Apple Loses Another AI Executive, Amazon's Prime Day Weakness

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1:53Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovellow in San Francisco. This is Bloomberg Tech. Coming up, another setback for Apple's struggling AI efforts as one of its top executives leaves for Meta. Plus, Amazon Prime Day kicks off, but already spending is down about 14%. We'll bring you the latest. And we sit down with the CEO of CoreWeave after the company's big purchase of Core Scientific for$9 billion. But first, we take you to these publicly traded markets right here, right now. Just erasing earlier gains. We're now trading about flat on the Nasdaq 100.

2:34Why? Well, clarity, it seems, coming from President Trump on a Truth Social post saying, August 1st, that is your deadline, and it will not be extended for the impact to be felt of reciprocal tariffs. Remember, an awful lot of negotiations still to take place, it would seem. We also want to be digging into what's happening on the individual stock level. I want to shine a light on what's happening in terms of Apple and Meta. We're up 4.10 % on Apple. We're down about 3.10 % on Meta. This all after, once again, Meta juggernaut that is sucking AI talent with promises of tens of millions of dollars takes a top executive, a top AI engineer from Apple.

3:11Now, we've already got some thoughts coming from lead investors such as Kathy Wood. Just take a listen to what she thought about the movement of talent to Meta. What we've seen there is one turnover of management teams after another. And it's all, you know, autonomous driving is an AI project. It's the largest AI project on earth, we believe. and so losing the talent that it has and as I understand it lost another one today to Mark Zuckerberg's top 50 so they've had a lot of trouble in this regard and I think the burden of proof is on them. And she learned that from our own Mark Gurman who broke the story of the Apple executive leaving and Mark just dig into whom Mr.

3:59Pang is and why indeed he's left. Yes, so Roman Peng, he is the distinguished engineer and manager of the company's Apple Foundation models team. Now, we talk about all these AI features. We talk about all these AI companies. But how does generative AI actually work? Well, large language models. These are the models that actually power this technology. And so all of these companies are racing to get the best engineers in the world who can develop these models. And Peng is known as probably the best of the best. He was the most respected AI engineer at Apple, the most respected AI executive at Apple, and one of the most respected model engineers in the entire artificial intelligence research community.

4:44So this is a massive swing for Meta, a major hire by Meta. And as big as a hire it is for Meta, it's probably even a bigger loss for Apple. In many ways, this was one of the guys holding everything together there. We've known their AI features have been struggling. We know their models have been struggling. There's a lot of background. You can read all my articles about this as to why they've been struggling. But this is a pretty big loss for Apple. And I'm told in order to get paying into Meta, they had to offer him a multi-year package worth somewhere north of$200 million. That's an extraordinary amount, Mark.

5:22And it paints a picture of the commitment coming from Mark Zuckerberg. But paint the picture of morale left over at Apple because are more people likely to leave the Foundations Model team? I'm told there are more people likely to leave the Apple Foundation Models team. Obviously, Pang is the most significant AI departure from Apple since the generative AI boom started a few years ago. His top engineer, Tom Gunter, he left a couple of weeks ago from the Foundation Models team. And now Pang is leaving as well. I'm told he'll start at Meta in the coming days and informed Apple yesterday that he would be leaving to Zuckerberg's company.

6:03This certainly is the beginning, I think, of more departures to your points. Apple just does not compensate in the same way as OpenAI or Meta. And what this has done is it's raised the idea within Apple that their points need to start paying more to retain these people. And so far, they've shown a reluctance to doing so. I'm told they didn't really make the counteroffer to keep paying. They didn't do much to keep them. And when your employee is being offered north of$200 million, there's really not much you can do. These pay packages from Meta are nearing what CEOs of the biggest public companies are getting.

6:43So you can't really do that for a singular manager or engineer. Money talks. So does a vision to win. Mark Gurman. Thanks so much. Extraordinary reporting as always. Meanwhile, let's get the investor take here. Jed Ellabrooks is with us. He's portfolio manager at Argent Capital Management. And I just want to go broader here. The commitment that we're seeing from certain companies, take Meta, but also Microsoft and Google, the so-called hyperscalers, to invest with such certainty in winning the so-called superintelligence race. Is this the right thing you want to be hearing and seeing? Yeah, I think it is.

7:18This is an exceptionally big money competition. It takes really deep pockets to attract the engineering talent, to get the compute power. So the big companies are flexing their muscles and showing great commitment. And they're seeing the demand signs thus far that that effort is worthwhile. And I think it's going to continue. And I think we're going to get a really good indication of that here in a few weeks when Microsoft reports their fiscal fourth quarter earnings. They will announce CapEx intentions for their next fiscal year. and I think we're going to see another big increase. Probably not as big as last year, but still a double-digit percentage increase to a number that's north of$100 billion.

7:57So before I dig more into the hyperscale in the AI trade, Jed, with your, what, more than two decades of experience managing money here in large caps, is Apple just one that you have to view in a different manner now, the way in which the company sees future growth? Yeah, Apple is a defensive tech business for investors. It is not a dynamic growth business, hasn't been for some time and won't be in the future. They're behind in AI capabilities and talent and resources, and that is a concern for investors. But I do think it was kind of interesting that a week or two ago, when word got out that Apple was considering using Anthropik and OpenAI models more for their customer interactions on the phone, that the stock went up 3 % or 4 % on that news.

8:48The market liked Apple de-emphasizing its own internal AI research effort. And that was Mark Ehrman's reporting as well. So pivot, therefore, to the companies that are committed, that are building the large language models. I know in particular, you think Amazon's a winner here. Why? I do. I think that their AWS cloud computing business is very well positioned to ride the wave of AI spending. enterprises are you know deploying ai tools on their their cloud platforms and i think that aws azure and gcp all have really outstanding growth prospects and i guess we should throw oracle in there as well interesting that oracle is also navigating a future of more hurdles when it comes to accessing chips by other countries think of oracle which has been investing a lot in malaysia for example and we understand from reporting here at bloomberg that maybe the administration is going to make it harder to get your own video chips into countries such as this without licenses.

9:45But I'm also interested more broadly about how any of these tech giants are navigating the current trade environment. We've just had the latest headline out of President Trump that August the 1st is where he's sticking. Yeah, I think he said the opposite more or less yesterday. So it's hard to put too much stock in one day's worth of comments from him. But yeah, the big tech companies have incredible advantages. Their balance sheets are incredibly strong. They're producing prodigious cash flow and they have all the AI capabilities that we listed earlier. So they're ready to flex those muscles.

10:18They are ready to pivot and adjust. And I think that they're all really well positioned to succeed. AI is a big money game. And is it one you want to commit more money to at this moment, Jed? We're basically near record highs. Yeah, I think for some of them the answer is yes. You know, meta valuation is higher than normal. I think maybe that's one where you don't need to rush into it right now, but I think others are, you know, fairly compelling. Amazon, like I said, is our personal favorite. Microsoft has had a huge run-up here in the last month and a half. Maybe no need to rush on that one. Nvidia, I think, is pretty compelling.

10:55You know, exceptionally strong competitive position with the GPU chips. They just sent out Blackwell Ultra, the first one, into the wild last week. That's going to be an incredibly compelling product for enterprises and hyperscalers to put in their data centers. So, yeah, there are places, I think, where you can put money to work confidently today in businesses that are AI beneficiaries. They send it out into the wild to CallWeave, and we've got the CallWeave CEO coming on a little bit later in the show. But, Jen, last question for you. Is it all about American exceptionalism here still? Yeah, it's such an interesting investing environment today.

11:30We have, I think, a fairly moderate growth U.S. economy, but with an AI revolution over here on the side that is very compelling, is going to continue, I think, for quite some time, both the investment and then the inference demand, the software deployment of these tools. So yeah, I think that the outlook for U.S. stock markets, for tech stocks in particular, is pretty bright. Argent Capital Management, Jed Ellabrook, it's been great having your perspective. Thank you. Let's shift gears and look at what the shares of Samsung are currently doing, trading in London as we speak, ADRs. And look, they are down by 0.8%.

12:09Profit fell for the first time since 2023. In fact, it plummeted 56%. This is once again about the chip maker not managing to win when it comes to high bandwidth memory yet but is this the bottom some analysts feeling that way investors feeling that way particularly over at CLSA and notably we keep an eye on how these companies perform out of their earnings meanwhile coming up President Trump unveils a wave of letters again threatening key trading partners with high tariff rates impact from big tech is coming up next for you this is Bloomberg Tech

12:54Wednesday was the original tariff deadline, but less than a handful of agreements are ready to announce, and President Trump instead is now saying his new August 1st tariff deadline will not be extended. Let's get to the latest. Bloomberg's Balance of Power host Kayleigh Lines is with us, taking to Truth Social to, well, try and tell us his commitment to this one. Yeah, this is after he was asked at the White House yesterday Caroline, if this was a firm deadline. And he said, yes, August 1st is firm, though not 100 % firm, indicating some degree of flexibility. And it seems that's what he's trying to course correct for with this true social post today, saying that on August 1st, tariffs will start being paid.

13:33He says there has been no change to that date, and there will be no change to that date. I would just keep in mind that initially he had suggested there wouldn't be a change to the July 9th date either. And that is the action he signed yesterday to extend the deadline from July 9th to August 1st for various trading partners that we don't have trade deals with yet. He, of course, yesterday wrote 14 letters and sent them to the heads of 14 different countries, outlining the tariff rate that they will start paying next month in the absence of a deal ranging from 25 percent for countries like Japan and South Korea up to 40 percent for countries like Myanmar and Laos.

14:07Though he did say in the letter that if countries would like to open their financial markets, eliminate tariff and non-tariff barriers, the tariff set out in the letter could be revisited. So still leaving some wiggle room for negotiations here. The president also on True Social today is saying additional letters will be sent today, tomorrow, and for the next short period of time. So we do expect to get news on new tariff rates that are sent on various countries. And we also could still see news on deals. Our understanding is that deals are getting closer for countries like India, for Taiwan, for the European Union as well.

14:39Signals that there has been progress there. It's just not clear when they may be announced and how robust they will be or whether or not it's really just trade frameworks. We're talking about here knowing that the team that the administration has put together to work on these has struggled to make progress in a lot of arenas, not only because it's about the tariff rate countries could pay overall, but there's also sectoral tariffs to contend with. Existing ones like tariffs on autos and steel and aluminum, for example, but also ones that have been threatened, that have opened Section 232 investigations into them, like semiconductors and pharmaceuticals.

15:12And that could be a sticking point in all of these talks, Caroline. And, of course, semiconductors key to this audience. Bloomberg's Kayleigh Lyons, thank you so much. Let's bring in Michelle Geider now for more perspectives. She is the CEO of the Krak Institute for Tech Diplomacy over at Purdue. You served as an assistant secretary of state for global public affairs under the first Trump administration. That was 2018 to 2020. And Michelle, the big picture we need to remind ourselves is what the ultimate goal is here. Yes, they might have to push back deadlines, but the aim is to have fairer trade.

15:41Are we actually getting to that point? You're so right, Caroline. The big picture is really important here. So let's remember that tariffs are a tool that are a means to an end of a very big objective here. And that is for America to both design and physically build the technology infrastructure that is going to be the backbone of the free world in the next century. And so in order to do that, we have to build and in some cases rebuild a lot of critical industries here at home. And we have to rebalance the trade ecosystem in order to do that. Because the current system right now disincentivizes our leadership in critical industry.

16:18It rewards offshoring, it punishes production here at home, and ultimately exports leadership in a lot of really important industries to countries overseas. And that can't be the case if we're going to lead in the new technology era. And I'll give you a really good example. For the AI revolution to happen, we have to build a lot of data centers. And in the pipeline at the end of 2024, we had 52 million square feet of data centers that we have to build in the United States. Do you know how much steel that that requires? It's billions and billions of dollars of steel. How great for that to be built by American companies with American workers rather than from artificially cheap steel from international partners overseas.

17:00So that's what's at stake. It's American leadership in many critical industries. They're going to be good for us, and it's going to be good for our allies. Many would say, though, taking out of chips, looking at defense, for example, or indeed looking at magnets and electric vehicles and the electrification of our economy here in the United States. We yet need more clarity on ultimate demand. Hearing time and time again from the defense tech startups that they need the DOD to actually buy the stuff, commit to. We're hearing time and time again that we can't start extracting rare earths that we don't have access to in the United States yet because there's not clarity on whether the energy field will really transition the way that they thought, particularly as you see the big, beautiful bill, as it's so called, seeming to drown out some of that movement to electrification.

17:47So, Michelle, how do they garner clarity and security here? Well, when it comes to clarity and it comes to certainty, I don't think there was anything more certain than the fact that tariffs were coming when Donald Trump was re-elected president. It was a core pillar of his first administration when I served as assistant secretary. Fair and reciprocal trade was a core message that we were communicating to every international partner in 185 missions across the world. And you can even go back to 1988. There's an interview that Donald Trump did with Oprah Winfrey talking about how he would revamp U.S.

18:21foreign policy. And in that, he talks about asking our allies to pay their fair share. And he focuses on allies, he says, because they're much easier to talk to than our enemies. And he highlights what country? He highlights Japan. And he talks about how they're dumping cars and dumping VCRs into the American market. At the same time, they're making it really hard for Americans to do business. So this has been a long time coming, but we're trying to rebalance a trade system that's existed for 50, 60, 70, in some cases 80 years across 90 countries. It's going to take some time and some deadlines are going to be pushed and it's going to be a little bit messy.

18:57But at the end of this, if America can come out leading in critical industries, that'll give really good certainty to our businesses in the long term. Michelle, have we got the talent to be able to do the manufacturing here, particularly as we look at making H-1B visas tougher, for example? I'd say yes, and we would benefit from all the brilliant talent from across the world. The Kroc Institute is based at Purdue University. It is the largest engineering school in the country, graduates more engineers than any other top university in the country. It's engineering excellence at scale. That type of talent is ready for national security jobs in commercial industries and in defense industries that are going to matter to our leadership in the 21st century.

19:42And the same is true in many other places across the country. So we have the talent. What we need to do is incentivize the economic landscape and the trade landscape in order to let them flourish. Michelle Guider, great to catch up with you at the Crack Institute for Tech Diplomacy over at Purdue. Now coming up, Amazon's Prime Day has kicked off, but shoppers, they might not see the heavy discounts like years prior. We're on that next. This is Bloomberg Tech.

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23:57Time now for Talking Tech. And first up, your sensitive data should from today be safer after a Justice Department rule takes effect today after an end of a 90-day grace period. Now, companies across sectors must now comply to the safeguard of bulk transfers of sensitive data from countries that pose a national security risk, including China and Iran. Plus, Epic Games, well, it has settled an antitrust case against Samsung, alleging that the company was conspiring with Google in blocking rival app marketplaces by default. Epic dismissed all antitrust claims against Samsung and Google, but Google remains a defendant on several non-antitrust claims.

24:35And some brands and consumers are sitting out on this year's Amazon Prime Day as President Trump's trade war really rattles shopping sentiment. Some merchants are actually unable to offer discounts due to increased costs from tariffs, Some shoppers, well, they're planning to skip Prime Day altogether. Prime Day spending has already fallen, it currently seems, 14 % in early hours compared to 2024. So let's get to it. Bloomberg Spencer Sopo can give us the inside track. Is it all about tariffs here, Spencer? Yeah, tariffs are definitely a key factor. This is like our first Prime Day, you know, since Trump's, President Trump's Liberation Day tariffs.