Bloomberg Technology Full Show (10/22/2024)

Qualcomm and ARM Dispute Over Chip License

• Shares of chipmaker Qualcomm and chip design firm ARM are lower after ARM canceled a license issued to longtime partner Qualcomm, potentially leaving the leader in Android smartphone processors without key intellectual property (58s).
• The cancellation could hit the finances of both companies ahead of a breach of contract trial in December, which centers around Qualcomm's acquisition of another chip firm that was already licensing ARM designs (1m18s).
• The dispute is over the acquisition of chip firm Nuvia, which had a license based on ARM architecture, and the redirection of that license to a lower rate after Qualcomm's acquisition (3m3s).
• Qualcomm's CEO stated that the company has a competitive impact and is thinking about new innovation for various markets, including phones, cars, and industrials (2m34s).
• Qualcomm had to respond to the Bloomberg reporting, stating that ARM's actions are unfounded threats designed to strong-arm a long-term partner into a performance CPU regardless of the broad rights under their potential license (3m49s).
• The trial in December will be over royalty rates, and ARM does not want to lose money with Qualcomm going with different designs, as Qualcomm is the most important smartphone processor maker for the Android platform (4m5s).
• Qualcomm's customers generate around 320 million in revenues, and ARM does not want to lose its number one customer, but a litigation blocking Qualcomm's ability to ship chips based on the ARM agreement is unlikely as it would affect the entire industry (4m26s).
• The scenario where Qualcomm cannot get ARM chips would impact the next generation of AI smartphones, and ARM declined to comment on the situation (4m47s).

Investor Attitude and Market Trends

• The investor attitude towards the chip sector is influenced by both specific challenges and significant opportunities, particularly due to enterprise investment in AI infrastructure. (5m6s)
• There is increasing demand for cloud migrations and AI, with more activity now compared to six months ago, and a shift towards production expected in the first half of the year. (5m42s)
• Qualcomm envisions a future where AI smartphones become ubiquitous within five years, and there is a focus on processing efficiency, which will require both centralized and on-device processing. (6m10s)
• In the enterprise software space, many companies are incorporating AI into existing products, but there is a need to distinguish between genuine innovation and mere marketing. (7m0s)
• Incumbent companies have rapidly embraced generative AI, with significant organizational pivots, and there is a focus on the complexity of back-end systems rather than just front-end applications. (7m34s)
• The software and hardware sectors are poised for more mergers and acquisitions, driven by factors such as corporate focus on generative AI, potential new candidates, and private equity activity. (9m7s)
• The environment for mergers and acquisitions may be further influenced by declining interest rates and rising valuations of companies like IBM. (9m55s)

Tesla Earnings and Apple's Activities

• Tesla is set to announce its earnings soon, with a preview of expectations to follow. (10m7s)
• Apple CEO Tim Cook visited Beijing, meeting with China's tech czar and promising to continue investing in the country (10m43s).
• Cook typically visits China two to four times a year to meet with providers and government regulators, which is necessary for a company of Apple's size (11m18s).
• Apple has around 40 retail stores in China and most of its services operate there, although there are some nuances regarding cloud storage and Apple Intelligence is not yet available (12m6s).
• Apple is scaling back production of the Vision Pro, but this is not because they plan to cancel the product, rather it's a normal process to prepare for new versions of products (12m39s).
• A new version of the Vision Pro is expected to be released in early 2026 with a faster processor and a focus on artificial intelligence (13m14s).
• Apple will also unveil a cheaper follow-up to the Vision Pro at the end of 2025 with reduced specifications and a lower price point (13m23s).
• Apple believes it can take a year to run out of existing supply of the Vision Pro, and there are indications of increased hiring and investment in the Vision Pro line (13m40s).
• Tesla is set to release its earnings after the closing bell, and investors will be looking for information on deliveries, pricing, and potential upgrades to the Model 3 and Model Y (14m13s).
• The expectation is that Tesla's earnings may dip due to the company's reliance on the Model 3 and Model Y, which are in need of upgrades (14m42s).
• Investors will also be looking for information on a potential Model Y refresh, which has been ruled out for this year but is expected to be part of Tesla's plans for more affordable models (15m15s).
• Investors are interested in learning about a ride-hailing app, but it's uncertain whether Elon Musk will discuss it on the call, given his tendency to be optimistic about timelines, which might make the topic premature for discussion (15m48s).
• Musk's involvement in politics might be a topic of discussion, especially since the company solicits retail investor questions, making it likely that something related to this topic will come up (16m14s).

Apple Vision Pro Production and Strategy

• Apple is scaling back production of the Vision Pro, but this is not because they plan to cancel the product, rather it's a normal process to prepare for new versions of products (12m39s).
• A new version of the Vision Pro is expected to be released in early 2026 with a faster processor and a focus on artificial intelligence (13m14s).
• Apple will also unveil a cheaper follow-up to the Vision Pro at the end of 2025 with reduced specifications and a lower price point (13m23s).
• Apple believes it can take a year to run out of existing supply of the Vision Pro, and there are indications of increased hiring and investment in the Vision Pro line (13m40s).

Tesla's Performance and Future Plans

• Tesla is set to release its earnings after the closing bell, and investors will be looking for information on deliveries, pricing, and potential upgrades to the Model 3 and Model Y (14m13s).
• The expectation is that Tesla's earnings may dip due to the company's reliance on the Model 3 and Model Y, which are in need of upgrades (14m42s).
• Investors will also be looking for information on a potential Model Y refresh, which has been ruled out for this year but is expected to be part of Tesla's plans for more affordable models (15m15s).
• Investors are interested in learning about a ride-hailing app, but it's uncertain whether Elon Musk will discuss it on the call, given his tendency to be optimistic about timelines, which might make the topic premature for discussion (15m48s).
• Musk's involvement in politics might be a topic of discussion, especially since the company solicits retail investor questions, making it likely that something related to this topic will come up (16m14s).
• Tesla is still in the business of selling electric vehicles to consumers, and recent reports and earnings provide insight into how the company is performing in this area, with many manufacturers pivoting to hybrids and plug-in hybrids (16m40s).
• Tesla has expressed its belief that hybrids are the wrong strategy, but competitors like Toyota have seen robust demand for hybrids, which might indicate that Tesla is struggling with broader trends in battery electric vehicle demand (16m51s).

Asana's New AI Features and Workflow Tools

• Asana has announced new AI features for workflow tools, including the ability to embed these features without using code, which allows leaders and team leads to set up AI to work in their existing workflows and tools (18m17s).
• The new features enable people to set up AI directly where they are already working, eliminating the need for additional places to work or remembering when to engage with AI (18m37s).
• A multinational advertiser is using Asana's AI workflows to empower their creative production teams, resulting in a 60% reduction in manual time and 15 hours saved per request (19m18s).
• AI agents can play a role in any company, and Asana's solution is unique because it sits on top of the existing scaffolding of work structure, providing transparency and accountability (20m12s).
• The CEO of Salesforce has been discussing what an AI agent is or is not, particularly in his critique of Microsoft Copilot, highlighting the importance of understanding and thinking about the use of AI agents (20m52s).
• The biggest unlock for AI agents is their ability to have creativity, and it's essential for organizations to decide the language they're willing to give AI and delegate slices of work to AI while maintaining accountability for decisions and results (21m9s).
• When deploying an AI agent, it's crucial to know what it did and why, and to have the ability to undo its actions (21m36s).
• Asana is good at AI agents because it works across apps that teams use today, and its AI agents are highly customizable, tailored to each team, and proactive in reducing busywork and executing tasks (21m45s).
• Asana's AI agents are unique because they are exactly tailored to each team, eliminating the need for teams to choose between different options, and they engage proactively to reduce busywork and help execute tasks (22m1s).

Technology Market Downturn and Chip Sector Turmoil

• The technology story in financial markets is currently dragging down the index level, with the Nasdaq 100 cutting down a percentage point, and some chip names experiencing pronounced declines ahead of earnings (23m9s).
• Qualcomm and ARM are both down, with Bloomberg reporting that ARM has canceled a license issued to Qualcomm with key intellectual property for smartphone processor designs, escalating an existing dispute that is headed for a trial in December (23m32s).
• TSMC has cut loose a client that was funneling chips to Huawei, a Chinese company subject to sanctions, bucking the trend in the space (23m58s).
• The dispute between Qualcomm and ARM is over an acquisition, and ARM's decision to cancel the license is a way of ratcheting up pressure and taking allegations of intellectual property infringement seriously (24m39s).
• The cancellation of the license does not mean that Qualcomm will absolutely be unable to make the chips it needs, but it does put pressure on the company to resolve the issue within 60 days (25m21s).
• The timeline running up to the trial in December is critical, with tremendous interest in the chip sector and escalating U.S.-China tensions and concerns about where these chips are ending up (26m4s).
• TSMC is benefiting from the AI boom, bucking the trend in the chip market, while Qualcomm faces questions about demand for the iPhone 16 and its potential impact on the company (26m26s).
• The tension between ARM and Qualcomm, one of its biggest customers, adds to the turmoil in the chip market, posing a risk that could hurt both companies (27m15s).

Qualcomm and ARM Dispute Details and Potential Outcomes

• ARM's decision to cancel the license is seen as an attempt to force a pre-trial settlement with Qualcomm, with a 60-day timeline that coincides with the scheduled trial date (28m20s).
• The dispute between ARM and Qualcomm is over the licensing rates, with ARM wanting Qualcomm to apply higher rates in its portfolio, while Qualcomm is transitioning to an architectural license with lower rates (30m3s).
• Qualcomm's response to ARM's decision is that it has its own architectural licensing with the same IP and technology, and is not willing to agree to ARM's terms (30m27s).
• The dispute is potentially driven by ARM's concern that rates could go lower if Qualcomm makes the transition to an architectural license (30m37s).
• A settlement between the two companies is seen as a likely outcome, as taking the dispute to a jury trial would not be beneficial for either party (30m51s).
• Qualcomm's recent unveiling of the Snapdragon 8 Elite, based on the new Via acquisition, is seen as a coincidence in the chronology of events, but may be related to the dispute with ARM (29m0s).
• The Via acquisition was an ARM service, but was designed by a team of Apple engineers, and Qualcomm's purchase of Via was to gain expertise in custom chip design (29m38s).
• Qualcomm responded to a Bloomberg report, stating it's trying to strong-arm a longtime partner, with the performance leading CPUs, and that the company is not the same as it was six years ago, having diversified its business through the Nuvia acquisition and a change in technology for smartphones (31m15s).
• Qualcomm is dominant in the smartphone market for Android, owning the whole flagship space, and has been pushing towards AI smartphones, which can drive an upgrade cycle and increase sales (31m51s).
• The company's architecture expertise is coming into play in terms of performance, and they have already launched PC chips, which will be rolled out across their increasingly diversified portfolio (32m24s).
• ARM shares are lower than Qualcomm shares in this situation, and the difference in their stock prices is notable (32m44s).

Wave's Expansion to Silicon Valley and Autonomous Driving Technology

• Wave, a UK-based startup, is making its way to Silicon Valley, road testing and opening a new office in Sunnyvale, California, with a focus on the foundation model, the robotic brain that helps a car learn how to drive itself (33m36s).
• Wave's CEO and co-founder, Alex Kendall, believes that being able to operate in AI in a diverse market is good for the company, and that their approach can allow for all ranges of automation, from driver assistance up to full autonomy, in different types of vehicles and environments (34m8s).
• Wave is now training with data from over 15 countries, and having a testing fleet on the ground in California will show that their AI can generalize and drive in a new environment (34m38s).
• The company is starting with level two functionality, which doesn't require a DMV permit, and plans to expand the testing for the California market, with the ultimate goal of deploying their AI in a range of automotive projects and products (34m53s).
• Wave has raised over $1 billion from investors like SoftBank and NVIDIA, and the company has been fairly disciplined in its spending, with the money going towards developing their AI approach (36m1s).
• A company has been pioneering approaches to autonomous driving, focusing on data efficiency, learning from simulation, and generative AI, with the goal of creating a lean and cost-effective solution (36m21s).
• The company has partnerships in the U.S. with companies like Uber, NVIDIA, and Microsoft, which is critical for powering their compute and earning systems (36m49s).

Brazil's Digital Economy and Google's Role

• Brazil has the most advanced digital economy in Latin America, with a large market of over 200 million people, high inflation in the 90s that drove automation in the financial sector, and a culture of entrepreneurship (37m54s).
• Google Brazil's president attributes the country's digital advancement to its large market, high inflation in the 90s, and the Brazilian people's love for technology and entrepreneurship (38m1s).
• Google plays a significant role in driving digital transformation in Brazil, with its platforms being widely used by Brazilians, and the company aims to empower businesses to become more efficient (38m40s).
• Brazilians are eager to adopt AI, and Google sees AI as a way to increase efficiencies and productivity, but also acknowledges concerns about privacy and data protection (38m58s).
• Google's approach to AI involves being bold and responsible, following ethical principles, and having a dialogue with society to ensure regulations are in place (39m21s).
• The company believes that regulations should be discussed with society and evolve with businesses, developers, and politicians to find the best model for emerging technologies (39m35s).
• Google is working to combat the proliferation of hate speech and disinformation in Brazil by respecting the law, having platform rules, and partnering with over 175 publishers to promote quality content (40m37s).
• The U.S. Department of Justice has launched an investigation into Alphabet's practices, raising concerns about potential ramifications due to practices that may prey on certain levels. (41m23s)
• In Brazil, regulators are working to balance innovation and consumer safeguarding, with Google having a positive relationship with regulators and engaging in dialogues to ensure a responsible approach. (41m57s)
• Google has been involved in discussions with the Supreme Court, Electoral Court, Senate, and Lower House in Brazil to find a common understanding and approach to innovation and regulation. (42m5s)
• Google has a significant presence in Brazil, with 80 years of history in Sao Paulo and having accelerated over 50 companies, and aims to maintain a supportive ecosystem for innovation and entrepreneurship. (42m33s)

Upcoming Interview with Ambassador Catherine

• The conversation with the President of Google Brazil will be followed by an interview with Ambassador Catherine, in conversation with Bloomberg's Stephanie Flanders. (42m57s)