Nissan, Honda Explore Merger, Databricks' $62B Valuation | Bloomberg Technology

Nissan and Honda Merger Talks

• Nissan is in talks to merge with Honda, a deal that could create the world's third-largest automaker, allowing them to better compete with Toyota and Tesla in the electric vehicle (EV) space (1m46s).
• The merger discussions may have been accelerated after Foxconn approached Nissan about taking a stake, which could have alarmed the Japanese government and driven Nissan into the arms of Honda (2m4s).
• Nissan has been challenged for years, particularly since the arrest of Carlos Ghosn, and the Japanese government has concerns about the company's long-term viability (2m20s).
• A combined Nissan and Honda would be beneficial as Honda has strength in the hybrid market, which would help Nissan compete better, especially in the US market where consumers are still not ready to switch to fully electric vehicles like the Nissan Leaf or Tesla (3m21s).
• However, the Biden administration's regulations compelling people to have zero-emission cars may affect the hybrid market, with California announcing intentions to phase out combustion cars from 2035, which could set a precedent for other states to follow (4m25s).

Semiconductor Industry and Market Trends

• The semiconductor space is also being closely watched, with Micron reporting earnings after the bell, and the industry is waiting to see if the company can deliver on high-bandwidth memory demand (1m32s).
• The Nasdaq 100 is flat on the day, with key additions from Nvidia, but some chipmakers like Qualcomm are experiencing profit-taking and selling off for the second straight day (1m3s).
• DataBricks' valuation has risen to $62 billion, and all eyes are on the company's performance (42s).
• Analysts are looking for growth in high-bandwidth memory, which is related to AI infrastructure, with a focus on U.S. chipmakers entering the space (5m38s).
• The largest deployment of AI to semiconductor content has been witnessed, driven by advancements in AI over the last couple of years, with free training of models from OpenAI and Google (6m8s).
• The transition is being made from pre-training and training to inference and time-based inference, which should be good for accelerated computing, with a potential change in the mix over time (6m46s).
• The shift in the industry is moving across the software, with companies starting to monetize their investments in data centers, and breadcrumbs of this shift have been seen in the last couple of quarters (7m45s).
• The application software ecosystem is expected to grow, with publicly traded vendors and startups contributing to the revenue models, and the software industry is expected to expand beyond its current $600-700 billion aggregate size (8m14s).
• The separation of winners and losers in the tech ecosystem, including software, is expected to happen in 2025, with companies having meaningful conversations with AI getting higher multiples and accelerated growth (9m34s).
• Companies that are struggling to adapt to AI will be left behind, with Adobe being an interesting case study as it has been debated whether it is on the right or wrong side of AI (9m56s).

Regulatory Issues and Tech Ecosystem

• Regulatory issues, such as the U.S. Supreme Court hearing arguments over TikTok divestment, may affect some internet names (10m26s).
• The tech ecosystem is navigating a hostile backdrop, which is expected to continue, making it difficult for large-cap tech companies to do M&A and leading to aggressive postures from the DOJ, as seen in the Google case (11m5s).
• The Supreme Court will hear TikTok's challenge to its US ban on January 10, just days before the ban or divest argument on January 19, with implications for Snap, whose shares are falling, and Meta, which is paring its earlier gains (11m21s).
• TikTok has been arguing that the law violates the right to free speech embedded in the Bill of Rights and the US Constitution, but lost an appeal in the DC Circuit Federal Court of Appeals, which voted 3-0 against the company's arguments (12m35s).
• The Supreme Court has a conservative majority, with three justices appointed by President-elect Donald Trump, who has expressed a warm place in his heart for TikTok and met with the TikTok CEO at Mar-a-Lago (13m12s).

US-China Tech Tensions and Semiconductor Probe

• The Biden administration will be announcing a Chinese semiconductor probe, looking at foundational chips, the older generation that are the backbone to everything from cars to smartphones (14m2s).
• The administration is concerned that China will flood the market with these older chips, making American companies less competitive, and has already announced plans to raise tariffs on older chips from 25% to 50% (14m32s).
• The investigation will be launched, but the findings will be left at the discretion of President-elect Donald Trump, who will decide how to handle them, whether through tariffs or other trade restrictions (15m9s).
• The US President has the discretion to act on tariffs threatened against China, and the findings will conclude whether China's unfair trading practices are involved in critical technology the US is heavily invested in (16m5s).
• Congress is consistently acting hawkish towards China, with the continuing funding resolution including language related to outbound investment into China restrictions (16m20s).

Energy, TikTok, and Meta

• The risk of blackouts will increase for most of North America over the coming decade, according to a report by the grid reliability regulator, as demand is forecast to rise the most in decades (16m33s).
• A new court order requires TikTok to turn over its source code and financial data after claims from the Chinese tech company Beijing Network of Cues of copyright infringement and misappropriation of trade secrets (16m48s).
• Meta's Instagram is expected to account for half of the company's revenue in the United States, with Instagram expected to top $32 billion in advertising revenue, more than 24% from the current year (17m7s).

Sandbox and AI-driven Innovation

• Sandbox has announced a new funding round, raising $300 million, which will be used in areas like drug discovery, navigation, and medical devices using its own AI techniques (17m58s).
• Sandbox's AI solutions are different from large language models, as they focus on quantitative relationships, which are more relevant to business sectors such as chemicals, energy, and financial services (18m40s).
• Sandbox's large quantitative models can be used in biofarma to create new drugs, and the company has already proven its impact with customers such as UCSF, NVIDIA, and Alphabet (19m44s).
• A company called SandboaQ, which has AI and quantum engines, is working on advanced computer technology, utilizing both large language models and quantum hardware, with a focus on applications in biofarma, chemicals, and materials, particularly in the development of batteries for electric vehicles and stationary energy storage (20m45s).
• The company is generating revenue today and creating value for its customers, with a focus on leapfrogging current technology using large quantitative models, and is looking to hire more PhDs and software engineers to advance its investment in the product environment (22m2s).
• The company's applications are becoming more broad, with a future vision of GPU, CPU, and QPU working together in a hybrid cloud, and significant progress is expected in quantum hardware over the next five years (21m45s).

MicroStrategy's Bitcoin Investment and Crypto Market

• MicroStrategy is investing heavily in Bitcoin, with a total investment of $45 billion, and its chairman, Michael Saylor, is open to serving on a digital assets advisory council and providing thoughts on constructive digital assets policy (23m58s).
• Michael Saylor has met with people in the incoming administration but cannot comment further, and is willing to provide thoughts on digital assets policy if asked to serve on a council (24m8s).
• MicroStrategy has announced plans to raise $42 billion over three years, with the goal of investing in additional assets, and its chairman is open to discussing the company's plans and policies (24m56s).
• The crypto market is experiencing a slight downturn ahead of the holidays, with Bitcoin trading at around $103,000, down from a peak of $108,000 the previous day (23m33s).
• Washington is considering crypto regulation, and the industry is waiting to see how it will iterate and impact companies like MicroStrategy (23m47s).
• NVIDIA is a key contributor to the company's growth, and the company is expecting a quarter-point cut, but is currently flat (23m17s).
• Michael Sailor discussed MicroStrategy's plans to continue raising capital, primarily through fixed income markets, and may also pursue preferred stock or convertible bond financing, with a goal of reaching $42 billion in capital by 2021 (25m36s).
• Demand for MicroStrategy's ETF is high, with billions of dollars in assets flowing in, due to the commercialization of Bitcoin and favorable policy with the new government, making MicroStrategy a popular proxy for Bitcoin (26m30s).
• The ETF is popular among both institutional and retail investors, with some institutions wary of Bitcoin itself but comfortable with MicroStrategy as a stock that trades on an exchange (27m12s).
• The hype cycles around crypto and AI have led to increased demand for infrastructure and exposure to these areas, with trillions of dollars in cash sitting on the sidelines and a wealth transfer happening among younger generations (27m51s).

Quantum Computing and Market Trends

• Quantum theory is being put into practice, with breakthroughs at companies like Google, and stocks with exposure to quantum and AI are dominating, including both large caps like IBM and Google, and smaller names that are taking off (28m40s).
• The most popular stocks in the quantum space are a combination of large caps and small caps, with some smaller names seeing hundreds of percentage points of performance, and ETFs like Quantum offer a mix of large caps and small caps for a balanced portfolio (29m8s).
• Investors have been cautious but also enthusiastic about getting into these wildly volatile names, with some doing a combination of both, and the high flyers in the quantum space have seen significant gains, with some up over 1000% (29m49s).
• Google is a company that does many things and can perform well, making it a favorable choice for balancing risk on smaller caps, and the current administration is expected to be favorable to quantum rate cuts and more freedom for M&A activity (29m59s).

Federal Reserve, SpaceX, and Databricks

• All eyes are on the Federal Reserve, with a decision expected soon, and the Defiance CEO is discussing the implications of this decision (30m28s).
• Elon Musk's SpaceX has repeatedly failed to comply with federal reporting protocols, triggering several federal reviews, and the Air Force recently denied Musk high-level security access (30m37s).
• SpaceX President stated that the company had a rough relationship with the Air Force early on but has developed a great relationship over the last 10-11 years, and it takes a long time to build trust (31m1s).
• NASA announced another delay, saying they will remain until late March, and Databricks is raising $10 billion in new funding, putting the software valuation to $62 billion (31m35s).

Databricks' Growth and AI Strategy

• Databricks intends to invest the capital in more AI products and significant expansion in its international go-to-market operations, and CEO Ali Ghodsi joins to discuss the AI applications and the wide-open space for Databricks (32m12s).
• Many companies, including Rivian, Walgreens, and Square, are using Databricks for AI in data processing, and the company is democratizing data and making it accessible to more people (32m41s).
• There is a war for AI talent, and Databricks will use a lot of the proceeds to become competitive and attract top talent, with a focus on looking abroad, particularly in Eastern Europe, where there is less intensity of competition (33m32s).
• The company believes there is a scaling wall, and even big companies are investing in others, opening up opportunities for more companies to participate in the next chapter of AI development (33m56s).
• Databricks is looking to hire talent from abroad, particularly in Eastern Europe, where there is less competition, but still values the talent density in Silicon Valley and the United States (34m50s).
• Databricks' CEO Ali Ghodsi mentioned that the company will compete in the market through accurate hiring, focusing on acquiring startups with talented people and valuable intellectual property, which will help them achieve their goals in the AI era (35m24s).
• Ghodsi stated that Databricks' key competitors have shifted in the AI era, and while Snowflake was a major competitor in the past, Microsoft, Amazon, and Google are now more significant partners and investors, with a majority of their revenue coming from storage and networking (36m13s).
• Databricks drives a significant amount of storage, compute, and networking, with close to 30 million machines in the cloud every day, making them a valuable customer to their partners (36m39s).
• Ghodsi described the relationship between Databricks and its partners as a "game of frenemies" in the technology industry, with both cooperation and competition occurring simultaneously (37m2s).
• Databricks has raised money through equity and debt markets, with a focus on long-term oriented investors who will support their 10-year vision, and has been selective in choosing investors, turning down most offers (37m26s).
• The company has also used debt financing to offset tax implications and keep employees happy, with Ghodsi explaining that taking a large loan with high interest rates can be beneficial if the company's valuation doubles in a few years (38m5s).

AI Regulation and Congressional Report

• A report released by Congress recommends guardrails and regulations on AI to protect Americans and maintain national security, with Senator Amy Klobuchar advocating for rules of the road for all platforms (38m44s).
• The report provides a comprehensive list of recommendations for regulating AI in various areas, including education, healthcare, financial services, agriculture, and national security (39m25s).
• The key takeaway from the report is that Congress is seeking to strike a balance between the benefits and risks of AI, and is examining its impacts on different areas to determine how to respond (39m53s).
• The US government is aware of AI's tremendous opportunity to unleash human productivity and solve complex issues, but also its risks, and wants to protect the American people and uphold their civil liberties (39m57s).
• Senator Amy Klobuchar is looking to combat the issue of deepfake pornography, which has been accelerated by AI, and Congress is eager to act quickly on this issue (40m22s).
• Congress is also looking to increase scientific research, expand energy infrastructure to meet AI demands, train the workforce, and clarify existing intellectual property law (40m40s).
• The key question is how Congress will translate these recommendations into action and legislation that gets signed into law (40m19s).

Micron Earnings and Market Outlook

• Micron is set to report its fiscal first-quarter results, and all eyes are on the company's earnings, particularly in the area of high-bandwidth memory, which is in high demand for training AI models (41m36s).
• Micron's revenue is expected to increase by 80%, and most analysts say to buy the stock, but there are concerns about the company's dependence on the smartphone and PC markets (42m6s).
• The company's success in the AI market is seen as a key factor in its future growth, but there are also concerns about competition from local competitors in China and access to the Chinese market (43m24s).
• China is always an issue for Micron, with concerns about access to the market, local competitors, and the impact of trade wars and bans (43m24s).
• The outcome of Micron's earnings report will be closely watched, and the company's ability to supply high-bandwidth memory to NVIDIA will be a key factor in its success (41m42s).