China Risks for Chips and Apple's Hollywood Ambitions | Bloomberg Technology

Semiconductor Industry Outlook

• The semiconductor index experienced its worst day since 2020, but rebounded slightly the following day.
• The market saw a strange pivot after TSMC, the world's largest contract chip manufacturer, raised its revenue outlook for the current period and reduced its capital spending plans.
• TSMC's positive news came amidst uncertainty surrounding former President Trump's comments about Taiwan, which has impacted the markets.
• Bloomberg Intelligence analysts believe that the China risks are more of a headline risk than a fundamental risk, as the impact on revenue has been limited to a few key players.
• The analysts also note that the recent run-up in stock prices, particularly for AI-related companies, has priced in almost nothing but positivity, making any roadblock a potential opportunity for investors to lock in profits.

Impact of US-China Trade Tensions

• The Biden administration is considering more trade restrictions on China, which, along with Donald Trump's comments on defending Taiwan, could benefit regional manufacturers in the U.S., such as Intel and GlobalFoundries.
• Kunjan Sobhani, a Bloomberg analyst, explains that the semiconductor manufacturing world can be divided into leading-edge and lagging-edge manufacturers.
• He states that Intel is the only leading-edge manufacturer in the US, while TSMC and Samsung are the other two leading-edge manufacturers.
• Sobhani believes that Intel would benefit from any political instability in China or Taiwan, as it would become the only alternative for leading-edge chip manufacturing.
• Amy from Stonebridge Group highlights the uncertainty surrounding potential trade curbs and the impact of the Trump administration's policies on Chinese-American relations.
• She emphasizes that while the Trump administration has expressed its stance on competition with China, the specific measures it will take remain unclear.
• Amy points out that the Biden administration is considering further restrictions on semiconductor products, particularly hardware, going to China.
• She also mentions that China is focusing on technology self-reliance, as evidenced by Xi Jinping's call for indigenous innovation and technology development.
• Amy concludes that the uncertainty lies in the specifics of the restrictions, including whether the US will be successful in negotiating with the Dutch and Japanese governments to expand restrictions on technology exports to China.

US Industry Pressure and Potential Retaliation

• US Industry Pressure: Amy expects continued pressure from US industry to restrict semiconductor technology sales to China, even if there are no direct national security concerns. This pressure stems from US companies feeling unfairly disadvantaged by Japanese and Dutch companies that continue to sell to China.
• Incremental Restrictions: Amy anticipates incremental restrictions on semiconductor hardware products for certain Chinese companies in the near term, but not a massive expansion of restrictions. She believes the Biden administration will take a more measured approach compared to the Trump administration, which remains an unknown factor.
• China's Retaliation: Amy highlights China's willingness to respond to any restrictions with significant subsidies and retaliatory measures. She emphasizes that the Dutch and Japanese are concerned not only about their own companies but also about China's potential retaliation.
• Xi Jinping's Response: Amy points out that Xi Jinping has made it clear that China will not passively accept restrictions on high-tech products and services. He has threatened to retaliate, potentially impacting Japanese industry by restricting graphite exports, a crucial material for Japan.
• China's Economic Constraints: Amy acknowledges that China needs to carefully consider the impact of its retaliatory measures on its already fragile economy. China's leverage has diminished compared to previous years.

Taiwan's Position and US-Taiwan Relations

• Taiwan's Silence: Amy notes the silence from Taiwan in response to former President Trump's comments suggesting the US might not come to Taiwan's aid. Taiwan is choosing to rely on the traditional Republican Party platform, which includes support for Taiwan.
• The discussion revolves around the potential impact of a potential Trump 2.0 administration on US-Taiwan relations, particularly in the context of the ongoing chip shortage and the potential for conflict.
• While there are concerns about a potential shift in US policy towards Taiwan, experts believe that a Trump administration would likely maintain a strong stance in support of Taiwan, given the strong support for Taiwan within the Republican party.

Volatility in the Tech Sector and AI Boom

• The conversation then shifts to the volatility in the stock market, particularly in the tech sector, with concerns raised about the sustainability of the AI boom and its impact on demand for chips.
• Goldman Sachs analysts are questioning the long-term impact of AI on productivity growth, highlighting the uncertainty surrounding the future of the AI market.

Apple's Streaming Ambitions

• Finally, the discussion turns to Apple's ambitions in Hollywood, with Bloomberg reporting that Apple is in talks with major studios to acquire more films for its streaming service, Apple TV+.
• Apple's strategy for Apple TV+ has been to focus on high-quality original programming, but the service has not yet achieved the same level of viewership as other major streaming platforms.
• Apple's foray into film distribution has also been met with mixed results, with some films performing well while others have been considered duds.
• Apple is shifting its strategy to focus on building its library content and audience for Apple TV.
• Netflix has a vast catalog of content, which Apple will need to compete with.
• The streaming industry is seeing a shift away from exclusive content, with shows appearing on multiple platforms.
• Warner Bros. Discovery is considering splitting its streaming business from its traditional TV business due to poor stock performance and the need to invest more in new programming.
• Analysts are skeptical about the effectiveness of this split, as traditional TV networks still generate significant revenue.

Crypto ETF Landscape

• The battle for potential Ether ETFs is underway, with issuers like BlackRock and Invesco competing on fees.
• The fees for Ether ETFs range from 0.2% to 2.5%, with varying conditions attached.
• The low fees charged by issuers for Bitcoin ETFs are a result of the competition and the lessons learned from the previous Bitcoin ETF launches.
• BlackRock's Bitcoin ETF attracted significant investment, with $1 billion raised in the first four days.
• The demand for an Ether ETF is lower compared to Bitcoin, as investors prefer staking Ether for potential rewards.
• The SEC's stance on Solana's security status is a key factor in determining its eligibility for an ETF.
• Issuers are facing challenges in launching Ether ETFs due to the SEC's concerns about staking and its potential security implications.
• Despite the challenges, the launch of an Ether ETF is considered a significant milestone for the crypto industry.
• The US is catching up with Europe and Canada in terms of crypto ETF offerings.

Nokia's Performance and Market Trends

• The discussion will continue with Teddy Goff, co-founder of Precision, to analyze Nokia's recent performance.
• The NASDAQ 100 is down 0.8% for the day, with mega-cap companies leading the decline.
• Ray-Ban maker EssilorLuxottica shares are rising on a report that Meta is exploring a stake in the company. This follows an existing collaboration between the two companies to produce smart glasses.

TikTok Ban and Meta's Dominance

• The market is reacting to former President Trump's recent interview, where he expressed opposition to banning TikTok.
• Mandeep Singh, an analyst, believes that Trump's stance on TikTok is less about the app itself and more about protecting U.S. companies like Meta.
• Despite the law passed to ban TikTok, the market is signaling that a ban is unlikely, as evidenced by the decline in Meta and Snapchat stock prices.
• Trump's use of TikTok for campaigning and fundraising suggests that he is not against the platform.
• The initial analysis of TikTok's user base suggests that it has one-third of U.S. adult users and 60% of people under 30, with users spending almost 80 minutes a day on the platform.
• If TikTok were banned, platforms like Snapchat, YouTube Shorts, and Instagram Reels would benefit the most, as users would likely split their time across these platforms.
• Former President Trump's comments about banning TikTok and its potential impact on Meta's dominance in the social media landscape are discussed.
• The potential antitrust risk for Meta is highlighted, given its ownership of three of the most popular websites.
• The uncertainty surrounding President Trump's policies and potential changes in opinion are mentioned, particularly regarding his stance on Silicon Valley.

J.D. Vance and the Tech Industry

• J.D. Vance, Trump's potential running mate, is praised by some in Silicon Valley for his pro-growth and pro-innovation stance.
• The potential impact of a venture capitalist in the White House on policymaking for innovation and small companies is discussed.
• There is uncertainty about the influence of the Vice President on the President's decisions.
• J.D. Vance's potential appointment as Vice President could be beneficial for the tech industry, particularly in areas like deregulation of AI and cryptocurrency.
• However, the tech industry is not monolithic, and there are divisions within the industry and the Republican party on issues like privacy and competition.

TikTok Ban and Political Communication

• The potential ban on TikTok is a complex issue, with Mandeep Singh outlining its potential impact on political communication and policy.
• While TikTok is popular among young Americans, it is unlikely to be a decisive factor in the upcoming election, as voters consider a wide range of issues.
• The ban could potentially benefit Trump, as young TikTok users might vote for him to prevent the app's removal.
• Candidates need to be present on social media platforms like TikTok, which is a critical communication platform for young Americans, even if its national security implications are debated.
• The conversation discusses the challenges of combating misinformation on social media, particularly during political campaigns.
• Teddy, who advised Obama on his reelection campaign, believes that one of the two campaigns has no interest in using social media safely.
• Teddy argues that countering individual pieces of misinformation is difficult, as it tends to sink into people's minds and influence their beliefs.
• He suggests that campaigns should focus on getting their own message out as forcefully as possible, hoping it will overcome the effects of misinformation.

Berkeley SkyDeck Fund and AI Startups

• The conversation transitions to discussing the future of Silicon Valley and global startup culture, specifically focusing on the Berkeley SkyDeck Fund.
• The Berkeley SkyDeck Fund is a program that helps startups grow and succeed.
• The program is highly selective, accepting only 1% of the 4,000+ companies that apply each year.
• The program provides startups with access to investors, mentors, and the Berkeley ecosystem.
• Startups are required to be physically present in San Francisco for most of the six-month program.
• The program has seen a significant increase in the number of AI-focused startups in recent years.
• The program is excited about the potential of AI to disrupt industries and change lives.
• The program has invested in a number of successful AI startups.
• The program is a valuable resource for startups looking to launch and grow their businesses.

GPT-40 Mini and OpenAI's Development

• Seth explains that GPT-40 Mini is not a revolutionary new model, but rather a smaller version of the larger GPT-4 model, which is still under development.
• He compares it to the iPod Mini, suggesting that it is a more accessible version of the larger model.
• Seth mentions that some companies have been given early access to GPT-40 Mini and are using it for tasks like processing receipts and responding to emails.
• He emphasizes that GPT-40 Mini is still a work in progress and lacks some of the more advanced features of the larger model, such as audio and video processing, due to ongoing safety concerns.
• Caroline notes that there was backlash after the previous announcement of GPT-4 and asks about the current status.
• Seth explains that OpenAI is conducting a "red team safety review" of the larger model and that GPT-40 Mini is expected to have many of the same features, but is still under development.
• Ed concludes the segment by highlighting the ongoing concerns about the chip sector competition between the US and China, which is contributing to the decline in the NASDAQ 100.