China Tech In Bear Market, Google's Chrome Future | Bloomberg Technology

Chinese Tech Stocks and Market Volatility

• Chinese tech stocks have entered a bear market, with Baidu under pressure due to its weak earnings and revenue decline of 3%, the weakest growth pace in over two years (35s).
• Baidu's core business of online advertising and marketing declined by 5% in the quarter, with the CEO citing a weak macro environment and the CFO acknowledging subdued advertiser spending despite Beijing's stimulus measures (2m20s).
• However, Baidu's AI business is still growing, with revenue increasing by double digits, although there are concerns about monetization as AI-driven search queries are monetized at a lower rate than general queries (2m53s).
• PDD is facing increasing competition from domestic businesses such as JD and Alibaba, as well as overseas companies like Temu, which is backed by Amazon (3m50s).
• PDD has pledged to continue investing amid rising competition, but its margins have been trending downwards, and the company has been reimbursing merchants more, which has hit investor sentiment (1m58s).
• The governor of Texas's attempt to limit US investors' access to Chinese investments has also sent a shiver down the spine of investors (3m36s).
• Amazon has boosted its stake in Anthropic, an OpenAI rival, by investing an additional $4 billion (44s).

Amazon's Investment in Anthropic and Google's Antitrust Case

• Amazon has boosted its stake in Anthropic, an OpenAI rival, by investing an additional $4 billion (44s).
• The Nasdaq Golden Dragon index is up 1.8%, but Chinese tech names are under pressure due to earnings and weakness, with Baidu and PDD selling off (1m29s).
• The CEO of Binance has discussed Bitcoin and the impact of a potential Trump White House (48s).
• Many stocks are driven by secular tailwinds, which can lead to sustained growth regardless of economic outlooks (5m28s).
• When evaluating investments, geopolitical tensions and potential risks are taken into consideration, and the discount rate may be increased if necessary (6m5s).
• The tailwinds for investments are not solely about artificial intelligence, but also about exposure to selling high-end chips into China, among other factors (6m22s).
• Companies like NVIDIA have a strong business outside of China, which can help mitigate risks associated with the Chinese market (6m41s).
• The geographic exposure of a company is considered when evaluating investments, and the ability to reallocate supply and demand to other areas is also taken into account (7m12s).
• Despite high valuations, investments in AI-exposed companies can be justified if they have a strong potential for long-term growth and sustainability (7m35s).
• The key to evaluating these investments is to look at the 10-year horizon and consider whether the company can sustain its profit pool and maintain its market leadership (7m52s).
• Not all AI-exposed companies will be winners, and it's essential to choose the ones with competitive differentiation and a strong potential for growth (8m3s).
• Amazon has boosted its stake in Anthropic, a company focused on AI, which is a significant development in the tech industry (8m27s).
• Google may be forced to unwind its partnership with Anthropic due to antitrust concerns, which could have significant implications for the company (8m55s).
• The proposed resolution to the landmark antitrust case could have far-reaching consequences, and the CEO of the Chamber of Progress, who has expertise in the matter, believes that Anthropic would be a loser in this scenario (9m39s).
• The US Justice Department has won a case against Google, and as a result, they are pushing for broad changes to Google's business, including potentially unwinding investments and selling off Chrome, which has a 60% market share in the browser market (10m24s).
• The idea of selling off Chrome is seen as unusual, as the Justice Department never brought charges against Chrome or made allegations that Google had improperly preferred its search engine in Chrome (11m3s).
• Chrome is valuable to Google as a way to encourage people to spend time on the internet, but it does not have revenue of its own and is not valuable if it is decoupled from Google (11m16s).
• The Justice Department is also proposing that Google make its secret sauce algorithms available to rivals, share user data with rival search engines, and pay for consumers to switch to competing search engines (12m32s).
• This proposal is seen as technically invasive and potentially detrimental to Google's ability to innovate, as it would require the company to share its proprietary information with competitors (12m22s).
• The proposal also includes a provision that would make Google pay for advertising campaigns for rival search engines, such as Bing and DuckDuckGo (12m52s).
• The potential remedies proposed by the Justice Department could have unintended consequences, such as limiting Google's ability to integrate AI-generated results into its search results, which could be seen as a direct violation of the consumer welfare standard (14m6s).
• The success of ChatGPT has led Google to build an AI layer, and the proposed remedies could take direct aim at this effort, potentially limiting the company's ability to innovate in the search engine space (13m49s).
• OpenAI is reportedly building its own browser, which could potentially be impacted by the proposed remedies (13m55s).
• The current antitrust case against Google may see changes with the new administration, as Jonathan Kanter is likely to hand over the reins, and the Trump administration, which brought the case, will have a turnover in agencies like the DOJ (14m50s).
• The sweeping remedies proposed in the case may be a result of Kanter's impending departure, as he will not be around for the trial about the remedies next year, and many attorneys prosecuting the case are shopping their resumes around Washington (15m1s).
• Trump has named Pam Bondi, former Attorney General of Florida, as his next Attorney General, who will decide the head of the antitrust division, and there might be slight changes in how they manage the case or different approaches to remedies (15m28s).
• Google might have to unwind its investment in Anthropic, but another company, Amazon, is piling in with an additional $4 billion stake in the builder of generative AI software (16m0s).
• Amazon's investment in Anthropic emphasizes that they have gone full bear hug, and they will tie Anthropic's AI software to their platform, as they think it can help them make a good AI chip and cloud platform (16m25s).
• Anthropic can still run on other clouds, and it's not like the Microsoft OpenAI deal, but Amazon is pushing more of Anthropic using its hardware to train its models (16m49s).

Meta Lawsuit, Paramount Bonus, DirectTV Deal, Apple's Siri Revamp, and AI Safety

• The US Supreme Court has dismissed an appeal by Meta, leaving it to face a lawsuit of misleading shareholders about the data harvesting scandal, including Cambridge Analytica (17m20s).
• Paramount is promising a one million-dollar retention bonus to its head of government relations and human resources if it merges with Sky Dance, and its three co-CEOs will have bonuses (18m5s).
• DirectTV has notified that it intends to terminate its acquisition of Dish Network after the bondholders failed to consent to a key exchange, killing the deal that would have created the largest pay-TV provider in the United States (18m21s).
• Apple is ready to revamp Siri, developing a more conversational version of the digital assistant, aiming to catch up with ChatGPT, using more advanced LLM's and handling more sophisticated requests (18m36s).
• AI leaders and safety institutes are gathered in San Francisco to discuss the impact of a second Trump administration on AI safety (18m59s).
• The looming topic of what policy would look like under a second Trump administration dominated conversations, particularly regarding the U.S. version of AI safety, which may be dismantled in some way (19m5s).
• A who's who of tech leaders, including Anthropic CEO, and officials from international countries agreed to be part of an international consortium of different AI safety institutes (19m37s).
• The U.S. side's own AI safety institute, currently headed by Elizabeth Kelly, may take a different approach to policy under a new administration, despite Kelly's assertion that the institute should not be seen as a politicized group (20m6s).
• Elizabeth Kelly made the case that the safety institute is part of a nonpartisan and larger government institute called MIST, which evaluates and makes safety standards, and has been doing so with technologies like facial recognition (20m41s).
• The big question is whether an incoming President Trump would try to take a different approach and if there would be changes to the institute (21m7s).
• AI companies are trying to build in what feels like a vacuum of direction, with uncertainty provided by the potential for a patchwork of legislation in different countries (21m18s).
• The AI safety institute provides standardized testing to say whether models are actually risky in terms of biological threats or cybersecurity threats, which is in the interest of companies to have standardization (21m40s).
• Companies are calling for the Trump administration to keep the safety institute to avoid having to run different tests for different countries (22m5s).

Market Fluctuations, Bitcoin's Price, and Leveraged ETFs

• At a local level, the new San Francisco mayor has appointed Sam Altman to be part of his transition advisory team, with an obvious incentive for both sides to take advice from someone powerful and for OpenAI to be a bigger part of civic engagement (22m15s).
• The NASDAQ 100 is up 1.5% for the week, making up some of last week's erosions, but is down on the day slightly, largely due to NVIDIA being off by more than three percent after earnings (23m22s).
• Bitcoin's price has increased by 0.7% to $98,741, and it continues to be a risk-on asset of choice, with some considering it a proxy for risk (23m50s).
• MicroStrategy's stock has run too far, too fast, and it may be time to bet against it, with the company's stock down 9% over the last two days, which is hurting 2x ETFs (24m35s).
• The 2x ETFs, which have around $4 billion in exposure, are having difficulty with the swap market, as not many people are willing to take on that risk and follow the volatility (25m35s).
• There are three brokerages that the ETF is currently working with, but it is hard to get more leverage going forward to chase the rally (25m56s).
• Retailers are taking on a lot of risk in these leveraged ETFs, with some using co-options to chase the upside, which can lead to big durations in the last 30 minutes of the trading day (26m5s).
• The ETF manager is facing a challenge in fulfilling the promise of these instruments, as the risk limits of the prime broker are being tested (26m23s).

SEC Chair Resignation, Bitcoin Surge, and Binance CEO's Perspective

• The SEC's chair has announced that he will step down in January, which has led to a rally in digital assets that were previously flagged as unregistered securities (27m30s).
• Bitcoin's price is near the $100,000 level, and it has been surging since Donald Trump's reelection (27m50s).
• Binance CEO Richard Teng believes that President Trump's reelection gives a boost and clarity to the cryptocurrency space, and that 2024 has been a landmark year for the industry (28m1s).
• The approval of Bitcoin ETFs in the US and around the world has given recognition and respect to the sector, and top financial institutions are starting to recognize the value of this space (28m19s).
• Institutionalization and mainstreaming of cryptocurrencies have started, with the Bitcoin ETF being the best-performing ETF in history (28m58s).
• The Trump administration's pro-crypto stance is seen as a big positive for the industry, which has faced tough regulation in the US over the last four years (29m17s).
• Binance CEO Richard Teng is speaking with Francine Lacqua amidst an ongoing SEC dispute, where no C-suite executives have been charged in the recent round of indictments (29m55s).

Stripe, One Password, and Native Application Investments

• Stripe, a private fintech giant, is buying back some of its shares at a $70 billion valuation, likely to see a lot of money change hands, particularly from ex-employees and venture capitalists (30m36s).
• This is Stripe's third tender offer this year, and it is different from the previous one, as the company itself is buying back a lot of shares, possibly to clean up their cap table (31m5s).
• One Password, a Toronto-based password management company, is having early conversations with banks and hopes to go public next year, after taking outside capital five years ago (31m33s).
• Investment in native applications reached $4.6 billion in 2024, almost eight times what it was in 2023, with the amount expected to increase in 2025 (32m10s).
• The money is flowing into places where applications can do well, such as tech, healthcare, and fintech, as the architectures are settling in terms of developers building applications (32m56s).
• Amazon is taking another $4 billion cash infusion and wants to make sure it is offering its own cloud technology to other clients with the help of Anthropic (33m23s).
• Application makers are seeing extraordinary support from cloud providers, such as Microsoft and Amazon, with a rivalry between the two companies (33m43s).
• The money is going in both directions, with models going up 6.5x to 6.5 billion in 2024 and spending going up 8x in 2024, indicating that dollars are flowing in both directions (34m47s).
• Certain sectors, such as the legal and healthcare industries, are seeing the most obvious sense of investment in native applications, with clients purchasing and spending money on these products (35m0s).
• Product market fit is definitely there, with clients seeing the benefit and spending dollars, and people buying up the software left and right (35m22s).
• Companies are finding value in AI software, with productivity being a key area that gets boosted, and they are getting tons of value from it, increasingly rapidly (35m57s).
• The next vanguard of money to be made within the AI cycle is focused around the application layer, as architectures are settled, making it easier to build applications, and any vertical is ripe for disruption for AI (36m18s).
• Workflow, automation, customer support, marketing, and human resources are areas where AI applications are expected to have a significant impact (36m33s).

TikTok's Future and Project Liberty's Summit

• TikTok could be up for sale in the United States, with Frank McCourt being a potential buyer, and the platform's future is uncertain under the next administration (37m1s).
• The CEO of TikTok recently spoke at APEC in Peru, highlighting the positive angles of the platform, but lawmakers are potentially looking at changing regulations within the administration (37m51s).
• Project Liberty is hosting a summit on the future of the internet, exploring how people can come together to create a better online experience for all Americans, with nearly 500 people and 100 speakers attending (38m21s).
• The summit aims to bring together people from different backgrounds, including lawmakers, TikTok creators, and technologists, to discuss their experiences on the internet and how it can be improved (38m34s).
• The founder of Project Liberty, Frank McCourt Jr., believes that policy intervention is not the answer to fixing the internet, as big tech is too powerful and influential, and instead, a new approach is needed to reimagine how the internet works (39m50s).
• Project Liberty aims to build technology and bring in partners from around the world to address concerns about the internet, including the scraping and aggregation of data by big platforms, and the need to reclaim ownership of personal data (40m22s).
• Frank McCourt Jr. emphasizes the importance of thinking of data as personhood and reclaiming ownership of oneself, rather than just complaining about the problems with the internet (40m49s).
• There is a growing recognition of the importance of owning and controlling one's data, and a desire to build a new version of the internet that prioritizes this, (40m54s).
• Social media has both positive and negative aspects, including connections, community, and business opportunities, but also potential harms, (41m9s).
• A decentralized social network protocol could allow people to keep their identity and data more secure, (41m37s).
• The goal is to create internet technology that amplifies good, optimizes for people, protects children, strengthens democracy, and helps people get smarter, (41m56s).
• A potential solution for TikTok is to move its user base to an open-source protocol where people can own their identity and data, (42m13s).
• The value proposition of this approach would be shared with users, and could potentially allow users to create a portion of the platform, (42m19s).
• The likelihood of this happening within the next administration is uncertain, but there are indications that President-elect Trump may not want to ban TikTok, (42m40s).
• Congress has passed legislation demanding that TikTok be shut down or banned due to national security concerns, but a legal decision is expected in early December, (42m59s).
• A potential buyer is waiting for the legal decision and is ready to purchase TikTok, with the goal of allowing the people to own it, (43m7s).
• The technology for a decentralized social network is already working, with nearly 1.5 million people using it, and TikTok could provide the scale needed to make it successful, (43m31s).

Market Overview and Bitcoin's Psychological Level

• The market has seen significant fluctuations, with NVIDIA experiencing a big round-trip and Bitcoin nearing the psychological level of $100,000, (43m48s).