2026 AND 27. ED: THIS IS WHAT QUALCOMM SAID. THIS REINFORCES THEIR TRACK RECORD OF SUSTAINED LEADERSHIP ACROSS 5G TECHNOLOGIES AND PRODUCTS.
AS EN OUTLINED -- IAN OUTLINED THE DEAL, YOU THINK THIS WILL BE PHASED WITH APPLE. WHAT IS THE MODEM SIT WITH OTHER ACTIVITIES AND SILICON? WHAT WE EXPECT IS MORE PROPRIETARY SILICON FROM APPLE GOING INTO THE LATEST HANDSETS. MARK: IT IS ONE LEG OF THE STOOL. THE MODEM IS A HIGH-PRIORITY COMPONENT. THEY HAVE OFFICES IN SAN DIEGO, CUPERTINO, EUROPE, MUNICH. THEY HAVE THOUSANDS OF PEOPLE ON THE EFFORT AND THE PERSON IN CHARGE OF THE MODEM IS A FORMER QUALCOMM VICE PRESIDENT WHO LEFT THE COME TO APPLE TO WORK ON THIS PROJECT.
THE APPLE SENIOR VICE PRESIDENT OF HARDWARE TECHNOLOGIES WHO OVERSEES ALL OF THIS. THERE'S A SPECIAL PLACE IN HIS HEART AGAINST QUALCOMM. CERTAINLY THIS IS AN IMPORTANT EFFORT TO APPLE. THEY WANTED DESIGN QUALCOMM OUT
OF ALL OF THEIR PRODUCTS. THEY'VE BEEN WORKING ON THIS EXTENSIVELY AND THEY HAVE RUN INTO BATTERY LIFE ISSUES. IN TERMS OF WHERE IT SITS IN OVERALL ORGANIZATION, HAVE THE MAC CHIPS AND TOMORROW THEY WILL ANNOUNCE ONE NEW CHIP, THE A 17 PROCESSOR, THE FIRST THREE NANOMETER CHIP. THERE WILL ALSO BE A NEW WIRELESS COMPONENT THAT IS LESS SIGNIFICANT. BUT THE CHIP WILL BE AN ELEMENT OF THE IPHONE 15 PRO AND PROMAX.
ED: THEY ARE ON TRACK FOR THE BIGGEST JUMP SINCE MAY, WHAT SPARROW THOUGHT FOR QUALCOMM AND WHAT IT MEANS. I SAID THIS WAS A SURPRISE, KNOWING THAT APPLE WAS WORKING ON ITS OWN MODEM BUT THIS IS GOOD NEWS. >> YOU LOOK AT THE ENDLESS NOTES AND THEY ARE SAYING THIS IS LIKE $7 BILLION OF GOOD NEWS FOR QUALCOMM. THEY HAD AN ANALYST DAY LAST NOVEMBER WHETHER SAID TAKE OUT THE NUMBERS, ACT LIKE WE DON'T HAVE THAT BUSINESS ANYMORE AND THEY STILL DO. CLEARLY THAT IS A PAT ON THE
BACK FOR THEIR ABILITIES. THIS IS DIFFICULT AS WELL, IT IS NOT JUST A CASE OF DESIGN A NICE PIECE OF SILICON. THERE IS A LOT OF SOFTWARE TUNING AND WORK, INSIDER KNOWLEDGE THAT GOES INTO IT. THE FACT THAT A COMPANY WITH THE RESOURCES OF APPLE CANNOT REPLICATE THAT EFFORT IN A TIMELINE THEY HAVE SET FOR THEMSELVES TELLS YOU THAT QUALCOMM IS DOING A GOOD JOB. ED: MARK GURMAN ON APPLE AND IAN KING ON QUALCOMM.
LET'S BRING IN THE NEXT, THE BEST CASE SCENARIO FOR QUALCOMM. IT'S -- I ONE YEAR SUPPLY DEAL. MARK GURMAN JUST EXPLAINED. HOW DO YOU EXPLAIN IT, THE TRANSITION BASED ON THE DEAL ANNOUNCED TODAY? >> I AGREE WITH YOUR HOSTS AND WHAT THEY SAID, THAT APPLE HAS BEEN WORKING ON THIS FOR YEARS AND IT IS TAKING LONGER. WE THINK THEY'RE GOING TO GRADUALLY MIGRATE OVER TO THEIR OWN CUSTOM BASEBAND THAT WILL TAKE THEM PROBABLY AT THE EARLIEST UNTIL 2025. WE THINK IT COULD BE THE LOWER
END SE FOR THE CONCERT USING THEIR OWN AND THEN THEY WOULD SHIFT SHAW THEIR MODELS IN THE LINEUP ON 2026. IT IS THREE YEARS, GIVE SOME TIME AND IN THE MEANTIME, QUALCOMM SUSTAINED THE LEADERSHIP POSITION AND GETS THE ADDED REVENUE AND EARNINGS THEY WOULD HAVE LOST STARTING NEXT YEAR. ED: I SPENT ALL OF 21 AND 22 TALKING ABOUT THE 5G SUPER CYCLE. MY MIND IS ALREADY GOING TO SIX J. I WONDERED IF YOU COULD TALK US THROUGH HOW YOU SEE QUALCOMM AS POSITIONED IF WE ARE ALL GOING TO MOVE ON TO 60 IN THE RELATIONSHIP WITH APPLE IN THE FUTURE.
>> A GREAT QUESTION. QUALCOMM IS VIEWED AS THE BEST COMPANY AND MOBILE TECHNOLOGY AND THERE IS A REASON. THEY HAVE BEEN DOING IT LONGER THAN ANYONE. BUT IF YOU ASK THE COMPANY ABOUT SIX G, AND PEOPLE HAVE OWN EARNINGS CALLS, THEY DON'T THINK IT IS GOING TO BE IN AND TALKED UNTIL THE END OF THE DECADE. AT THE EARLIEST, YOU'RE TALKING
FIVE OR SIX YEARS ALLAY--AWAY. IT WILL TAKE A LONG TIME. RIGHT NOW, THE FOCUS IS BROADENING THE REVENUE BASE. MOVING BEYOND MOBILE. THEY TOLD THE WALL STREET COMMUNITY TO TAKE THE APPLE BUSINESS OUT OF THE REVENUES. THEY WANT TO GO INTO AUTOMOTIVE, OTHER AREAS OF THE MARKET, PC COMPUTING. WHERE THEY CAN DIVERSIFY BEYOND MOBILE. THE INDUSTRY IS FINALLY READY
TO GO TO SIX G. WE'VE GOT MULTIPLE YEARS BETWEEN THEN AND NOW BEFORE IT WILL REALLY MATTER FOR STOCK OR INVESTORS. ED: I'VE SPOKEN MANY TIMES ABOUT THIS MOVE TOWARD AUTOMOTIVE. THE IMPORTANCE OF ON DEVICE RUNNING, IT IS ANOTHER AREA FOR QUALCOMM. CAN THEY MAINTAIN TECHNOLOGY AT THE SAME TIME TO MOVE AND GROW THESE OTHER AREAS? >> I THINK THEY CAN. THEY MAKE SO MUCH PROFIT AND
MONEY FROM THE BASEBAND AND MOTIVE JUST MODEM BUSINESS. THE LICENSING BUSINESS IS ALMOST 100% MARGINS. THERE ARE NEW AREAS OF SILKEN TECHNOLOGISTS AND THEY ARE TALKING A BIG GAME ABOUT HOW GENERATIVE AI IS GOING TO MOVE FROM -- TOWARD THE END-USER DEVICE. THAT IS WHERE THINK THEY WILL HAVE AN EDGE BECAUSE OF THE ADVANTAGE AND MOBILE PROCESSING UNITS WHERE THEY ARE ALSO A LEADER.
IF USERS WANT TO UPGRADE THEIR PHONE TO A MORE POWERFUL DEVICE. ED: WITH THE CAPEX AND RD COMMITMENTS, GOING INTO HOW TECHNOLOGY COMPANIES USE AI WITHIN THEIR CORE BUSINESSES. >> FIRST AND FOREMOST, THE CONVERSATION OR THE ANSWER HAS TO START WITH NVIDIA.
THEY WERE JUST DOMINATING THE SHIFT IN TERMS OF PROCESSING FROM CPU, TRADITIONAL SERVER, GRAPHICS PROCESSORS WHICH ARE MUCH MORE -- THEY HAVE ADVANTAGE OVER COMPETITORS. BUT INTO 2024, OTHER COMPANIES WILL BE IN THE MIX. MATAMELA AND LAURA -- MARV L AND BROADCOM ARE BIG CONTRIBUTORS. I WOULD NOT COUNT OUT INTEL AND I WOULD LOOK TO MEMORY COMPANIES LIKE MICRON. YOU ARE GOING TO NEED A LOT OF MEMORY TO RUN THESE SYSTEMS. ED: GOOD TO CATCH YOU UP HERE.
THE CLEAR TOP STORY HERE, THE STORY IS OUTPERFORMANCE. LOOK AT THE UNDERPERFORMANCE -- INDEX YIELDS CREEPING HIGHER. BITCOIN IS STILL AROUND 25,000 U.S. DOLLARS PER TOKEN. CPI WEDNESDAY, THE MARKETS TRENDING -- TREADING WATER GOING INTO THE ECO-PRINT.
SO MANY STORIES AHEAD, THIS IS ED: THIS IS THE MARKET STORY. U.S. MAJORS TRADING IN THE GREEN. THE S&P 500 NEAR ITS 4500 LEVEL. THE STORY IS OUTPERFORMANCE IN THE TECHNOLOGY. CPI PRINT WEDNESDAY. IN THE LAST SEVEN DAYS EIGHT NEW STORY SNUCK IN, CONCERNS ABOUT CHINA.
U.S.-CHINA TENSIONS. THE NASDAQ 100 UP MORE THAN 40% YEAR TO DATE. PROBABLY BECAUSE OF ARTIFICIAL INTELLIGENCE. LET'S BRING IN THE FEDERATED HERMES SENIOR EQUITY STRATEGIST. A TOUGH THING TO ASK. RIGHT NOW FROM A TECHNOLOGY PERSPECTIVE, WHAT IS DRIVING THESE MARKETS? >> YOU MADE THE IMPORTANT POINT THAT ARTIFICIAL INTELLIGENCE, THE AI CRAZE IS NOT REALLY A CRAZE. IT IS A REVOLUTION.
AS HER PREVIOUS GUEST DISCUSSED IN DEPTH, WHETHER OR NOT WE PEAKED OUT IN OUR USE OF CHAPPIE TO -- CHATGPT FOR THE MOMENT, LOTS OF COMPANIES ARE WILLING FOR WHAT IS GOING TO BE GREAT PRODUCTIVITY. IT IS EXCITING, AND HIS MOVED THE MARKET AND IT HAS A NICE CORRECTION INTO NOW, SO NOW WE LOOK AT IT AND SAY MAYBE IT IS TIME TO GET BACK IN AND THEN TRADE DOWN SEMICONDUCTORS. ED: IS AN EQUITY STRATEGIST, EVEN IF YOU'RE TAKING A MACRO VIEW, HOW HAS ARTIFICIAL INTELLIGENCE CHANGE THE DATA POINTS THAT YOU LOOK AT? WILL TALK ABOUT THE FED AND CPI IN A MINUTE. I WONDERED IF YOU HAD CHANGED YOUR APPROACH, WHERE YOU LOOK FOR INFORMATION TO TRY AND UNDERSTAND WHAT AI IS DOING. LINDA: I APPRECIATE THAT QUESTION. AS A GENERAL EQUITY STRATEGIST,
IT BEHOOVES US ALL TO LEARN ABOUT AI AND HOW QUICKLY IT MIGHT COME CHANGE OUR LIVES. THE BOTTOM LINE FOR ANY GENERAL -- ANYBODY LOOKING AT STOCKS, IS THE COMPANY YOU ARE LOOKING AT GRASPING THIS OR ARE THEY TURNING A BLIND EYE AND EXPECTING IT TO GO AWAY? THOSE WHO ARE INVESTING, LOOKING FOR COMPANIES THAT ARE HIRING FOR AI TALENT IS ONE INTERESTING WAY TO LOOK FOR STOCKS OUT THERE. THE PRODUCTIVITY ENHANCEMENT THAT SHOULD BE EXPECTED OVER THE NEXT 10 YEARS CAN COME QUICKER THAN MANY PEOPLE THINK AND THAT IS GOING TO SHOW ITS WAY THROUGH EARNINGS. ED: IS THERE ANY SPECIFIC SUBSECTOR OR AREA WHERE YOU SEE MOST POTENTIAL UPSIDE FROM INVESTMENTS INTO ACCELERATED COMPUTING OR INTO LARGELY WHICH MODELS, THE UNDERLYING --UNDERLYING TECHNOLOGY BEHIND GENERATIVE AI? LINDA: THAT IS INTERESTING.
IT IS PROBABLY GOING TO CROSS THROUGH ALL SECTORS OF THE ECONOMY. BUT REALLY THERE ARE TWO AREAS, THE INFORMATION PART OF IT, JOBS THAT ARE HIGHLY INFORMATION ORIENTED THAT CAN BE AT FIRST HELPED BY AI AND THEN MAYBE SEE JOBS DISPLACED BY AI GOING FORWARD. THAT WILL BEAT SOME OF THE MORE HIGHLY PAID, HIGHLY COMPENSATED AREAS. I DON'T KNOW IF YOU ARE A LAWYER, MAYBE YOU NEED TO WATCH
OUT. ON THE LOWER END OF THE SPECTRUM, YOU WILL SEE COST-CUTTING IN TERMS OF LABOR IN AREAS THAT ARE HEAVILY LABOR-INTENSIVE BUT REPETITIVE. THAT GOES TO THE ROBOTICS SIDE OF THINGS.
THE RETAIL SHARES ARE IN A -- ARE IN TROUBLE. IF I WAS LOOKING TO GIVE ADVICE TO A YOUNG STUDENT, I WOULD SAY YOU MIGHT WANT TO BE A NURSE INSTEAD OF THINKING YOU ARE GOING TO WORK AT THE MALL FOR EXAMPLE. ED: I AM NOT A LAWYER, I DID GO TO LAW SCHOOL, BUT I KNOW A NUMBER OF STARTUPS LOOKING TO USE AI FOR LEGAL DOCUMENTS. THE STORY ABOUT CHINA IS THE TENSION BETWEEN THE U.S. AND CHINA CENTRAL GOVERNMENT. BUT AI IS AT THE HEART OF GOD. I WONDERED HOW YOU SEE THE LATEST HEADLINES FROM CHARTER IMPACTING THIS MARKET. LINDA:
CHINA AS A PLACE TO INVEST IN SOMETHING PEOPLE ARE EVERMORE AFRAID OF FOR NUMEROUS REASONS. THIS IS JUST ONE EXTRA THING TO ADD TO THAT. WE WANT TO BE SELF-SUFFICIENT HERE AND MOVE LOTS OF PRODUCTION TO THE UNITED STATES AND OTHER COUNTRIES AROUND THE WORLD. IT IS GOING TO TAKE A LOT
LONGER THAN MANY THINK. IT SEEMS VERY CLEAR THAT WE AS THE UNITED STATES, OUR LEADERSHIP, MAY WANT TO TAMP DOWN THOSE CONCERNS. AS YOU KNOW, SOME OF THE BEST MONEY BEING SPENT IN CAPITAL EXPENDITURES IN THE MANUFACTURING SIDE IS BECAUSE OF THINGS LIKE THE CHIP ACT WHERE MONEY IS COMING FROM OUR GOVERNMENT TO HELP GET MORE SELF-SUFFICIENT IN THE UNITED STATES. SO WE CAN TRY TO WEAN AWAY FROM CHINA IN THIS WAY. BUT IT WILL TAKE LONGER THAN MANY THINK AND JUST BRINGING EVERYTHING BACK WILL PROBABLY TAKE LONGER THAN MANY THINK. ED:
CPI WEDNESDAY, WHERE'S YOUR HEAD WITH THE FED AND WHAT IT MEANS FOR THE TECH SECTOR? LINDA: WE BELIEVE YOU WILL SEE PROBABLY ONE MORE HIKE THIS YEAR, MAYBE NOVEMBER, MAYBE THEY WAIT ONE MORE TIME AND THAT IS SOMETHING REASONABLY EXPECTED. IN THE TECH SECTOR, IT IS ALSO A LONG-DURATION ASSET AND YOU REALLY DON'T WANT TO SEE REAL RATES GOING UP. I HAVE GONE UP FAIRLY QUICKLY. IF WE ARE RIGHT ON WHEN INFLATION EXPECTATIONS ARE COMING DOWN, THEN THE FED WILL STOP RAISING RATES, IT MAKES IT MORE DANGEROUS AND MORE VULNERABLE FOR THESE STOCKS THAT ARE LONG DURATION TECH. ED: LINDA, SENIOR STRATEGIST AT FEDERATED HERMES, GOOD TO SEE YOU. THE FORMER CHIEF OF ALIBABA QUITS. MORE NEXT.
ED: MONTHS AFTER AGREEING TO LEAVE THE CLOUD DIVISION AND IT IS A NEW -- JUST AS IT IS NAVIGATING A COMPLICATED BREAKUP. IT'S BRING IN ISABEL FOR MORE. >> THIS IS A SURPRISE TO MANY. AFTER THE APPOINTMENT, INTELLIGENCE SAYING THIS WILL LIKELY MEAN THE NEW PARTNERS WILL HAVE MORE OF AN INFLUENCE IN THE STRATEGIC CLOUD DECISIONS. BLOOMBERG REPORTED THAT ALIBABA WAS IN REPORTS TO RAISE FUNDS FROM CHINESE STATE ENTITY US. THIS COMES AFTER AN EIGHT YEAR
STORIED CAREER. BUT HE WILL STILL BE IN THE ECOSYSTEM, RUNNING THE ONE BILLION PET FUND OFF THE FIRM. THE RESHUFFLE COMES AS ALIBABA NAVIGATES THIS BREAKUP. THE CERTAINTY IS GETTING TO THE INVESTORS.
SHARES FELL AS MUCH .5%, THE LARGEST FOLLOWED SOME THING LIKE THREE WEEKS. ED: IT IS MORE OF A KNOWN QUANTITY TO US, ONE OF THE COFOUNDERS OF ALIBABA ALONGSIDE JEFF NODDLE. -- JACK MA.
TELL US ABOUT THE NEW NAMES. >> HE GAVE UP HIS ROLES TO EDDIE WU AND ANOTHER. EDDIE IS LESSER-KNOWN BUT HE HAS BEEN THERE SINCE THE BEGINNING AND HE HAS A COMPUTER SCIENCE MAJOR, CREDITED FOR THE DEVELOPMENT OF THE PAYPAL LIKE ALIPAY.
HE IS A FORMER LACROSSE PLAYER IF THAT IS OF SIGNIFICANCE AND HE IS THE OWNER OF THE BROOKLYN METS. HE WAS THERE SINCE THE BEGINNING SO THAT TELLS THEM IT PROBABLY VALUES LOYALTY. THE TWO OF THEM WILL BE RESPONSIBLE FOR THE COMPANY, AFTER YEARS OF 21 WHEN CHINA REALLY CREPT DOWN WITH THE TECH SECTOR. IT WILL BE INTERESTING TO WATCH. IT IS A NEW, UNEXPECTED AND IN THE MIDDLE OF A HUGE HISTORIC RESHUFFLE. ED: ISABEL LEE WITH THE FLOW DOWN. COMING UP ON BLOOMBERG TECHNOLOGY, CURIOUS ABOUT THE FUTURE OF QUANTUM TECHNOLOGY? THE CEO OF THE FIRST COMMERCIAL SUPPLIER OF QUANTUM SUPPLIERS ED: WELCOME BACK TO "BLOOMBERG TECHNOLOGY". ED LUDLOW INJECTED TO SCALE HERE.
QUICK PICTURE OF THE NASDAQ 100, UP .7%, CPI DATA ON WEDNESDAY AND AS WE HEARD FROM GUESTS IN THIS HOUR, A BIG VIEW TO WARMING HOW WE FEEL ABOUT THE FED BASED ON THE DATA PRINT. WE ARE COMING OFF 1.4% DROP ON WEEKLY BASIS ON THE NASDAQ LAST WEEK. THERE BEEN CONCERNS THROUGH THE PER--SPOKE OF EARNINGS SEASON.
ONE OF THE BIG STORIES IS TESLA, BASICALLY ON TRACK FOR ITS BIGGEST JUMP SINCE THE END OF JANUARY. MORGAN STANLEY OUT, RAISING THE STOCK. ADDING A PRICE TARGET OF $400. LOOK AT THE TESLA
SUPERCOMPUTER, THE WORK IN SEMICONDUCTORS. THIS IS LIKE AN AWS MOM BRENT -- MOMENT FOR AMAZON. THEY SEE THE OPPORTUNITY FOR TESLA, GO BACK TO 2015, ON THE SCENE WITH A 70% RAISE A PRICE TARGET ON TESLA BECAUSE HE SAW THE FUTURE IN ROBOTAXIS. PRESENT DAY, NOT QUITE THERE. BUT INTERESTING NONETHELESS. AND HAVING A BIG IMPACT ON
MARKETS THIS MONDAY. SUPERCOMPUTERS ARE NOT THE ONLY TYPE OF TECHNOLOGY WITH GROWING COMMERCIAL APPEAL. ENTER QUANTUM COMPUTING, A SEPARATE KIND OF TECHNOLOGY WITH THE CAPABILITY TO ACCELERATE VARIOUS SECTORS IN SOCIETY. JOINING US NOW, TO WALK THROUGH THE TECH WAVE, THE CEO ALAN BRATS. ONE OF THE FIRST COMMERCIAL COMPUTING COMPANIES IN THE WORLD. THAT IS A GOOD PLACE TO START,
THIS MISCONCEPTION THAT QUANTUM COMPUTING IS STILL THEORETICAL. IT IS NOT IN THE REAL WORLD. THAT IS A POINT OF VIEW YOU WOULD DISAGREE WITH. >> ABSOLUTELY. THANK YOU FOR THE OPPORTUNITY
TO BE HERE. I'M EXCITED TO SPEAK WITH YOU. YOU'RE RIGHT. MOST OF THE PEOPLE IN THE INDUSTRY ARE SAYING THAT QUANTUM COMPUTING IS YEARS AWAY FROM COMMERCIAL REALITY. BUT WE TOOK A VERY DIFFERENT APPROACH TO QUANTUM COMPUTING, ONE THAT HAS ALLOWED US TO DELIVER COMMERCIAL QUANTUM COMPUTERS TODAY. HAVE BEEN DELIVERING THEM FOR ALMOST TWO YEARS. WE HAVE OVER 60 COMMERCIAL
CUSTOMERS THAT ARE LEVERAGING OUR QUANTUM COMPUTER TO SEE IMPROVED PERFORMANCE AND A BROAD ARRAY OF BUSINESS APPLICATIONS. ED: I'M GOING TO PLAY DEVIL'S ADVOCATE. HAVE 60 COMMERCIAL CUSTOMERS, YOU'VE BEEN DELIVERING COMPUTERS. I LOOK AT YOUR REVENUES AND THEY ARE LOW. IF QUANTUM COMPUTING IS IN THE REAL WORLD, WHY ARE YOU NOT BOOKING MORE SALES AS A REAL COMMERCIAL PRODUCT? >> SHORT. FIRST OF ALL, COMMERCIAL
QUANTUM COMPUTING IS STILL EARLY. EVEN WE WERE NOT COMMERCIAL UNTIL A LITTLE OVER A YEAR AGO. WE HAVE ACHIEVED THAT MILESTONE AND WE ARE NOW GETTING STARTED BUILDING THE BUSINESS. WE HAVE SEEN OUR BOOKINGS ACCELERATE QUARTER OVER QUARTER FOR FIVE QUARTERS NOW.
WE HAVE SEEN OUR AVERAGE DEAL SIZE GROW SIGNIFICANTLY FROM TENS OF THOUSANDS OF DOLLARS TO WELL INTO THE HUNDREDS OF THOUSANDS OF DOLLARS. AND WE ARE SUPPORTING APPLICATIONS AS FAR RANGING AS EMPLOYEE SCHEDULING, E-COMMERCE DELIVERY, CUSTOMER LOYALTY REWARDS, OPTIMIZATION OF MARKETING CAMPAIGNS, EVEN IMPROVING THE PERFORMANCE OF SHIPPING PORTS. SO IT IS EARLY DAYS BUT WE ARE OFF TO A GREAT START AND WE ARE REALLY EXCITED ABOUT THE PROSPECTS FOR THE FUTURE. ED: THE BASICS OF QUANTUM COMPUTERS IS THAT THEY USE QUANTUM MECHANICS TO CARRY OUT CALCULATIONS WITH HIGHER EFFICIENCY THAN SUPERCOMPUTERS.
WHAT IS IT ABOUT THIS THAT IS PROPRIETARY, UNIQUE ABOUT YOUR TECHNOLOGY? >> AS I MENTIONED EARLIER, WE HAVE TAKEN A DIFFERENT APPROACH TO QUANTUM COMPUTING FROM EVERYBODY ELSE IN THE INDUSTRY. WE ARE THE ONLY COMPANY IN THE WORLD THAT PURSUES QUANTUM COMPUTING IN THE WAY THAT WE DO WITH THE TECHNOLOGY THAT WE HAVE DEVELOPED. AND WE HAVE DEVELOPED IT AND -- ENTIRELY OURSELVES. EVERYTHING FROM THE DESIGN TO THE MANUFACTURING OF THE POINT -- QUANTUM COMPUTERS, THE SOFTWARE FOR PROGRAMS, ALL THE WAY UP TO THE QUANTUM CLOUD SERVICE, THE VEHICLE BY WHICH OUR CUSTOMERS ACCESS OUR QUANTUM COMPUTERS. WE DESIGN, DEVELOP AND DELIVER THAT OURSELVES AND WE HAVE EXTENSIVE PATENT COVERAGE FOR ALL OF THAT TECHNOLOGY.
WE HAVE OVER 200 U.S. BRANDED PATENTS AND OVER 100 IN PROCESS WORLDWIDE. THAT SPACE FOR QUANTUM COMPUTING IS OWNED BY D WAVE. ED: A FEW WEEKS AGO WE HAD A COMPANY FROM THE U.K. ON THE PROGRAM TALKING ABOUT THEIR WORK IN QUANTUM ALGORITHMS AND COMPUTING. ONE OBSERVATION MADE BY THEIR
FOUNDER WAS THAT CHINA IS MAKING PROGRESS IN THE FIELD OF POINTING COMPUTING, IT IS A COOPERATIVE INITIATIVE GLOBALLY FOR THOSE IN THE FIELD. COULD YOU SPEAK TO HOW YOU VIEW CHINA'S PROGRESS IN QUANTUM COMPUTING, BECAUSE CHINA RIGHT NOW IN ITS ACCESS TO TECHNOLOGY IS A MAINSTAY OF THE NEW CYCLE. >> YOU'RE RIGHT. THIS IS A REAL CONCERN. CHINA IS INVESTING OVER $15 BILLION IN QUANTUM COMPUTING. I WAS IN EUROPE LAST WEEK, I WAS IN THE U.K., SWITZERLAND, GERMANY. THEY ARE ALL INVESTING HEAVILY
IN QUANTUM COMPUTING. THE U.K., OVER $4 BILLION IN QUANTUM. U.S. IS CURRENTLY INVESTING LESS THAN $4 BILLION IN QUANTUM COMPUTING. IN SOME SENSE WE ARE LAGGING IN THIS SPACE AND WE MUST GET OUR ACT TOGETHER. THIS TECHNOLOGY IS GOING TO
FUNDAMENTALLY TRANSFORM THE WAY BUSINESSES OPERATE AND HAVE A HUGE IMPACT ON THE SOCIAL AND ECONOMIC ENVIRONMENT AND THE U.S. MUST ACCELERATE ITS INVESTMENT IN THIS AREA. EDIT: ALAN, THANK YOU FOR JOINING US ON BLOOMBERG TECHNOLOGY. SAYING QUANTUM COMPUTING MORE AND MORE.
NEXT, A CEO JOINS US TO TALK ABOUT THE EARLY STAGE ECOSYSTEM THAT CHANGES HOW WE DO THE ECOSYSTEM. THIS IS BLOOMBERG. ED: IT IS A BIG WEEK AHEAD FOR IPO'S IN THE TECHNOLOGY SECTOR. LET'S KICK IT TO NEW YORK CITY WHERE SONALI BASAK HAS THE LATEST. SONALI: WILL ZOOM IN ON INSTACART, SETTING THE STAGE FOR AN IPO THAT COULD VALUE IT AT UP TO $9.3 BILLION. THAT IS LESS THAN A QUARTER OF WHAT IT WAS WORTH AT THE HEIGHT OF THE PANDEMIC.
LET'S BRING IN KATIE ROOF TO BRING IT -- BREAK IT DOWN. WE'RE LOOKING AT THIS INSTACART IPO AND IT IS NOT THE ONLY ONE THAT MAY BE FACING A DOWN ROUND. >> INSTACART WAS WELL AWARE THAT MARKET CONDITIONS HAVE AFFECTED THE VALUATION. THEY LOWERED THEIR OWN INTERNAL VALUATION, THE VALUATION TO MARKET CONDITIONS, AND THEIR OWN SLOWED GROWTH. SOME PEOPLE ARE SAYING BANKERS MAY BE TRYING TO PRICE THIS -- IT OPENS THE WINDOW FOR IPO'S. SONALI:
EVEN WITH A VALUATION THAT IS CLOSER TO WHERE IT WAS IN PRIVATE ROUNDS, THIS IS STILL LOWER. THEY ARE BRINGING AN INTERESTING MASSIVE NAMES. WHAT DOES THIS SAY ABOUT THE MODEL TO TAKE COMPANIES PUBLIC? >> AT THIS POINT GOES IN THE TECH COMPANY WERE NO LONGER IN DENIAL. THE MARKET HAS BEEN IN CORRECTION FOR OVER A YEAR NOW
AND COMPANIES ARE AWARE THAT IT IS NOT GOING TO LOOK LIKE 2021. THEY ARE SO CLOSE TO NOSH -- SONALI: THE BIGGEST INVESTORS, TWO TIGER CUBS THAT HAVE BEEN INVESTING IN THIS -- THE IPO COMPANIES. >> THEY ARE GOING TO MAKE A LOT OF MONEY REGARDLESS.
WHEN THIS WAS A VERY YOUNG COMPANY, DEPENDING ON WHAT SHAREPRICE THEY GOT IN, IT IS STILL GOING TO BE FOR MOST OF THEM A LOT LOWER THAN WHERE IT IS TRADING. SOME OF THE ONES THAT INVESTED AT 39 BILLION VALUATION ARE GOING TO LOSE MONEY ON THOSE SHARES UNLESS THERE IS A GIGANTIC POP. BUT OVERALL, I HAVE TO DO THE MATH. IF YOU ARE INVESTED IN IT IS A DOLLAR SHARE OR LESS, YOU'RE GOING TO MAKE A LOT. SONALI:
KATIE ROOF BREAKING THE NEWS IN THIS MARKET. BACK TO YOU, AND. ED: THANK YOU, WOULD AND -- THAT IS ONE END OF THE SCALE. THE LARGEST PRECEDED INVESTOR IN THE WORLD MAKING SOME STRATEGIC CHANGES TO WHERE -- THE WAY THEY OPERATE.
STARTING TO MOVE -- JOINING US NOW, GARY ON THE PROGRAM ON FRIDAY. SUMMER 23, THE CLASS CAME TO A CLOSE AND HE WAS TALKING ABOUT WHAT IS DIFFERENT THIS TIME AROUND. WE WERE ALSO THINKING DIFFERENTLY. >> THANK YOU FOR HAVING ME ON YOUR PROGRAM. IT IS A PLEASURE.
THE BIG NEWS IS THAT WE ARE MOVING TO A -- PROGRAMS WILL NOW START AND END TOGETHER TWICE A YEAR. THE FIRST TERM , WE WILL BE RUNNING 22 PROGRAMS AND 16 CITIES ACROSS FIVE COUNTRIES. A LOT OF THIS PROGRAM WILL BE IN PARTNERSHIP WITH CORPORATE ENTITY IS LIKE JP MORGAN, AUDI AND MORE. THAT IS A BIG CHANGE. ED: YOU AND I WERE ON STAGE TOGETHER AT SORT OF GRINDER. I ASKED A QUESTION THAT ELICITED SUCH A RESPONSE FROM THE AUDIENCE, WHICH WAS HOW DO YOU FIND CANDIDATES? HOW DO YOU GO OUT AND FIND THE RIGHT COMPANY IS JERICHO -- COMPANIES? >> A LOT OF COMPANIES AROUND THE WORLD KNOW THEY SHOULD COME TO US IF THEY ARE INTERESTED IN GETTING A FIRST CHECK.
WE HAVE RECEIVED THOUSANDS OF APPLICATIONS EVERY MONTH AND WE GO THROUGH THESE. WE HAVE LOCAL TEAMS IN THE DIFFERENT COUNTRIES I MENTIONED BEFORE SO WE HAVE THE OPPORTUNITY TO MEET IN PERSON. WHETHER IT IS NEW YORK, SEATTLE, SAN FRANCISCO, PARIS, LONDON AND TEL AVIV.
ED: YOU'RE JOINING US FROM I BELIEVE SAUDI ARABIA NOW. WE KNOW ALL ABOUT SAUDI MONEY. YOU ARE AT THE EARLIEST STAGE OF FOUNDERS. WHAT IS THE LANDSCAPE LIKE THAT? >> IT IS A YOUNG ECOSYSTEM. PART OF THE REASON WHY WE HAVE BEEN ACTIVE IN THE MIDDLE EAST FOR A LITTLE OVER FIVE YEARS, MAKING INVESTMENTS IN THE REGION, WE HAVE OVER 60 INVESTMENTS IN THE REGION. PART OF THE REASON WE ARE THERE IS BECAUSE WE ARE USUALLY BUILDING THE DEAL FLOW THAN THE INDUSTRY INVEST IN. WE CAME HERE, PART OF WHAT WE
WERE ASKED TO DO WAS TO GO AND FIND PEOPLE WHO WANTED TO BE ENTREPRENEURS, AND HELP THEM. >> THERE HAS BEEN A DEBATE AMONG VENTURE CAPITALISTS ON THE PROS AND CONS OF PARTNERING WITH SAUDI LPS. WHERE DOES TECH STARS SIT ON THIS DEBATE? >> WE ARE IN A POLITICAL ORGANIZATION. WE GO WHERE WE BELIEVE WE CAN HELP ENTREPRENEURS.
WE HAVE DEEPLY ROOTED INTO OUR CULTURE AND OUR MISSION THE IDEA THAT TALENT AND IDEAS ARE EVENLY DISTRIBUTED AROUND THE WORLD BUT OPPORTUNITIES ARE NOT. WHETHER IT IS THE U.S., CANADA, SAUDI ARABIA OR JAPAN, WE SEE AN OPPORTUNITY TO GO AND FOUNDERS ON THE GROUND. WE GO THERE. ED: ONE THING GARY REFLECTED ON FRIDAY WAS THAT THERE WAS AN AI FOCUSED STARTUP, BUT MORE THAN 50% WERE LOOKING INTO AI IN SOME WAY. IS THERE ANY NUMBER YOU CAN GIVE US ABOUT WHERE THOSE SITTING IN YOUR PROGRAM ARE PER FORTUNATELY FOCUSED -- PROPORTIONATELY FOCUSED IN AI? >> NUMBER IS SIMILAR. THE CHALLENGE IS TO STING WISH
WHEN IT IS THE CORE BUSINESS YOU ARE INVESTING IN, VERSUS AN ENABLER OF THE CORE BUSINESS. WHEN YOU LOOK AT LEADER INVESTMENTS THROUGH 2023, THE VAST MAJORITY OF COMPANIES HAVE LEVERAGED AI IN ONE FORM OR ANOTHER AND ABOUT 20%, 20 TO 30% HAVE AI AS THE CORE OF THEIR BUSINESS. ED: MY COLLEAGUES WERE TALKING ABOUT EVERYTHING TO COME THIS WEEK.
I KNOW YOU ARE INVESTING AT THE OTHER END OF THE SCALE. WE HAVE BEEN THROUGH SO MANY MARKETS. I WONDER IF YOU GIVE US YOUR PERSPECTIVE ON HOW MUCH OF A STARTING GUN THIS WEEK IS FOR TECH IPOS IN 2023.
>> THIS IS AN IMPORTANT WEEK. IF ANYTHING BECAUSE THE ENTIRE TECH ECOSYSTEM HAS BEEN WAITING FOR A LONG TIME. THERE HAS NOT BEEN ANY SIGNIFICANT IPO IN THE LAST 12 MONTHS. EVERYBODY IS WATCHING WHAT IS GOING TO HAPPEN. IS THERE GOING TO BE A SUCCESSFUL INSTACART IPO WHICH WILL GIVE INCREASED CONFIDENCE TO VENTURE CAPITALISTS, AND TO GO -- OR IS IT GOING TO BE A VERY TUNED OUT AND IN THAT CASE, THE COMPANIES ARE PROBABLY GOING TO WAIT LONGER TO GO PUBLIC.
ED: YOU HAVE ACCESS TO REAL-TIME DATA ABOUT THE HEALTH OF VERY SMALL COMPANIES AROUND THE GLOBE. HOW HAS THE PRECEDED MARKET HELD UP OVER THE VOLATILITY OF THE LAST 18 MONTHS OR SO? >> THE EARLY STAGE OF THE ECOSYSTEM HAS COOLED SUBSTANTIALLY, WITH THE EXCEPTION OF ARTIFICIAL INTELLIGENCE AND CLIMATE TECH. HAVING SAID THAT, IF YOU LOOK AT PRE-SEED, THE VALUATIONS HAVE REMAINED FAIRLY STABLE. THERE CONTINUES TO BE A GREAT DEAL FOR INVESTORS, DRIVEN BY NOT JUST AI BUT BLOCKCHAIN AND NANOTECHNOLOGY. COMPARED TO A COMPANY THAT TOOK THE BIGGEST HIT SO FAR, THE EARLY STAGE TYPE OF COMPANIES HAVE BEEN FAIRLY PROTECTED.
ED: OUR -- INVESTING IN THOUSANDS OF CEOS -- IPOS, THANK YOU. CHARTER AND DISNEY REACHING A BACKGROUND. THIS IS BLOOMBERG TECHNOLOGY. ED: TODAY, GOING VIRAL. WE ARE TALKING ABOUT THAT U.S., NOVAK DJOKOVIC AND COCO GOFF TAKING HOME THE CHAMPION HOUSES OVER THE WEEKEND. BUT MANY SPECTATORS WERE NOT ABLE TO WATCH US ABC, ESPN AND OTHERS HAD LIKE SCREENS AMID A BUSINESS DISPUTE WITH CHARTERED MEDICATIONS.
HOWEVER, A DEAL HAS BEEN REACHED ENDING THE BLACKOUT. FOR MEN -- MILLIONS OF CUSTOMERS, BEFORE THE FIRST BROADCAST OF MONDAY NIGHT FOOTBALL, MAKING TECHNOLOGY PRODUCER JACKIE LOPEZ A VERY HAPPY JETS FAN. CHRIS PALMERI LEADS OUR MEDIA COVERAGE AND JOINS US FROM L.A.. >> IT LOOKS LIKE CHARTER GOT MUCH OF WHAT IT WANTED. CHARTER WANTED TO INCLUDE DISNEY STREAMING SERVICES IN BASIC CABLE PACKAGES AT NO ADDITIONAL CHARGE, IT LOOKS LIKE THAT IS HAPPENING. FROM THE $60 A MONTH -- YOU GET A SIMILAR DEAL FOR PEOPLE WHO PAY MORE FOR ESPN PLUS.
WHEN WE LAUNCH AN ONLINE VERSION , YOU BOB IGER CEO OF DISNEY SAID THEY WOULD, IT WILL BE INCLUDED IN THE CABLE BUNDLE AS WELL. ANOTHER BIG SURPRISE IS LESSER CHANNELS ARE OFF THE CHARTER SYSTEM. DISNEY JUNIOR, DISNEY XD, FREE-FORM WHICH USED TO BE AIMS -- ABC FAMILY. THOSE WHAT WEEK AVAILABLE TO CHARTER SUBSCRIBERS. ED: CHARTER SHARES UP, DISNEY UP A PERCENTAGE POINT. YOU GET A KNEE-JERK REACTION. HERE'S THE STORY I DON'T UNDERSTAND.
A MORE NARROW LINEUP ON THE SPECTRUM. IT IS NOT ALL GOOD. >> SUBSCRIBERS TO CHARTER WON'T GET THOSE CHANNELS ANYMORE. THAT THESE HAVE TO PAY FOR THOSE. AND IN CABLE TV, IT WAS THE SPINOFF CHANNELS AND YOU GET MORE MONEY CASH DISNEY -- YOU GET DISNEY XD AND DISNEY JUNIOR AND THOSE CHANNELS ARE GOING AWAY BECAUSE THE CABLE BUNDLE COST SO MUCH IN THE STRATEGY IS NOT WORKING ANYMORE. TO SEE ALL OF THOSE CHANNELS DROPPED BY THE SECOND LARGEST CABLE PROVIDER IS BIG NEWS. IT SIGNALS THAT THOSE CHANNELS
WILL PROBABLY SEE A LOT MORE. ED: THEY STILL GET NET GEO. THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY". TO RECAP THE SHOW ON OUR PODCAST, GET IT WHEREVER YOU GET YOUR PODCASTS. ON ALL OF YOUR BLOOMBERG PLATFORMS, FROM SAN FRANCISCO,
2023-09-13 18:07
