Nvidia, AMD Set to Resume Some AI Chip Sales to China

24:54So if we can do so successfully, we can be that indispensable, essential neighborhood network. That brings in the local news component. I found this fascinating. Why go into local news? We're in an environment where the big social platforms increasingly are pulling back from news on the platform by choice. That was something that you were sort of jumping into headfirst. Well, there's a great quote from the famous venture capitalist Michael Moritz that I just read a couple of weeks ago. And the quote is, local news is as important to a city as air, water and gas. And we believe that at Nextdoor.

25:34Local news is what compels citizens to have civic discourse. It's what helps keep communities stronger. And so as part of this new Nextdoor, we're doing something that we haven't done in our 14-year history. We are inviting local publishers to come to our platform and use it as a distribution mechanism to take their great journalism and spread it to our users. And so we have 3 ,500 local publishers publishing 50 ,000 articles every week. And now our users can read that news. They can stay informed. They can engage in conversation. And it's something that isn't happening, to your point, on any of the other social platforms today.

26:13Nirav, let's end by talking about M &A because these strategies, which include local news, there are different mechanisms you can use to grow. How do you think about M &A and moving into the new domains that you want Nextdoor to win in? Well, every single advisor that I've talked to, either as a private company CEO or as a public company CEO, has said the same thing. You have to operate your company as if it will be around forever as a single independent entity. And so that's the way that we think about Nextdoor. As a public company, we always have to listen to any conversation that comes our way.

26:47But I will tell you, we are 100 % focused on achieving our potential as a standalone independent entity. Nirav Talir, CEO, President and Co-Founder of Nextdoor, back here on the program. Coming up, deals for AI startups continue as Cognition AI agrees to buy the remainder of Winsurf. We'll hear from both of the CEOs next. This is Bloomberg Tech.

27:24Welcome back to Bloomberg Tech. There is so much happening in the AI domain that is moving markets as well. Let's start with CallWeave. CallWeave pushing a lot higher. There's news out of Pennsylvania this morning that the company is going to invest$6 billion into an AI data center there. Now, remember, Pennsylvania, Pittsburgh in particular, is all the focus this morning as Senator McCormack hosts that inaugural Innovation and Energy Summit. We're going to get to a lot more of that, but the stock really pushing higher, a lot of momentum for CoreWeave up 8%. There is our top story, and it is a clear top story.

27:58NVIDIA and AMD shares both pushing higher after announcing plans to resume sales of some AI chips into the Chinese market. Why? They've secured assurances from Washington and the administration that they will get the approvals and licenses needed to do so. We'll get much more into that throughout the remainder of this program. Now, as Chipstock saw on that news that semiconductors will be able to sell more of their product to China, the Trump administration is still working out its trading relationship with Beijing. Earlier, Bloomberg's Anne-Marie Horton spoke with Treasury Secretary Scott Besson.

28:32Listen to this. I can tell you the one thing that we do not want is a digital belt and road springing up around the world because other countries or China are substituting for our American chip manufacturers. This is the same chip, though, that the Trump administration blocked with export controls in April. So why the change in policy now? Anne-Marie, you might say that that was a negotiating chip that we used in Geneva and in London. So this was part of the trade talks when it comes to Washington and Beijing? Yes. Was it a quid pro quo then? As you said it wasn't, but was it potentially to make sure that you can get the licenses when it comes to rare earths?

29:25Yeah, I think it was all part of a mosaic. They had things we wanted, we had things they wanted, and we're in a very good place. I expect to meet my Chinese counterpart, the vice premier, in the next few weeks. So when and where will that meeting take place? We're still working on that. The Chinese leadership has a big conclave at the beginning of August, so we're trying to work out whether that could be in a third country before or after that conclave. Will the administration release the framework of the Geneva and London talks? Well, we have released some of it. And I'll tell you that now, having settled on tariffs, on the export controls, we can move on to the next stage of talks.

30:19And I think it's very important, both for the global economy, for the U.S. economy, and for the Chinese economy, for us to move on and talk about China opening its markets and the increased domestic and consumer production there. Are you hoping to get to that next phase before August 12th, when that's currently the detente between these two economies? Yeah, look, I think we're in a very good place. And I tell market participants not to worry about August 12th. That was Treasury Secretary Scott Besant speaking with Bloomberg's Anne-Marie Horton. Let's get back to Pittsburgh, where the inaugural Pennsylvania Energy and Innovation Summit is underway.

31:06And we're going to speak with AI and crypto taking center stage of the energy and its digital future. Joining us now, delighted to say, David Sachs, White House AI and CryptoZar, Senior Policy Advisor to the President. David, welcome back. It's great to have you, as always, on the program. The focus is NVIDIA. Thank you, David. The focus is NVIDIA and AMD's ability to now sell in a limited way chips back into the Chinese market. Just your reaction generally to that. Well, Ed, we still have a policy of not selling our state-of-the-art advanced semiconductors to China. And the H-20 is not that. It's a heavily deprecated chip.

31:46And that's why the Biden administration allowed the sale of the H-20 to China. And this is a continuation of that policy in the larger rubric of the trade negotiations that Secretary Besson was talking to you about. So this is a heavily deprecated chip. I think that, like Secretary Besson said, there are some things that China wants from us or other things we want from China. And this was all part of the overall trade negotiation. David, you advised the president on AI policy as well as crypto policy. Do you have any sense of when he met with Jensen Wang last week at the White House, what case Mr.

32:22Wang made to the president that it was the right thing to get the American technology stack back into China? Well, Jensen's been making the case publicly for competing in China. And I think there are a lot of merits to the argument. If you look at developments over the past year, Huawei has advanced very rapidly. They have a new technology called Cloud Matrix, which networks together 384 of their Huawei Ascend chips. Now, the Huawei chip is not as good as the NVIDIA chip. The NVIDIA chip is three times more powerful, but if you network together enough of those chips, you can brute force your way to a similar kind of result.

33:01And that is what Huawei has been developing as this cloud matrix 384. And there have been reports, including from Bloomberg, that they've started exporting that technology or they've been seeking to export it. So Huawei is becoming much more competitive. And if you give the whole Chinese market to Huawei, it's a huge subsidy for their R &D. And it basically forces Chinese companies that might be willing to use H20 to use the the Huawei chip and to basically figure out, basically to figure out the bugs, work out the kinks of the cloud matrix system and help Huawei scale that up. So I think there is a compelling argument here that you just don't want to hand Huawei the entire Chinese market when Nvidia is capable of competing for a big slice of it with a deprecated, less capable chip.

33:48Again, we're not selling our latest, greatest chips to China, but we can deprive Huawei of basically having this giant market share in China that they can then use to scale up and compete with us globally. So I think this policy is nuanced, and I think it makes a lot of sense. The report you were referring to that Bloomberg had was that Huawei was going out to some of the Gulf nations and also some of the Southeast Asian nations and offering prior generations of their chip, but also the cloud matrix that you mentioned. The concern being that in dealing with third countries, you know, that there be some Chinese access to other nations technology.

34:27How involved have you been, David, in these kinds of talks and in framing the president's thinking that actually just having direct access to lower performance compute is OK with China right now? Well, look, I'm not going to discuss what I talked to the president about, but I can tell you what I think, which is the Bloomberg story discussed how Huawei was basically trying to make available the Huawei Ascend chip, which is their current chip, which is basically put together in a rack system with Cloud Matrix to create a viable competitor to NVIDIA. And I think it is a viable competitor. I think NVIDIA and AMD and other American companies have a better product.

35:08But if we don't compete across the world, then we will hand the market to China. And one of the reasons that the president went to the Gulf states on that trip is to encourage business relations between the U.S. and the Gulf state. He signed massive investment deals. And one of the deals that we signed was this new AI acceleration partnership where we want to create a pathway for the Gulf states like UAE to buy American technology, to buy American chips, and to create data centers on the American tech stack. And I can tell you that this, I don't quite understand why this has proven to be so controversial in Washington.

35:44But these nations, like the Gulf states, they have two choices. They can go with an American technology or they can go with a Chinese technology. And if you don't let them buy the American technology, you're pushing them into the arms of China. And a lot of people said, well, China won't be ready to sell for years. But now we see that there are reports that Huawei is out there trying to sell and export the Huawei Ascend chip. So I think it's very important that we enable our American companies to compete in the global market, that we don't tie their hands, that we don't hobble them. Because, again, it's a zero-sum game.

36:19That market share will either belong to our companies like NVIDIA or it's going to belong to Chinese companies like Huawei. There's a very simple test for this. Just look at market share. If five years from now we look across the world and we see that NVIDIA or other American companies have 80 % market share, it means that we won the AI race. But if we look across the world in five years and see that Huawei has 80 % market share, then it means that we lost the AI race. So I think it's very important that we do everything we can to encourage American exports to be sure we can name our security standards.

36:52But this is a very easy trust but verify situation. You know, the chips that we're talking about are really mainframe computers. They're 8 feet tall. They're 3 ,600 pounds. It's very easy to send inspectors into data centers and count the server racks to make sure that they're where they're supposed to be. So the security concerns can be addressed. I understand that there are some security concerns, but I think they're very easily handled. And what we need to be doing is making sure that we win the AI race globally by making American technology the global standard and not creating a Huawei Belt and Road.

37:27Live on Bloomberg Television and radio worldwide, we're in conversation with David Sack, Senior Policy Advisor for AI and Crypto, the AI and Crypto czar. David, I wrote in my newsletter earlier this week about the analogy that Jensen Wang has been using, that the American technology stack should be akin to the US dollar as the world's reserve currency. That's how he would like the administration to approach it. Do you share that view and see some truth in that analogy? Well, here's the way I see it. And this is really, I think, a Silicon Valley view because ultimately I've been a founder and investor in Silicon Valley for 25 years.

38:05And what we see is that the winning technology companies are always the ones that create the biggest ecosystem. They have the most developers on their platform. They have the most apps in their app store. And so they work very, very hard to create a partner ecosystem. And I think that the United States needs to do something similar with the American technology stack. We want the most other countries using our technology because again it's a zero-sum game and it's not just the chips it's the operating system that runs on those chips it's the AI models that then are run in these data centers. We want all of that to be American-made and American-powered and you know look to be sure there are security concerns that we can address them I don't think that's that hard but if we hobble our American companies and don't let them participate in the global market again we are creating we're playing into China's arms and playing into their digital silk road.

38:54So I think, to me, this is a pretty easy question. I think we do want American technology to be the global standard. It is a little bit like the dollar. There is a network effect there. The reason why everyone loves the dollar is because they know that everybody else will accept it as well. So we do want to have the strongest dollar. We want to be the reserve currency. And we do want our technology to be the global standard. David Blumer reported this morning that on July 23rd, The president's going to speak in an event titled Winning the AI Race, which you and the rest of the All In Pod team will be hosting, essentially.

39:27I guess that's going to be a moment where we'll have a fuller sense of what the president and this administration's big picture AI policy is going to be, what the big goals are going to be. That's right. The president will be giving a keynote address at a one-day AI conference in Washington, D.C. on July 23rd. It's co-hosted by All In and Hill and Valley Forum, which is also a D.C. and Silicon Valley policy group. And the president, I think, will be giving his first major address on the topic of artificial intelligence, building on the remarks that he's giving here in Pennsylvania today, which are also AI-related and related to energy investment, the kinds of investments we have to make to power the next generation of AI.

40:10David, you've been speaking there in Pittsburgh this morning. What's the main focus on the energy side of this AI story? energy security as a national security priority, but just simply whether we will have enough energy resources to power the goals of Meta and the other hyperscalers. Well, Pennsylvania is a huge energy producing state. I think it's our second biggest energy producing state. They have abundant natural gas, which I think in the near term is going to be the power source for these data centers. I think in about five years, we could start seeing nuclear scale up and the administration believes in that too we want on all of the above approach but pennsylvania is very big in natural gas and there are major investments being announced here for more for more basically fracking for more grid infrastructure for more power generation all those things are needed to power data centers ai runs on gpus that are incredibly power intensive and those these data centers of the future are going to need more power and the the one area I think where America is a little bit behind.

41:15I mean, I think we're winning the AI race pretty much at every level of the stack, except that the size of our power grid has not increased very much over the past decade. If you go over to China, they've roughly doubled the size of their electric grid over the past decade, where ours has only gone up by a couple of percent a year. So this is an area where we need to make major new investments, and the president is coming to Pennsylvania today to announce many of those investments, and I think you're gonna, this has been a major priority of the administration, and I think you're going to see a lot more of this.

41:43White House AI and Cryptozar, David Sachs, thank you very much for coming back on Bloomberg Tech. Okay, coming up, deals for AI startups continue as Cognition AI agrees to buy the remainder of Winsurf. We're going to hear from both of those CEOs next. This is Bloomberg Tech.

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45:02Internally, the companies were saying it's the perfect fit. What happened? Why did it happen? Winsurf CEO Jeff Wang and Cognition AI CEO Scott Wu join us now live on Bloomberg Tech. Scott, I'll start with you with that simple question. How did all of this come together, please? Yes, absolutely. And so I think we all found out about the news around the same time on Friday afternoon. And we were looking at this and saying, wow, there's such a clean fit of all of these things, both in terms of the products, which is Winsurf is one of the leading IDEs, Cognition builds Devin, the first AI software engineer agent.

45:41And so there's a clear offering of IDE and agent. At the same time, both of us have a very clear enterprise focus in terms of how we do business and even kind of the customers that we have, the team that we have and so on. And it just seems like such a great fit. Jeff, what I was hearing over the weekend is that some of the investors on both sides might have played a role in sort of brokering that this was a good idea. Is there some truth to that? Actually, the way that the other deal panned out was it should have been a clean cut. So there were kind of like conversations going, but as job as interim CEO, you have to find a lot of options for the future of the company.

46:19And I think after talking to Scott, it was a done deal in my mind. It was just a perfect fit. Scott, what's so interesting is like the conviction that Cognition had. Why were you able to move so quickly and just say, you know what, this is a great deal for us? Yeah, yeah, absolutely. Look, I think we are in the AI code space. I think Windsurf is a very kind of different, like, complementary offering in the space. But naturally, you know, we see it, we've tried the product ourselves, we've used it a lot. And it helps us just get to conviction very quickly. And Jeff and I talked. And I think, especially with everything going on, it was clear that, you know, the sooner that we could get to an outcome, I think the better for the team and for the customers as well.

47:01What role did Google or even Varon play in this, Jeff? We're trying to unpick a series of deals and chronologies that kind of happened very quickly. I have to say that the whole Google situation was meant to be a clean cut. So everything at Windsurf was intact. The product, the IP, the go-to-market team, the marketing team, even the enterprise engineering team. And it just so happened that these are the components that Cognition was looking for. So I want to just be clear, like it was structured in a way where it was a clean cut from Google. What was the mood at Windsurf, Jeff, on Friday when the Google licensing and acquihire was confirmed?

47:46Yeah, I had to do an all hands to the team and I had to tell them the news. And I have to say that was probably the hardest day for 250 people at the company's lives. and I was immediately in action. I don't think I slept maybe three hours over the next 72 hours. And my only goal was to get the best solution for the company. And I think now that we're with Cognition, everything is intact. We have an amazing core engineering team with Cognition now. And we also have Windsurf, the product still, everything is the same. And now we also have Devin. And now we have the foreground agent and the background agent.

48:23This is like an amazing combo for the company. Scott, would you kind of go over the basics of the terms of the deal? Like, was this a cash or stock deal? It started Friday, and by the beginning of this week, it was done. Yeah. Yeah. Yeah. What I can say is that Windsurf employees are, you know, every single Windsurf employee has an immediate consideration as part of this deal. And then from here on out, we are all just one team. And so Windsurf employees are now part of Cognition. We are working on this together. and excited to get moving. When I first learned about Windsurf, it was in the form of Codium.

49:05And Jeff, this question to you and Varon, and then the big news was OpenAI and Windsurf. When did you kind of get the sense that that wasn't going to happen? I know we're going back over history a little bit here, but actually, you know, in a few years' time, I might look back and go, wow, that was a pretty wild series of events. So when did you look at it and say, okay, OpenAI and Winsurf's not going to happen. What happens next? I think it was time. So OpenAI, kind of the rumors broke like three months ago. And if you think about it, like if three months later, there's no progress and there's still drama.

49:40A lot of it is reported in the news, I'll say. That is a pretty good signal that things are not progressing as fast as you'd like. And I remember the founders of our company were kind of like locked in a conference room for, I think, six weeks. and I kind of got the sense that things are probably going to shift in another direction. Scott, I'd love to talk about technology for a moment, if that's okay. What is it that Winsurf and Cognition can do together? Absolutely. And so Winsurf is, you know, in one line is an IDE that makes it so that a developer, when they're at the keyboard, can go faster and produce code faster.

50:16And Devon is an AI software engineering agent that you can delegate tasks to. And there is a lot of natural integration of how we can work together. You can imagine kicking off the agent to go do kind of a first pass at a project and then coming in and doing the finishing touches yourself with WindServe. You can imagine using the IDE to plan. And then once you have the task sorted out, to be able to hand it off. And we're super excited because I think both of us have always been very focused on making software engineering work in the real world. And in the last few days, actually, at Cognition, for example, we've announced that both Goldman Sachs and Citibank have been rolling out Dev into their teams.

50:53Windsurf has been working with JP Morgan. And similarly, you know, when we go down the customer list, when we go down the sectors, we found a lot of natural partnership. Jeff, I got the sense from reading but also speaking to people over the weekend that kind of post-Google, the remainder of the Windsurf team felt a little bit left out in the cold. But on the other hand, that's a great team. You know, was there a moment where you kind of thought, okay, we can carry on alone? or did the cognition part of it just say, you know what, we can be better by building with them? Yeah, so the funny thing is there's no way I can tell the team at the all hands that, oh, we're just going to go get acquired, right?

51:32The first thing I had to do is make sure there was an achievable plan and it's not as exciting as before of breaking frontier AI models, training and getting to the next big thing. It was kind of picking the safe route and making sure everybody could believe in a route that we can do. And on the side, obviously, it was what is the best company that we can work with and how can I get in touch with them? But I had to keep all the options open there. And Cognition obviously was the best fit for us. Scott, I think I'm right in saying you've kind of said on social media that this is a real acquisition.

52:05But I would be grateful very quickly from each of you, your reflection on what's happened with all of these acquihires and what you think the net result of it is. Yeah, you know, I think it's started to come up more in the market. And I think it's, frankly, it's a bit disappointing, which is, to your point, exactly what you said. You know, there are a lot of great teams that have gotten left behind. And I think in our case, I think, you know, we were huge fans of the Windsurf team from the beginning. And we saw an opportunity to work together. And, Jeff, we just had 20 seconds, but your thoughts?

52:38I think me and Scott might have just invented a new model for what's going on in the market right now. If there's aqua hairs going on, there's a lot of valuable pieces left. And I don't want to say pieces, but even what was left at Windsurf was incredible. And the other important thing to note is all of the investors' founder shares were wiped off the cap table. It was an entirely employee-owned company. So a lot of people were very happy yesterday, I think is the summary, I'll say. But this might be the new model going forward. Jeff, CEO of Windsor, Scott Wu, CEO of Cognition. We got it all in.

53:16I'm really grateful to you both. Thank you. That does it for this edition of Bloomberg Tech. Don't forget to check out the podcast. You know where to find it online on all the Bloomberg platforms. Back in San Francisco, unexpectedly, this is Bloomberg Tech. If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more.

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