US Pulls TSMC China Waiver, Tech Stocks Fall

25:23Just very quick, Chris, do you expect that this could be some sort of meaningful contribution to revenues this year. You kindly gave us your financials for last year. Just model it out for us. I think it's still, it's not going to be a massive contributor this year, but we're also very aggressive in pricing for our partners. It's all about building liquidity right now. But if you look at what's it going to be in like five years time, I think it's going to be a massive business line for us. Crypto.com CEO, Chris Mazalek. It's great speaking with you. come again soon. Meanwhile, coming up, Tesla.

26:00Well, it underwhelms in its India debut. So much more news on that particular company, but we are more broadly looking at Tesla shares off by 1.5%. In fact, Ed, every single Magnificent Seven name is in the red today. We are looking at a market that is under pressure as we head into a pretty tumultuous month of September. Checking out Mag7 off by more than 2%, Ed. Yeah, the Tesla one's so interesting. Like there's three stories out there. Bloomberg breaking the numbers on what's a pretty soft launch for them in India. But again, there's this like macro level, macro level, yeah, it's a macro level thing, anxiety about how much concentration risk there is right now, particularly with NVIDIA.

26:37We've had some great conversations about that. Our earlier guest saying that September, the most hated month, Caro? Oh, notable. Whether we'll see or not, some of the pressure continue on NVIDIA. It's so good to have your voice back on this show as we enter the month of September. four straight days of losses for the company. This is Bloomberg Tech.

27:08Welcome back to Bloomberg Tech, and we'll get right to markets and right to NVIDIA. It's kind of the biggest drag right now, down for a fourth straight session, which is the biggest run of decline since March, which actually, let's be honest, it's not much to write home about other than we've just had a long weekend following NVIDIA's earnings print, which was last Wednesday. There's this macro level anxiety of concentration risk because of NVIDIA's weighting and other MAG7 weightings at the index level. There's still some kind of unpicking of what happened at earnings. And thankfully for us, Bloomberg's Ian King, who's led semiconductor coverage at this company since the 90s, joins us on set.

27:44And that's the thing. I don't think anything's really changed since Wednesday or Thursday of last week. But the market is moving in that general downward direction? Yeah, I mean, their earnings was kind of a non-event in many respects. There was a lot of left in the kind of TBD category. We still really don't know what's going to happen with China when that revenue is going to come back, how much of it is going to come back. But we believe there probably will be some China revenue. So that was a kind of a mixed message. We know that NVIDIA is still concentrated on a few extremely big customers.

28:16But again, nothing surprising there. And fundamental demand, as I said, was OK. And Ian, though, the broader context that leans into the China story is, again, another headline that hits TSMC's ability to get chip equipment, for example, in the country. So the U.S.-China tension, not to mention, of course, China really leaning into its own domestic creativity, whether it's innovation on chip design or indeed manufacturing. Is that speaking to some of this weakness? It could possibly. I mean, what it's reminding us of, as if we could forget, is that this is a very volatile situation. and that the trend is towards decoupling, that China goes its own way and tries to wean itself off American technology.

28:57That's something that's been happening. And this kind of event is a reminder of that. And obviously, long term, that is not good for NVIDIA or any other U.S. technology stock. Thank you very much. Let's turn to Tesla. Loads of news out on Tesla. China data, month on month change, year on year drop, customers switching to local rivals. Tesla struggling elsewhere in Asia. It's Indian order numbers disappointing investors, a story that Bloomberg broke. And then Elon Musk is downplaying the car business. He says Tesla will derive 80 % of its value from the Optimus robot that's still in development.

29:35A trio of stories, Bloomberg's Craig Trudell joins us from London. Actually, I want to start with the India piece of it, if we can. That's a story that Bloomberg broke. And we have specific numbers about initial orders that India has for Tesla. So just explain that to us, Craig. Yeah, just a little over 600 orders at this point. And just to put that number into perspective, Tesla delivered roughly that number of vehicles around every four hours in the first half. So really, really tiny. And this is not necessarily a shock, right? India is a very price conscious, price sensitive market. There's not a lot of demand for more expensive vehicles.

30:15And part of that, of course, has to do with tax treatment and tariffs. Tesla's getting some relief from that perspective, but not a whole lot. And, you know, I do think that even with the sort of relief being, you know, only so helpful, I think there was still some hope or some, you know, prayers that maybe, you know, India would be a source of growth for this company. And it's looking like, you know, a pretty slow start for them there. Meanwhile, Well, China's not a source of growth. We've seen yet another dismal monthly numbers in terms of 4 % lower in terms of units being shipped. Not to mention Europe's number last week, which was very ugly, Craig.

30:56All of this just speaks to an ongoing weakness in car sales for Tesla. Yeah, and I do think the U.S., of course, will be very interesting to see over the next few weeks. We'll get quarterly deliveries at the beginning of next month. I think everyone is, of course, counting on there being a big pull ahead of people in America wanting to take advantage of the tax credits before they go away. And Tesla really kind of utilizing that for all it's worth. But the big question for me is what's on the other side of that? And also, you know, even even if we see, you know, a strong U.S. number, will it be offset by the fact that, you know, the China slowdown is substantial and the Europe, you know, sales?

31:39I think it's safe to refer to them as an out-and-out collapse at this point. Craig, Tesla's published Master Plan Part 4 in the last 24 hours. But the bit we're paying attention to was some commentary from Elon Musk on X about the future of the business. And it's not cars or robo-taxis. It's humanoid robots. Yeah. And I do wonder how much of this is, you know, an effort on Musk's part to kind of paper over and distract from from how much of a challenge they're having on the car side. And the question, of course, with with this potential for Optimus is when is this thing actually going to be ready for, you know, actual revenue generation?

32:21You know, when anyone's been able to pin Elon down on a sort of rough sense of a date, he talked back in January about maybe the second half of next year. This thing is, you know, effective for really cool videos, for little demonstrations. But in Elon terms, you know, this thing is not necessarily doing something useful yet. And until and unless we see that, it's really hard to kind of take him at his word that this valuation of the company is going to be tied to something that is still just an internal developmental project at this point. We're watching those little cool videos as you're speaking.

32:55Craig Trudell, thanks for breaking down all of those stories for us. Let's keep the conversation going because Pierre Ferragou is with us, New Street Research, Head of Global Tech Infrastructure, who has, I think it's a 465 price target on Tesla. You clearly see 40 % upside from here. But when you're hearing the master plan part four, Are you seeing that Optimus could really be 80 % of revenue? Well, Optimus is about creating humanoid robots that could take billions of jobs on the planet. So as long as you remain vague on timeline and what the scenario looks like, yes, it's very easy to imagine that Tesla would be first expanded in terms of valuation with a successful robot taxi operation.

33:42And then, of course, like a fleet of like hundreds of millions of human robots would dwarf, actually, the economic value of even a robotics business. So you have to remember that, you know, this plan Tesla publishes and Elon likes to comment on is really like a vision, like a stretch vision. He's always been managing his businesses, bringing up like his very long term visions. And then he has this way of presenting these versions very often with a slightly distorted time scale, you know, when he talks about Mars and the conquest of Mars on SpaceX and things like that. So you have to put the comments in the right context.

34:25So today, we know that the robot taxi business in the most bullish case, which would be Tesla and Scala with robot taxis, doesn't really have significant competition. Given the quality of their cost base, that business would be worth multiple trillions and would be already like a multiple of the existing auto business. and yes on top of that a human-eared robot bull case where Tesla dominates the space again and human-eared robots can take over hundreds of millions of jobs you can easily get like you know to like the large number of trillions like close to 10 trillion dollars of valuation does that mean this is what I have in my model and what you should bet on today maybe not.

35:14i spent a lot of time reading the document uh it's like an economic theory right they're basically arguing that because tesla can scale if they do build all of these things there will be this sort of great economic impact around the world to people of all class economic classes is that something pair that is it analysts covering a specific name or specific stock that you kind of model for you go okay in the future tesla is going to change the world economy as we know it yeah it's a very good uh it's a very question ed so let's look at you know like what is tangible at tesla today that's the auto business and let's look at what good analysts do covering tesla you understand tesla's uh technological um you know leadership you know how early they're coming to the market with what kind of performance what kind of features uh and then you measure also the performance of tesla's uh cost base like their cost efficiency uh and so that's what we've done over the last five years looking at Tesla and what you've seen is that Tesla came into the market five years ago in large scale with really like a cost base that was not that nobody could approach and also with like a performance like a quality of innovation that nobody could approach.

36:26Today as you see in China local Chinese competitors are actually capable of being very competitive with Tesla in terms of innovation and in terms of cost as well. We've done very detailed analysis of the cost of manufacturing a car, BYD, and others versus Tesla. And what you see is that they are about on par. So that type of analytical work, you can do it on a business that is actually ramping today. If you look at it like in the longer term, it's more difficult to do. But what you can get from Tesla is this very interesting perspective that by having a very, very proactive and very integrated model and vision, they can actually hit technological and innovation leadership with by far the most advanced cost base, which is exactly where they are today on the robot taxi front.

37:18They have the cheapest platform and the platform that today is, you know, the jury is still slightly out, but probably like the the highest performing platform as well. And then, of course, Elon's bet is to put Tesla in the same position with a human and a robot into three years from now. Pierre, you mentioned China several times there. I just want to brought out the conversation briefly. When you're looking at TSMC being limited for what equipment it can get in, you cover KLA, I see, you cover Tokyo Electron, you cover Lam Research. How much are these companies going to be impacted by US-China?

37:52Well, they're all going to be sitting on their hands waiting for directions of how the negotiation and the relationship between the US and China is going to be handled. If you take specifically semi-cap equipment players, they are generating a lot of their revenues. Still above 20 % of their revenues is coming from China today. And to us, it's an overhang. It's a concern. It's probably coming down, normalizing over time. So we see that as a potential headwind on their financial performance. But you have to take things back to what they are. It's only 20 % of their business. That's kind of like a peak-ish, at a peak.

38:35So it's not like a game changer for them, of course. Pierre Ferragou keeping us honest on what's game changing in China. New Street Research, we so appreciate it. Meanwhile, coming up, Andreessen Horowitz partner, Olivia Moore, joins us to discuss the top 100 gen AI consumer apps. Let's see how many you're using. This is Bloomberg Tech. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment.

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41:01And I really thought about it. I was like, no, at this point, it would kind of be betraying the trust the author and the listener have in telling this story if I don't go through it. But there's places in this book that deeply emotionally affected me. And I left it on the mic. That's great. Because it served the story. People will say like, oh, my God, I cried at the end. It's like, yeah, dude, me too. Listen to Earsay, the Audible and iHeart Audiobook Club on the iHeartRadio app or wherever you get your podcasts.

41:38Andrewson Horowitz has again released its top 100 generative AI consumer apps, 50 AI-first web products, and 50 top AI-first mobile apps. And for that to discuss, we have Olivia Moy joining, A16Z partner on the consumer team, focused on AI. We are so thankful because, like many in the world, we are awash with the latest, greatest gen AI app that we should download and when we should use it. But what's interesting with your list is that we're starting to see basically stability. We're not seeing a whole host of new names each iteration now. Exactly. Yeah. On this version of the list, we only had 11 new names of the 50 on web, which was a real marked divergence from the last list when it was 17 new names on web.

42:17And perhaps most striking to me, we've done this list five times now. We do it every six months. And there were 14 names that have made every single list, which for the fact that we're only two years into AI means that we're starting to see some really exciting stability. Olivia, Mr. Elon Musk has put in the spotlight recently App Store methodology. So for the avoidance of any doubt, would you just go through the methodology of how Andreessen Horowitz has put this list together for the fifth time, I believe? Yeah, it's all objective data. So for our web list, we use a provider called SimilarWeb.

42:48We rank every single website globally by the number of monthly visits. And then we take the first 50 that are generative AI native. And then on the mobile app side, we use another provider called Sensor Tower. We rank them by monthly active users and we take the first 50 again that are AI native. So there are some takeaways, right? ChatGPT still dominates, as you can see on the left-hand side of the screen. Google is making progress. The way I explained this to Caroline this morning and how I approach it is I'm starting to see these tools like streaming subscriptions. I use all of them. Some of them I pay for.

43:20Bloomberg gives me a corporate access to ChatGPT. Some of them are free. But at some point, I've got to decide which I don't want anymore. Does the data show any of that, like short-term use moving to others? Yeah, it's really interesting. There's a lot of cross-app usage. Quite a few general LLM products made the list, and you might expect that consumers would pick one of these, like ChachiBT or Perplexity or Clodd or DeepSeek. Instead, what we're seeing in the early days is consumers are using all of them, but maybe for different reasons every time. But we're also seen the emergence of things like consumer subscriptions that cost$200 a month to use the best version of ChatGVT and perplexity.

43:58And so if we're moving towards that version of the world, we might expect to see them have to make a choice so you're not paying thousands and thousands of dollars per month across your AI subscriptions. So blend this with A16Z's own perspective here on whether there will be an LLM to rule them all, whether we'll all end up defaulting to ultimately ChatGPT or whether it's Gemini or Grok or whether actually we will be specific and we will see that there are lanes for different apps for different use cases and they will have different benefits. Yeah I think the interesting thing about this list is ChatGPT is definitely in the lead so the number two Gemini has about 12 percent of the traffic on web so it's a very big drop off between number one and number two but there's also an incredibly long tail here There's apps on this list that have never raised funding.

44:45There's apps on this list that have millions of users, but maybe do something as specific as removing a background from a photo or generating a PowerPoint presentation. So I think our view as a firm is that we have the best models in the world from OpenAI, Google, and many other companies that they're making available through API. Some of them are even being open sourced. And that allows companies and developers that are more opinionated about products to build things that will serve customers for more specific use cases. And in many cases, those customers are probably more likely to pay versus maybe using the free version of something like a chat GPT.

45:20I think what's interesting is for the last couple of weeks, we've been obsessed about how enterprise is adopting or not adopting to efficiency. The MIT report, the fact that 95 % of pilots are ultimately not bringing RO AI. When you're thinking about consumer perspective here, some of the names are sort of enterprise in nature. Are people getting return on their AI investment to the amount that they need to? Yeah, we're seeing a big kind of what I call the great expansion of consumer software, which is really new in the AI era, which is that previously you would see consumer companies take years, if not decades, to actually transition their software to enterprise.

45:55Think about Canva. It took them eight plus years to even have a Teams plan. Now we have companies like Eleven Labs that are going from zero to hundreds of millions of revenue in two years or less. And many of these companies are actually making much, if not most, of their revenue from enterprises, which is really exciting. We do take a look at the retention data, and our data shows that for generative AI products, there's a lot of tourism. So if you're a free user, you're probably less likely to retain than you would be on a Comm or Duolingo or a pre-AI subscription. But if you're a paid user, you're just as likely as to retain.

46:28So that suggests that the ROI is there, at least for those consumer and prosumer users. Olivia, we've told you what we're up to. Which apps are you using and how are you using them? I have a lot of apps I use. I published my whole stack recently. I am a power user of ChatGPT. I'm also a power user of Google on their Ultra subscription. I'm a big fan of VO3 and the new Nano Banana Photoshop-esque video image editing model that they launched. I also use a lot of products like CREA for creative tools. Gamma I use to create almost all of my presentations. There's everything as specific as a product now called Happenstance that lets you search through your network much more easily than LinkedIn.

47:06And I would say my top advice for anyone interested in AI is just to try the products because it's absolutely the easiest way to learn. When you're thinking about investing, I look at some of the names on here. MidJourney is a fascinating case study which has never taken money and been able to scale and hold on and retain users. Where do you think the best dollar is allocated from an A16Z at the moment? Yeah, it's a good question. We invest both in the model companies themselves, many of which have grown extremely quickly, and then at the application layer companies. I think we're very focused, to your earlier point, about companies that are vertically oriented and are building for specific users.

47:46We talk about founders that have kind of an earned secret or a special insight and are almost maniacal about building for a specific user. And so often these are not the extremely general broad-based products that you can do anything on, but are products that are really, really specific for one or two things that users might want to do and almost become their system of record or a new core workspace or canvas for them to get things done. Olivia Moore, partner at Andreessen Horror. It's great to have you on Bloomberg Tech. Thank you very much. Now, coming up, these beautiful images are from the Hubble telescope.

48:17But plans for telescopes that could give us an even deeper view of space could be delayed following U.S. budget cuts. We're going to talk about that next. Stay with us. This is Bloomberg Tech.

48:38Cuts by the Trump administration are threatening to delay construction of a new powerful telescope, one that scientists say can vastly expand our understanding of the universe. U.S. astronomers warn the setback may give China an edge in space research. Let's bring in Bloomberg's Bruce Einhorn, who's been covering this story. It's a beautifully written sort of deep dive into what these funding cuts could mean. But why U.S. versus China? Why is this a worry from a national security perspective, Bruce? Well, the U.S. has long been a leader in astronomy dating back to the end of World War II. And it's part of a broader push by the United States to invest in science.

49:18And there are lots of spillover effects from having those sorts of investments. China is making big investments in science now. there is concern among many scientists that the Trump administration's plans to reduce spending, say, by the National Science Foundation, will have an effect not just on the projects themselves, but also on the scientific ecosystem of postdocs and graduate students and all the people who are there to make sense of all the data that gets generated. Bruce, just really quick, is there any evidence that the U.S. government kind of heeds the warning from the scientific community here in America?

49:58Well, we're still waiting to find out just what the budget allocation will be. Of course, the budget process is still very much underway. The administration had proposed a pretty big cut, more than 50 percent, to the National Science Foundation as part of its budget proposal. There has been some pushback from Capitol Hill about that, and we're still waiting to see just how much money will get allocated. Bloomberg's Bruce Einhorn. Thank you very much. That does it for this edition of Bloomberg Tech, Caro. Markets in focus because of the MAG7 declines. But what an episode it has been to start a short week.

50:38Only 12 stocks, 11 now in the green on the Nasdaq 100. Don't forget to check out all of our coverage on our podcast. You can find it on the terminal as well as online on Apple, Spotify and iHeart. Great to have you back, Ed. This is Bloomberg Tech. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person.

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