US and China Trade Talks Impact Tech Ecosystem | Bloomberg Tech 7/29/2025

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[Music] Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lelo in San Francisco. [Music] This is Bloomberg Tech. Coming up, Apple closes a retail store in China for the first time ever. What this means for the iPhone makers plan to revive sales. Plus, US and Chinese officials continue talks to extend the tariff truce beyond a mid- August expiry with tech export controls under the microscope. And we discuss SoFi second quarter earnings with the CEO, Anthony Nodo, as the stock surges, >> but it's alone in terms of surging right now, Ed. It feels as though the general markets are just treading water ahead of all important Fed decisions tomorrow. a spate of earnings that is 11 trillion dollars worth in market capitalization come Wednesday, Thursday. I'm looking at just the NASDAQ 100 clinging to gains of about a tenth of a percent right now. We've got some bid movers to the upside and the downside. Just get to some of the micro data. Yeah, earnings is clearly a feature, right? So, Spotify is where I'm starting. Surprise swing to a loss in the second quarter largely because of stock comp and the the trajectory of the stock in the quarter impacting that. We'll go deep on that later in the program. PayPal has made a late move in the session and one of the factors behind it is the CEO on the call talking about worrying consumer data. We'll dive into that. Then Apple's kind of softer down 710 to 1% a big points drag at the index level closing a store in China which we can get to. And then headlines in the last hour from the Wall Street Journal that JP Morgan is now the frontr runner to take over that Apple credit card business. There's a lot to discuss. >> There is and there's a person to do it with. Bloomberg's Tom Giles joins us now. And Tom, just first of all, this signal that we're getting pulling back from one particular area, bricks and mortar in China, is it a big deal for Apple? >> China is a huge deal for Apple. Let's put it in perspective. This one particular store, am I looking here? >> This one particular store, there's a question mark about this mall. You've had other retailers, US-based retailers like Coach, Hugo Boss, have gotten out of there. So, I'm not sure how much to read into this one particular mall, but let's dial the lens back and talk about the big picture in China. China is a huge market for Apple and they have seen sales declining there for a whole host of reasons. Most recently, you have to look at the domestic economy in China. There are deflationary pressures. There are questions about how much the tariffs are going to affect that economy. Remember, exports are a huge part of China's global economy. So demand there, how big is demand for products like Apple's iPhone? That's what Apple needs to take into consideration. We're going to be hearing from them in the next couple of days to see how things are going in China. And don't forget, there's a lot of competition domestically in China from names like Huawei and Oppo and Vivo. We talked about them before, but the competition there is real and people are looking for alternatives to Apple because of this whole all these questions about USChina relations and whether and how much pressure the government is putting on domestic uh markets to to focus on China uh names and not Apple. >> That sets us up really well for earnings where I think analyst consensus is that they will swing back to revenue growth on a year-on-year basis in greater China. So we wait for that. The headline this morning is from the Wall Street Journal and that JP Morgan in a pack of many is now the front runner to take over the credit card business. Interesting in the sense that services for Apple was important, but what do we need to know? >> Well, remember that this is an important relationship for the banks. Goldman tried it with Apple, it fizzled. Uh there are questions about Goldman's uh consumer strategy and whether that was the right mix for them. Um it's a big deal for JP Morgan. gives them an opportunity to uh push financial services products to a whole new uh legions of of Apple customers. Big deal for them. >> Bloomberg, senior executive editor for tech, Tom Giles here in San Francisco. Thank you very much. Let's stick with that China story. US and Chinese officials are in their second day of trade talks in Stockholm. This to extend their tariff truce beyond an initial 90day period. Let's get over to Stockholm where Bloomberg's Oliver Crook is standing by. Oliver, what's the latest? Yeah, that's right, Ed. We're just in the briefing room here. We're expecting Treasury Secretary Scott Bessant um any moment now in the next couple of minutes, uh Jameson Greer, who have been locked in discussions with their Chinese counterparts for the last two days with the vice premere of China um five hours yesterday, about six hours so far today in terms of the trade negotiations and the ambition, as you say, Ed, is to extend that trade truce that currently stands between the United States and China. Those tariffs from the US have dropped down to 30%, 20% of those are fentinyl related. 10% of those sort of baseline tariffs and that's down from the 125% level we reached at the sort of fevered pitch of the trade war between the two sides that is set to exhire on August the 12th and that is what they're sort of locked in the discussions to try to extend um over another 90 days there are plenty of other issues as you cover every single day that they have to discuss the question will be within they make progress on any of those things is there enough progress to give a kind of timeline on when a comprehensive framework could potentially be happening uh with the Chinese could there be something of a timeline on the meeting between Xi Jinping and Trump. These are going to be all of the questions that are going to have for uh Treasury Secretary Scott Besson and probably a few other questions on other issues of trade, the the deal the deal with the EU. There's still some open questions about steel tariffs, about pharmaceutical tariffs. So, a great many questions to put to the Treasury Secretary when he comes out here in the next few minutes. >> There certainly is. Oliver, just going back to our sweet spot of tech, there has been a lot been made of rare earth metals, whether or not they've actually been able to get more swiftly from China into the United States. And of course there was that offering that olive branch of H20s going back from Nvidia. >> Yeah, that's right. And that's really kind of the only place you've seen a great deal of olive branches ext extended from the US and from China to one another. And we should say these are not just sort of acts of goodwill. These are two sectors in which each side is dependent on the other. Whether it's the Chinese who have a strangle hold on those rare earth metals on those magnets or whether it's the United States that has a strangle hold on those advanced AI chips. and they've made those concessions, but not necessarily out of the goodness of their heart. There is going to be a question about whether or not those deliveries, those rare earth metals have been flowing. I'm sure that will be one of the questions um to to the Treasury Secretary Scott Besson. So, we will get a little bit more detail on that Caroline in the next couple of minutes. So stay tuned and we'll hear from the Treasury Secretary quite quite quite soon. >> We'll be coming back to you Oliver Krook. Thank you from Stockholm. Look, let's get you broader context now. Michelle Guy is with us. She is the CEO of the Croc Institute for Tech Diplomacy at Purdue. Served as assistant secretary of state for global public affairs under the first Trump administration. That was 2018 to 2020. And Michelle, the context now is one of which US and China are setting themselves up for this race, whether it be in AI, whether it be in manufacturing, whether it be in energy. Which is the most important outcome, do you think, in terms of where we take trade going forward? >> The most important outcome is going to be American security, prosperity, and leadership. And that's what all of these trade negotiations are about. They are a means to that end. China has built a massive manufacturing economy. The United States has built a massive consumer economy. So they make stuff and we consume it and we buy it. And now being a consumer at that scale is a big vulnerability when your largest supplier is an adversary. And we buy and consume $300 billion uh more stuff from China than they buy from us. And that matters when it's not just toys at Walmart and it's not just home appliances. We are consuming things and dependent on them for things that are really important to our national security. As you had just mentioned, rare earth magnets, it's batteries, it's pharmaceutical ingredients. It's the ability to make ships across the world that have a commercial and a defense implication. So rebalancing our trade relationship is key to making sure that we are reincentivizing our ability and and making it more attractive to buy and to build these things at home than to rely on China to do those things. >> It's interesting. We of course had MP materials with an announcement that they as one of the only rare earth metal miners here in the United States are going to be supplying Apple in some way. But are there enough incentives for what is ultimately a very dirty process? Do we want to bring that home, Michelle, more broadly? Well, China is either going to do it in a very dirty process because we have have seen that the Chinese Communist Party does not have a lot of regard for the environment or we can incentivize American companies to do it here in a much cleaner and more efficient and effective way. And so I think having America lead in these things, rare earth processing and other uh critical minerals is going to be really important. We'll do it much uh cleaner, more effectively, safely and trustworthy than the Chinese Communist Party. >> Michelle, good morning. Z in San Francisco. I don't want to go broad. That meeting that's happening right now in Stockholm between Chinese trade officials and American trade officials. Who is currently on top in this negotiation? >> Well, I think what we've seen is that everything is on the table and the United States has a lot of leverage as you said. You know, they want a lot of things from the United States including our chips uh and and including our consumer economy because they are largely export-based. And so we matter to them as much as they matter to us. And so I think everything's on the table. And ultimately here the goal is to walk out with a better deal for the United States uh so that we are more prosperous, more free, more secure, and we can incentivize building the sectors here that are going to be important to American leadership. The president last week just talked about our big AI action plan and wanting the to run on American tech. And so we need to incentivize the industries that are going to make that possible. And one of the pillars of that plan is for America to export technology to the world. How important an export market is China for the American technology stack? >> Well, the jury is still out on whether or not China is going to be an economy that wants the American technology stack. If you listen to what Xiinping has said, he wants an independent, controllable AI hardware and software foundational system. That means a Chinese tech stack. And so we'll see whether or not Xiinping and the Chinese economy wants American tech. It's all the more reason that deals with our allies like the EU that just happened, like the like Japan that just happened, uh matter because if you look at the US and our top 10 democratic allies, the EU included, that's like 60 to 70% of global GDP. What a great place to start for us to deploy American technology as the backbone of the global economy in the free world and then start to work out from there. Michelle, it's almost the one area of bipartisanship has been a hawkish nature towards China. But I think about a potential ban on Tik Tok currently not happening. When we think about a potential meeting between Trump and Xi Jinping, some China hawks, some of the most ardent in the current administration feel frustrated that actually President Trump is giving away too much for a deal. What do you make of it? Well, I think the the big picture is all of these things are chips in the bargaining tools. They're all on the table and up for negotiation so we can ultimately get to a deal that does make us more secure and more prosperous. And so we've seen uh back and forth on Tik Tok. We know that the H20 chips from Nvidia were under export controls in April and then in July there were assurances that those licenses would be granted to export them. But all of these things are in flux and it's part of the the high stakes negotiations that are taking place. Ultimately though, we want to get to a a place where we are incentivizing American leadership and security first >> and that takes regulation here at home as well. The AI action plan meant to foster growth particularly when it comes to the underlying language models and indeed the infrastructure. What's interesting is there is this game of cat and mouse in China yet more and more sophisticated models open ones coming to the four. How do you measure how far China is in the generative AI race? Well, I think it's how many uh countries and partners across the world are adopting Chinese tech versus American tech. And our goal is to have more countries and more companies adopting American tech and in some cases allied tech if we're not the category leader so that the tech stack across the world is trusted. And so having a scorecard where we where we track how many companies and countries are adopting US and allied technology versus Chinese technology is really important. And I think as as the president laid out in his AI action plan, what the administration is going to start to do is put together exportable AI packages to start to facilitate that more effectively. >> Michelle Guider of the Croc Institute of Tech Diplomacy at Purdue. Thank you very much. Now, coming up, Spotify shares drop as the music streaming company disappoints investors with a surprise second quarter loss. We'll have the details next. This is Bloomberg Tech. [Music] Spotify shares having their worst day in 2 years as the company reported a loss in the second quarter. Let's get more on Spotify's earnings with Bloomberg's Ashley Carman. The signal seems to be about employee pay in some ways and taxes upon that. Yeah, in some ways Spotify is a victim of its own success. They've basically said that because they've been doing so well in the stock market, they've had to pay out a lot more than they anticipated to employees for payroll taxes and whatnot. And so that ended up in a loss in earnings per share. >> There's a lot of like earnings mechanics and financial wizardry around this kind of stuff. Is there a kind of core Spotify story, Ashley, of how streaming audio is going for them and maybe a little bit about their their video strategy as well? Yeah. So, Spotify keeps adding subscribers, users, like they keep growing every single quarter. It's pretty remarkable. But what's sort of been a challenge for them is figuring out what their next verticals are and seeing that through successfully. So, they've really made a push for advertising. That hasn't really panned out. They're said they said now they are going to be kind of rethinking that approach with advertising. Uh their head of advertising actually stepped down yesterday. He's taking a job at Door Dash. So they sort of suggested that this is going to be a direction that they're going to change course and then they're making a very concentrated push into video and on today's earnings call they said one of their co-presidents said that this is you know a very exciting opportunity but it's not a necessary opportunity. So I think they're still kind of figuring out where they want to move next. >> It's interesting that the weak dollar of course plays into all of this and the third quarter forecast not looking that pretty either. Ultimately they are building more and more users as they say it's sort of growing like a weed. So that's got to be a positive momentum story for many in the longer term. >> Yeah, I think that that's how they're trying to position this is that in the long term they seem very bullish. They're excited. They feel like they've had a really great product. It's just these short-term issues that they're kind of dealing with and investors will see how they're feeling about it. >> The stock's down almost 11% which intraday is the biggest drop since early April, but if it closed there' be the biggest drop since June of 2023. So it's a strong reaction. I'm going to ask you something I ask you every single quarter because this is how I listen to podcasts. How is Spotify doing in podcasts? >> They've really pivoted into video podcasts and they've been trying to recruit more video creators to the platform. So, they really have not focused on these audio podcasts anymore. I've reported quite a bit on how this initiative is going for them. They're still missing quite a few of the largest podcasters on that service for video, but they're still pushing. They're still trying. Where is the audience for them or where's the growth story at least? >> Seems like it's developing markets but then also just trying to get people to spend more time on the platform, watch these videos which they compensate based on consumption rather than ads. They're really trying to get people to spend more time through audio books and maybe uplevel them to different tiers of subscriptions. So I think that's where they're eyeing some possible growth. >> Exactly common on the streaming and Spotify beat. Thank you very much. We have another earnings story in PayPal. Look at the shares of the company down significantly on track for their biggest drop in almost six months. In part, it's just the basics that they're seeing slowing growth in payment volumes. But what happened in the morning session was that the CEO on the call was talking about US retail spending and sort of softening economic consumer data, that kind of thing. But he was basically saying that they see a slight dis acceleration and that's kind of worried people a little bit. It's going to be interesting later in the hour, Caro, when we have SoFi because it's somewhat analogous, right, that we might get a similar or maybe different read on the strength of the consumer through the fintech lens. >> Well, from a share performance is a very different story for SoFi, which is up a whopping 13% right now. That interview to come. But right here, right now, coming up, we've got OpenAI backed startup Ambience Healthcare. It's reaching a $1 billion valuation. We speak with the co-founder Nikil Bummer. That's next for Subber Tech. [Music] [Music] [Music] Open AI backed startup Ambience Healthcare. has announced it's raised $243 million in a new funding round valuing the administrative AI company at more than $1 billion. For more, Nikil Baduma, Ambience Healthcare co-founder and chief scientist joins us. It's really interesting, you know, I actually go back two maybe even three years and this is where a lot of people said the promise in the near term was AI and healthcare, you know, the administrative task, but the round is big. I mean, what do you need $243 million to do? Yeah, I think um this this round $243 million values the company at $1.25 billion. Now that round is led by Oak HCFT, Andre Horowitz and with participation from OpenAI. I think it's a testament to this platform that we've built for health systems which liberates clinicians from the administrative burden and enables them to focus on their patient. And a big part of it is we've built this sort of best-in-class platform which in practice what it does is before the patient walks into the room, the system actually summarizes all the context for the clinician so they know what's going on with that particular patient in the visit. It's listening in the background. It's generating the documentation automatically for the clinician on behalf of them as well as a summary for the patient and their families and then afterwards it's automating all the downstream sort of revenue cycle coding and billing prior authorization workflows which is how health systems get paid. I think uh it's allowing us to essentially work with many more institutions. We work with some of the largest healthcare organizations, academic medical centers in the country, Cleveland Clinic, UCSF, Houston Methodist. I think this round is a testament to that work. >> What what's the company's core competence? you know, I understand the platform, but what is it that you're good at that's allowed you to build the platform? >> I think a big part of it is we've we've built an incredibly deep working relationship with OpenAI and other foundation model makers to build the most capable foundation models for healthcare and medicine and we've taken that and packaged that into a series of workflows to help clinicians. So, I'll give you one example. We work with Cleveland Clinic, one of the most subsp specialcialized academic institutions in the country. They have a 100 plus different specialty and subsp specialty areas. And you can imagine every single one of those specialists practices different medicine. They have different workflows. There's different administrative rules. And so what we've been able to do is create a platform that services the needs of every single one of those specialists. Um over 80% of clinicians at Cleveland Clinic use the the the technology in clinic every single day for over 70% of those visits and that's more than two to three times some of the other alternatives on the market. >> Nil go to that relationship that working relationship that you want to invest in further with OpenAI. What makes your business defensible versus open AAI just sort of building it themselves? >> I think a big part of it is as you think about sort of the gap between general purpose reasoning models and models that are actually clinical grade and compliance grade. There's a massive gap between models that truly understand the medicine that's happening in every single visit. We talked about Cleveland Clinic and other academic medical centers. just the level of depth in clinical reasoning that's happening across a 100 plus different specialties and how that's different from primary care to if you have to go see an oncologist to even an oncological subsp specialist who might specialize in a particular type of cancer and it's bridging that gap in sort of the understanding and reasoning capabilities of these models that ultimately allows us to build software that really solves the problem for clinicians on the front lines. >> We are currently as we speak just also seeing live pictures of President Trump who is currently in Scotland. He's opened of course a new golf course. Police also been negotiating with the EU. Continues to be discussing relationships with the UK going forward. We're going to be diving into that as and when necessary for you. But let's just return to you Nquille as we hear of course what President Trump has been doing. I want to go to the regulatory perspective here for your business at Ambience because I am thinking immediately about health care requirements when it comes to privacy. How have you made sure that that's front and center when you're relying on so many different users who well each hospital has a different rule case? I'm sure >> it's a great question. I think the idea of how do we build AI that's safe? How do we do it responsibly? How do we roll it out in a way that's effective? We're lucky to work with some of the premier academic institutions in the country and that's allowed us to build infrastructure not only to create and train AI in a safe and private way but also the governance processes to roll it out responsibly but I think the opportunity getting this right is actually massive. You think about the 10,000 seniors aging into Medicare every single day. The fact that in every sort of virtual virtually every category of our healthcare workforce, we're projecting a shortage of 100 plus thousand people over the next 5 to 10 years. And we as a country spend one trillion on administrative waste. The opportunity to leverage AI to sort of help rehaul how the system works and have better tools for our clinicians and actually take better care of our patients is pretty exciting. >> Nikil Buma of Ambience Healthcare. Thank you. As we see live pictures in Abedine of President Trump, surrounded by family as of course he has been unveiling golf courses, been meeting and doing bilaterals with the UK and indeed the EU US trade relationship. But coming up, Microsoft and Open AAI may be close to changing the terms of their own partnership. That's next. This is Bloomberg Tech. [Music] So bestlaid plans as I welcome you back to Bloomberg Tech. I was going to tell you that semiconductors were really outperforming and then when we went to commercial break actually most major industries particularly tech focused ones kind of fell away into negative territory. Uh there was outperformance in chips but no longer the case. However AMD is really interesting. It got another upgrade today from Bank of America raising the price target to $200 from 175. And I've been tracking through the month of July loads of sellside names really boosting price targets on AMD. Very bullish. But the stock's performance in that period in the last month and the last quarter actually outpacing the analysts ability to catch up with it. a lot of hope that under the AI action plan and some of those deals we got from the Gulf, that AMD Caro is going to catch up a little bit with Nvidia, which we always say has a technical monopoly in the AI accelerator market. >> And you were speaking with Lisa Sue just last week after that AI action plan was announced. But let's just shift gears into the other of AI and the relationship between Microsoft and Open AI because apparently they're in advanced negotiations that could change that relationship and actually help inaugurate the AI age. The ongoing talks would give Microsoft access to open AAI's tech even after the chat maker has reached its goal of building artificial general intelligence. For more on what is going on, let's bring in Bloomberg's Matt day. Look, this is an age-old relationship. It was the what bore really chatt was the financial backing of OpenAI. But the deal was always that they would have limited access to tech if OpenAI did reach AGI. How is this going to change Matt? >> That's right. So Microsoft as a condition of all the investment they've poured into uh OpenAI, they have access to their technology, they can bake it into their products. They're worried um for some time about a potential cliff. You know, should OpenAI say, "Hey, we've, you know, built an artificially general intelligent system, Microsoft would lose access to the tech." Um so what we're hearing recently is that Microsoft is getting more comfortable that the talk terms they're talking about now mean that cliff might not occur. There might be a way that they can continue to have access to some of OpenAI's technology, you know, should they hit that milestone. Matt, we've heard that that talks are progressing, that they're positive, but they're still ongoing. We heard from sources that in some valley Sam Alman actually met with Satia Nadella to talk about the issue. The part of it that that is on the open AI side of this is that they want to change that corporate structure. What do we know about how these negotiations are moving toward that? >> Well, so we know that first of all, Microsoft is is the biggest hold out to that renegotiation of OpenAI structure. Um, we know that OpenAI wants to to alter its its corporate charter. They want more flexibility. They want the ability to raise a whole lot more money. And that's really what's kind of ticking the clock here. Um, particularly a bunch of cash from SoftBank. Um, you know, the big investor has the authority to dial down some of that investment if OpenAI doesn't complete the restructure before the end of the year. So, it's just created this little bit of ticking clock in the background. Um, putting pressure on both sides to come up with a deal. >> And also revenue share, right, Matt? It feels as though OpenAI is realizing well how much value they're adding and wants a little bit more of it. >> That's right. I mean, if you wind back the clock to 2019 when Microsoft P first put cash into Open AI, um Microsoft got a really good deal um on kind of a flyer at this AI lab was going to be a big deal. Roll the clock forward. Turns out they're an enormous deal and OpenAI wants a bit more of that pie for sure. >> Bloomberg's Matt Day reporting with the rest of the AI and infrastructure team. Really appreciate it. Thank you very much. We're going to stick with Microsoft, which reports earnings tomorrow. Cash Rangan, global investment research managing director at Goldman Sachs joins us. He covers the software sector, has a buy rating and a $550 price target for Microsoft TV time, but you heard the reporting there. When you are uh covering Microsoft, one assumes you have to model in this relationship with Open AI, both the financial exposure, but the technology exposure as well. >> Yeah. What did you hear then and what do you make of it? >> Yeah, so first of all, congratulations on breaking that news story. So that's incremental development and uh we actually published our note uh later uh yesterday and we didn't cover the the detailed reporting that you guys did. So uh that certainly is a wrinkle but it does not change the overall thesis. Our view has been that uh the partnership has more legs to it than commonly believed in the media and in the Wall Street community. there's a lot more to be gained on either side of the fence be it access to technology from Microsoft's perspective or access to distribution uh and and a world-class customer base that Microsoft brings and the ability to not uh certainly not to uh overemphasize uh the very common thing to train models and run on world-class infrastructure. So I think this this uh if this were to progress to its ultimate fruition that if the deal were to be signed it would take away a hurdle at least an investor's perspective as to what is the time duration that you can bank in your model and what is the longevity of this partnership because the AI revenues have come out of nowhere seemingly and have scaled and helped Microsoft's uh Azure business propel itself to a north of 30% growth rate which which we thought was unthinkable 2 years ago. But both parties have so much to be g uh to to gain from this and I think it's incrementally >> let me ask it this way. What has the biggest net benefit to Microsoft been from the relationship with open AI? >> Yeah. Uh many things. First of all uh that they are tech forward and uh you could argue that in the cloud computing cycle that they were uh not exactly the first ones out of the gate. Uh but in this AI cycle they're the first ones out of the gate. There's so much of a cache and boasting right that you have especially with uh with with CEO Sati Nadella who is a rank insider of the company who's been there for a long time being able to pivot the company at the right time that's of enormous strategic importance right uh from a financial perspective what it has allowed the company to do is uh although it has required a lot of capital build out of a scale that the world has never seen so far in the technology world and maybe in broader industry as well it has allowed the the Azure business to to grow at scale. Uh so depending upon whose numbers you look at, we're roughly close to an 80 billion run rate for the Azure business and AI has helped keep that growth rate steadily in the 30 plus% range. And if we get an inflection point with respect to uh AI moving up from infra at Goldman Sachs, we have this this uh thing that AI is stuck at the infrastructure layer. >> Yeah. >> For every computing cycle, you need to move to the platform and applications layer. When you make that progression, you see monumental shifts that are happening in the marketplace. So that's all to Microsoft's benefit. >> The 80 billion run rate for Azure comes in tandem cash with a more than $80 billion need to spend on capital expenditure. Is that currently totally vindicated in your mind's eye? And will we see it increase? >> It's a dollar for dollar, right? So a dollar of capex gives you a dollar of Azure revenues roughly give or take. And there's within that there is a slightly more inefficient conversion of the dollar of capex into AI revenue and slightly more efficient conversion. So uh we we think that it is the right tradeoff at this point in time. And the good news of your Microsoft is that you're running a very diversified business. Uh that all the capex is not extremely punitive to your free cash flow. I mean you could run a model where you're not generating any free cash flow at all. That's not Microsoft's thing. So they do generate a pretty meaningful significant free cash flow margin because of the health of the overall business. You got to look at Microsoft uh not just in the context of Azure but there is a broader uh Microsoft cloud business which has the M365 and then you have the server on premises business and a couple of other businesses that are equally uh uh significant in terms of revenue scope and uh and significant drivers of profitability. So they've got the ability to generate the cash to be able to fund this capex and that's that's a very important consideration. So, as long as the returns keep coming and you're able to generate a dollar of revenue for every dollar of capex, as as long as that algorithm, broadly speaking, holds, I think it's the right trade-off for the company. >> There have been concerns though surrounding Microsoft, whether or not it's just how great the product is to use when you're sat within its ecosystem, but also the cyber issues that we've seen running front and center this month. Cash, how much do you expect Satillaa to really talk to those issues? >> Yeah. uh I I believe that uh there there is a bit of a lag between the actual chat GPT technology that is open AAI broad broadly speaking technology and how much of that in gets incorporated in the Microsoft office co-pilot and I believe that that lag is likely to reduce over a period of time and uh uh we're also implementing consumer grade technology in the enterprise I mean that is a completely different piece so I'm not surprised to hear what you've heard uh with respect to where the product is relative to enterprise expectations and I would argue that the product is I use it personally uh at Goldman and it's come a long way since about 6 months nine months ago and it's it's likely to go a long way in the future the uh the that that version of copilot that we use today is going to go through significant enhancements ability to customize it tailor it to your workflows all that's going to get significantly better so the buzz is going to get better >> one thing I've always wanted to ask you cash is uh present day middle of 2025 Microsoft oft is the world's second most valuable company, right? And if I think back to when I arrived in Silicon Valley in 2018, but even two years ago, did you see that coming where Microsoft would v with Nvidia to be the most valuable company in the world based on the direction it was headed pre-open AI and and all of that? So when I launched coverage at Goldman in 2021, we had a big price target on Microsoft and the push back that we got was uh you're implying that the market cap can go grow by another half a trillion to it's already a multi- trillion dollar market or what was I think it was a couple of trillion. >> Yeah. >> And I think what it comes down to is if you unlock a big tech cycle, the dollars at stake in every tech cycle are larger and larger. And if you are leading this cycle as opposed to being a fast follower, uh, who is to say what the the new market, no, nobody envisioned this this kind of playing out the way it did. So, and we're still early in AI. So, if you listen to the economist, they're talking about how the labor market could be incorporated by way of AI. If that were to happen, you got a lot more value creation along the way. So, I'm not I'm pleasantly surprised by how quickly it has happened. But uh I was just remarking earlier that uh Microsoft stock has actually performed in line with the NASDAQ finally since the launch of ChachiPT. For a while it was lagging. I kept telling myself this is the company that facilitated the birth of this AI revolution along with Nvidia and OpenAI and their stock is lagging. It doesn't make any sense. Right now finally we're just about even. So feel vindication. >> Cash Rangan managing director of global investment research at Goldman Sachs. Great to have you here on Bloomberg Tech. Thank you very much. Carrie some news. >> Yeah it's time for talking tech now. First up, Door Dash has hired Spotify's global head of advertising. Lee Brown will join the food delivery company as chief revenue officer starting in late August. Now, Brown previously led Spotify's $2 billion ad business across 90 international markets and is set to oversee Door Dash's revenue in the US, Canada, Australia, and New Zealand. Plus, Whimo is set to launch its robo taxi service in Dallas next year in a partnership with rental car company Avis. Now, Whimo says Avis will serve as a fleet fleet partner providing infrastructure, maintenance, car management operations. The Dallas deal marks a multi-year partnership that Whimo and Avis plan to expand into more cities over time. And venture debt firm Toora has raised $685 million with the backings from the likes of Peter Thiel and Mark Andre. Now, according to CEO Kerry Finley, the money will be used to make loans to about 20 to $30 million to startups. Now, the latest investment brings the firm's assets under management to about $1.4 billion, Ed. >> Okay, coming up, SoFi CEO Anthony Noto joins us to discuss the company's second quarter results, an upbeat forecast, and my goodness, the shares are really taking off this Tuesday. Stay with us. This is Bloomberg Tech. [Music] [Music] Shares of SoFi climbing after the company reported second quarter revenue, 72% year-over-year jump in feebased revenues. Let's discuss with the man in charge, SoFi CEO Anthony Notto. You know, the SoFi story, Anthony, has become kind of simple. You've kind of invested in feebased business lines, many of them. They've been consistent, but now what the market seems to be seeing is that flowing through to the bottom line as well. Would you just explain how how that went in the quarter? >> Sure. Um, we've made a conscious effort to diversify our business into these capital light less credit risk uh fee revenue streams. One of which is our loan platform business where people pay us to use our originations platform which includes our underwriting capabilities, our marketing capabilities and our servicing capabilities to produce loans for them for a fee that they pay us. We also generate fees in our SoFi money account business uh through interchange as well as our brokerage business and then of course our credit card businesses. And so as we've diversified the products that we offer, the revenue streams have also diversified where about 44% of our revenue now comes from these fees that are generated without use of capital and without credit risk. And so that derisks the balance sheet quite a bit. So our ability to grow their overall business 44% with a 29% operating margin is is reflective of that diversification and less risky revenue that's more visible as well. >> Anthony, you you just talked about de-risking. Um, elsewhere in in the earnings domain, PayPal was asked about the strength of the US consumer and comments from from that company were were somewhat negative that they see some sort of cracks in in the the strength of the consumer. From from those that use your platform and your various financial offerings, what are you seeing present day? >> Yeah, they have a very different strategy and business than us and a very different target audience. Um, we're appealing to the overachievers in the United States that are looking for ways um to be able to save to achieve and and invest to achieve their long-term ambitions, whatever their American dream may be. So, we're helping them spend less than they make and invest the rest. Um, and we're seeing really strong trends for them. We see them lowering their cost of debt by refinancing out of expensive credit card debt that charges 24 to 30% interest into our loans that only charge 12 to 13% interest. We see see them moving their money into SoFi money. We give 3.8% interest on a savings account in SoFi money with a if you're a direct deposit customer or a SoFi plus customer. We offer them investment opportunities that are really attractive. We offer stocks without commissions, fractional shares. Uh we have SoFi ETFs that are award-winning as well as robo accounts. But we also offer IPOs. In addition to that, private equity. So you can invest in private credit uh private real estate um venture capital funds as well as long short uh public hedge funds and then finally private growth um growth equity capabilities. And so much more diverse business. Our consumer is very strong. Credit's performing very well, continues to improve. Spending through SoFi money is also very strong. So, we're seeing a consumer that's really trying to lower their costs and, you know, spend less than they make and invest the rest. And the flywheel is really working. >> Anthony, it's interesting that that flywheel comes at the same time as basically the market's got a flywheel of its own and we're seeing froth in certain sectors. Retail investors really wanted to get in on the latest meme stock as well as IPO. How are you thinking about generative AI like helping with the education side of things? I know you're targeting overachievers, but are they diversified enough in their own investments? Sure. And let me take your question and talk about what I what I think are two technology super cycles that are unprecedented. We're driving the growth that we are over the last eight years without the benefit of crypto or blockchain or AI. But I think the combination of uh of blockchain and crypto as well as AI are two super cycles that will put a tailwind behind our company and really help us really revolutionize the financial services industry in ways that continue to give people faster ways to send money at lower cost and to do it safer in addition to being able to invest in this asset class which does help as it relates to the you know areas outside the country that may not have exposure to the the US dollar and its stability. In addition to being able to invest in that asset will allow people to borrow against that asset which will lower their cost of funding. Um in addition to that will allow them to be able to pay across borders uh more easily and and and quicker. Um artificial intelligence is helping us today across our entire business. We're using in the back office to uh to res resolve disputes faster um to file suspicious activity reports to solve account takeover issues faster. Um, on the consumer side, we're offering something called cash coach, uh, which is the ability to look at your cash across all your accounts. So, it's really that's not impacting our results yet. It's on the come, but they're both really exciting super cycles to see the benefits from. >> Anthony, CEO of Sci-Fi, SoFi, thank you very much for joining us. We actually have some breaking news crossing the Bloomberg terminal, and it comes from China's trade envoy, Lee Chengyang. He's talking about the progress of talks in Stockholm. He says that the US and China have agreed to extend the trade truce. They have exchanged views on various macro economic issues. They agree on the importance of safeguarding SA trade and that the talks have been constructive on major topics. The main headline I think right Caro is that they have agreed to extend the trade truce uh and that the talks between the China between China and US negotiators currently in Stockholm will continue in what Lee calls close communication. We will go out to Stockholm as and when that press conference starts. But coming up for you, Meta set to report earnings after the closing bell. What to expect from the social media giant spelling big on AI talent. This is Bloomberg Tech. [Music] Meta set to report earnings after the closing bell on Wednesday, I believe it is, with investors closely watching its AI investments. For more, Bloomberg's Kurt Wagner joins us. Look, we've got some big M's to think about more broadly, Kurt, and I'm interested as to where we go in terms of the spending that everyone's looking at. It's about talent. It's about capex. Will it be raised? I think that's the speculation is that especially once you saw what Google did last week raising their capital expenditure target for the year. I think there's some assumption that that Meta might do the same given the scale AI deal and all this very expensive hiring they're doing on the AI front. Now remember they already raised the uh uh range for their capex last quarter as well. So there was a different number in January, a different number in April and now we'll be watching tomorrow to see if there's another new number. But given the spend in AI, I would not be surprised if they go that route. >> And yet, we're always reminded every quarter that Meta makes all its money from advertising. And so there's the AI story where ads are better, priced more powerfully, and then there's like, is all this investment going to pay off? What is the street expecting? Well, I think the good news for them now is that the AI story they're telling today feels more urgent and more uh timely, I think, than the one they've been telling for the last year or two, which was related to like the metaverse. And so here now they're talking about chatbots. They're talking about LLMs, data centers, like things that people I think have a better understanding of what the potential outcome is. the metaverse was always, Ed, you will remember the the main thing that they were sinking all of this money into and there was no real um, you know, end insight to that. Now, I don't think there's an end insight to AI either. Um, but at least I think they're doing something that a bunch of other companies are doing. It's a little easier perhaps to wrap your head around. >> Bloomber's Kurt Wagner looking forward to Meta after the bell tomorrow. Thank you very much, Caro. That does it for this edition of Bloomberg Tech, but we had some big breaking news in the last few moments. We did and it's so important to the tech ecosystem and more broadly the world economy. We're looking at China saying it does indeed agree with the United States to extend that tariff truce. Remember it was likely to expire in mid August as to where currently tariffs have been set at about the 30% level. We did see the NASDAQ 100 just tick into the green there. We're up a tenth of a percent. The S&P 500 though is still in the red at the moment, but it has had what is it six straight days of record highs. >> Yeah. And so we we we are going to read the language very carefully. All those experts on uh wording China and US talks were candid says Lee Cheng gang. Candid good thing or bad thing? The markets will tell us in due course. Gareth >> and what does it mean for semiconductors? What does it mean for the flow of rare earth metals? Do not forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart. From New York, from San Francisco, this is Bloomberg Tech. [Music]