AWS Races to Address Widespread Outage

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

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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. Amazon says its cloud service is recovering after widespread outages affected customers like Zoom, Snapchat and Coinbase. Plus, U.S.-China trade talks resuming this week as President Trump lists rare earths among his top priorities. And IBM and Grok partner up to provide greater access to the full potential of enterprise AI. We'll discuss with them later this hour. But first, let's check in on these markets, Ed. I'm sat in London this week, but I can see from across the pond, what, 1.3 % on the Nasdaq 100, a new record high.

1:55There's a risk on tone throughout the markets. We're looking towards those China-U.S. trade talks. but there are some notable gainers underneath the hood. Yep, Apple is a big points driver to the upside at the index level. Apple has touched its first record high of 2025. That's the first record high since December of 2024. We have an upgrade at Loop to buy, like many recently, citing trends in the iPhone upgrade cycle. We're going to have a lot more on this story throughout the hour, but clearly this is a big jump for the company and it's really impacting markets at the macro level. We're also looking at Amazon, the parent of cloud computing AWS.

2:32The stock's actually up a percentage point. A massive outage overnight, principally around one U.S. data center in North Virginia, the U.S. East One site. But it has had repercussions for the public sector, the private sector and technology companies of all types. Let's get out to Bloomberg's Yajo Sun, who's been reporting on this throughout the incident. Very simply, Yajo, what happened and what have the ramifications been? Yeah, Ed. So this morning, Amazon reported that they're experiencing operational failure across multiple services in its data center hub in northern Virginia. Even though the issue occurred in the northeast of the United States, the impact really fell far and wide.

3:17Some of the victims of this outage include trading platform Robinhood, Lloyds, the British Bank, HMRC, the British Tax Authority, as well as Perplexity, the AI platform. So the company said that the issue has been largely fixed, but there are residual effects. And this definitely gives me flashback of the CrowdStrike outage last year, which you might remember a buggy update from CrowdStrike really paralyzed nearly half the world's computers and left people scrambling at airports and sent bankers home early because they simply couldn't turn on their computers. Yeah, Jo, it does remind us of the importance of a very few very powerful players when it comes to our tech infrastructure.

4:04It hasn't been that significant an incident for Amazon in and of itself for many years now, was it 2021? But tell us about the learnings that Amazon is going to push forward for AWS. Yeah, I think this really speaks to the fragility of over-dependence on the very few, you know, hyperscaler cloud operators that we have. AWS is the world's largest cloud provider. Its business surpasses Google and Microsoft's. And I believe AWS analysts predict that this unit is going to bring about$126 billion to the company. Amazon itself has said that the company is going to invest around$100 billion or so into building data centers and model training.

4:53Given that so much of our AI training and inference is run on these data centers, cloud computing services these days, I think Amazon will really have to think about business continuity so that this does not happen again. Yeah, Joe, lots of our audience here on Bloomberg Tech are highly technical. It might be their job to deal with their cloud computing provider. Loads of people will be watching and be like, I don't understand any of this. I don't understand what happened. I spent a lot of time reading about DNS and reading about DynamoDB, the data center database that AWS relies on. Have they actually answered the why of what happened?

5:32How could they let this happen? They have not answered why. So DNS is a system that translates web addresses to IP addresses so your apps and your websites can load. I think we will, throughout the U.S. day, the company will say exactly what happened. We'll probably let us know. But I think it's very telling that a very small part of the digital infrastructure can create such a ripple effect throughout the global economy. And I think we will see if the company will say anything about how, you know, if there will be, what they will do to satisfy their customers going forward. And I'm sure you'll be the first one to help us report it out, Yajosun.

6:19We so appreciate you jumping on today. Thank you. Let's get to the wider impact. Look on the tech sector writ large today. We're in risk-on mode. Anna Rathbun is with us, Grenadilla Advisory Founder and CEO. And Anna, look, we see these technical glitches and the realization and, well, maybe just rememorizing the idea that we do depend on a few very big players, not just for our infrastructure, but for the market to go higher, too. What do you make of the rally today? Yeah, the rally, I mean, especially for Amazon, it seems like there was no glitch today because Amazon is also up with the rest of the market.

6:55As regards to Amazon, I do think that there is a concentration problem. Everyone talks about the stock market concentration. I mean, this is sort of the same thing. I think we have to start looking at digital infrastructure almost as utilities. You really can't live without it. And so from that standpoint, I think barriers to entry are high, but we need to start thinking about sort of diversifying our exposure. With regards to the rest of the market, I think there is a lot of excitement, certainly not only in tech, but in other areas of the markets as well. I mean, last week we learned about Walmart and open AI.

7:33Today we learned about Cleveland Cliffs and rare earths exploration. I feel like what's happening now is something that investors have been waiting for for a long time, which is to see the expansion of the tentacles of AI reaching the different parts of the economy and different parts of the markets. And this makes us feel a lot better about the AI play and AI development because it's becoming stickier. We can't peel this off as easily. We can't just say, OK, those are the data centers that are going to go dark and we may not use it for 10 years. This is becoming more of a real thing in our daily lives.

8:09It's so interesting you're talking about the broadening out effect in the markets. But let's just go back to the first point about the over focus. There are basically an oligopoly when it comes to cloud provision. I'm here in Europe because We've got our tech summit in London. And one of the key debates is to be had is Europe's over-dependence on other global players. The fact that they don't make their own chips, but they also don't have their own cloud providers. What do you make out of whether that might indeed change as we all think about sovereign AI and sovereign cloud? Yeah, so I think the concentration risk we talked about earlier, it applies to everybody.

8:47This was a global event, right? And so you do need to think about diversifying your exposure. But we've had stuff like this in the past, maybe not as large as Amazon, but I think the previous speaker talked about CrowdStrike. It really requires a massive amount of investment and a massive amount of effort to get that done. And so far, the effort has been coming from a select few regions and countries. Certainly, Europe probably needs to think about having their own infrastructure as well. But it's not as easy to do as it is to say. And Apple's just touched 4 % in the session, again, hitting a record high for the first time this year.

9:31It's a big factor at the index level. What do you make of all of these upgrades on optimism around iPhone? Yeah, so especially with regards to the negotiations with China, it is really nice to see sales up in the United States because then it makes Apple look like less dependent on some of this rhetoric between China and the U.S. But I would also say that there is a little bit of a spending of pulling forward of spending. When you think that iPhones or anything is going to cost four or five percent more in a year, are you really going to wait for iPhone 18? No, you're going to buy it today, especially if you have an iPhone X or iPhone 9.

10:13I can't even remember the numbers anymore. But a lot of people have been keeping them. And if they're going to renew it, they're going to renew it now rather than waiting until next year. So I think we're seeing some of that pulling forward effect as well. The optimism in technology markets today seems to be around earnings in particular and what's to come this week. But trade negotiations are also to come this week. Balance those two risk factors for us. Well, earnings is fundamental and in my mind is much, much more important. And I do think that the stock prices will react to earnings with regards to trade talks.

10:50I mean, I feel like the market's rising ever since the first day when President Trump said that he may not meet with President Xi. It's been going up. And I think that's the market basically calling bluff on both countries. China is an export dependent country. It needs to export rare earth minerals as much as we need to buy them. U.S. is a consumer based economy. We need to be able to import cheaper goods from China as much as China needs to export them. We need each other. So I think the markets are saying, OK, the deal is probably going to get done. It's just a matter of time. Anna Rathbun of Grenadilla Advisory, thank you very much.

11:30So coming up, Meta, TikTok, Snap and many more under pressure. We're going to discuss why social media giants are about to face a mountain of litigation. That's next. This is Bloomberg Tech.

11:56social media giants are about to face a wave of litigation meta snap bite dance alphabet are set to appear in court over two consolidated lawsuits accusing them of knowingly designing their platforms to addict users resulting in depression anxiety insomnia and self-harm for more bloomberg's olivia carville who's been following these lawsuits joins us now And in one of the key lines in your story about this, Olivia, you talk about how one lawyer who's going to be representing the federal cases says, all told, this is a massive legal siege on the social media industry. Why is it all coming in this wave?

12:30I mean, we have been seeing these lawsuits filed in state and federal court over a number of years now. This all started back in 2022 after Francis Hagen kind of blew the whistle on Facebook, releasing a trove of documents about how the social media giant was kind of impacting youth mental health. Following that, we saw plaintiff's attorneys really focus in on that and start to file lawsuits against these companies, accusing them of harming children. and over the course of three years all of those lawsuits or the majority of them now have been consolidated into two different litigation tracks in state court and in federal court we're going to see these cases come to the courtrooms next year and it's going to be you know as he mentioned in the story a massive legal siege on the social media industry we're expecting to see you know a number of trials next year and possibly thousands of plaintiffs waiting in the wings once those trials close.

13:31Olivia, a part of the reason that this litigation has been pending for quite a long time is that the social media companies have had this liability shield, right, that has protected them in some sense from user harm litigation. Explain that shield and why it's now not preventing these pieces of litigation moving forward. Yeah, that's right. I mean, the Communications Decency Act, this is a federal law that has long protected social media platforms and really any internet platform from facing user harm lawsuits. What that law does is it provides an immunity shield or a blanket that says you cannot file a lawsuit against these companies for the content that exists on their sites.

14:14What these cases are trying to do is sidestep that immunity blanket by saying this is not about the content that users are posting to Facebook, to Instagram, Snapchat or TikTok. This is about the design of the platforms, that these companies intentionally designed their platforms to try and addict young users and resulting in many harms to kids from mental health harms like depression, anxiety, all the way through to self-harm and suicidal issues. Olivia, often the markets ignore potential legal threats for big tech companies. and it has been notable that actually a lot of companies have been trying to update the protections for children in particular, I think of Instagram just last week.

15:01How have they set themselves up to really tackle this in a forward-going way? Yeah, as these cases have been piling up in the courtrooms, we've seen almost every one of the defendants start to update their policies to really try and get better, stronger safeguards for kids and you saw that recently with what Meta announced on Instagram. And that's certainly true. But at the same time, this litigation is not going away. These allegations stand in court. And I think what's remarkable about the kind of position that we're in right now is that as of next year, we're going to see the alleged victims of social media into the courtroom for the first time in the US.

15:44So these cases are going to be tried. Juries are going to hear testimony from teenagers, from experts, from company insiders as well about whether or not social media has actually harmed the mental health of youth. A lot of people have been asking that question, but a jury will have to face that question for the first time next year. Runeberg's Olivia Carville. We thank you very much for bringing us the latest. Now we turn our attention to talking tech. First up, sales of Apple's iPhone 17 are off to a strong start in the US and in China. The latest iPhone model has outsold its predecessor in their respective first 10 days by 14%.

16:23It's all according to CounterPoint Research. The research firm attributes the boost to an improved display, more storage, and the upgraded A19 chip. Plus, London-based fintech Revolut has been cleared to launch banking operations in Mexico. It's the second regulatory green light in Latin America this month after Colombia approved it to create a bank. The region is central to Revolut's growth plans, and the company says it expects, quote, millions of people in Mexico. And China says it has irrefutable evidence of a U.S. cyber attack on its national timekeeping agency dating back to 2022. Beijing accuses Washington of exploiting vulnerabilities in the mobile phones used by the agency's employees to steal sensitive data.

17:02The U.S. National Security Agency didn't immediately respond to a request for comment. One of the things I want is China's going to buy soybeans. I want China to stop with the fentanyl. Very, you know, normal things. I don't want them to play the rare earth game with us. President Trump there aboard Air Force One outlining his expectations for upcoming trade talks with China discussions that could have major implications for the global tech supply chain and semiconductor industry Bloomberg Senior Tech Editor Mike Sheppard joins us now on the latest important conversations to strike up again in Malaysia this week They certainly are, Cara and we're going to be watching exactly as you said for what the U.S.

17:43might be willing to give up in return for those three key areas that President Donald Trump outlined on Air Force One yesterday. One of them, of course, is rare earths that matters a lot for the tech industry, all those critical minerals going into so many different products, but not just in tech. They go into autos, they even go into defense equipment. So this is something that is crucial for the U.S. to reach an agreement on after China moved to start to impose export controls on sales of those critical materials to buyers here in the U.S. That really hit a nerve with U.S. negotiators. But another sore point, Carol, and while it's not exactly tech, it is important perhaps in a connected way, and that is soybeans.

18:29The president has been disgruntled, along with his advisors, that China is not buying any soybeans from U.S. producers this year, and that is taking aim at a key source of political support for the president here in the U.S. And he wants China to start buying those soybeans again. That was$12 billion in purchases in 2024. It has zeroed out this year. So again, it's on the table. But Carol, the question is, what will the U.S. give up in return? And does that mean a relaxation of some of those export controls on critical technology that Beijing has chafed against for the past several years. Will it mean a relaxation of limits on exports of AI chips or perhaps semiconductor manufacturing equipment like what we see made by ASML and Tokyo Electron?

19:17This will be all on the table later this week when Scott Besson meets with his Chinese counterpart in Malaysia later this week. Mike, overnight, a lot of headlines on Nexperia. Can you just help us understand what's happening in that case study scenario, what the U.S. government is aggrieved about relative to the Dutch? Well, Ed, this is a fascinating sideshow, really, to the broader conflict between the U.S. and its allies and China over technology. But in this case, it all boils down to one company based in the Netherlands, Nexperia. The U.S. is concerned that its parent company, Wingtech, has a plan to siphon critical chip-making technology out of European hands and into China to bolster the domestic industry.

20:06And it put pressure on Dutch authorities to seize control and replace the CEO, which happened at the end of last month. We learned about this all last week through court filings in the Netherlands. And China is responding forcefully. It has imposed restrictions on exports of Nexperia products that were made in China. And we've also seen messages in WeChat to Nexperia employees in China saying that they do not have to listen to the new management running Nexperia based in the Netherlands. So this is something we will want to watch closely as we see the Dutch taking on the world's second largest economy over the fate of this company, which also, I will say, provides a lot of semiconductors, legacy chips, mind you, but still to the auto industry and consumer electronics producers.

20:56Bloomberg's Mike Shepard, thank you very much. Another story. Proxy advisor Glass-Lewis is urging Tesla shareholders to vote against Elon Musk's potentially trillion dollar pay package, the second major proxy firm, to do so ahead of Tesla's November 6th annual meeting. Let's get out to Bloomberg's global auto czar, Craig Trudell. I'm reading the Glass-Lewis note, And they're worried about, I think, shareholder dilution. But just summarize why they're proposing and recommending voting against this comp package. Yeah, I think you put the nail on the head there in terms of dilution being an issue, I think.

21:34And this goes back to, you know, sort of criticism that, you know, the judge in Delaware sort of level that at the initial pay package that Tesla's board arranged for Musk back in 2018. This is a case of a CEO who's already quite aligned with the future of his company by virtue of the substantial stake that he has in the company. And there is a question on the part of these proxy advisors of just to what degree is it necessary or appropriate to hand over more control of this company and issue so many shares that would dilute the current shareholder base of Tesla. Now, Tesla, Craig, has said that the Glass-Lewis recommendation is, quote, misguided in an ex-post.

22:24And they're talking about the recommendations attempting to override the mandate of our shareholders delivered to Elon and ignore the staggering financial results that were delivered under Elon's leadership. Just what is the argument coming from the business right now? Yeah, I think it's interesting because, you know, you sort of at some points hear Tesla, you know, talk about the idea that they're more than just a car company. And yet it's interesting that they sort of compare their performance versus other car companies. And they're by virtue of doing that comparison, you know, make themselves look awfully different from from these companies that for a long time they've said, you know, we shouldn't be compared with those companies.

23:08So, of course, there is some reason to sort of celebrate the returns that this company has managed under Musk. We should acknowledge that as well. We'll see if that's celebrating happens on Wednesday when their earnings come. Bloomberg's Crude Trudell, we thank you.

23:31welcome back to bloomberg tech the vibe in tech markets right now is a lot of anticipation around earning season 85 of the s &p 500 has already beaten profit expectations nasdaq 100 is up 1.4 a big factor is good vibes around apple and also other names pushing higher despite negative news headlines. Let's get out to some of the top stories of the day with Bloomberg Equities reporter Nora Melinda. Let's start, Nora, with Amazon and AWS. Yes, lots to keep an eye on right now, Ed, and pertaining to Amazon here. Of course, we know this has been a discussion all day long about the widespread outage that was seen here, this disruption from AWS that affected a lot of different companies, including Roblox, Fortnite, Snapchat, a few others here.

24:15So we are seeing shares currently rebounding, but we were seeing some weakness earlier in the trading session as it was really falling behind, lagging a lot of its MAG7 peers. But if you look about a year-to-date basis here, looking at shares of Amazon, down about 2 % here. So definitely something to keep an eye on as we just think about the broader landscape of this company. And it's also notable that it's one of the key points additions, but not the one. But Apple, let's switch gears to a company that's at a new record high, helping the index from an underneath focus today. Nora, talk us through Apple and why it's rallying.

24:49Yes, Apple shares down just shy of 5 % year-to-date, but really seeing some green on the screen today. Of course, this comes after the fact that we did see over the first 10 days of the sale of the iPhone 17 series, we are seeing that it outsold the iPhone 16 by about 14%. So you did see Loop Capital upgrading the stock to buy from hold, of course, underscoring the positive iPhone demand trends. But we are seeing shares of Apple, as you mentioned, Caroline, rallying for a record high today. really strong today as well absolutely starting to see like that four percent add to now a four percent rally on the year finally breaking into positive territory bloomberg's nora meninder we thank you so much look let's shift gears to other areas that are rallying in particular crypto and crypto stocks are actually doing better this monday than underlying bitcoin is we're looking at bitcoin miners in particular they're outperforming in general the original cryptocurrency as they expand further into AI data centers.

25:45Ike Torovich is with us, August's co-CEO and co-founder, to discuss all things crypto, but I just want to dwell on that for a moment. This desire for compute has seen companies pivot. CoreWeave, once upon a time, was a crypto miner, and now it's a key neo-cloud. What are you making of others trying to ride that wave and hiring key executives to do so? Look, at the end of the day, you're going to go where, you know, whoever pays you the most and where you can sell the highest price. And to your point, the Bitcoin miners have a secured grid power. It gives them that strategic advantage if you think about data center space.

26:19And so I think right now they're definitely coming out as a favorite. And you're seeing that demand across the board. So it's going to be very interesting. You know, today, Bitcoin isn't used, Bitcoin blockchain isn't used for processing transactions. But it'll be interesting to see if that has any effect online. line. In recent weeks, it's been very interesting to track how Bitcoin's behaved. In the moment, sometimes it can seem severe in the context of risk, headlines about trade, the president's relationship with China. But I think you could give us some historical context that things are actually more calm through the Bitcoin lens than at least the headlines might suggest.

26:59Yeah, absolutely. So on October 10th, we had our newest Bitcoin Black Friday, which saw 19 billion in roughly liquidations across a number of exchanges. You know, it was a very large move. But relative to your point, Ed, you know, Bitcoin only moved the price move 12 percent. And if we had looked at, you know, call it 2020 or 2018, we probably would have seen that move over 40 percent. And so, you know, the maturation of the space is definitely here. The liquidations were clearly isolated to a number of exchanges. But it did show that while there was price maturation, in terms of the technology that actually exists in the space, there's a lot of work that needs to happen for it to reach the level of a New York Stock Exchange or CME.