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21:56Ed Ludlow:That was David Sachs, co-chair of the President's Council of Advisors on Science and Technology and partner at Kraft Ventures. As Sachs calls for clearer rules around artificial intelligence, there's also a growing push to modernize how those rules are written and implemented within governments. Joe Scheidler is the CEO of Helios, an AI platform designed to help track and navigate legislation in real time. Joe was a former advisor at the White House and U.S. State Department under President Biden and joins us now. Just interested in your thoughts in the first instance on what Mr. Sacks was saying, the trajectory and timeline for a federal level set of rules on AI.

22:34It's great to be with you, Ed. Yeah, I think what David had kind of stated yesterday makes a lot of sense. A patchwork of regulations across 50 states is not a sustainable structure in a global competitive technology race. I think as a builder and somebody who has sat inside of government, I can confidently say what we need right now is a single national framework that advances this critical technology in one of the most consequential times we're seeing in modern history.

23:07Ed Ludlow:Joe, what everyday Americans may be confused by is the distinction between either there not being enough regulation. In other words, we do not have a federal level framework. But there is a lot of state by state regulation, the point that Mr. Sachs was making. What is the real risk over regulation or under regulation in this context? Yeah, I think there is a fundamental mismatch between the pace of this technology and the rate at which we're trying to regulate this across different states, localities, cities. And the issue is this is still a very emerging technology in many respects. It's a horizontal technology that cuts across every sector, vertical industry.

23:56and there's a question that I think is persisting throughout circles in D.C. in the valley of if not America, then who? And we are at a moment right now where we're seeing massive productivity gains in key sectors of the economy to include government itself and I think it's far too early to be taking an over-regulatory approach to a technology we're still learning a great deal about.

24:25Ed Ludlow:There's two specific areas I want to talk to you about. The first is the use of AI generally in national security and defense. Anthropic is the biggest case study of late, right? And just having returned from D.C., the position of many was it is not up to the companies how the government, particularly the defense arms of government, use the technology. Your viewpoint on that, please. Yeah, I mean, I would say it's the prerogative of any American to express their First Amendment rights. And at the same time, we have systems to affect change. We live in a democratic electoral society. If folks are unhappy with the position of any given administration or a government composition, there are plenty of tools at our disposal to affect change.

25:12What I would say is these technologies aren't anything new to the U.S. military or defense circles in general. We've been using machine learning and AI capabilities for decades. And for now, it's starting to get a lot of attention in the media, particularly because of, I think, adjacent stories that have a tendency to get a dialogue moving. for instance, the patchwork of regulatory frameworks and many hyperscalers being caught in that as well. But I would say, in general, there's a dangerous notion of allowing boardrooms and private executives asserting too much influence in systems of government that have clear processes for change.

26:04Ed Ludlow:Joe, we just have 30 seconds, but the pace of innovation in AI agents, genuinely autonomous AI agents. How do you regulate for that? I mean, I think right now we need to be thinking through a verticalized mindset. There are a lot of platforms, ours included, that are trying to close the delta between generic models trained on mixed quality data and very sensitive enterprise workflows across private industry and government itself. and so I would say applying an over-regulatory approach to agentic workflows could be short-sighted in the grand scheme of global competitive race. Joe Scheidler, Helios CEO, great to have you on the show.

26:49Ed Ludlow:Thank you very much. Coming up, Apple opens its doors to outside AI assistants like Google's Gemini, Anthropics Claude. We've got the Bloomberg reporting next. It is halftime and this is Bloomberg Tech.

27:11Ed Ludlow:Welcome back to Bloomberg Tech. It's Friday, but it's the end of a difficult week for technology stocks. The Nasdaq 100 has fallen into correction territory. On a technical basis, it has fallen 10 % from a recent high. Then there's some movement as well in cybersecurity stocks. This one is a little less straightforward. Cybersecurity stocks fell after a report that Anthropic is testing an AI model that has very advanced cyber capabilities. And it sparked some fears that actually this model could go on the offense. It could present a cyber threat to some of those names that are down you see on your screen that would provide the defense.

27:50Ed Ludlow:Go out and read about it. It's complicated, but I'm sure we'll be speaking about it again. Then there's the big news from Bloomberg. Apple plans to open Siri to outside AI assistants, allowing users to choose their own chatbot. The Siri overhaul is set to be incorporated into the company's upcoming iOS 27 update. Bloomberg's Apple and consumer tech editor, Mark Gurman, once again, broke the story. This is strategy all over the place, right? As you know, I just upgraded to iPhone 17 Pro, got the latest iOS. I've gone to using Siri. I'm reading your reporting and it seems like Apple's latest strategy is to say, whichever chatbot the consumer wants, we'll find a way to integrate it.

28:33Ed Ludlow:Give us the details. Yeah, they're going a bit agnostic here. The idea is they want all the different AI platforms to be easily accessible from their devices. And what that would allow them to do is tap into a new app store section they're building. And then that would allow them to take 30 % or whatever the slices that they agreed to with that AI provider to up their subscriptions to the higher end tiers on those devices. So they're going to make money there. And so this is them doubling down on their hardware as a platform, doubling down on their services strategy, really slightly bowing out of the AI race here as they continue to see how this is going to end up developing.

29:11And as I reported earlier this week, they're also working on some new first-party features like that Siri app, the ability to access Siri from the keyboard more easily. And so they are continuing to push forward there. And as we've talked about numerous times, they are rebuilding their underlying models using technology from Gemini.

29:29Ed Ludlow:You broke another story about Apple, but what's happening internally with Comp, super interesting. There seems to be a return to a sort of bonus or incentive structure for the teams that work on design. What do we need to know here? and what are the kind of numbers involved? Yeah, one of the biggest issues Apple is grappling with are companies sort of circling it like sharks, given the AI situation there and the AI crisis they've really been facing. And different companies, OpenAI in particular, wanting to poach their best hardware engineering talent. And so what Apple is doing is trying to respond to that by giving one-time bonuses, RSUs, these vests over four years to some of the key talent, particularly this week, it was the iPhone product design team within the hardware engineering group, incentivizing them to stay and not jump ship to OpenAI.

30:24Ed Ludlow:It's difficult to tie those two stories together because, as you've just outlined, the bonuses are going to the iPhone design team, but the bigger environmental picture is AI talent. What about those AI teams? AI talent per se. So what OpenAI is doing, they are building hardware. They are building devices. And as you know, Apple has some of the best hardware engineering talent in the world for building devices. And so what OpenAI wants to do is they want to marry that fit and finish of Apple. They want to marry that hardware engineering capability of Apple with their own AI models that they consider industry leading.

31:02And so bringing the two together would be extremely powerful. And so they are going after Apple talent. They've been poaching several dozen people, I would say even a month over the last half a year. And don't forget the hardware engineering group at OpenAI is run, two of the people running it used to run hardware at Apple. So it is a pretty interesting situation right now.

31:25Ed Ludlow:There's actually a third story out overnight from Mark about Apple discontinuing the Mac Pro desktop, but you have to go and read that one. Bloomberg's Mark Gurman. Terrific stuff. Thank you very much. It's been a roller coaster week for memory and storage stocks. After Google unveiled an AI breakthrough that can cut the memory requirement to run an LLM by a factor of six, the market reaction came in waves. First, everything in memory sold off around the world. Then investors started to realize this might not be doomsday for all of them. Let's refresh your memories for a moment. If storage for AI data is like a warehouse, NAND and Flash are the long-term holding area.

32:06Ed Ludlow:But high bandwidth memory, on the other hand, is the workbench, the loading dock. This is how it was summed up by Bloomberg's Mandeep Singh of Bloomberg Intelligence of how the market is digesting this breakthrough in memory. Typically, when something like this happens, everyone would implement those sort of efficiencies. Remember DeepSeek? Everyone pivoted to a reasoning model within the next six months. And guess what? The demand actually took off because, you know, everyone implemented that and it helped, you know, drive more usage. So if anything, I think it should drive more usage and the effect of that will be more memory demand.

32:50Ed Ludlow:So this isn't the AI trade breaking. It's investors getting much more informed, but more selective about where the demand actually is. Worth going back and reading that on the Bloomberg Terminal. Now, coming up, we're going to hear from Kostler Ventures co-founder Vinod Kostler on his take on the AI race between the US and China. That conversation next. This is Bloomberg Tech.

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36:30Ed Ludlow:President Trump is set to travel to China in May to meet with the country's leader, Xi Jinping. The AI race conflict in the Middle East and trade tension are likely to be top of the agenda, especially as China launched a pair of investigation into U.S. trade practices, retaliating against Trump's tariffs. Let's get the broader picture with Michelle Guider, CEO of the Crack Institute for Tech Diplomacy, Purdue. She also served as Assistant Secretary of State for Global Public Affairs under the first Trump administration. Off camera, we were talking, you know, I've tried to make sense this week of where the United States currently stands as it relates to China in the context of technology.

37:09Ed Ludlow:Earlier in the program, We spoke with David Sachs about just that. Your sense of the balance right now in closer economic cooperation with China while considering them in the technology context to continue to be an economic adversary? Yeah, there's a lot going on when it comes to conversations in D.C. and in Silicon Valley about the United States leading in technology. And you're right. All of that is within the context of making sure that we're winning this so-called technology race with regard to China. And I think that's really important. And I think it's important also that we have a common picture and an understanding of what winning means.

37:45You referenced your interview with David Sachs yesterday, and I think he put it really well. It's market share for American technology or allied technology, ultimately trusted technology. And I think that's really important. However, the big challenge there that I think isn't talked about enough is that if you look at market share of artificial intelligence, there's a concerning trend growing with Chinese models, and specifically their open weight and their open source models, which are cheap. They're good enough. And if you look at the trend just about a year ago, 15 months ago, Chinese open source models were essentially a negligible part of world AI usage.

38:25Fast forward to 15 months later, end of 2025, all of a sudden they're going from 1 % to almost 30 % of global token usage, world AI usage all of a sudden. And so they're cheaper, they're good enough. And the Chinese are very focused, not necessarily on having the best models, but on having the most used. And so I think the United States, when we're talking about Silicon Valley and Washington, D.C. connecting, need to make sure that not only do we have an innovation strategy, we've also got a really big distribution strategy.

39:00Ed Ludlow:We're going to hear later in the program from someone who is a China hawk, but maybe a different definition of a China hawk. That's Vinod Kostler. The reason I wanted to talk to David Sachs about the Presidential Council of Advisors for Science and Tech is look at who's on it. Those are companies that either at one time had a big market share in China or would love to export their technology to China. With something like PCAST, is it realistic that a sitting president's thinking or the policy of the administration of the day actually gets influenced by those that are a part of it? Yeah, I think the bridge and the conversation between those tech leaders and Silicon Valley leaders in general in Washington, D.C., has increasingly been fortified.

39:46And those conversations were happening anyway. I think PCAST and that group of advisors is now going to accelerate that. But it's not new. And that conversation and the back and forth on policy has already been taking place. And I think that's really important. And that bridge is really important. At the same time, let's not forget that we also have to keep in mind every American in between Silicon Valley and Washington, D.C., when it comes to technology, they're focused on jobs, they're focused on the energy requirements and data centers being built in their backyard. So that's also really important, as are our allies, because AI ultimately is borderless.

40:21And the only way that the United States is going to lead is by working hand in hand with our allies as well.

40:26Ed Ludlow:Let's go back to Iran. You know, we said that when the president travels to China, depending on where we are in that process, they will likely discuss the war in Iran. Why does it matter quickly that the U.S. get China's view on this? Well, I think, look, they're one of the leading economies. They have a lot to do with our own economy, oil prices and things like that. And so, you know, making sure that we're on the same page is good for American strategy. And I'd say, you know, we're seeing a big role that technology is playing in Iran as well. And so all of that is part of American technological leadership and dominance and ultimately bringing this war to a victorious end as soon as possible.

41:07Ed Ludlow:Michelle Guida, CEO of the Crack Institute for Tech Diplomacy at Purdue. It's great to have you back on the show. Thank you very much. Sticking with China, we discussed the AI race between the two world powers with Coastal Adventures co-founder Vino Khosa. This week, that was on the sidelines of the Hill and Valley Forum. And here's what he had to say about NVIDIA CEO Jensen Wong celebrating the company's approval to sell AI accelerators to China. He is celebrating that. It's in his short-term economic interest. I don't believe it's in the interest of the country as a whole to do that. Of course, he's got whatever deals he can.

41:45He's a great guy. He's a very visionary guy. but it's good for his business and that's his responsibility as CEO. That doesn't mean everything he does is good for America. It's good for his global business. Do you think there's a chance that we change policy, change tap, decide to cut off? I think we absolutely should and I'm in the cape of being as hawkish as possible and it's the right policy for America and I thought this administration was on that bandwagon, but they seem to have changed course. I don't know what the influences were. There are probably some that I don't understand.

42:28Ed Ludlow:The middle ground... Middle ground is not the right term. The other consideration are countries in the middle, principally the Gulf. You export the technology to the Gulf if you don't same vacuum. China comes in. But equally, there are still so-called diffusion considerations around, would China have access to that technology through Gulf nations? Where do you stand on that, Vinod, that middle ground? You know, look, there's no clear answers to all these questions. That's a place where if we don't fill the vacuum, they will. China will. And I think it's important to have global use of our technologies.

43:14So it's a balancing act.

43:16Ed Ludlow:I would like to talk a little bit about OpenAI, but in a slightly different context. You wrote the first real institutional check into OpenAI, if you will. You are not an investor in Anthropic. That's right. We are not an investor in Anthropic. The conversation here at Hill & Valley in part has been, of course, Anthropic's relationship with the Pentagon. And what I had heard from a number of Anthropic investors is that they actually cheered Dario Amodei taking not a moral high ground per se, but basically saying having that niche of having red lines is good commercially. Now, the consequence of that action is that OpenAI came in and had an opportunity to do business with the Pentagon.

43:59Ed Ludlow:And I'd be grateful, you know, drawing on your experience in the Valley and as an investor on how you feel Anthropic handled that and then what OpenAI did coming into it. So I had a tweet on Dario's comments. It was very simple. I said I admire him for sticking to principles, his principles. And I admire anybody who sticks to principles. But I think he had the wrong principles. He should not be the one deciding what technology the Department of War should use in the battlefield or anywhere else. I think he can mandate things like no illegal uses, like mass surveillance and others. That's a reasonable position to take.

44:52But to understand what the Department of War can or cannot do with the technology should require all the knowledge that the Department of War has and their knowledge of what President Xi would do in Taiwan or what President Putin would do. I don't think Dario is in a position to do that or judge that. And I think so the principle of sticking to principles is great. He just happened to have the wrong principles. And it's reasonable for him to explain what the technology is capable of and not capable of. The capabilities which he's qualified to do. Qualified to then judge how that technology is used.

45:35That's just being arrogant.

45:38Ed Ludlow:That was Kostler Ventures co-founder Vinod Kostler. Anthropic has won a key court order pausing a ban on government use of the company's AI tools. that follows the dispute between Anthropic and the Pentagon over the use of its AI. Bloomberg's Katrina Manson covers defense technology and has the details. This was a moment in time this week, but what do we need to know about it? Well, the judge is saying this looks like illegal retaliation, putting a seven-day injunction saying that the Pentagon cannot declare Anthropic, in fact, a supply chain risk. Now, the judge put a stay on that injunction.

46:15So for seven days, the Pentagon now has a chance to appeal. So we're really still in this incremental stage of trying to work out these very fraught lines between whether the Pentagon can claim that Anthropic is essentially usurping chain of command, the president's ability to command his own troops, and whether Anthropic is instigating unfair headlines or whether it's absolutely extraordinary, which we know it is, it's unprecedented, to declare Anthropic a supply chain risk, treating it as an adversary, a U.S. adversary, and a judge at the moment saying, no, that is not okay.

46:54Ed Ludlow:A lot of people weighed in on this. Palantir has been one of the winners of the government's attitude towards working with the private sector and opined on it. It's been a big week for you as well a new book project maven out in the world you know thread that together where palantir and the story that you're telling fits in uh today well it was fascinating the book came out on the same day that you uh me everybody else was at uh hill and valley and for the founders of hill and valley so much of what has been animating them to end what they called to me this cold war between East and West Coast, between Silicon Valley and Washington, goes back to Project Maven.

47:39The moment that Google workers protested, discovering they were involved in what they called the business of war, their cutting edge AI tech being used to identify with drone footage, identify potential targets in U.S. battle zones. Now, today we see it playing out slightly differently. But nonetheless, we are in this key moment where Anthropic and the Pentagon are now at war again. And AI is at the heart of another fracture between Silicon Valley and what the Pentagon wants to do with AI.

48:18Ed Ludlow:Bloomberg's Katrina Manson, author of that new book, Project Maven, hits the shelves this week. Thank you very much. Now, coming up, Amazon is coming after Walmart in rural America. We'll discuss why that conversation is next. This is Bloomberg Tech.

48:41Ed Ludlow:Amazon spent decades perfecting urban and suburban delivery. Now Amazon's expanding rapidly in rural America, duking it out with Walmart over the$1 trillion rural U.S. market. Bloomberg crunched exclusive data for this big take. Bloomberg Spencer Soper covers Amazon is behind it all. Interesting battleground. I mean, what's the Amazon strategy here? Well, Amazon's always tried to sell to rural America and the proposition has always been, look, we'll connect you with a broad assortment of goods that it's going to be tough for you to find nearby. But you're going to have to wait for them. You know, Amazon's known for like one, two day delivery in most of the country.

49:21But in rural areas, it could be four days, six days. It's always been a bit longer. And so the challenge there is how do we how do we speed that up? Give a high cost. Right. It's so expensive to deliver to disperse populations. So they're trying to crack that and they're bringing in small business owners to deliver around their businesses for like two dollars and 50 cents a pop. So that's really how they're trying to crack this code is by bringing in a new kind of partner other than the Postal Service or UPS that's willing to do these deliveries kind of like a side hustle.

49:54Ed Ludlow:Spencer, real quick, is the state of play that Walmart still dominates in rural areas? And I guess Amazon isn't worried about the cost. It's bigger than Amazon. It's bigger than Amazon in rural areas. But rural America's spending is also very fragmented. About 80 percent of it is going to like a huge mix of you've got like dollar general tractor supply and any number of regional chains and things. So so it's it's it's wide open. Walmart's definitely bigger than Amazon in rural America. And Amazon is its new delivery centers are like on top of it in a lot of cases. So there's a fight between those two.

50:31But there's also a lot of peripheral players that stand to lose some share.

50:35Ed Ludlow:Bloomberg Spencer's sober with a big take. Thank you very much. One last piece of news, especially if you're planning to spend your weekend playing video games. Sony plans to raise the price for the PlayStation 5 console by$100, citing pressure on the global economy. The hikes take effect on April 2nd, with the cost to consumers going up around the world. Remember, PlayStation, hugely popular console in countries all over the planet. That does it for this edition of Bloomberg Tech. Happy Friday, wishing you a good weekend. But there was a lot in the show to recap. You can do that on the podcast and you know where to find it.

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