Meta Shifts to AI Devices From Metaverse

0:00Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

0:41That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor. Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, Head of Government and Economics at Bloomberg. Every week, I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street and beyond. Listen to new episodes every Wednesday and follow Trumponomics wherever you listen.

1:20Bloomberg Audio Studios. Podcasts, radio, news. CPU allocation, right? We've been obsessed about GPUs and AI accelerator cards, but you need to have an equivalent, if not greater number of CPU in the design of the server. And that's an area that Intel and AMD have done well to get some market share where NVIDIA is trying to dominate the whole system. And clearly two big moves. Our size moves almost, Caro, for an analyst upgrade. But Intel in particular soaring high at the moment. Yeah, wants to watch big points contributors. Let's just flip gears a little bit and talk about, but wears one out on some of their investments of late.

1:56Hedge fund investors. Well, they haven't had it this good since the aftermath of the financial crisis. Data compiled by industry tracker hedge fund research showing that back in 2025, the industry posted its best year since 2009. Gains are about 12.6 % on average, but some scoring much higher than that. Bloomberg hedge fund reporter, Hemma Palmer, joins us now. And we like to think about the way in which they've all embraced AI and the quant funds are doing well, but who really shone in 25 and why? Yes. So, you know, it's such an interesting year because funds across strategies, across sizes generally did very, very well.

2:28And when we look at the big winners, you're looking at some of the tech-focused firms. If you look at Whale Rock, they did quite well. If you look at Light Street, they got over their high watermark from the really difficult 22, 23 period. You're seeing some of the best returns over at Bridgewater. If we look at Macro. Well, that's 30%, right? Exactly. Excellent numbers. So kind of across strategies, you're seeing winners across pretty much every strategy. D.E. Shaw, over 20 % in the multi-strat strategy. So pretty interesting and good news for investors and hedge funds. Yeah, Hemmer, when I was growing up in the Bloomberg School of Hedge Funds 10 years ago on the TV desk, that's what hedge funds do, make cash out of chaos.

3:12Isn't that the whole point? is there anything unique in this bucket of data that we've got about what they're doing differently? AI playing a role, talent stepping up and delivering big performance. Yes. So what makes the year interesting is the volatility that we're seeing is the kind that goes in and out pretty frequently and provides great times to get in on different types of trading opportunities. So AI has been a great lifter for a lot of the tech-focused funds. But if you look, for example, at Viking Global, which Viking doesn't do as much tech and AI as, say, other funds like other Tiger Cubs, CO2, for example, they didn't do as well.

3:52They were only up about 8.6%, putting them lower in the pack of tech funds. Tiger Global, which we typically think of as a tech investor, they did well in their long book, but their short positions ate into those gains, putting them also lower in the pack, more than 7 % gains. So, you know, everyone made money, but the real question is who made the double-digit gains? And you see with Lightstreet, good returns from a lot of those sort of popular names. Bloomberg's Hemmer Palmer with the hedge fund breakdown. Thank you very much. Now, J.P. Morgan kicked off a week of big bank earnings today. One area of focus, the impact AI could have on spending at those banks.

4:33CEO Jamie Dimon insisting the bank will be spending on AI to drive efficiencies, but also keep up with competitors. There was a surprise in the expenses number for J.P. Morgan of the year,$9 billion above what the streets saw. And they wanted to know if AI was to blame. Let's bring in Alexandra Moussavisadeh. She's co-CEO and co-founder of Evident, a platform that benchmarks and tracks AI adoption across the financial services sector. It was a really interesting earnings call. Often it's with Jamie Dimon, but this was Wells Fargo's Mike Mayo basically saying like, hey, those expenses seem very high.

5:06And you've been talking up AI a lot, JP Morgan. Is that directly correlated? And Jamie Dimon's point was kind of like, we will be spending. It's just not as much as you think. We have to because everyone is. Is J.P. Morgan ahead in this AI implementation race in the banks? Yeah, well, thank you. Thank you, Ed. Yeah, it was interesting to see your discussions today. But sort of stepping back and overall, as you know, we map the biggest banks in North America and Europe on their AI deployment. And J.P. Morgan is very much leading. They're out number one three and a half years in a row. So they are leading on AI deployment.

5:47They are leading on deploying and embedding AI throughout the bank. They do also spend a lot on tech, and a growing proportion of that is on AI, precisely to be able to take over time some of these costs out. A lot of the deployment we do see are in those internal processes and to create the efficiency gains, but also some on revenue uplift. Alexandra, a lot of this question is about when those efficiency gains come. have they already come? Are they coming in 26? Or is it more still longer term from your perspective? Yeah, I mean, it's interesting, right? Because we're three years into the Gen AI journey.

6:28And that was a journey that started with a lot of excitement and testing, and now use cases moving into production. But there seems to be a real sort of shift in the tectonic plates now, where it's looking at fully embedding it across the banks and every across the bank in every function and line a business. And with that, you need to have platform architecture that's built for scale. And what we are definitely seeing is some return on investment coming through on the efficiency side. So automation of KYC processes and going into the asset management side, the investment banking and so on and so forth.

7:06So really across the entirety of the bank. So it's still early days in terms of the actual sort of return and the ROI. I still think that there's some years it will take for this to really fully come through. And then we've also got agentic AI use cases coming, you know, going into production. And that's where I believe we're going to see the real impact. But it is going to take another three to four years for agentic and fully autonomous agentic use cases to be fully embedded and to see that, you know, really fundamental and sizable ROI that we know is coming, but it is going to take a couple of years for the Gen AI to fully come through and maybe three to four years for Gen Tech AI impact to fully come through.

7:50It was interesting that basically that question about AI from Mike Mayo was at the tail end of the call. Before that, there was myriad of questions for Jamie Diamond around the Apple onboarding with the credit cards there, but we're also talking more broadly about their investment banking miss and indeed credit cards. But Alexandra, push us forward. We've got a whole host of other earnings coming thick and fast. Where will they be talking about AI most abundantly? Well, so, you know, it's a time when there are a lot of things going on. So AI might not be front and center this time. It has been over the years.

8:23Some of the questions that have been asked in the earnings calls, there's a lot of shareholder pressure to understand where the bank is. We've definitely seen a shift in terms of banks being much more clear that it is a high priority, that it is part of the senior leadership team and the CEOs are fully understanding that it has to be embedded across the bank and has to be core. So I expect that there will continue to be not only in the earnings calls, but as we've seen throughout the year and investment days and investor days and press releases when partnerships and so on are getting produced by the banks.

9:00The discussion on AI is an ongoing one and throughout the year. But we've got some earnings calls coming through from the big banks. You know, Goldman Sachs has also made a big announcement late last year about their OneGS 3.0 program, which is really about fully transforming the bank end-to-end, top-down, bottom-up for, you know, fully embedding AI. So it's going to be really exciting to see what numbers might be associated with that. The leading banks are going to be talking about ROI, I believe. There has been a lot of talk with numbers associated with it in the last year. I think that these numbers are probably the tip of the iceberg, and we're going to see these being updated and upgraded in 2026.

9:47Alexandra, we just have 30 seconds, but how competitive is JP Morgan in attracting and paying top talent in AI? Very, yeah, it's very good at getting top talent. It is a place that is known for putting AI first. Jamie Dimon was very clear about that all the way back in 2017, where he said we're going to be an AI first enterprise. They are able to attract top talent. They're in competition with the tech sector. Everyone's looking for that top talent that really do the difficult systems rethink. Everyone's thinking about the shark tanking, taking talent from tech companies that can rethink the processes end to end and completely change the system.

10:31Remember, the technology here is just 10 % of the problem. 90 % of the problem lies in the sort of rethinking of the processes entirely. You almost have to build a digital twin, rethink the process and put it back in. That talent is what JP Morgan can attract. Thanks, Sandra. It was a visit. Always great to catch up with you. Co-CEO, co-founder of Evident. We thank you. Coming up, we're bringing you Bloomberg's exclusive conversation with the Baidu CFO, Henry He, on the U.S.-China race. From New York, from San Francisco, this is Bloomberg Tech.

11:11Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

11:52That's vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor. Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're 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.

12:26And 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

13:05Defence Secretary Pete Hegseth lamented the defence industry's risk-averse culture and praised Elon Musk during a visit to the SpaceX Starbase launch site. That was last night. Hexeth announced plans to integrate Musk's Grok AI platform into the Defense Department system and to make the U.S. military a, quote, AI-first warfighting force. Take a listen. We need to be blunt here. We can no longer afford to wait a decade for our legacy prime contractors to deliver the next perfect system, only to find that it's delivered years behind schedule and cost 10 times what it should. Winning requires a new playbook.

13:46Elon wrote it with his algorithm. Question every requirement, delete the dumb ones, and accelerate like hell. You know, Kara, people are saying, why is PegSeth at SpaceX? Well, SpaceX has$4 billion in government contracts alone just for development, but one of few carriers, Falcon 9, Falcon Heavy, that's authorized to take Pentagon-sensitive satellites to orbit. It's also interesting timing regarding Grok, right? I mean, already Google AI is integrated with the Defense Department. But to add Grok at this moment when there has been a lot of concern about what it has been producing in terms of imagery and the like, a notable step forward in that respect and that relationship deepening at least.

14:28A week ago, the president put on True Social that he wanted to cap salaries of defense companies who weren't performing for their CEOs. Today, we have news that the government is taking a significant stake in a top five defense contractor, L3 Harris. What do we need to know? Yeah, and the idea that they're going to be spinning off an IPO of the unit, the Missile Solutions business. L3 Harris is going to retrain control of the Missile Solutions business. But second half of 2026, they're looking at spinning it off. and we understand the Department of Defense is set to invest$1 billion in convertible preferred security.

14:58I mean, it's lifted the shares up 2%, up 6 % at one point, Ed. Meanwhile, in Asia, Baidu CFO Henry He spoke with Bloomberg's Stephen Engel about that company's AI spending of over$14 billion. Listen to this interview. In the November earning call last year, we actually disclosed one numbers. Since earnings came out back in 2023, we have invested over 100 billion RMB in terms of AI investment, which is a huge investment just on one side. On the other hand, we do see a great return on that. For example, right now, our cloud revenue increasing about 128 % on a worldwide basis in Q3 for the AI cloud.

15:38And also we are seeing over kind of 200 % growth on the AI search transformation. So, for example, last year we only have 3 % of the contents are generating for the AI for our traditional search. But right now this number is increasing to about 18%. And we're seeing kind of three digits increasing on the traditional search to the AI new search. And also for the robot taxi, as I mentioned, it's actually delivered over a quarter million drives every week. And we're seeing that number is on accelerated growth paces. So I think the investment, we are seeing the good trends of the monetization and the computing on the return.

16:14How do you see the difference between how AI is evolving in China versus what we've all been following very closely in the MAG-7 and what's happening, OpenAI and others in the United States? Essentially, there are concerns about over-allocation of capital and not getting the kinds of returns. So there could be potentially a bubble. China, there are bubble concerns as well. But there is a bifurcated AI space in China as well. The big boys like you and Tencent and ByteDance and Alibaba, and then there are new up-and-comers that are hitting the market in Hong Kong, like Minimax and others, those LLMs that are starting to make a dent.

16:53But you guys have the capital base. Is there a bubble forming as well in the investment in China because of the overinvestment? I want to call it two tails of the city. Obviously, I think if you want to decompose the drivers, I think there are four things. The data, model, computing power, as well as applications. So I think if you analyze these four different things, US-China does have a lot of different contexts. For example, right now in the US, there's a lot of investment on infrastructures. But today, if you look at electricity, cable network in China has already been built in the past few years.

17:31So if you really want to compare on the IOI or ROE on the infrastructure side, I think China does have a certain advantage on that. And also in the past 10 years of the mobile internet age in China, there's a huge accumulation of data. And data become important for today's inferences because a few years ago, everyone was competing for foundation model, right? So to your question, I think in my view, any company have a closed loop or full stack of the computing power, data, and ownership of application user cases will be sustainable on AI. Baidu CFO Henry Hey there. Talking of full stack, we're going to talk about Alphabet next.

18:09Coming up, Dan Ives of Wedbush joining us to talk about that deal, the impact of Apple choosing Google's AI to power Siri. That's next. This is Bloomberg Tech.

18:25New research out today on Apple's plan to use Google's AI to power its Siri voice assistant and much more. Bloomberg Intelligence writing that the deal highlights the cost advantages of Google's Tensor chips over rivals. Analysts also welcome confirmation in the news, which Bloomberg reported late last year, remember. Now, when Bush reaffirmed its$350 price target, it's the highest on the street for Apple after the deal. I'm pleased to welcome Dan Ives, managing director, senior equity analyst at WebBush, who has that number. So let's talk about the benefits for Apple first. Why the reaffirmation of 350?

18:56Why is this good for them in Apple intelligence? Look, they've had an invisible AI strategy. I mean, if you go back to like the last WWDCs, you felt like Michael J. Fox back to the future, right? There was really nothing there talking about AI. Finally, this is a huge step forward and it's not going to happen internally. had to happen from Google, Gemini. Look, and it comes down to like, if they never win D or J suit, this doesn't happen. So it speaks to just brick by brick, they're finally building it. And I think this is going to be instrumental to the valuation for Apple this year. If you look at the statement that was put out, it was very much for the time being, this is going to be embedded in Apple foundation models.

19:37The idea is that they pull away, they are able to get a grip on their own foundational models and indeed Siri becoming actually useful. Do you think they will distance themselves from Google over time? Look, I think there's a better chance of me playing NFL playoffs than Apple doing something internally at this point. Look, the reality is this is also a game of high-stakes poker negotiation that's going on too in terms of a broader deal with Google that I think they're ultimately going to have to do. Look, I think this will be exclusive. And because my view is that there's going to be some sort of subscription service, freemium.

20:10You also need a platform for developers. And it comes down to the AI revolution. Apple's watching it from the sidelines, from the stands. They need to get into the game. And that's why we talk about$7 ,500 per share, that this adds to the story as they execute on the consumer AI revolution, finally going through Cupertino. Dan, you had advocated on more than one occasion that Apple, by perplexity, with this confirmation of Gemini being the underpinning of Siri, is such a transaction still necessary to your mind? Yeah, and Ed, it's a great point, but a lot of that was based on as the DOJ suit was going on with Google.

20:53There was a sort of period there where Apple needed to do something. Now, obviously, perplexity came and went. They're clearly not going to do that. But once Google won the DOJ suit, That was sort of like green light, lights on, and now it's sort of go time for big tech. And I think that speaks to why Apple did this deal. And look, you look at Google Gemini, what they've done. You go back a year ago. It's phenomenal. And I think Apple is making that bet. It's going to be a much different 2026 and 2025 relative to Apple when it comes to AI. Again, Cara just made the point that Apple was very careful in the statement to explain which parts of Siri's functionality would be underpinned by Gemini.

21:40The other way of looking at it is to say, have they still got a lot of work to do to make Siri a sort of all-encompassing AI assistant? I mean, look, it's an Everest-like uphill battle. Because the reality is they've lost so many developers. They've lost so much talent. You've seen a lot changing. And look, Ed, you know it as well as anyone. Like the DNA of Cupertino, a lot of that is supposed to come internally. And I think Cook recognized, look, writing on the wall, it speaks to my point that like, Cook is not going to leave his CEO and leave this sort of in transition. He has to get the AI strategy sorted out.

22:17It's going to be a work in progress, but 2.4 billion iOS devices, 1.5 billion iPhones. It's my view that the consumer AI revolution ultimately comes through Cupertino. And this is a first step in that direction. We'll obviously see more about it in the spring and of course more WWDC. Some might say it's incredibly savvy to be AI-lite, to not have to make all the investments in the data centers, to be able to say, look, privacy first, we're going to lean much more on edge AI. Is that actually going to be a winning formula for Apple in the future as models and sophistication develops? Yeah, look, but also Apple's in a much different situation because of the unrivaled install base, because of where they play in the consumer.

23:01That's why, like from a CapEx perspective, they're not Microsoft, Google, you know, many other big tech players. But I think they finally hit the point, rubber met the road. They need to do something. They're going to have to incrementally spend, but they're basically going to rely on Google as a partner because you cannot have the fourth industrial revolution, biggest tech transition in the last 40 years, come and go and they don't monetize. And I think that's something that they recognize front and center. And it's key to the stock. I mean, realistically, like a year from now, stocks 350 or lower from here.

23:34It's all based on AI and them monetizing it. Dan Ives, Managing Director at WebBush with the street high price target 350 on Apple. That does it for this edition of Bloomberg Tech, Cara. And what an edition it was. It was. I mean, we started with Nancy Tengler telling us about how this really shows Alphabet's prowess. Then we finish on how it's Apple's future. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple and on Spotify and iHeart. This is Bloomberg.

24:08Bloomberg 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, Meta and Esselor Luxorica double production capacity for AI-powered smart glasses by the end of this year, based on growing demand. Plus, Microsoft seeks to quell consumer anxiety over the power price impact of data centers, pledging to pay utility rates that will cover the company's costs. We discuss. And Klarna CEO Sebastian Schimachowski weighs in on President Trump's call for a 10 % interest rate cap on credit cards for the year. First, we turn our attention to the markets, that despite that cooler inflation print, CPI, coming in with 2.6%, we're looking at markets under pressure.

24:57We're naturally erasing yesterday's gains. We're off by 0.2 % on the Nasdaq 100. These aren't massive moves, but we are still seeing some risk aversion amid the geopolitical turmoil. And whether or not we do indeed get any sort of Fed pause, it seems as though the rate cut is being put to the back burner by the markets at the moment, Ed. A lot of meta news this morning. The latest from Bloomberg is that talks with SLO Luxottica are around doubling capacity for Ray-Ban metas to 20 million units from 10 million units current in store capacity. If demand's good, they're talking about maybe, according to our sources, 30 million units in the year.