China's Chip Sector Rally and Amazon's RTO | Bloomberg Technology

China's Chip Sector Rally

• China's chip sector experienced a significant rally, with Semiconductor Manufacturing International Corporation (SMIC) leading a $13 billion surge as global investors bet on potential Beijing stimulus to support the industry, which is central to China's geopolitical ambitions. (36s)
• SMIC's stock rose over 28% in one day and about 65% over a few days, with shares trading in Hong Kong due to the mainland Chinese stock market being closed for holidays. Anticipation is high for when the Chinese market reopens. (1m23s)
• Smaller competitors in the chip space also saw increases, with semiconductor stocks up 17%. Investors speculate that the Chinese government might introduce semiconductor industry-specific stimulus. (1m55s)
• Despite recent gains since late September, Chinese stocks have been in a bear market since February 2021. The market is awaiting further details on potential stimulus from China, with a press conference expected soon. (2m25s)
• There has been a shift in sentiment towards Chinese tech stocks, with $6 billion flowing into U.S.-listed China ETFs in the last week, as investors globally try to capitalize on the current momentum. (3m45s)
• Analysts have been skeptical of China due to its undervaluation compared to the U.S. and other developed markets, but there is a shift in positioning as the Chinese market is driven by momentum and liquidity. (4m26s)
• Chinese tech companies are undervalued compared to their US counterparts, but there is still large upside potential, despite question marks for the longer term (5m4s).
• The semiconductor sector in mainland China is state-supported, making it a favorable sector for investors given its importance, but developed economies may still be skeptical and have restrictions on these companies' products (5m36s).
• It is possible that people may not be protected enough from the downside, and some investors may get burned, but the rally could last for a while given the underweight positioning of global investors (6m38s).
• The Chinese authorities may have to provide more stimulus, and there is a chance for some investors to benefit, but the situation needs to be monitored closely (7m2s).
• Institutional and retail money is flowing into the semiconductor sector, and both types of investors are showing optimism, but the longevity of this trend is questionable (7m16s).
• The global semiconductor sector, mostly driven by US players, has structural supportive drivers, and it is essential for institutions to participate in this theme to avoid missing out (7m37s).

Cyberattack on American Water Works

• American Water Works, the largest publicly traded water and wastewater company in the US, has been hacked, with parts of its systems disconnected or deactivated to contain the cyberattack, potentially affecting 14 million customers across half of the US states (10m57s).
• The US government has been warning about Chinese groups infiltrating US water systems in possible preparation for more disruptive attacks, and while it's unclear if this breach is related, the context and size of the water company make it a potentially big deal (12m2s).
• The US government has been issuing warnings about Chinese hacking for economic espionage and spying on government agencies and military contractors, but the current warnings are about Chinese hackers pre-positioning themselves inside critical networks to conduct potentially disruptive attacks (12m48s).
• The US government is accusing a Chinese hacking group called Vault Typhoon of pre-positioning themselves inside critical networks, which is a different type of attack than seen in the past, and is being referred to as "preparing the battle space" (13m7s).
• Water infrastructure is being targeted by hackers, and the US government and companies are being tested on their ability to defend against these attacks, with the Colonial Pipeline attack several years ago being a notable example (14m18s).
• The US government is raising the alarm about Chinese attacks on critical infrastructure, and it's unclear if the American Water Works breach is related, but the context and warnings from the government suggest that there may be something deeper involved (13m46s).
• Disrupting IT systems can significantly impact critical infrastructure, such as electricity and water providers, without directly attacking physical pipelines. This was exemplified by the Colonial Pipeline incident, where a ransomware attack on IT systems disrupted gasoline shipments across the Eastern U.S. (14m24s)
• The cybersecurity competence of critical infrastructure providers varies, with larger companies generally having better security due to bigger budgets, while smaller providers may not be as well-protected. (15m12s)
• Ukrainian hackers claimed responsibility for a cyberattack that disrupted online broadcasts of at least 20 Russian state TV and radio channels, coinciding with Russian President Putin's 72nd birthday. However, these claims could not be verified by Bloomberg News. (15m46s)
• In the U.S., state and local officials are preparing for potential disruptions, including cyberattacks and disinformation, ahead of the upcoming elections. Arizona, a significant flashpoint in the 2020 election, has implemented measures to enhance both physical and cybersecurity around voting systems. (16m7s)

Arizona's Election Security Measures

• Arizona has increased transparency and security by installing fences, using air-gapped networks, and inviting public tours to demonstrate the integrity of their voting systems. These efforts aim to counter conspiracy theories about election security. (16m50s)
• Security measures in Maricopa County, Arizona, have been strengthened since the 2020 election, with access to the building where votes are counted now requiring security clearance. All voting machines are audited, tracked, and checked to ensure election integrity. (17m43s)
• A company has implemented a thorough process to ensure the accuracy of their ballots, using a machine to sift through them and cancel out any batches with irregularities (18m40s).

Agility Robotics' Humanoid Robot Plant

• Agility Robotics is building the world's first humanoid robot assembly plant, which will produce 10,000 robots per year and is designed to work in warehouses, including Amazon (19m45s).
• The plant is located on former agricultural land outside of Oregon's capital and features sophisticated robots with arms and sensors that can simulate stacking tote bins and listing them on conveyor belts (19m55s).
• The robots are still in the testing phase, with one robot attempting to place a stack of bins on top of another but being off by a small margin and requiring software intervention (20m27s).
• Agility Robotics started with the goal of building robots that can move in human spaces and is adding new devices to their robots, including lifting totes (20m41s).
• The first robot assembled at the plant will be completed sometime this month, and the company is still figuring out their documentation and assembly processes (21m2s).
• Amazon has been downgraded by Wells Fargo due to concerns over profit margin trends, with the analyst citing that growth in the cloud computing business is unlikely to help much (21m9s).
• Amazon has decided to bring employees back to the office full-time, with sources citing that the reason is to improve company culture and allow new hires to learn and understand the culture (21m25s).
• Amazon's CEO, Andy Jassy, is passionate about company culture and has written a note to employees explaining the decision, which has been met with pushback from some employees who feel it's a way to thin the ranks (22m23s).
• The true reason for the decision is likely a combination of both improving company culture and reducing the workforce (22m42s).

Apple's Changing Product Release Cycle

• Apple has been downgraded by analysts due to doubts about the hype surrounding the latest iPhone (22m48s).
• The semiconductor index is currently flat, with some single names moving to the outside, and Bitcoin is pushing above $63,000 per token (23m31s).
• Apple's product release cycle has been changing, moving away from annual releases, which has both advantages and disadvantages, including product delays and software delays, but also more polished products (26m4s).
• The company's organizational structure, which is cross-functionally designed, contributes to product delays as every team has to touch every new product before it's released (26m34s).
• Apple has been slowly inching away from the annual cycle, with some products, such as the Apple Watch Ultra, being retained for two years in a row with only minor updates (27m10s).
• The iPhone is updated every two to three years, and the iPad is also updated less frequently, which is a change from the previous annual update cycle (27m19s).
• The shift away from annual releases may be a good thing, as it allows for more generational updates and potentially more productivity from Apple (27m43s).
• The iPhone is a unique product that may not be replicable, and Apple is searching for the next big idea or category, but it's unclear if that exists (25m39s).
• Analysts are discussing the potential for the iPhone 16 and 17, but the iPhone 17 does not exist yet, and some analysts may be late to the game in recognizing Apple's changing product release cycle (24m31s).
• The discussion around Apple's product releases is ongoing, with some analysts mentioning the potential for new form factors or products that could disrupt the market (25m56s).
• Apple's lead time analysis, which measures how long it takes to get a phone after placing an order, is not a reliable indicator of demand, as it's often used to make judgments about the cycle, but the actual performance can only be known by the next spring, and by then, everyone is looking at the next version (28m58s).
• The iPhone 16 cycle is not expected to be game-changing, and the stock has been lagging due to underperformance expectations, but the iPhone 17, with the next iteration of AI software, is expected to drive a replacement cycle and get people excited (29m33s).
• Investor attitudes towards Apple are not good, with daily reports suggesting weaker demand, and most people are underweighting the stock in their portfolios, expecting it to underperform unless there's a surprise (29m58s).
• Despite being 4% off its record high, Apple's share price is still sideways trading, with anxiety priced in, and the stock has been up 17% this year, better than many other names, particularly in software (30m53s).

Foxconn's Strategic Shifts

• Foxconn, a major electronics manufacturer, is moving up the value chain to generate better profits, with AI being one area of progress, and semiconductors being another, focusing on older, less sophisticated chips (32m34s).
• Foxconn is working with companies like NVIDIA, Microsoft, and Amazon on AI infrastructure and is looking to compete in the semiconductor space with a value proposition similar to what it once had for Apple (32m43s).
• The company is generating nearly $200 billion in revenue and is looking to build an enormous business by introducing AI applications into their platforms (32m3s).
• Goldman Sachs predicts that outsourcing in the design manufacturing sector could be worth $140 million by the end of the decade, although Foxconn's major auto ambitions remain unrealized. (33m29s)

Tencent's Potential Ubisoft Buyout and AR Glasses Market

• Tencent is speculated to be considering a buyout, but potential regulatory hurdles exist due to the current geopolitical climate. Ubisoft has issued a statement indicating they are reviewing strategic options, including focusing on open-world games, despite recent challenges with their Star Wars game. (34m23s)
• Shares surged after it was revealed that Exotica has taken a stake in an eyewear maker, which plans to invest over $600 million by 2030 to enhance its lenses and other offerings. (36m26s)
• An AR glasses maker is expanding its retail presence across Europe, Asia, and the United States, moving from online sales to physical stores to allow customers to try the product firsthand. The glasses can connect to other devices but do not have their own operating system. (36m50s)
• The AR glasses company aims to deliver a product that is usable today, focusing on providing a fully spatial computing experience, while acknowledging the contributions of major tech companies like Meta and Snapchat in the space. (38m11s)
• A new type of high-resolution virtual display sunglasses can connect to cell phones or laptops, allowing users to stream movies, play games, and enhance laptop productivity. These sunglasses have captured nearly half of the global augmented reality market share. (38m54s)
• The manufacturing of these sunglasses takes place in the same type of plant as the Apple Vision Pro, leveraging China's manufacturing capabilities and efficiency. (40m6s)

Disappointing Opening of Joker Sequel

• The sequel to the "Joker" film had a disappointing opening weekend, earning $40 million, significantly less than the projected $60 million, and far below the first film's opening of nearly $100 million. The sequel cost $190 million to produce. (40m29s)
• Negative word-of-mouth and critical reviews have been cited as reasons for the "Joker" sequel's poor performance, with some attributing it to the film's over-the-top nature and musical elements featuring Lady Gaga. (41m50s)
• The film industry is facing challenges in drawing audiences back to theaters, competing with streaming services. Despite some recent successes, the "Joker" sequel did not meet expectations set by its predecessor. (42m21s)
• The Hollywood industry is also dealing with the aftermath of strike actions, with discussions around artificial intelligence being a significant issue. (43m30s)
• The anticipation around a film was high, with people loving Joaquin Phoenix as the Joker in the first one, but it seems to have gotten out of proportion (43m43s).
• The film was shot in multiple locations, including New York, Los Angeles, and New Jersey (43m47s).
• The movie features a lot of courtroom drama scenes, which is a departure from the crime scenes in Gotham from the first film, and may not be appealing to people in the same way (43m55s).
• The discussion is part of a recap on a podcast, with information on where to find it (44m9s).
• The team in New York City and the crew in San Francisco are acknowledged for their work on Bloomberg Technology (44m17s).