Anthropic’s Compute Bet, Musk on AI, Apple’s New CEO

22:38Whether you own stocks, bonds, real estate, commodities, even crypto, these are discussions you absolutely need to hear. Subscribe to the Masters in Business podcast on Apple, Spotify, or anywhere you listen.

22:58Ed Ludlow:YouTube has tapped Amazon as its newest affiliate partner in YouTube shopping. Part of the video giant's push to prioritize e-commerce as one of its next big bets, YouTube creators can now tag Amazon products in their videos and live streams, driving more business directly to the enormous global marketplace while taking a cut from those sales. Let's stick with the e-commerce giant. The FTC and a group of U.S. states sued Amazon over claims it systematically overcharged advertisers by more than$20 billion since 2019. The complaint was filed on Monday in Seattle Federal Court and alleges Amazon ultimately misled 1.2 million advertising customers.

23:39Ed Ludlow:Bloomberg Spencer Soper, who leads our coverage of the company, joins us now. Let's start with just the basic allegation that the FTC and this group of U.S. states is making against Amazon. Yes, so they're saying that Amazon introduced a synthetic price that basically inflated the ultimate price that advertisers pay. This works with a on an auction basis, meaning, you know, you bid against search terms. So someone gets on Amazon and searches for a phone charger or something like that. You know, there's various people bidding to be the featured listing, the featured advertisement shown against that search term.

24:22And that's very valuable real estate. And so that's supposed to be done on an auction where people are bidding against that search term. and what the AFTC alleges is that Amazon kind of just decided this is, you know, what this advertisement should be valued at. And that created kind of like a floor where the where the bidding ultimately had to cross and that that inflated the value of the advertising and led to, you know, more than 1.2 million advertisers being being overcharged over several years.

24:53Ed Ludlow:Spencer, in response to this suit, Amazon's given an email statement that basically says the lawsuit presents no evidence of harm to shoppers. We're going to show some of it now. The FTC claims advertisers were harmed because they didn't understand how our auction worked and therefore overpaid. Just take us into what Amazon's disputing here. Yeah, I mean, Amazon's basically saying that the market is working fine. And their main argument is that advertising rates on Amazon, the cost per click, has basically been about flat. When you consider inflation, like they haven't gone up at all. And conversion rates, the number of people who see an ad and actually make a purchase has gone up over that time.

25:39So their argument is basically that whatever the FTC is saying, our advertiser actually getting better value from our advertising system and haven't been overcharged. They're actually getting more value for their money is their argument.

25:54Ed Ludlow:Spencer, real quick, we just got 30 seconds or so. Is advertising an important business for Amazon? Oh, absolutely. It's, you know, $60 billion a year. Not a huge number revenue side, but huge profitability side. So you think selling stuff online and delivering it to your house and owning all these warehouses, very expensive. They've been able to build this advertising layer on top without all of those assets needed. And it's incredibly profitable for Amazon. Bloomberg Spencer Soper, best in the business, covering Amazon, important details of this suit. Thank you very much. Now, coming up, it's John Ternus's first day as Apple CEO, and he's got some big shoes to fill.

26:38Ed Ludlow:We're going to discuss the transition at Apple next. Halfway through the program here from San Francisco, this is Bloomberg Tech.

26:56Ed Ludlow:Welcome back to Bloomberg Tech. Generally speaking, technology shares are lower. Earlier in the program, we talked about how it's the global bond market that's a big driver of the narrative with yields at their highest level since 2008. Micron is now modestly lower, two-tenths of a percent. But in the pre-market, a report out of Taiwan that some of Micron's work is threatening a potential strike over how Micron shares profits and the proposal on the table from the memory chip maker. It spooked markets. You saw Nasdaq futures take a leg lower. That's kind of rebalanced and hasn't really evolved into anything in the session, but it was notable in the pre-market.

27:34Ed Ludlow:Let's talk about Apple. Apple's Tim Cook has officially handed over the reins to John Ternus, leaving him some big shoes to fill. Cook turned a$350 billion company on a market cap basis into a$4.6 trillion iconic global brand. Apple shares have jumped almost 2 ,300 % since Cook became CEO. That was in August of 2011. The stock pulling ahead of the S &P 500 and NASDAQ 100, and honestly, never really looking back. Let's get the stock story with Bloomberg's Ryan Vestelica. It's a brilliant size and scope piece on the terminal. A lot of people are reading it. But today is day one of John Ternus. Tim Cook becomes executive chair.

28:17Ed Ludlow:Summarize the stock story. Yeah. So the real big takeaway is that underneath Tim Cook, even though he has sort of the reputation for not being nearly as exciting as, say, Steve Jobs, the stock performed extremely well under him. The favorite stat that I uncovered, I think, was from Bank of America saying that under him, Apple added more than$30 million in market cap every hour for 15 years. So just massive accumulation over time. A real focus on building out the company's services business, which is high margin recurring revenue. So more of that, less of the exciting sort of new product introductions that people associate with the Steve Jobs era, but certainly under him, pretty remarkable outperformance, especially relative to the broader market.

29:02Ed Ludlow:Nearer term, is there anything to talk about around how the stocks behaved since Apple announced that this was going to happen, that Tim Cook would step down today, John Ternus would take the CEO role today? Or has it been more closely aligned with an AI story from the stock's perspective? Yeah, I don't think people were expecting too much by way of a rocky transition here. So the stock hasn't really been pulling back on that. What has been interesting about the stock is you alluded to the AI part of this. Apple has had a kind of pronounced negative correlation with AI. It's very negative correlation to semiconductor stocks, to the Nasdaq 100.

29:41The idea is that because Apple isn't investing too aggressively in AI the way the hyperscalers are, it's not benefiting from it the way the chip makers are. If sentiment towards AI starts to sour a little bit, we see people in general rotate back into Apple and vice versa. So today we're seeing some weakness in chip makers. There's some concern about the state of maybe AI overall. And that's why we're seeing Apple outperforming today, or at least contributing to that.

30:07Ed Ludlow:Bloomberg's Brian Vestelica, thank you very much indeed. It is John Ternus' first day as Apple's CEO, but he's the former head of hardware and he doesn't have much time to get settled in before the company's new product unveil next week. Let's get up to speed with Bloomberg's managing editor, Mark Gurman, who leads our coverage of Apple. I appreciate that over a number of days we've been talking about this story. It is day one of John Ternus as CEO. And you outlined so clearly. Nothing just gets ripped up and changed overnight. But there was a piece of the Business Week story you wrote that I went back and read.

30:40Ed Ludlow:This idea that John Ternus is the product guy. He's good at hardware. But he's not necessarily good at finance or sales or legal. He'll have a team of people around him. Talk about that and how John Ternus manages a veteran management team. over at Apple. Yeah, it's funny. We've been talking about this now for two and a half years, so it feels a little repetitive rather than day one, but it is interesting that we've finally come to this moment. This is a big deal for Ternus. This is a big deal for Apple. And this is an interesting situation in which someone who was a peer of the rest of the staff on Apple's executive team has now risen up to be their boss.

31:20And that's different than when Tim Cook took over because Tim Cook wasn't necessarily a peer when he took over the company of the rest of the executives. He had already been serving as Apple's interim CEO two or three times before then. He had been the COO, so he was in a different stratosphere to everyone else, and he was a shoo-in for the role. Ternus, until my reporting on this about two and a half years ago, was a bit out of left field, dark horse surprise, and it all came to be. That's because of his product chops and how he's going to lead this company, the board hopes, he hopes, Apple employees hope, and of course customers hope, into new innovative products for the future.

32:01Ed Ludlow:Somebody's situation who does appear to be changing, you've reported on in the last 24 hours. There is a retirement or there is somebody senior in that group who is stepping back? He's not the only one, but I'll talk about the one that we've reported so far. That's Phil, company's longtime head of marketing. After stepping down from the marketing role in 2020, he became an Apple fellow running the App Store and Apple events, which means he's in charge of the stores on all the company's products as well as his product launch events. He's stepping back for unspecified projects, so he'll remain at the company for now.

32:38But he is en route to retirement. And so that's another big changing in the guard for Apple as well. And there'll be one more that we can talk about later.

32:46Ed Ludlow:Okay, you will be back on the show when that happens. Next week, Wednesday, September 9th, we get the full iPhone event. The centerpiece of foldable iPhone. What have you reported on what we expect to hear from Apple? It's going to be pretty and it's going to cost a pretty penny. I continue to hear that it's going to be priced north of$2 ,000 US. Obviously, this is expensive technology with that expansive display as well as that folding mechanism. and you have two screens now, the inner screen and the outer screen. And so that is going to be the main event at this showcase. We'll also see the 18 Pro, 18 Pro Max.

33:24There'll be a bevy of new colors, including a new sky blue and a wine, burgundy red, whatever you prefer to call it on the Pro models. The Pro Max will now get a mechanical aperture, so you can use a manual setting to let in as much light as you want into the photo, so better dark photography or photography at night. and then you'll see the new Apple Watches as well. AirPods 5 is also likely to arrive. Not major changes on the Apple Watches, but you'll see improvements to health tracking, including a continuous heart rate monitor. Right now, you're at random intervals and when you're working out,

34:01Ed Ludlow:now you'll get more data all day long. Mark, very quickly, is this going back to live events? This is still recorded? We just have 15 seconds. It'll be the same as you've seen before. John Ternus will come on stage, talk for a few minutes, introducing himself as CEO. Then they'll play the video. That's for attendees in Cupertino at the Steve Jobs Theater. And then everyone else can watch that same video live online through the Apple TV, through Apple website, YouTube, other social sites. So it should be a fun event. I'm really looking forward to it. Blueberry's Mark Gurman, who leads our coverage of Apple and Consumer Tech.

34:34Ed Ludlow:Thank you so much. In other news, Airbnb has replaced its chief business officer with a former executive of TripAdvisor and Booking. This as it tries to expand into new travel segments. Pepin Ravers is succeeding Dave Stevenson in overseeing several business areas, including short-term rentals, enterprise operations, and the company's growing hotels offering. The new appointment follows a spate of executive changes at Airbnb over the past year as several tenured leaders stepped down or retired. Okay, coming up. Data centers have become a hot debate in the US midterm campaign. But candidates in Brazil's presidential race are also leaning in.

35:15Ed Ludlow:We'll discuss. This is Bloomberg Tech.

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37:48Ed Ludlow:Data centers have become politically divisive in the U.S. midterm campaign, but not in Brazil's presidential race. Ahead of the country's October vote, both right-wing candidate Flavio Bolsonaro and President Luis Genasio Lula da Silva are making multi-billion dollar data centers and the AI investment that comes with them central to their pitches to bolster Latin America's largest economy. Bloomberg's Peter Miller joins us for more from Rio de Janeiro. Really interesting how this plays out in different societies and different economies. Explain the race with data centers in the middle of it. Yeah, thanks for having me.

38:28Brazil, like many countries apart from the United States, there's an issue of data sovereignty. Most of, I think, 60 percent of Brazil's data currently gets processed in the United States. And so that's a message that kind of the leftist center, the left wing, if you will, government of Lula is pressing and making that case to the public that we need data centers so that we can process our data here in Brazil. And the Trump administration has come out against one of the apps, the popular payment app, PIX. And so that's very popular here in Brazil. People want to keep that, and they want that data processed here in Brazil.

39:10And the other side, Flavio Bolsonaro, he's used data centers in his campaign as a way to bring in investment. And similar to Trump, he supports AI as a way to modernize the economy and improve efficiency.

39:25Ed Ludlow:With the two different candidates, is it clear which side the technology industry in Brazil is backing, private industry is supporting? They don't want to side with one candidate or the other. They would be very interested in steering clear of the political debate so that they can pursue their projects no matter who wins. Bloomberg's Peter Millard joining us from Rio de Janeiro. It's great to have you on the program. Thank you very much. The situation in Brazil is in sharp contrast with the U.S., where voter anger over higher electricity bills, water use, is putting politicians on the defensive, even in data center strongholds like Virginia and Texas.

40:06Ed Ludlow:Jason Oxman is the CEO of the Information Technology Industry Council and joins us for a discussion. This is fascinating because we are getting closer to the midterms. There are specific races across the board where data centers have become a central issue. Lay out the landscape you're seeing in those races and why you think this is happening. Well, it's great to be with you, Ed. And, you know, as Peter noted, there are politicians that recognize in Brazil, as they do in the United States, that AI is the infrastructure of the future. And there's been a lot of talk about construction of data centers, which are essentially AI factories.

40:48What I find fascinating about the political aspect here is I think the facts show very clearly that AI infrastructure investment is creating tens of thousands, hundreds of thousands of jobs across construction and the various trades, but also across the various scientists as well that go into these data centers and operate them. So it's good for jobs. But there are concerns, as you noted, about the state of the economy more broadly, the extent to which data centers are responsible for higher power bills. The answer to that, again, is in the facts, they're not. Data centers use a low single digit percentage of overall power in the country.

41:27There are a lot of other factors that go in, but it is incumbent on the tech industry to respond to these concerns. I think you're seeing that response pick up in recent weeks as well.

41:36Ed Ludlow:Jason, you represent the trade association that represents the tech industry, right? But it's interesting, you seem to be acknowledging that the concerns that everyday Americans have are warranted, right? Does the industry hear those concerns? Is it taking action to at least engage on them? I think it's both industry and government. I'll give you an example. The Trump administration has convened not one but two ratepayer protection pledge events where the tech industry, in partnership with utilities, is pledging not to raise rates on consumers. You've seen multibillion-dollar investments by the tech industry in power-generating capability and modernizing grids and other steps to minimize the impact on consumers.

42:22So I think we are taking it very seriously as an industry, and we do, of course, need to work in partnership with government to make that happen. And the Ratepayer Protection Pledge is a good example of that. But you're right. The tech industry can do more. And we are endeavoring to do more. Investing in power companies themselves. You've seen Microsoft's investment in restarting nuclear power capability adjacent to one of their data centers, for example. Meta has invested in Louisiana in additional generation capability as well. So there's more to do. And it is important that we be responsive to these concerns that are raised.

42:58Ed Ludlow:Should we talk about advertising? It's very interesting to look at the data that's available and see directly how the data center industry or those that rely on data centers are sort of getting out into the world. This is ad spending broken out by party. So Democrats account for the vast majority of it, 73%. What are you seeing among your members in the marketplace for advertising around data centers? Well, there is a lot of advertising taking place because I think there's a lot of need to correct a lot of public perception and feelings about data centers. And data centers have been around for decades.

43:37You know, I've lived in Northern Virginia for 30 years and the data centers in Northern Virginia, of course, are the reason we have the internet. And data centers are the reason that I'm able to talk to you via this video connection. They're the reason we're able to send emails, the reason that our doctors can access our medical records, It's the reason we're able to do everything that we can do to communicate and stay in touch with each other. And that's been the case for decades and decades. There are 5 ,000 data centers in the country today, and those have been around for many, many years. So I think the reason you're seeing a lot of communication with the public around data centers is an effort to make sure that we remember that they are AI factories, yes, but they're also the factories that make all of our digital infrastructure possible, and they are a good thing.

44:18A lot of community concerns being raised about what they look like and their power usage. But I think the facts really are there to address the underlying question about data centers, which is, are they good for the American economy, good for the American people? And I think the answer to that is an unequivocal yes.

44:35Ed Ludlow:If data centers have always been there, right, the difference now is that we're in the AI age. I think what's very interesting, Jason, is to what degree do you recognize the distinction between the American public's concern about data centers and the American public's concern about AI generally? I think that's an interesting question. And I do think there is a certain aspect of this discussion that renders data centers a proxy for AI. I think you're right that that is conflated in a lot of people's views. And I do think there's a broader discussion happening about the role that AI will play in American society going forward.

45:16But I think there are a couple of things that are important to keep in mind, and we're obviously encouraging policymakers to think about that as well. There are ways to address the concerns about the proper regulatory environment for AI without engaging in bans of data centers, which is what that proxy has resulted in. And you've seen governors in red and blue states put pauses on data center construction moratoria in place because of those concerns. And I think you're right. That is a proxy in some ways for AI. But I think if we want to remain competitive, and I'll go back to Peter's story about Brazil.

45:50The reason Brazil is doing what it's doing is because it's in competition with Argentina and Chile to attract data center investment. America is in competition as well. The competition is with China. And that competition should lead us to want to make the AI infrastructure investment in the United States to ensure that we have that economic growth available to us. But the discussion is, as you noted, leading us to a place where people are talking more about pauses on data construction. They're going to get built and the AI investment is going to be made. The question is, is it going to happen here, which we certainly hope, or is it going to happen overseas, which we hope it won't?

46:26Ed Ludlow:Jason Oxman, CEO of the Information Technology Industry Council. It's great to have you back on the show. Thank you very much indeed. Let's get out to New York and Bloomberg's Yahaira Anand. Hi, Yahaira. Hi, Ed. It's time now for Talking Tech. First up, SB Energy, which is backed by SoftBank, has filed for a U.S. IPO with OpenAI and NVIDIA among its investors and customers. The company is looking to capitalize on booming demand for AI infrastructure with a data center business backlog of$430 billion. SBEnergy plans to list on the Nasdaq under the ticker SBE. Plus, Baidu says its big AI bet could soon pay off.

47:05The company's CFO tells Bloomberg that AI now accounts for more than half of revenue with margins potentially matching its legacy search business in the near term. Baidu is betting stronger demand for its cloud and chips can drive growth while keeping AI spending in check. And the fight over Dutch chipmaker in Xperia is heating up again. A Chinese court has frozen more than$300 million in assets as an Xperia's Chinese owner fights to regain control of the company. The dispute began after the Dutch government intervened last year over concerns about technology transfers. The move has already disrupted chip supplies to automakers.

47:48Ed?

47:48Ed Ludlow:Thank you, Yajira. Coming up, Dyson is sinking its teeth into AI. introducing a$499 smart toothbrush. We've got the details next. This is Bloomberg Tech.

48:10Ed Ludlow:Dyson is brushing up on AI and putting a camera in your mouth. The company is launching a$499 toothbrush that uses AI and a building camera. Bloomberg's Sam Kelly wrote the story and joins joins us now. How does a camera-based AI toothbrush work, please, Sam? Yeah, it's definitely interesting. So it uses a camera and also AI paired together. It's half toothbrush and half flosser. So basically what it does is there's a little camera at the top and it's tracking in real time what it sees inside your mouth, specifically narrowing in on the little gaps in between your teeth, which is known to develop plaque.

48:46And then it kind of targets this little propeller of liquid mouthwash or water into those areas to cut down on the plaque. And certainly something we haven't necessarily seen before. Toothbrushes of smart, elevated, premium toothbrushes aren't necessarily new, but this is certainly a new take and a whole new category for Dyson.

49:07Ed Ludlow:So that's super interesting. I mean, unsurprisingly, everyone is clicking on your story and reading about it. From a consumer tech perspective, very quickly, is 500 bucks a lot? Is this the AI age of dental care? Yeah, I mean, toothbrushes, what, cost maybe$5,$6. You can even get them at the dollar store. So really, it depends on what you're looking for. Yes, this is very expensive. But Dyson has a knack, you know, an engineering company, obviously turning vacuums into premium devices. It's tried this with beauty products, you know, years ago. And now it is, I think, 30 % of its U.S. sales are now its premium hair tools.

49:44It's had some flops before it's tried washing machines and experimented with an electric car. So these new categories aren't always a win, but this is something really interesting that's been rumored for quite a while.

49:57Ed Ludlow:A story everyone's really getting their teeth into on the Bloomberg Terminal and the website. Bloomberg Sam Kelly, thank you very much indeed. That does it for this edition of Bloomberg Tech. Lots going on in the world of financial markets, technology. Recap everything on the podcast. You know where to find it on the Bloomberg terminal as well as online on Apple, Spotify and iHeart. This is Bloomberg Tech.

50:41We sit down with the CEOs, economists, policymakers, and thought leaders whose decisions are shaping markets everywhere we find them. Subscribe to the Wall Street Week podcast on Apple, Spotify, or anywhere you listen.