US to Revoke China Waivers for South Korean Chip Firms

23:41We've been actually helping folks with that as well as they've been moving to other countries. And I think really the news today shuts down the other country loophole. We already saw the impact of this from China back in May. And so I think the market already had a chance to see how that would play out. And now we're just kind of closing up the other port of entries and really forcing that more domestically. OK, so have any decided to make domestically, build in America or are they building in Mexico? I think there's still a lot of nearshoring with Mexico. I think there's a lot of brands that I talk with that are looking at what they can do domestically.

24:14but the labor market is just so expensive that it can be really challenging to do it in a cost-efficient way. I see some brands that are being successful at it, but it's a challenge and it's a multi-year journey. This is not something that can happen overnight. So the real impact here is just raising prices, turning off certain products that are not yet ready. They don't have the sophistication to handle that compliance, to remit the duties, to even get the import bonds. A lot of sellers have never had to deal with that type of complexity. And so I think you see a mixed bag across the board. So what kind of products, Josh?

24:44fast fashion is certainly one of the ones that are hit the most but you see it across the spectrum you know de minimis went from in 2018 just a few billion dollars to over you know 60 70 billion dollars in recent years and you see it across the spectrum a lot of hard goods sellers as well but most of it comes from china and the areas where you really see it as a consumer you're going to see it on temu sheen areas that were really focused on importing those products through the de minimis loophole and taking advantage of that, as well as Etsy, kind of the custom, unique products that smaller sellers and creators are selling overseas and then importing to the U.S., you'll also see those products impacted.

25:21Longer term, do you think this will bolster your own infrastructure, e-commerce own infrastructure inside the United States, Josh? We've certainly benefited from it because, you know, mostly because we were not leveraging the de minimis loophole, if you will. We're playing by the rules. And I think almost anybody who was playing by the rules will see the benefit here. They're going to have less folks undercutting them on price because they're not paying the same tariff or duties that we're paying. I also see in the fulfillment structure, we've already seen a lot of brands and companies have worked on building more onshore fulfillment capabilities and moving those products here.

25:56So actually, we're also going to benefit from having faster ship speeds because a lot of the de minimis loopholes were slower ship speeds coming over from China and other countries. And now we're going to really pre-position those goods and inventory domestically because there's no advantage to keeping them in the country of origin, if you will. Quicker, but maybe a bit more expensive. Josh Kesser, global CEO of Spreetail. Great to get your expertise. Thanks so much. Welcome our TV and radio audiences worldwide. The U.S. government has begun distributing economic data on public blockchains, marking the latest Trump administration endorsement of the crypto industry.

26:29The move creates another avenue for publishing the GDP data, according to the Commerce Department officials. But here to discuss really the regulatory changes affecting the crypto industry after the crackdown of the Biden years is SEC Commissioner Mark Hueda. We welcome you to radio and TV. And just recently, Project Crypto was launched. And this really sort of endorses the initiative to modernize regulation to make it fit for purpose for current innovations within decentralized finance. Are we getting enough clarity? How quickly might we know what tokens of securities, for example? We have a lot of ground to catch up.

27:02The last four years in the Biden administration, we saw a lot of efforts to suppress crypto, at least in the United States. That was one of the things the president did, I think was the third day of his administration, January 23rd, when he issued that executive order with a clear goal. We need to make the United States one of the global leaders in innovation in crypto and digital assets. That was why, you know, one of the things I did immediately upon becoming the acting chairman was to name one of my fellow commissioners, Hester Peirce, who spent an awful lot of time talking to the crypto community.

27:33You're going to be in charge of our efforts, leader of our crypto task force, and that now under our new chairman, Paul Atkins, has now pivoted into what we call Project Crypto. We are working side by side with our colleagues at the CFTC. They announced what they call Crypto Sprint. So we're really anxious to get some things done. In terms of getting things done, there is a sort of fever pitch of innovation going on. And a lot of that is to do with perhaps adoption of new ETFs around things. I'm interested in companies, so called treasury companies, companies that are building up crypto as their assets, or indeed new ETFs springing up.

28:12Are you comfortable with the pace of innovation as it is? Are we going as fast or too fast from your perspective? Well, they are part of the innovation equation, so to speak. but they're just only a part of it. We've got a lot more to do. You know, with these companies, the SEC in its 90 years of existence has always been a disclosure-oriented regulator. That means we don't, we're not supposed to put our thumb on the scale of whether an investment is good or bad. What our concern is, is whether or not you're telling the truth when you market and provide the disclosures with respect to these products.

28:49So they can put crypto in their treasury. They need to disclose that. They need to disclose the risks about that. They need to disclose what their intentions are in accordance with our rules and regulations. But there's so much more that we need to do. Well, important for those companies that are looking to be treasury companies or those that want to put Solana, for example, or XRP or even Dogecoin in an ETF, how soon will they know whether those tokens are indeed deemed securities or not? Well, we've already put out a number of statements from our staff in the Division of Corporation Finance, which says some things are not securities.

29:27Now, we are working on, as Chairman Atkins said, as part of his project Crypto Kickoff, to provide some commission-level guidance, what is and is not a security when it comes to crypto. It is tied up in a decades-old Supreme Court decision called Howey, SEC versus Howey, as to whether or not it's an investment contract. The good news is that it is what I view as a principles-based test. Is it an investment in money in a common enterprise with the expectation of profits from the efforts of others? How do you apply that in the crypto space? That's what we're looking to do. In the next month? Can't talk about timing.

30:05But what I can say is this has been part of the Crypto Task Force's efforts from day one of this year. We took a position, which I objected to. I put out many dissents, objecting to it with this idea that every crypto, with the exception of Bitcoin, which is what our former chairman, Gary Gensler, testified before Congress, was a security. No, we have this whole framework. We weren't applying it properly. We said, we're going to do this. That was what the Crypto Task Force started doing. That's why they held a series of roundtables. In fact, that was the very first roundtable was talking about what ought to be in and outside the scope of this.

30:45We're speaking with Mark Guader, Commissioner of the United States Securities and Exchange Commission. I'm interested in, previously, it was sort of regulation by enforcement, and you said you don't want to put your thumb on the scale in this way. But how many crypto enforcements are ongoing at the moment? Can you tell us in terms of the amount of investigations still going? I know that, for example, Unicoin is being sued, for example, and that happened in May. We have a number of ongoing investigations and actions related. that I would say are crypto or crypto related. We have an awful lot of what one might call fake crypto, which is somebody who purports to be involved in crypto, but it is nothing more than the types of Ponzi schemes and other scams that we have seen since probably the creation of currency.

31:30How many staffers are looking at enforcement now compared to the prior four years? Well, what we've done is we still have a unit, although we've changed it from the cyber and crypto unit to be more broadly focused on technology. We have an enormous number of tips, complaints, and referrals that come into the agency every year. In fact, I think we're on track from nearly 45 ,000. A number of them relate to crypto, so we deploy staff appropriately. And you said you're working in lockstep almost with the CFTC. How is that relationship going at the moment? We've got a great relationship, and it's one of the things that was very important on the financial regulatory front, not only between us and the CFTC, but us with Treasury and the banking regulators about how to address crypto.

32:15You saw this with the president's working group on digital assets. They issued the report last month. This has been something that has been, I think, really all of the relevant regulators in the executive branch are all communicating with each other and all coordinating with each other to make sure that we can make this effort successful. Now, the SEC does more than just look at crypto. And I'm interested in, at the moment, you're currently suing Elon Musk, and that's to do with alleged violation of securities law about when he was taking a significant chunk in Twitter. He had owned about 5 % in excess of, and he was meant to make that declaration.

32:53Many would say he didn't do it quickly enough. He wants that suit dropped. Should it be dropped? Well, I'm not going to comment on any particular investigation or enforcement action that we currently have. But what I will say is we have these Schedule 13D and 13G requirements out there. One of the key parts about whether or not you can file on a 13G is whether or not you are a passive investor. And one of the things that we did take action is there were a large number of very influential asset managers that hold significant chunks, well above 5 % of a company's stock. The question is, what sort of relationship should they be having that requires additional disclosure?

33:36If they're asking or directing the company and says, you need to do the following things, for instance, on climate change, you need to hit net zero goals, you need to have a plan of how you get to net zero, you're no longer a passive investor. That requires additional disclosures of some form because we have concerns whenever they're in, or at least you say Congress passed laws, telling that when you have really large shareholders, more than 5%, which perhaps doesn't sound a lot, but in the real world, that is quite a bit for a company, that they need to provide the appropriate levels of transparencies of their discussions with company management.

34:10Well, plenty more on your agenda other than just the Elon case and indeed just crypto. It's been wonderful having some time with you. We'll let you get back to the day job. Mark Luader, of course, Commissioner for the United States Securities and Exchange Commission, the SEC. Meanwhile, President Trump is threatening so-called substantial tariffs on countries that impose digital levies. Just days after we understand that Meta CEO, Mark Zuckerberg, privately raised concerns during a White House meeting. Sources say that Zuckerberg met with President Trump last week behind closed doors. Let's get more on this with Riley Griffin.

34:42Riley, it's interesting that basically lobbying works, it seems. Yeah, last week we learned from sources that Mark Zuckerberg had come to the White House to talk about many things that have been on the agenda in previous meetings. As you know, Caroline, Mark Zuckerberg has been making frequent trips to the White House since the outset of the year, talking about artificial intelligence, European regulation. What was new here was the discussion about digital service taxes. These are the taxes that are imposed on companies related to their revenue generated from users abroad. And this takes place in France, Italy, Australia, Spain.

35:24And the lobbying did indeed work. We saw that Donald Trump, the president, tweeted on Truth Social, rather, about these taxes, threatening tariffs just on Monday. Riley, tell us the context of the relationship between Mark Zuckerberg and Metta more broadly with the administration now, because it's a very different place than it was in the previous Trump administration. No doubt. Remember, in the past, Donald Trump had called Mark Zuckerberg a criminal. He threatened to throw him in jail. This was some of the conflict that arose after January 6th when Meta suspended Trump from all of its platforms.

36:05Since then, we've seen a rekindling of that relationship that really began in earnest after the president was reelected this past November. Zuckerberg has made frequent trips to Mar-a-Lago, to the White House, and he's donated to the inauguration via Meta. He attended the inauguration, even co-hosted a black tie event in the president's honor. This is an ongoing relationship. We're seeing Zuckerberg actually purchase real estate in D.C. He now owns two homes near the Naval Observatory. They are all in. And this is just the latest and greatest conversation that has happened between the two as that relationship continues.

36:46Riley, in terms of impediments on revenue growth, is digital services tax the biggest one on Mark Zuckerberg's agenda when it comes to things that could be changed from an administration's level? Or are there other areas that he's concerned about? Well, remember, Meta itself, it's the parent company that oversees Instagram, it oversees WhatsApp, Facebook. These are products that make the most of their revenue from advertising at users. So these kinds of taxes set an uncomfortable precedent for Meta. European regulation is much more concerning to the company than what we're seeing here in the U.S., especially with a friendly administration to Silicon Valley.

37:30So between the digital service taxes, between other regulations in the EU around speech, Mark Zuckerberg has been quite concerned there. We're also thinking about AI and regulation of AI as the company pivots and really makes that perhaps the top priority of this year as it invests hundreds of billions in infrastructure. And I think it was President Trump and his cabinet meeting showing the Louisiana data center that Metro is currently building. Bloomberg Tech reporter Riley Griffin, it's so good to catch up with you. Thank you. Now, coming up, we take a look at the state of the secondary markets as investors look to follow Trump policies when it comes to their investments.

38:08We speak with Emily Zhang of PitchBook. Meanwhile, let's just check in on some of the big movers of the day of the week. NVIDIA, it's been all about their earnings. We're off by 3 % now on the day, the worst week since May for the company. As we digest competition coming from China, lack of access perhaps into China. But keep an eye on some other areas. Marvel technology, it makes really specific chips for the likes of Amazon. and the likes of Microsoft were off by 16 % as they were unable to really give clarity on the future of demand, some lumpiness there. We're seeing Dell Technologies off by 8 % as there was perhaps slight slowdown in bookings for their AI servers.

38:43This is Bloomberg Tech.

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40:01And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. Hey everyone, it's Cal Penn. I'm the host of Earsay, the Audible and iHeart Audiobook Club. This week on the podcast, I am sitting down with Ray Porter, the narrator of Andy Weir's audiobook Project Hail Mary. Massive sci-fi adventure about survival and science and what happens when you wake up alone very far from Earth. I really had to make a decision because I caught myself getting that frog in my throat and starting to get teary as I'm narrating some of these sections.

40:48And it's like, okay, yo, yo, yo, is this indulgent? And 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.

41:26Let's talk about the now not so nascent secondary market for U.S. startup equity. It's shifting as the Trump administration pushes an America first agenda in AI and crypto and defense. PitchBook data shows demand still outweighs supply. Investors eager to follow these very themes in terms of investing. Joining us now, Emily Zhang, senior venture capital research analyst at PitchBook. Look, many people want to be able to buy shares in these hot, hot startups, and few can. But there is a secondary market. Where are people piling into and how, Emily? There has been a really big concentration in the top companies, mainly because information is really hard to come by in the secondary market.

42:09Ventures are already opaque. So if you're looking to invest in venture and you're newer to the space and using secondaries as that tool, you'll look at companies that are getting the most headlines, that are raising the most capital more recently. And that's why we're seeing such a heavy concentration. About over 90 % of trading volume on Hive is in the top 20 companies. And I can imagine that's the open AIs of the world, the Anthropics, the Andurils, if you think of crypto names that are still to come out. I think Gemini is looking at some sort of exit. $61 billion in volume. How does that compare to the needs of, say, VC companies that perhaps want to exit certain positions or indeed the actual workforce of startups who want to be able to sell out and have liquidity on the secondary market?

42:55$61 billion is notable, but for comparison, it's about 2 % of primary unicorn valuations and it's about a third of primary VC exit value over the same time period. So what it means is that secondaries are a vital liquidity valve and have a lot of room to grow, But in its current state, it really only benefits the select employees and investors that have access to these top companies that are driving much of the volume. What about the volume changing around IPO expectations? There's reports in the Wall Street Journal that as soon as next week, the marketing, once again, of Klarna is going to start.

43:34I mean, what will we see in terms of the hype around the secondary market if this company is about to IPO? So there is a very strong correlation between primary VC exit activity and the secondary market. For example, when space and defense company Voyager went public earlier this year, immediately the secondary market looked at Andurl, which is also a defense company, and they are trading at one of the top 10 companies across multiple platforms. So there is this symbiotic relationship, and that's also because of this pricing transparency. Secondary investors are inherently different than primary venture investors because they have a lot shorter timelines.

44:14They don't want to wait 10 years for an exit. That's why they're investing in the secondary market. So as soon as the IPO window opens and there are more activity, then secondary investors will probably likely buy more secondaries. Who are the secondary investors? There is a really wide range, but because secondaries have a lower barrier to entry for venture with shorter timelines, like I mentioned earlier, also you're investing in late stage, more mature unicorns that have proven business models. We're looking at more family offices, pensions, more nontraditional investors, most likely. There's also a lot of venture firms that are either creating secondary specific funds or there are already a lot of established players in the space that look at secondaries as their specific strategies.

45:04So there is a wide range of investors in the space. It is the tale of the haves and have nots when it comes to raising money. So is that the case in the secondary market? Are we seeing certain companies in certain sectors totally overlooked? Yes. So the companies that are really gaining the most attention is correlated with primary VC as well. There are a lot of tailwinds from key policy parties of the Trump administration, including AI, crypto, fintech, defense, security. And we're really seeing a lot of interest in that space through the secondary market as well. Lastly, IPOs. Are we going to get a whole spate of them in September, do you think?

45:47Is the window going to remain open? I think the window is slightly open, and it's more of a reset rather than a rebound right now, just because a lot of the companies that we are seeing filing for IPO are aligned with the Trump administration's key sectors, or they are incredibly profitable. Like, Figma had a really strong business model, strong fundamentals. So it's the tail of two cities. And for IPOs right now, you have to be aligned with these key sectors or you have to have strong fundamentals, profitability or at least a path towards that. Emily Zhang, it's great to catch up with you of PitchBook.

46:22We appreciate it.

46:28It's been a big week, to say the least, for AI investment themes. with earnings from NVIDIA, Marvell, Dell, investors, maybe questioning the pace of the AI infrastructure spend going on right now. Maybe they're questioning Chinese domestic competition. Joining us now to break it down, Bloomberg Intelligence, senior analyst, Manip Singh. Manip, let's focus in on what, if anything, Marvell's telling us, because they are all about chips specifically designed for an Amazon or for one of the hyperscalers. The lumpiness has got people worried about if you can't win now, when can you? Is this just an idiosyncratic story?

47:02It sounds like they weren't as bullish last night as we heard Jensen, you know, talking about the top four hyperscalers spending$600 billion. So I would put Amazon in that top four. But look, I mean, you will have periods of digestion. That's always been the case with data center spend. But the one thing I would call out is Jensen saying data center market will be$3 to$4 trillion. Now, traditionally, that's more like$300 billion. So he's talking that market becoming 10x by the end of the decade. That's huge. If that's true, I mean, we're talking about durable growth. And so therefore, looking at Dell's AI server business and the fact that the book, the amount booked was half of what it was the previous quarter.

47:49Don't worry about that because this is going to come in fits and starts. Exactly. And you have to think through 2030 because that's what he's saying. every company will spend more on AI infrastructure. The hyperscalers will keep spending on their CapEx because there is so much demand. And look, I mean, they're the biggest company out there. They have more visibility into what the supply is, what the demand side is. So if he's saying that, and the use cases are emerging, the next vector I would point out is the cost side. So if Gemini is able to do a Gen AI use case at a fraction of a cost that OpenAI can, then that will be a durable advantage.

48:30And that's where, you know, a company like Google that is vertically integrating with their LLM chips may have an advantage in the long run if, you know, the LLM performance matches at parity. Quickly, the Chinese giants are vertically integrating as well. Is there a worry for NVIDIA there? Because the stock is down on reports that China's really going at it for domestic chips. And that too, Alibaba. I mean, we're talking about the largest cloud player developing an in-house AI chip. And that's where, you know, all the hyperscalers, if they decide to go in-house, will have a bearing on the semiconductor companies, whether it's NVIDIA, Marvel, or anyone else, Broadcom.

49:08NVIDIA currently having its worst week since May at the moment, off by 3%. Mandeep Singh has been across our network, I think on every single show throughout this week. We wish him a restful weekend watching the tennis, Mandeep Singh of Bloomberg Intelligence. Now that does it for this edition of Bloomberg Tech. Do not forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart. Wishing you a wonderful Labor Day for those that are going to celebrate on Monday. We've got a day of rest. So big thanks to the team here. This is Bloomberg Tech. Healthcare doesn't always work great.

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