Trump Talks US-China Trade, Crypto Billions Vanish

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0:11Bloomberg 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. President Trump says the threatened 145 % tariffs with China are not viable. Will this soothe trade relations between the two world's biggest economies? Plus billions of dollars in crypto market value vanish as altcoins plunge, we'll dive deeper into some of the riskier parts of the tech markets. And Apple plans a revamped MacBook Pro with a touch display in late 2026 or early 2027. But first, we check in on these markets that have been whipsawed this week and we shine a light on what's happened to the NASDAQ 100 that throughout some of those trade tensions, despite the anxiety around credit in the banking sector, we remain higher at 1.6%.

1:00We really have earnings on top for some of the key players, take TSMC, take ASML. But let's return now, of course, to what's been happening in the world of crypto as well. We have seen some pressure on that particular part of the market. The riskier edges, look at some of the quantum stocks, look at some of the more risky leveraged ETFs, we're off by more than 8 % when it comes to Bitcoin, so has not managed to revive from that tumult that we experienced over the course of the weekend and leverage getting flushed out. Return to all of these parts of the market. But first, we talk the macro context here, because President Trump says indeed that the threatened high tariffs with China are not viable as tensions between the world's two largest economies intensify ahead of an expected face-to-face meeting with Chinese counterpart Xi Jinping.

1:42Here's what he said on Fox Business. It's not sustainable, but that's what the number is. It's probably not, you know, it could stand, but they forced me to do that. I think we're going to be fine with China, but we have to have a fair deal. It's got to be fair. It's soothing markets. For what's the long-term impact? Bloomberg Senior Tech Editor Mike Shepard joins us now. To break it down, look, we're worried that that meeting between Xi and Trump wouldn't be on. It looks as though tantalizingly it might be. Yes, he is indicating, Caro, that this meeting will take place. Of course, We still don't have the details on when or exactly where, although it is expected to take place during the APEC summit that both leaders are scheduled to attend at the end of the month, which is really about 10 or 12 days away.

2:35So they don't have a lot of time to lock that in and then also do some of the key legwork ahead of time. And that's grown only more complex with all of the back and forth over some really sticky trade issues that we've seen more recently. And this all was thrown into doubt by last week's move by China to impose curbs on exports of rare earth elements, which are critical across the economy and everything from autos to consumer electronics to defense equipment. And that was something that really set off U.S. officials. We saw Treasury Secretary Scott Besson's really visceral reaction earlier this week.

3:12And the U.S. has since moved to rally allies against China's move, recognizing that this would have global implications and that it would affect far more than just the U.S. economy. So it'll be interesting to see how this all plays out in those lower level negotiations. But for now, the president is saying the quiet part out loud, acknowledging, Caro, that there will be some severe economic fallout if those very high tariffs actually take effect. I'm looking at certain tech names that are exposed to China and they have been rallying whether or not it's just a risk on attitude into the weekend or whether it is on the back of these comments.

3:46But what are you watching for in the tech sector more broadly, Mike, as to how they weather this ongoing instability, uncertainty? Well, part of the question really is going to be the degree of investment that will flow to China and whether there is any sort of chill elsewhere as well as a result. One of the key questions in the U.S.-China relationship has been not only the Chinese export curbs on rare earths, but the U.S. export restrictions on advanced technology. That includes the AI chips from NVIDIA and AMD that you and I have talked about so much in this space, but also the semiconductor manufacturing equipment from the likes of ASML and Tokyo Electron that is so critical to making those chips that are powering the AI revolution.

4:31That gear has been restricted by U.S. measures over the past couple of years. And one of the reasons Beijing is trying to use this leverage right now at this moment on rare earths, a market and a sector that it really dominates, it has this control over that supply chain. It wants the U.S. to relent a little bit in this area so that it can gain back some access to those critical materials itself. The AI chips and the semiconductor equipment, manufacturing equipment needed to make them. CTO Palantir telling us that exact thing this time last week on our Defense Tech special. Mike Shepard, it's great to have you on the show.

5:08Thanks for the context. Let's go out to Mike Dixon now for the market impact of U.S.-China trade tensions. He is the head of research and quantitative strategies over at Horizon Investments. He's got$10 billion in assets under management all told, Mike. And I'm interested as to how you weather the ongoing headline risk that we see about U.S. and China. Well, it's certainly there, and we have seen that impact certain areas of the market. But overall, as we're heading into the bulk of the tech earnings season here in just a couple weeks, I think it's helpful just to kind of zoom out a little bit and see where the fundamentals are.

5:42And we've got an early read on that this week, of course, with ASML and TSM showing there's very strong demand. Oracle's Investor Day as well supported as much. And when we look at the returns thus far for the top of the market, I think one of the most interesting things to me is that we actually have not seen returns driven by valuations increasing this year. So as we head into earnings season, I think it's a really good point to remember and kind of zoom out for a little bit of the bigger picture. And we'll see how this China trade tension stuff works out. But the underlying fundamentals are very much strong.

6:14OK. What have the returns been driven by then? It's been driven by this increased demand and overall just the expected earnings continuing to grow and clip along at very high rates. And we're seeing that through the continued AI demand. And I think strong fundamentals supporting the returns is a much better place to be than having that be driven by just the increase in investor optimism through valuations going up. And I really do think it's a very strong place to be as we head into earnings season to actually see valuations be at or below for a lot of these bigger names. And they really were even to come into the year.

6:54And I think investors really need to be aware of that, especially those that are bearish on some of this continuation of the trend, because the fundamentals are very strong and it is supporting the price trends that we've seen. OK, so it feels as though you're not thinking there is some sort of bubble. But that's in parts of the market which have seen the AI optimism really light fire. We've seen it particularly, as you say, TSMC, ASML. I just want to go back to some companies that are rallying today that have exposure to China in particular. I'm looking at Tesla. I'm looking at Apple. I am looking at ASML, which managed to calm our anxieties that they can continue to see the megatrend continue, even if China falls away in terms of demand.

7:33But what about those companies that have high exposure to China? Is that something that you need to be anxious about? Well, I think we need to go back to just what we've seen over the last six months with all of the tariff stuff. Of course, we're in this period where we're not exactly sure how this is going to work out. But when we look at the last six months, there has been a lot of fits and starts of tariff situation is going to be terrible. And then we ultimately get a deal. And look, I think overall, the market has become a little desensitized to a lot of this back and forth tariff situation.

8:06I, for one, think that, you know, ultimately, and Trump alluded as much in his interview, I think wants to make a deal. And so I think that that should be kind of our base case here. And this headline volatility that we've seen, you know, is just necessary for, you know, that risk premium to be realized. Mike, going back, therefore, to the idea of valuations. Yes, they're high, but it's because earnings have grown into them. Where are you seeing the earnings likely to catch fire in this set of earnings for the companies that you follow? Because you are in all the major players when it comes to AI.

8:43Yeah, that's right. I mean, when you look at just the top of the market, you know, Mag7 obviously comes up a lot. There's pretty big, you know, divergence amongst that group this year. And so, you know, some of the names that have been laggers amongst that group, the Teslas, the Apples, the Amazons, you know, I think where that sits as what's attractive with the top of the market, I think that's probably still going to be the case that in the medium term, those are probably still going to be the laggards. The winners in that AI group at the top of the market are still going to be the winners. A lot of that, I think, has to do with a lot of the smaller software and services type names have had a difficult time really separating themselves and really showing unique value propositions for their products.

9:28Therefore, the market is defaulting to what they know. And that is those AI winners. So I think, you know, even amongst that top of the market in the MAG7 names, the ones that have been doing well, I think, are poised to continue to do well. And the laggards are, at least in the medium term, probably still going to be the laggards. Follow the trend, Mike Dixon of Horizon. We appreciate you. Have a good weekend. Now, coming up, we'll break down the latest F5 cybersecurity hacks, how it's affecting the Defense Department and wider implications for the cybersecurity industry. Jaya Balooz with us from Aisle.

9:59This is Bloomberg Tech. Thank you.

10:31has been blamed on state-backed hackers from China. China Foreign Ministry spokesman Lin Jian said that China always opposes and fights hacking activities in accordance with the law. For more, it's Bloomberg Cybersecurity Editor Jeff Stone. But why is this so potentially catastrophic? One of the things we have to remember, Caroline, is that cybersecurity companies like F5, like a lot of technology companies, but cyber companies in particular, have really deep access to their clients' systems, their networks. They control firewalls. They control who has access to what. They control which IPs can access other computers, certainly passwords and usernames and that kind of thing.

11:07So when the people who are trying to stop hackers from getting in ultimately are compromised, that gives outsiders, spies from places like China, really, really deep, valuable insight. For a long time. For a long time. After 12 months. And what sort of companies and institutions are being implicated here? We're still trying to get a sense of that. We're really trying to understand how Chinese hackers also accessed F5 in the first place. But we know F5 works with government agencies. We know they work with a huge number of the Fortune 500. It's a big, successful, publicly traded company. You mentioned the shares fell.

11:45I mean, that's a reflection of the severity of the issue, obviously. Severity of the issue that means the UK and the US are both together put out these warnings. But as companies try to tackle this, how else are they analyzing their defense systems? and how else are they also thinking about other companies that are at the very backbone of their own infrastructure? That's right. One of the things that we've seen, certainly out of China, for instance, is this evolution from typical email phishing attacks and they're now resorting to companies with deeper access. Instead of trying to hack your email, they are hacking the company that you rely on to protect your email.

12:18So for companies that are potentially affected by that, they need to take a closer look and they are taking a closer look at who they rely on to do what. They're looking at their vetting procedures, and they're really looking at who they trust with their own kind of crown jewels. But it's hard. It's a really difficult process. We understand, according to people familiar, that the CEO of F5 himself is out there calling up clients, trying to discuss how Chinese hackers in particular were able to access. But what are the next steps for a company in this situation? F5 is going through this process where they're going to try to generate as much trust as they possibly can.

12:50Part of that is going to mean being transparent about what they do know, what they don't know, and some of the things that they're trying to fix. I know that the CEO, for instance, you mentioned, is talking about China. One of the reasons that we see executives do that a lot is because it's a serious argument for a CEO to make to say, hey, we're a private company. We're being attacked by some of the world's most advanced, thoughtful, sophisticated spies, really. And this is how they got in. And here's what we're going to try to do about it. Jeff Stone, we thank you from Bloomberg. back. Sorry, excuse me.

13:25Now, let's bring in Jaya Baloo into the conversation. She is co-founder, COO, and chief information security officer at Aisle. It's a new AI-native cyber reasoning system for vulnerability management, which just came out of stealth yesterday. Perfect timing for us in our audience, Jaya. And I'm interested as to what your read is on this situation. How fierce is the threat coming from state-related activists and hackers? It's actually incredibly fierce. And it's because there's a very strong motivation to do these kinds of attacks. And what you'll see is that this particular group, who is part of, we think, Silk Typhoon, or maybe a separate group, we've been seeing this type of activity classified under something called Brickstorm.

14:07And it sounds terrifying because it is terrifying. And that's why the cybersecurity agency in the United States put out an emergency directive just this Wednesday, because 48 out of the Fortune 50 are using F5. A vast number of the federal government are using F5. We suspect that there's thousands of devices being deployed. And really, because the source code is now out there and in the hands of the Chinese, that means that a nation state attacker is now looking for vulnerabilities in this source code and has information they never should have had about undisclosed vulnerabilities that F5 was already investigating.

14:48And because the attacker was there for more than a year studying F5, it's actually quite terrifying all the capability they could have. How have they gone unnoticed for so long? Well, one of the biggest reasons is because if the attacker comes in over remote management devices and protocols using zero days, it's very hard to find the initial vector of how they originally got into that network. And, you know, simply if they got in more than a year ago, the chances are high that there's not even logs that hold that type of log retention for over a year. That's let's start there. That's how we don't know when they actually got in in the first place.

15:31The second part of that problem is most of these network devices don't have like a sort of, you know, detection and response that we can actually see. There's no EDR in these network devices. So we can't actually see this malicious activity. We don't necessarily see this telemetry as they're conducting this latter movement. I mean, theoretically, we should. And at some point F5 did, but that was as late as August of this year. And they were directed for national security concerns to keep it quiet until they could release this information in their SEC filing. Jaya, you are making it clear to our audience how critical this is.

16:12But when we all go home and sit around our dinner tables, I don't feel like this is becoming the top of conversation that perhaps it should be given the strength of the concerns and anxieties you make clear. What is it that ends up affecting the consumer or more writ large in this circumstance? The fact of the matter is, especially from a consumer perspective, we don't always feel like paying for cybersecurity. We think it should be built in rather than bolted on from a consumer perspective. Enterprises are more used to this notion that, you know, it's like a never done thing that we continuously need to improve, that it's a rinse and repeat like action.

16:45But we still expect more and better from cybersecurity vendors, from people who are comfortable in this space. But frankly, if you are really successful with your software and hardware, you should expect that nation states will target you for some type of supply chain compromise. It's almost inevitable. It's because of that very success that your reputation and your network and information systems are critically at risk. And particularly in the world of AI, where ever more sophisticated attacks are happening and writ large at such pace. Jai, this is where your company comes in. And I'm so interested in Aisle and what you're currently building because you're saying it's the first AI native cyber reasoning system.

17:26Can you talk us through exactly how it works differently from others? Yes. So we are AI native, which means that everything we do starts from an AI first principle. And one of the most tenacious problems we have in cybersecurity is this ability to both find the right set of vulnerabilities and then remediate them quickly. So what we do at Isle is exactly that. We have an analyzer that actually looks to find those vulnerabilities that truly matter, not just small, low-level bugs. And we've proven that with several very famous programs that you have online, open source programs. We found incredibly critical zero days.

18:04We've reported them responsibly to the maintainers of these open source projects, and they have fixed them. And what we've really been trying to do is make sure that we are not just showing, hey, this stuff is broken, but allowing customers to actually be able to remediate those incredibly quickly at superhuman speed. And that has to be how we work because you can bet your bottom dollar that the attackers are using AI. Now we need to make sure that the defenders are too. And this is something that really we haven't been doing in this way for so long. And this kind of static basis that we've had is no longer suitable for the types of threats that we face.

18:44Just going to Ireland, who its core customer is, it feels that it's everyone. But all these cyber companies are becoming ever more platforms and want to own your entire ecosystem of cyber. So where do you fit in, Jai? Well, we start where everything is being built. So if you're right now, I feel like every customer that we look at is really, I mean, it's remarkable, but we have changed into a planet that operates on software. So everything that we actually look at is a company that's using software. So if they build software, if they're having someone else build software for them, for their manufacturing process, for their supply chain, you know, for those kinds of potential customers and design partners, That's where we come in and we try to make sure that those supply chain vulnerabilities that could impact others downstream, as well as their own vulnerabilities, that we give them critical knowledge to know what is it that's really broken that you need to focus on.

19:41And how can we get you to a place where you have zero vulnerabilities coming in? Most of these companies also have rather terrifying backlogs of vulnerabilities that they have not fixed. Millions in the backlog. And I'm telling you, as a CISO of three different publicly listed companies, I've had these experiences myself of these tenacious, hard-to-fix vulnerabilities. And I wished for this solution, which is why we now built it. Well, you've got some phenomenal backers and some phenomenal co-founders. Jai Baloo, COO and CISO at Isle. It's great to have you back on the show. Have a good weekend.

20:16Coming up, Apple is finally getting in on the touch display game with a revamped MacBook Pro. So, details next. This is Bloomberg Tech.

20:31Apple. While it's planning to launch a revamped MacBook Pro with a touch display in late 2026 or early 2027, it's all according to sources, the new computers will also have thinner, lighter frames and run on Apple's M6 line and chips. Let's get out to the man who, of course, has been breaking it all down. It's Mark Gurman, our consumer tech editor. Mark, I so often personally try to move my MacBook Pro with my hand. Finally, it'll actually work. This is a, yes, this is a very big deal for Apple. For 15 years or longer, they've been resistant to doing touchscreen Macs. Why? Because they sell iPads.

21:05And they had this fear that the Mac, if it got touch, would cannibalize iPads. They also strongly believe that the ergonomics of a touchscreen computer, to quote Steve Jobs, were terrible. And to quote Tim Cook, would be like merging a toaster in a refrigerator. But the reality is the market has changed. Touchscreens on PCs are now table stakes. MacBooks are outselling iPads. You also have the reality that Apple has now combined many of the fundamental technologies between the iPad and the Mac. They both run the same processors now. They both run the same user interfaces. They both have a shared app ecosystem because of Apple's new App Store, where they've merged the applications across iOS and macOS.

21:49So there's so many similarities now. Consumers are desperate for touch, and so they finally are doing it, and they think they can bring the Mac more upmarket by doing so. We're desperate to make toast in our refrigerators. That's okay, Mark. But I'm also interested that we're all desperate to consume more sport on Apple TV, just quickly on F1. It's been a long time in the making. yeah you know f1 is interesting there are a lot of fans specifically overseas apple is now bringing f1 in a big way to the united states uh this is going to make the apple tv not plus now just apple tv subscription uh more valuable clearly there was a lot of interest in the f1 movie with brad pitt uh now they're getting more clearly into the sports i'm personally hoping they do something about the nba because it's completely uh flummoxing how many apps you need to access that now, but I guess F1 is good for now.

22:38Well, we can see you're a sports fan from over your shoulder. Bloomberg's Mark Gurman. It's always great to have you on. Thank you so much. Now coming up, Oracle quells Wall Street fears over its AI profitability, or does it? Why is it sinking off by almost 8 %? This is Bloomberg Tech.

23:02Welcome back to Bloomberg Tech. Let's take a quick check on these markets, because maybe we've had some nerves soothed a little bit. We are off on the day by three-tenths of a percent, bouncing off some of our lows as we try to steady the read-across of whether or not Xi Jinping and President Trump will indeed meet in the next few weeks and will indeed manage to back away from the highest possible tariffs, 145%. We know that President Trump's put to Fox Business saying this would be unsustainable if we did hit that sort of a level. We also, though, think about the risk and the anxiety in the market.

23:33Yes, there's about the banks, particularly the smaller banks, and exposure to credit. There's also the riskier parts of the market. Bitcoin, as you'll see over the last five days, has been under some serious pressure. We can see the sell off more than 7 % amid that big liquidation that occurred over the course of the weekend prior. Let's talk about all this. Bloomberg ETFs and cross-asset reporter Emily Grafeo joins us on the more, should we say, frothy parts of the market are starting to lose a bit of steam, particularly in crypto and altcoins in particular. That's exactly right. You look at what Bitcoin's done over the last week, it's down about 8%.

24:05Typically, the frothier parts, the altcoins like Dogecoin, Polkadot, those drop more than Bitcoin and Ether. There's a little bit less liquidity there. We see them as more kind of high beta. What's interesting now is in the ETF world, issuers are trying to package those altcoins into ETFs, into products. Given the success of BlackRock's Bitcoin ETF, they're looking at products like a Polkadot ETF, a Chainlink ETF, Caroline, a Pengu ETF. Integral. I don't know if you've heard of this. I have heard of this. Okay. Affiliated with Pudgy Penguins. Who doesn't have a Pudgy Penguin? I mean, it's so many you never ever seem to have it as his avatar.