Apple Picks Gemini to Run AI-Powered Siri

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts. Radio. News.

1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, NVIDIA plans to invest$1 billion over five years in a new lab with Eli Lilly to speed up the use of AI in the pharmaceutical industry. Plus, Paramount sues Warner Brothers Discovery and plans to nominate directors to the board as its increasingly hostile takeover bid takes aim to upset Netflix. An alphabet breaches$4 trillion in market value. This, as CNBC reports, Apple has picked Gemini to power Siri this year. And then those moves fall again. And really, we've got anxiety across the markets more broadly.

1:57digging into the market implications of what seems to be a dialing up in the administration's fight with the Fed. That is what the market tries to digest and why we see a bit of a sell America theme at the moment. Yes, there's more moves in terms of benchmarks for stocks. We're down by a tenth of a percent on the Nasdaq 100. But we're seeing bigger moves when you're looking at what's happening in the bond market, in the dollar, for example. We're seeing 30-year yields once again pushing up two basis points, seeing the dollar on the downside. All of this as we try and bake in the macro implications.

2:24We look to CPI tomorrow, but you're looking at what's underneath the hood right now. Yeah, the big breaking news of the last hour is that Apple has selected Google's Gemini model to power Siri this year. Reporting from CNBC, citing an Apple statement. And you can see a big reaction in the stock the moment the headlines hit. It has faded. I'll take you back to November when Bloomberg's Mark Gurman reported that a deal was very close, that Apple would pay Google$1 billion per year. And this was just an interim until Apple could get its own foundation models together. But we'll continue to track that story.

2:58Another interesting transaction in the market this morning. NVIDIA co-investing$1 billion with Eli Lilly into a Silicon Valley-based lab split over five years. AI pharmaceuticals. But the details are interesting here, Cara. And we want to get those details. We can do exactly that with Katie Greifeld. She's over at the JP Morgan Healthcare Conference. Indeed, looking at Silicon Valley, getting ever closer to the world of health. Katie, what do you make of this deal? Yeah, this was a really interesting headline to wake up to, especially when you remember that Eli Lilly partnered with NVIDIA back in October to develop an AI supercomputer.

3:38So the details on this specific deal as you guys run through them, $1 billion over five years to build a facility in Silicon Valley, basically a new lab. We don't have much details when it comes to the terms beyond that, but both companies have described this as a joint investment. And I just actually spoke to the CFO of Eli Lilly, Lucas Montarse, about what the ultimate vision is here when it comes to AI and health care and this specific partnership. And he said this is really about drug discovery. It's still early days, of course. They haven't built the facility yet. But the hope is that this will help basically in discovering drugs to really target and treat those really hard to treat diseases.

4:20Think gene therapy, for example. So, again, early days, but some big ambitions here. Bloomberg's Katie Greifeld just down the road at the JPMorgan Healthcare Conference all day long here in San Francisco, less than two weeks into the new year. And NVIDIA is already dominating the news flow. I want to get to Denny Fish, portfolio manager on the global technology and innovation team at Janus Henderson. And the frank reality is that NVIDIA is the top holding across a number of funds that you manage. What do you make of that relationship between NVIDIA and Eli? Yeah, well, it actually makes a ton of sense to me.

4:51I mean, if we think about what's grabbed all the attention over the last three years since the ChatGPT moment, it's effectively been the idea of the digital manifestation of AI. But the reality is, if we think about the profoundness of how this will impact the economy over time and society more broadly, the physical manifestation of AI is as big, if not a bigger opportunity. And if you think about drug discovery and what that means for society, and then just think about how far we've come with autonomous driving, where we're going with robotics, there are all these different verticals where it makes a lot of sense for NVIDIA to be leaning into.

5:29And frankly, NVIDIA has got some of the best talent in the world. And to see these partnerships with market leaders makes a ton of sense. And I bring it back. Sometimes you get this argument of circularity. But the reality is if you're Jensen and you have a firm belief at just how big these market opportunities are, you should be leaning in hard to this in co-investments into labs like they're doing with Lilly or direct investments into companies like they're potentially doing with OpenAI. With autonomous driving, a lot of people get it. I wrote about it extensively this weekend. We're going to talk about it later in the program.

6:05The go-to-market in the first instance is with Mercedes. We use hardware and software. But with pharmaceuticals, drug discovery, research, what is the go-to-market that NVIDIA is going to pull off in the future? Well, so far, if we think about pharmaceuticals, where we've seen the early benefits of AI have been in things like the clinical process, getting drugs that have already been discovered through that process, internal efficiencies, marketing, things like that. The real, you know, the big prize out there is drug discovery. It's finding solutions to problems that we just couldn't get there without AI or would have taken much, much longer.

6:48So the go-to-market is actually direct partnerships with these companies to fast forward the discovery process. Denny, that speaks to the broadening out that we're starting to see in the market. We're also going to talk about that, the fact that we are seeing the S &P 500 actually doing a bit of a challenge in terms of returns versus some of the Mag 7 names. How much does it mean that we've already juiced the valuation side of the equation for NVIDIA? Or is AI infrastructure still going to be the key watchword for 26? Well, so far, all the data points would suggest that the investments into AI infrastructure are going to continue to be quite robust.

7:30and we would fully expect that. And so far, just looking back, I mean, Ed was talking about Alphabet earlier and the relationship with Apple, just watching the leapfrogging effects with OpenAI and XAI and Gemini, that's very healthy. And as long as we continue to see that and then bringing back to NVIDIA, NVIDIA now is, they announced last week, Rubin is fully in production. That is going to have material impacts as it relates to inference productivity versus training. And inference is the next big handoff. And so if you're a believer that we are now in this period where we're going to start seeing increasing deployment of these applications, inference is going to go through the roof.

8:18And as a result, that's going to continue to sustain the investment profile. So we expect it to be pretty healthy. Now, I will say when you're talking about the broader S &P 500, I mean, one of the theses that we've had for the last three years is AI has really started to take hold is this is going to be very impactful across all industries. And if you believe that and the companies that are able to get revenue lift because of deployment of AI, but then at the same time are able to drive cost efficiencies, that should be pretty good for multiples. And so I'm not surprised to see the market sort of anticipating of sorts some of the benefits we might get from AI.

8:57The market's also got more discerning on who has to pay for the AI infrastructure and what that costs in terms of debt, Denny. I'm looking at, again, yet another number,$3 trillion this time coming from Moody's, saying how much the data center infrastructure build-out is going to cost up until 2030. I mean, McKinsey had already put$7 trillion on that number. but is there a worry as to who has to actually pay for it, Denny? Well, of course there is. The good news is the majority of this is being funded by the hyperscalers and they generate the free cash flows to actually be able to fulfill the commitments that they've made.

9:33And they're all playing the 20-year game. I mean, we've just seen that with the number of power agreements that are being struck between Meta and Google, Microsoft and others. And so we feel pretty good there. Now, clearly, you know, the debt markets are going to have to remain healthy. We're going to have to continue to see progress as it relates to, you know, the ambitions of these companies. But there's also something else, too. You know, when you look at those numbers, there's also a lot of double counting in it. You really have to parse it back to get to the real meat of what's necessary.

10:07and then also there are natural governors at just how fast this can get deployed. So the deployment of the capital is going to be pretty measured and that's what makes this very different than say the dot-com era where so much capital came into areas like telecom infrastructure so fast and it was very easy to get that stuff deployed. This is hard. You look at what's going on at Stargate and Abilene, Texas and trying to put up 10 gigawatts, the labor that's needed, the power, just the expertise. And, you know, it's a heavy lift. And so that in itself is a natural governor on just how fast it can get deployed.

10:43This is what we were trying to pass at CES last week. The baseline assumption very quickly, Denny, is that demand still outstrips NVIDIA and AMD's ability to supply. How does that set us up for this year? Well, that's good for infrastructure, you know, because when you're in a situation like that, and even a TSMC, for example, where... second top. Yeah, yeah, where, where, you know, you only have so much capacity and you can only bring up incremental foundries so quickly. And so as a result, that's really good from a pricing standpoint, particularly when you're the only game in town. And for certain aspects, NVIDIA is still the only game in town, too.

11:22Danny Fish of Janice Henderson, investors, great to have you on all the games. Meanwhile, coming up, Paramount in ramped sub efforts to support a planned merger between Warner Brothers Discovery and Netflix. The latest in the media Emerger saga. That's next. This is Bloomberg Tech.

11:44Paramount Skydance. Well, it says it plans to nominate directors to Warner Brothers Discovery's board to vote against the approval of a merger with Netflix, of course. And the company has filed a suit to force Warner Brothers to disclose information about the proposed Netflix Warner Brothers tie-up. Bloomberg Entertainment reporter Felix Gillette joins us on what is an ever more hostile potential takeover. So suing for more information, what do they want to really demonstrate to investors here? I mean, at this point, you know, they're choosing to raise the hostility versus raising their bid. Yes.

12:16And I think, you know, they've been campaigning shareholders, join our tender offer. You know, they've said for weeks now, our offer was better than the Netflix offer, accusing the Warner Brothers board of not being transparent during the proceedings. And now they're making this move to essentially say, you know, you have to provide the information to shareholders so they can judge which is a better offer. And to do that, you know, the big, most contentious issue for months now has been how do you value the cable assets that Warner Brothers is planning to spin off prior to selling the studios and the streaming business to Netflix?

12:52The Netflix offer$27 a share for the studios and streaming spin off the cable networks paramount 30 a share for all of it but basically assigning a value to the networks of zero dollars right this is a saga it will play out over time it's a really difficult question for you as as editor here felix but like what happens next is there a real chance that paramount can force a hostile takeover through this mechanism they're gonna try you know i mean i think like you you know the shareholders at this point a lot of them seem to be sitting on the fence, you know, in terms of who they're going to support.

13:28I think a lot of them are hoping that Paramount would come in with a higher bid, go over the$30 a share. That hasn't happened yet. You know, I think, again, you know, David Ellison and Paramount have been trying to advocate for this notion that, like, the Netflix deal isn't even going to happen. They have too many regulatory issues, you know, putting aside the fact that if Paramount offer was accepted, that they'd have their own issues in Europe with the States. So, yeah, I mean, this continues to just get more and more hostile. And this is, you know, the next step is this lawsuit and a proxy fight over the directors.

14:08Bloomberg's Felix Gillette, thank you very much. Another top story, DeepSeek founder Liang Wenfeng's hedge fund surged more than 50 % last year, making it the second best performer among China quant funds. The strong performance helped boost the cash available for DeepSeek itself. Let's get out to Bloomberg Tech Executive Editor Peter Elstrom. You know, there's the Bloomberg story, right, which is about a quant fund's amazing performance. But in the reporting, it's super clear. The read-through that people are making is that the returns on that, the earnings from that fund's performance can be taken by DeepSeek's founder and used to give DeepSeek a bigger budget for research and deploying its models.

14:48Right, right. That's exactly true. Yeah, so there's a finance story here, but there's also a tech story. And the finance story is very impressive. The hedge fund high flyer that was really the place where DeepSeq was born had a great year. Returns were 57 % on average across their various funds. That is very good for the founder, Liang Wenfang. As you mentioned, it's good performance compared with the other quant funds out there. But it also gives him a much bigger checkbook to be able to go out there and make new investments. Now, that probably would be in DeepSeq. DeepSeek has gained a lot of momentum since a year ago when they had their big breakthrough, dropped the bombshell that they had invented this LLM for a fraction of the cost of open AIs with very similar performance.

15:31So now you could see the founder invest more money into DeepSeek, perhaps chase after a little bit of the capital intensive projects that we've seen in the U.S. in particular. We haven't seen those kind of investments in China so far. Or he could invest in other kinds of AI initiatives that may not be directly the same as DeepSeek. Because the whole claim about DeepSeq was it only cost them$6 million. And the theory in this particular reporting is that maybe they're getting revenues of some$700 million. That could go a long way if you're thinking about the costs of doing the business here. Peter, talk to us about why they're able to outperform so much.

16:06What is it they're betting on? How are these quant funds managing to be so superior? Well, partly with DeepSeq, early on, they were able to do this because there were a lot of constraints around the AI initiatives. in particular. And we've written a fair bit about High Flyer in the past. They have these quantitative techniques to be able to outstrip their peers within the China market. They were the number two fund, as you mentioned. Also, the China market has been on fire. There have been a lot of investments in other kinds of AI models. DeepSeek hasn't gone public yet, but two of the other AI models within the country have gone public, giving them a lot of momentum here.

16:41So the market's been very strong. They've been able to take advantage of that. But again, as you say, they now have 100 times as much money as they used to start up DeepSeek in the early days. What are they going to do with that money? How are they going to invest it? They're not talking about this publicly, of course, at this point, but we would expect more things to come from High Flyer and DeepSeek in the future. I mean, just think MiniMax went public on Friday. It was up 100%. It's up 15 % again today. Peter Elstrom on All Things Asia. We so appreciate it. Thank you. Coming up, a bit more on Asia.

17:09Could Chinese EVs actually dodge tariffs in the EU? We're going to discuss the global electric vehicle wars with Stephanie Valdez-Streetie from Coxsup Automotive. That's next. This is a Bloomberg Tech.

17:26The European Union is weighing minimum prices for EVs exported to the bloc from China. That actually would replace steep tariffs. Is it a sign that we've got some easing trade tensions, even as the US presses Europe to take a tough line on Beijing? Here to discuss this is Stephanie Valdez-Struti, Director of Industry Insights for Cox Automotive. That was sort of the latest news headline that we get that maybe BYD will be able to sell into Europe and not have to have huge tariffs that eats its margin. Are we going to see them able to tackle the European market and continue to scale? Yeah. You know, we look at the electric vehicle market, right?

18:01China definitely is dominating. You think about their strategy is to export, right? They've exported millions of vehicles, and they've had a lot of luck in increasing share. And so the UK, it's basically, you know, it's a compromise, right? The EU, Europe needs to meet those climate goals, right? They need to increase their EV adoption. They rely on China for minerals, right? Batteries. So I think it's a good compromise. And I think China will continue to increase their share in those markets, not only UK, but some of the emerging markets as well. Meanwhile, one of the biggest feedback I often get on my social is about the lack of BYD or Chinese offerings here in the United States.

18:43Is that ever going to come to bear or are they just forever going to be shut out because it's really bets on Tesla and also pushing away against EVs more broadly? Yeah, you know, I think if you look at the U.S., that's one thing I think both political parties can agree on is to keep China out. And so I think that's kind of where we're at now in the future. Maybe we could see something that's similar happen to the Japanese and the Koreans. They come, they build, they partner, and they build manufacturing plants. But for now, the near term, we're not going to have those, other than the ones that we already have under Geely, which is the Volvo and Polestar.

19:16But definitely, I think consumers are seeing EVs when they travel abroad and getting the experience of riding in a Chinese OEM and discovering how good quality, high tech. And so I think that it would resonate with you as consumers at the right price. Stephanie, last week at CES, NVIDIA outlined a full stack hardware software solution for autonomous driving. And it very quickly raised questions about Tesla. So I asked Jensen Wong about it. Listen to this. I think the Tesla stack is the most advanced AV stack in the world. And I think the Tesla AV operations is the most advanced in the world. And I'm fairly certain that they were already using end-to-end AI.

20:03So here's the thing. Mercedes will ship a vehicle this quarter capable of point-to-point, hands-free, using NVIDIA technology. Does Tesla finally have something real in the market to worry about? I think they do. You think about some of the – even Rivian is another player, right, that they, at their AI day, they announced their plan. I think definitely there's a lot of competition. And I still think, you know, we're making some tremendous progress. But I think one of the challenges continues to be regulation, safety. But I think the NVIDIA announcement with that technology to really identify those edge cases, which will help with regulations, more credibility.

20:41So definitely Tesla has some challenges out there for sure. The reason I find it fascinating is that if you are a Tesla owner, you know, you know all about full self-driving FSD. It's a part of the pitch from Tesla. but the vast majority of the auto market, at least in America, maybe they don't think about, okay, I'm going to buy a vehicle based on its ability to do this. Do you think that changes from here on in? I think more from consumer, it's more about the in-car experience. So we keep hearing the software defined vehicles. I don't think they're going into like, I want this autonomous or full self-driving.

21:14It's more about what kind of consumer experience can I have with technology in the vehicle, so in-vehicle experience. So maybe it's the ability to have some of that ADAS technology, but I don't think that's the main driver. It's more about what's that experience going to be and what other options that vehicle provide for me. In many ways, it's about marketing, getting people in the cars to understand what it feels like and then sort of perpetuate that demand for wanting more and more and more. From your perspective, is the consumer mindset there from a safety perspective? Is the regulation there from that perspective as well?

21:48Yeah, I think so. I think that's the one thing. If you think about, you know, I think when you think about robotaxis, right, we're starting to see a lot of that with Waymo and some other companies, Tesla, getting consumers into those robotaxis autonomous. So they're getting to finally experience that. But I still think, you know, it's been hard to get consumers to trans, you know, kind of consider electric vehicles. To get into an autonomous vehicle isn't more so. So I think there's still a lot of work to be done in terms of credibility and safety perceptions for autonomous vehicles from a consumer perspective.

22:21Stephanie, look forward to 2026 for us. What is it you expect to have in the United States, in particular, in electric vehicles and any growth that may or may not come to your mind? Yeah, you know, 2025, it ended exactly where we thought it would. Our report comes out tomorrow, But we're going to be about 2 % down year over year, round up to 1.3 million vehicles. But going into 2026, right, we got rid of the carrot and the stick. We no longer have the IRA tax incentive. The corporate average fuel economy standards have been less stringent, the California waiver. But given all that, we still have 20-plus new EVs launching in 2026.

23:03So I think we're still going to see momentum. It's going to be hard, but I think consumers are going to have more product. But I think the one thing which we've talked about before in the past is the affordability. If you look at the current product lineup, these that are offered over 60 percent or over sixty five thousand dollars. So that's definitely about it. Stephanie Baddard-Street, Director of Industry Insights, Cox Automotive. Thank you so much. Coming up, we'll speak with Lux Capital co-founder Peter Herbert about the firm's latest fund, its biggest fund. Silicon Valley meets D.C. This is Bloomberg Tech.

23:45welcome back to bloomberg tech there's a story we're going to go deeper on later in the program the president saying that if credit card companies don't respect an interest cap of 10 in the year they will be facing uh illegal activity claims basically these are two of the more tech focused names klana affirm both down on the news i would note american express is also down as an example significantly. We're going to get to that later in the program. Back to one of the top stories. We've had confirmation from Google that it has entered into a multi-year agreement with Apple for Gemini to be the underpinnings of the next-gen AI Siri.