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Bloomberg Audio Studios, podcasts, radio news.

This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis along with Doug Krisner. Join us each day for the stories making news and moving markets in the Asia Pacific. You can subscribe to the show anywhere you get your podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis along with Doug Krisner. Join us each day for the stories making news and moving markets in the Asia Pacific. You can subscribe to the show anywhere you get your podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

Later this year, Apple will deliver some of its new AI features using data centers engineered with Apple's in house micro processors. This is part of a sweeping plan to infuse Apple devices with AI capabilities, Sources telling Bloomberg, the company will place its high end M two Ultra chips in its cloud computing services. Those chips debuted last year as part of the MacPro and Mac Studio computers. Simple AI TESK will be processed directly on on Apples, computers and mobile devices. Apple is expecting to lay out an ambitious AI strategy at the Worldwide Developers Conference that will happen on June tenth.

Later this year, Apple will deliver some of its new AI features using data centers engineered with Apple's in house micro processors. This is part of a sweeping plan to infuse Apple devices with AI capabilities, Sources telling Bloomberg, the company will place its high end M two Ultra chips in its cloud computing services. Those chips debuted last year as part of the MacPro and Mac Studio computers. Simple AI TESK will be processed directly on on Apples, computers and mobile devices. Apple is expecting to lay out an ambitious AI strategy at the Worldwide Developers Conference that will happen on June tenth.

Brian, all right, let's bring in Mark German for a closer look at this story. Bloomberg Chief Global Technology correspondent and one of the experts on Apple mark. So this is in data centers. How does this actually work and compare with AI inference?

Brian, all right, let's bring in Mark German for a closer look at this story. Bloomberg Chief Global Technology correspondent and one of the experts on Apple mark. So this is in data centers. How does this actually work and compare with AI inference?

Very good question. So Apple's developing multiple large language models. Some of the lms are going to run on the devices themselves, so in the iPhone and the iPad, in the Mac, in the Apple Watch. Another set of the lms that Apple's developed are going to run on the cloud itself. Why is that important, Well, some of these large models can't actually fit or run on the processors in the phone. You need more space, you need more advanced processing power, go to the cloud. And so what Apple's done is they outfitted some of their data centers with M two Ultras, that's currently their highest end processors with the biggest AI capabilities and processing horsepower. And so the more advanced features like summarizing a lot of text, image and text generation, those are going to rely on the data centers, whereas simpler tasks are going to involve running directly on the phone themselves.

Very good question. So Apple's developing multiple large language models. Some of the lms are going to run on the devices themselves, so in the iPhone and the iPad, in the Mac, in the Apple Watch. Another set of the lms that Apple's developed are going to run on the cloud itself. Why is that important, Well, some of these large models can't actually fit or run on the processors in the phone. You need more space, you need more advanced processing power, go to the cloud. And so what Apple's done is they outfitted some of their data centers with M two Ultras, that's currently their highest end processors with the biggest AI capabilities and processing horsepower. And so the more advanced features like summarizing a lot of text, image and text generation, those are going to rely on the data centers, whereas simpler tasks are going to involve running directly on the phone themselves.

So in terms of the chip, I'm going to imagine that the chip is being manufactured by TSMC, is Apple partnering with another firm. In terms of the construction of the actual server itself.

So in terms of the chip, I'm going to imagine that the chip is being manufactured by TSMC, is Apple partnering with another firm. In terms of the construction of the actual server itself.

Well, these chips, the M two Ultras, These shifts actually last June, so these have been on the marketplace for a while. And yeah, as you know, TSMC is the exclusive manufacturing manufacturing partner for Apple's chips at this point, right, so those are TSMC made. I don't expect this to be a big boon to TSMC. This is part of the normal cadence of manufacturing for these chips. Anyways, there's a new chip that's the M four that Apple announced in the iPad pro earlier this week. A version of that next year. Later next year will come to the data centers for more increases in processing power as they expand the cloud performance.

Well, these chips, the M two Ultras, These shifts actually last June, so these have been on the marketplace for a while. And yeah, as you know, TSMC is the exclusive manufacturing manufacturing partner for Apple's chips at this point, right, so those are TSMC made. I don't expect this to be a big boon to TSMC. This is part of the normal cadence of manufacturing for these chips. Anyways, there's a new chip that's the M four that Apple announced in the iPad pro earlier this week. A version of that next year. Later next year will come to the data centers for more increases in processing power as they expand the cloud performance.

Here, perhaps we can talk a little bit more about these AI type of chips. But I also wanted to get to a comment by the ARM CEO, Renee Haas he talked about how geopolitics has hurt Apple in China and that local brands are getting featured there and we understand that, but he also said that they're not going to seed that ground. And I'm wondering how that translates and what it translates into. Does that mean that Apple might get more aggressive on pricing in China?

Here, perhaps we can talk a little bit more about these AI type of chips. But I also wanted to get to a comment by the ARM CEO, Renee Haas he talked about how geopolitics has hurt Apple in China and that local brands are getting featured there and we understand that, but he also said that they're not going to seed that ground. And I'm wondering how that translates and what it translates into. Does that mean that Apple might get more aggressive on pricing in China?

Well to that end, here's the good news for Apple and China. They've been losing some steam there, they've been losing some share there, but they've done nothing to stop the bleeding. They haven't pulled any lever available to them to try to turn things around there, right, And so the good news is it's very likely as they start pulling those levers, you're going to start seeing a turnaround. Pricing, lower end devices, colors, promotions, new financing plans, particular to the Chinese market, those are all things you can see Apple try to engage with over the coming months.

Well to that end, here's the good news for Apple and China. They've been losing some steam there, they've been losing some share there, but they've done nothing to stop the bleeding. They haven't pulled any lever available to them to try to turn things around there, right, And so the good news is it's very likely as they start pulling those levers, you're going to start seeing a turnaround. Pricing, lower end devices, colors, promotions, new financing plans, particular to the Chinese market, those are all things you can see Apple try to engage with over the coming months.

So, Mark, if we circle back and talk a little bit about Apple's approach to artificial intelligence. We know that Microsoft, for example, has been working with open Ai. In fact, they have a big position in the company. And then down the road in Silicon Valley you've got Google, Alphabet really in partnership with Anthropic along with Amazon. Is Apple choosing to partner with anybody when it comes to artificial intelligence.

So, Mark, if we circle back and talk a little bit about Apple's approach to artificial intelligence. We know that Microsoft, for example, has been working with open Ai. In fact, they have a big position in the company. And then down the road in Silicon Valley you've got Google, Alphabet really in partnership with Anthropic along with Amazon. Is Apple choosing to partner with anybody when it comes to artificial intelligence.

So the models that I described, the cloud model as well as the in house model, those are developed internally at Apple, and so those are Apple models. However, Apple has not developed its own gender Todai chatbot things like Google Gemini, things like open AI's chat GPT. That's actually where Gemini from Google and open i come into play. Apple is in talks with both of those companies to partner with them to implement their chatbots zeep into the new version of iOS and the new iPhones coming in the fall in September, I expect Apple to ultimately partner with open Ai. Talks have advanced, they've intensified. I've reported a couple of weeks ago, and at this point it seems pretty likely that there's going to be a deal with open Ai reached by June when this announcement is expected. And it's also possible becomes you an agreement with Google at some point too.

So the models that I described, the cloud model as well as the in house model, those are developed internally at Apple, and so those are Apple models. However, Apple has not developed its own gender Todai chatbot things like Google Gemini, things like open AI's chat GPT. That's actually where Gemini from Google and open i come into play. Apple is in talks with both of those companies to partner with them to implement their chatbots zeep into the new version of iOS and the new iPhones coming in the fall in September, I expect Apple to ultimately partner with open Ai. Talks have advanced, they've intensified. I've reported a couple of weeks ago, and at this point it seems pretty likely that there's going to be a deal with open Ai reached by June when this announcement is expected. And it's also possible becomes you an agreement with Google at some point too.

And I also wanted to ask you about this ad that they now have that Apple now has said we'll not run on television about the iPad and the destruction of a lot of creative tools let's say the human condition has been using for thousands of years into a iPad. Just your thoughts about the thinking behind that and perhaps where and how it went wrong.

And I also wanted to ask you about this ad that they now have that Apple now has said we'll not run on television about the iPad and the destruction of a lot of creative tools let's say the human condition has been using for thousands of years into a iPad. Just your thoughts about the thinking behind that and perhaps where and how it went wrong.

I see exactly what Apple was trying to do, but here's a very simplistic perspective. They are trying to show that the iPad is super thin, and they're using a you know, an industrial press machine to squeeze in all the items that are in a that people can do on the iPad, the physical items, but squeeze it into that really thin five millimeter device. So that's what they tried to do. How it appeared Apple's destroying everything that people love from the real world in favor of using the iPad. Not a great look. Obviously they missed the mark. If they have come to that conclusion beforehand, maybe they wouldn't have done it this way. I think it was a ridiculous move that this ad even made it to market. But I guess this is like the third apology in the history of Apple. So we'll take this one until the next start, think fifteen years from now.

I see exactly what Apple was trying to do, but here's a very simplistic perspective. They are trying to show that the iPad is super thin, and they're using a you know, an industrial press machine to squeeze in all the items that are in a that people can do on the iPad, the physical items, but squeeze it into that really thin five millimeter device. So that's what they tried to do. How it appeared Apple's destroying everything that people love from the real world in favor of using the iPad. Not a great look. Obviously they missed the mark. If they have come to that conclusion beforehand, maybe they wouldn't have done it this way. I think it was a ridiculous move that this ad even made it to market. But I guess this is like the third apology in the history of Apple. So we'll take this one until the next start, think fifteen years from now.

So give us your assessment of the new iPad. I mean, it's been a while since they've updated this product line. I mean, what's your take.

So give us your assessment of the new iPad. I mean, it's been a while since they've updated this product line. I mean, what's your take.

It's a spec bump. It looks better, it's cooler, it doesn't do anything new, it doesn't change the iPad story. They still need to upgrade the software on this thing to make it more like a macroplacement or a laptop. Success or it doesn't do anything differently than the last iPad, the iPad before that, or the ten models before that. So the hardware is awesome, but the hardware on the iPad has always been awesome. The problem's always been the software. This doesn't change that one bit.

It's a spec bump. It looks better, it's cooler, it doesn't do anything new, it doesn't change the iPad story. They still need to upgrade the software on this thing to make it more like a macroplacement or a laptop. Success or it doesn't do anything differently than the last iPad, the iPad before that, or the ten models before that. So the hardware is awesome, but the hardware on the iPad has always been awesome. The problem's always been the software. This doesn't change that one bit.

Yeah, so the iPad was positioned between the phone and the laptop, but a lot closer to the phone than the phone got bigger. So, as I've read from a lot of the stuff that you've written, you know this is an effort going in the other direction. How much further does it need to go to get closer to a you know, to a laptop without actually trying to become one.

Yeah, so the iPad was positioned between the phone and the laptop, but a lot closer to the phone than the phone got bigger. So, as I've read from a lot of the stuff that you've written, you know this is an effort going in the other direction. How much further does it need to go to get closer to a you know, to a laptop without actually trying to become one.

Well, I'll answer it this way. It needs to become a laptop. They need to go all the way or this device.

Well, I'll answer it this way. It needs to become a laptop. They need to go all the way or this device.

And why do you need a laptop? Then if you've if you've got an iPad that is a laptop.

And why do you need a laptop? Then if you've if you've got an iPad that is a laptop.

Well, the Mac line isn't doing so hot, the iPad line is not doing so hot. You should create, if you're Apple, the best version of the iPad that you can make, and they're just holding that product back. So what if it kills the laptop? Something's going to kill the laptop? One day it might as well be Apple. But right now they're just kind of screwing around and creating the Twitter device. They've moved way past that. The market has moved way past that. It's time to kill the laptop or make this a laptop replacement, make the laptops even better.

Well, the Mac line isn't doing so hot, the iPad line is not doing so hot. You should create, if you're Apple, the best version of the iPad that you can make, and they're just holding that product back. So what if it kills the laptop? Something's going to kill the laptop? One day it might as well be Apple. But right now they're just kind of screwing around and creating the Twitter device. They've moved way past that. The market has moved way past that. It's time to kill the laptop or make this a laptop replacement, make the laptops even better.

German tells it like it is, Mark, thank you for joining us. Some very interesting comments there, Mark German, Bloomberg, Chief Global Technology Correspondent. The Security is In Exchange Commission is launching a probe into claims made by Boeing about its own safety practices. This after a January accident aboard one of the seven thirty seven Max nine planes. Joining us now is Julie Johnson, Bloomberg, Senior Aerospace reporter. So what is it that the SEC is particularly concerned about that perhaps these comments about the safety record were inaccurate or went too far.

German tells it like it is, Mark, thank you for joining us. Some very interesting comments there, Mark German, Bloomberg, Chief Global Technology Correspondent. The Security is In Exchange Commission is launching a probe into claims made by Boeing about its own safety practices. This after a January accident aboard one of the seven thirty seven Max nine planes. Joining us now is Julie Johnson, Bloomberg, Senior Aerospace reporter. So what is it that the SEC is particularly concerned about that perhaps these comments about the safety record were inaccurate or went too far.

Well, that's what we'll find out or or not. We'd love to know a little bit more about what they're what they're looking into, and whether whether the company made maybe made assurances to investors. I mean, they've been stressing safety publicly ever since the twenty nineteen you know, accidents and global grounding. So it's you know, I think the regulator regulators will want to know whether Boeing may be over sold what was going on in its own factories, but the actual details we don't have.

Well, that's what we'll find out or or not. We'd love to know a little bit more about what they're what they're looking into, and whether whether the company made maybe made assurances to investors. I mean, they've been stressing safety publicly ever since the twenty nineteen you know, accidents and global grounding. So it's you know, I think the regulator regulators will want to know whether Boeing may be over sold what was going on in its own factories, but the actual details we don't have.

So this is the panel that brew off that Max nine, the Alaska Airlines flight AM I right about that, and since that time, there have been a lot of other issues that the company has had to address regarding things like safety and design and manufacturing.

So this is the panel that brew off that Max nine, the Alaska Airlines flight AM I right about that, and since that time, there have been a lot of other issues that the company has had to address regarding things like safety and design and manufacturing.

Yeah, that that January incident really sort of precipitated this whole crisis, and so Boeing's being investigated on a number of fund fronts. You've got the FAA and NTSB, you know, looking into what happened with that accident, what went wrong within Boeing's own factories. And then the FAA has come down really hard on on Boeing over the last few months and has its auditors, you know, in Boeing's factories and looking very closely at quality controls and safety and Boeing's Boeing's got a critical report coming up on that. And then there's a criminal investigation launched by the Justice Department and the grand jury in Seattle. So it's it's really been something.

Yeah, that that January incident really sort of precipitated this whole crisis, and so Boeing's being investigated on a number of fund fronts. You've got the FAA and NTSB, you know, looking into what happened with that accident, what went wrong within Boeing's own factories. And then the FAA has come down really hard on on Boeing over the last few months and has its auditors, you know, in Boeing's factories and looking very closely at quality controls and safety and Boeing's Boeing's got a critical report coming up on that. And then there's a criminal investigation launched by the Justice Department and the grand jury in Seattle. So it's it's really been something.

Else for Boeing Julie. Is there any suggestion of a whistleblower on this?

Else for Boeing Julie. Is there any suggestion of a whistleblower on this?

I don't think so. I think this is more looking at whether the company's private practices uh were in line with what it was saying publicly around what was going on in its factory. And just as a reminder with the SEC, we don't know of any allegations of wrongdoing here. And these enforced enforcement actions don't you know, don't always flow from investigations, but quite often the agency can levy finds against the company or the corporate officers.

I don't think so. I think this is more looking at whether the company's private practices uh were in line with what it was saying publicly around what was going on in its factory. And just as a reminder with the SEC, we don't know of any allegations of wrongdoing here. And these enforced enforcement actions don't you know, don't always flow from investigations, but quite often the agency can levy finds against the company or the corporate officers.

So it's not just going from might understand. I mean Spirit Arrow Systems, which is the company that manu factiously the wing assembly the fuselage. That company also has some exposure. But are they going to be swept up in this SEC probe?

So it's not just going from might understand. I mean Spirit Arrow Systems, which is the company that manu factiously the wing assembly the fuselage. That company also has some exposure. But are they going to be swept up in this SEC probe?

Do you think yes?

Do you think yes?

Actually, one of the interesting things is that we found out about this in part because Spirit had a very detailed explanation of the various probes and subpoenas that it's facing in a quarterly financial statement that it made on Tuesday, and they disclosed that the SEC had subpoened them, you know, related to the seven thirty seven MAX issues in the Alaska incident. They didn't provide a whole lot of details, but it was pretty clear the agency was looking hard at Spirit and they're so closely tied to Boeing on this that you know that it made sense that Boeing was also, you know, a target.

Actually, one of the interesting things is that we found out about this in part because Spirit had a very detailed explanation of the various probes and subpoenas that it's facing in a quarterly financial statement that it made on Tuesday, and they disclosed that the SEC had subpoened them, you know, related to the seven thirty seven MAX issues in the Alaska incident. They didn't provide a whole lot of details, but it was pretty clear the agency was looking hard at Spirit and they're so closely tied to Boeing on this that you know that it made sense that Boeing was also, you know, a target.

Julie, do we have any new information about exactly what's happening with the chief executive officer position at Going Oh.

Julie, do we have any new information about exactly what's happening with the chief executive officer position at Going Oh.

I'd love to know what's going on there. The board is searching for, you know, a new CEO, and they launched that that search back in March, and it's being led by the chairman, Steve Mallenkopf and Dennis or sorry, Tennis Ballenberg is.

I'd love to know what's going on there. The board is searching for, you know, a new CEO, and they launched that that search back in March, and it's being led by the chairman, Steve Mallenkopf and Dennis or sorry, Tennis Ballenberg is.

The former CEO.

The former CEO.

Dave Yeah, Dave Calhoun, the current CEO is is staying on until a successor is found. And the board's sort of given itself a lot of leeway with that search and by saying, you know that Calhoun will be around through the end of the year, but you get the sense that they would like to get this done sooner rather than later, just because right now it's it's a bad time to be you know, I'm in transition to your.

Dave Yeah, Dave Calhoun, the current CEO is is staying on until a successor is found. And the board's sort of given itself a lot of leeway with that search and by saying, you know that Calhoun will be around through the end of the year, but you get the sense that they would like to get this done sooner rather than later, just because right now it's it's a bad time to be you know, I'm in transition to your.

Leader, and it's a bad time for the airlines that have been waiting for new aircraft. I mean, that's the other part of the story, that production has come to a virtual standstill and you have many airlines that have been unable to take delivery of new aircraft.

Leader, and it's a bad time for the airlines that have been waiting for new aircraft. I mean, that's the other part of the story, that production has come to a virtual standstill and you have many airlines that have been unable to take delivery of new aircraft.

Yeah, that's so true. It's it really has become a huge sort of pressure point for the whole industry. And you've seen a lot of frustration voiced by the US carriers as well. And you know, I mean, Boeing's got its own problems, but everybody's struggling. I mean, Airbus is doing better, but they're not They're not hitting delivery targets either. So it's just a bad time for an airline, you know that that's out there looking for planes.

Yeah, that's so true. It's it really has become a huge sort of pressure point for the whole industry. And you've seen a lot of frustration voiced by the US carriers as well. And you know, I mean, Boeing's got its own problems, but everybody's struggling. I mean, Airbus is doing better, but they're not They're not hitting delivery targets either. So it's just a bad time for an airline, you know that that's out there looking for planes.

I'm kind of curious something that you alluded to moments ago, but I'd like to hear more on it about the coordination and or differences between the SEC and the FAA when it comes to Boeing.

I'm kind of curious something that you alluded to moments ago, but I'd like to hear more on it about the coordination and or differences between the SEC and the FAA when it comes to Boeing.

Yeah, that's a that's a really great question. I wish I knew what was going on behind the scenes, but you know, because sometimes we just we get our information sort of bit by bit and we don't have the entire picture. But you know, the FAA got sort of a black eye for certifying the seven thirty seven max and standing by Boeing back in twenty nineteen when these tragedies happened and some of Boeing's shortcomings were made public. And so they've been this time around. They've just been very, very diligent. And I think that the SEC action is something you would expect. And it's an election year in the US, by the way, so everybody's going to want to, you know, stay on top of this.

Yeah, that's a that's a really great question. I wish I knew what was going on behind the scenes, but you know, because sometimes we just we get our information sort of bit by bit and we don't have the entire picture. But you know, the FAA got sort of a black eye for certifying the seven thirty seven max and standing by Boeing back in twenty nineteen when these tragedies happened and some of Boeing's shortcomings were made public. And so they've been this time around. They've just been very, very diligent. And I think that the SEC action is something you would expect. And it's an election year in the US, by the way, so everybody's going to want to, you know, stay on top of this.

This situation one of the interesting things and maybe you can weigh in very quickly on this, Julie. One of the very interesting things about this industry, and I'm talking about aerospace as a real rates to commercial aircraft, that these manufacturers are almost self regulated. They are expected to do a fair amount of the monitoring that you would expect a federal agency would do during the manufacturing process.

This situation one of the interesting things and maybe you can weigh in very quickly on this, Julie. One of the very interesting things about this industry, and I'm talking about aerospace as a real rates to commercial aircraft, that these manufacturers are almost self regulated. They are expected to do a fair amount of the monitoring that you would expect a federal agency would do during the manufacturing process.

Oh, I know, it's a real conundrum for everybody, and the FAA is not a huge agency. This is part of the problem. And to fully fund them to go back, you know to the days when they were climbing all over Boeing's factories would be you know, that takes a lot of money, and US Congress has been cutting, you know, cutting their bundt for years. So yeah, it's that complicated, Yes, sure does.

Oh, I know, it's a real conundrum for everybody, and the FAA is not a huge agency. This is part of the problem. And to fully fund them to go back, you know to the days when they were climbing all over Boeing's factories would be you know, that takes a lot of money, and US Congress has been cutting, you know, cutting their bundt for years. So yeah, it's that complicated, Yes, sure does.

Julie, thank you so much for joining us. Julie Johnson Bloomberg senior aerospace reporter. Joining us now in our studios for a closer look at markets is Richard Harris, CEO of Port Shelter Investment Management. Richard, thanks for coming into the studios. So May has been a reasonably good period here for both stocks and bonds, and we're waiting on confirmation of any kind of economic slowdown. And the reason why that's being seen as good news, obviously is it might take a little pressure off the FED. But when you get these like we had the claims that Doug mentioned earlier, claims jumping a little bit, you wonder whether or not this is a welcome cooling of the labor market or some sort of unwelcome development, like a more serious slowdown.

Julie, thank you so much for joining us. Julie Johnson Bloomberg senior aerospace reporter. Joining us now in our studios for a closer look at markets is Richard Harris, CEO of Port Shelter Investment Management. Richard, thanks for coming into the studios. So May has been a reasonably good period here for both stocks and bonds, and we're waiting on confirmation of any kind of economic slowdown. And the reason why that's being seen as good news, obviously is it might take a little pressure off the FED. But when you get these like we had the claims that Doug mentioned earlier, claims jumping a little bit, you wonder whether or not this is a welcome cooling of the labor market or some sort of unwelcome development, like a more serious slowdown.

Your thoughts, well, well, the market seems to have the emphasis of the moment of eat, drink and be merry for tomorrow. We die because we have good news and the markets go up. We have slightly bad news and the markets go down. I do think that unemployment is going to be a very big indicator looking out forward, because we are relying on consumer growth driving earnings in the market. So yes, that's a very big narrative going through. But I'm not sure that we're actually there yet. I think that what we're seeing is that the market's quite happy to take a rather bullish view, risk on view all the way through, despite the fact that elements of bad news. You know, as we were looking over ago, the market has been relatively flat, despite the fact that we've had issues with huties, issues in hor Moos, the whole escapade in Gus, and the mark's been reatively flat. There are a lot of bad news out there, but the market doesn't really want to look at it.

Your thoughts, well, well, the market seems to have the emphasis of the moment of eat, drink and be merry for tomorrow. We die because we have good news and the markets go up. We have slightly bad news and the markets go down. I do think that unemployment is going to be a very big indicator looking out forward, because we are relying on consumer growth driving earnings in the market. So yes, that's a very big narrative going through. But I'm not sure that we're actually there yet. I think that what we're seeing is that the market's quite happy to take a rather bullish view, risk on view all the way through, despite the fact that elements of bad news. You know, as we were looking over ago, the market has been relatively flat, despite the fact that we've had issues with huties, issues in hor Moos, the whole escapade in Gus, and the mark's been reatively flat. There are a lot of bad news out there, but the market doesn't really want to look at it.

I guess we can refer to this as the Dionician trade. Is that fair? I mean, at least for the moment, right eat, drink and be merry and let it rip to the upside for as long as it's able. And I'm curious to get your take on what's happening in China right now. So much of what we have focused on here is the FED and whether or not we're going to get a rate cut before the end of the year. The earnings to the quality of corporate earnings here in the States have been okay, but there's been a perhaps a bigger question over a lot of what's happening in China. We were talking yesterday about the fact that the market's been powering ahead. Maybe this is just kind of the introduction of a lot of foreign capital that's testing the water in China. How much do you think of what the move that we have seen, either in Hong Kong or on the mainland is predicated on the assumption that the quality of earnings is going to begin to improve for Chinese firms.

I guess we can refer to this as the Dionician trade. Is that fair? I mean, at least for the moment, right eat, drink and be merry and let it rip to the upside for as long as it's able. And I'm curious to get your take on what's happening in China right now. So much of what we have focused on here is the FED and whether or not we're going to get a rate cut before the end of the year. The earnings to the quality of corporate earnings here in the States have been okay, but there's been a perhaps a bigger question over a lot of what's happening in China. We were talking yesterday about the fact that the market's been powering ahead. Maybe this is just kind of the introduction of a lot of foreign capital that's testing the water in China. How much do you think of what the move that we have seen, either in Hong Kong or on the mainland is predicated on the assumption that the quality of earnings is going to begin to improve for Chinese firms.

Well, I think that's right, but I think a lot of the move at the moment has been stress relief. You know, we've had very weak period in China. We had huge expectations both COVID and nothing really came of it. The Hong Kong market has been especially bad, and the Hong Kong market's probably likely to act as a warrant on China, you know, worse when China does bet does worse, and better when China does better. China has recently been doing better, and one key reason for this, of course, is that the authorities need to keep that economy going. They can't have it in the slough of despond for a long period of time. So they have put a lot of stimulus into the market pretty well at trillion dollars, you know, which even for China's a reasonable amount of money that's starting to come through. They use the big Bazuka. But there are signs so they may actually be now looking at restructuring the property market, maybe putting some of the bad debt into a bad bank, put it aside, making sure the apartments there already been bull to finish these kind of things. If they can tackle that property market, I think the sentiment in China will improve dramatically.

Well, I think that's right, but I think a lot of the move at the moment has been stress relief. You know, we've had very weak period in China. We had huge expectations both COVID and nothing really came of it. The Hong Kong market has been especially bad, and the Hong Kong market's probably likely to act as a warrant on China, you know, worse when China does bet does worse, and better when China does better. China has recently been doing better, and one key reason for this, of course, is that the authorities need to keep that economy going. They can't have it in the slough of despond for a long period of time. So they have put a lot of stimulus into the market pretty well at trillion dollars, you know, which even for China's a reasonable amount of money that's starting to come through. They use the big Bazuka. But there are signs so they may actually be now looking at restructuring the property market, maybe putting some of the bad debt into a bad bank, put it aside, making sure the apartments there already been bull to finish these kind of things. If they can tackle that property market, I think the sentiment in China will improve dramatically.

The tricky part, Richard, is that markets get out in front of the actual data. That's why I don't think that really smart investors are always data dependent. For instance, you look at the HANKSNG index. It has matched the S and P five hundred year today nine percent higher for both. And we have not seen good earnings in Hong Kong, we have not seen good earnings in China, and yet the market has moved out. So we've talked also about the queues. The ETF that looks at Nazaq one hundred and it's actually flat for the past three months, and yet there hasn't been bad earnings from companies like Nvidia and Broadcom. So give me something where you're looking out into the future that the data of the day is not telling us.

The tricky part, Richard, is that markets get out in front of the actual data. That's why I don't think that really smart investors are always data dependent. For instance, you look at the HANKSNG index. It has matched the S and P five hundred year today nine percent higher for both. And we have not seen good earnings in Hong Kong, we have not seen good earnings in China, and yet the market has moved out. So we've talked also about the queues. The ETF that looks at Nazaq one hundred and it's actually flat for the past three months, and yet there hasn't been bad earnings from companies like Nvidia and Broadcom. So give me something where you're looking out into the future that the data of the day is not telling us.

Well.

Well.

I mean, you make an extremely good point, Brian, because you know what we're talking here is the wisdom of the crowd. We all know the market. The crowd seems to sense that good news is coming through. You know, why is it that markets are doing quite well? And then the data comes through and say, oh, that's why the market was doing well, you know, because the probabilities of things happening become sharper towards as time goes on. And I think that's what we're seeing with this forecasting element. But doesn't it take you back to a big question about the FED? The FED is always data dependent. Well, if you're waiting for data to come through, it's too late. And maybe this is a problem with so many people in the FED being economists. Maybe you should have more bankers in the FED who actually spend their time looking forward and not back.

I mean, you make an extremely good point, Brian, because you know what we're talking here is the wisdom of the crowd. We all know the market. The crowd seems to sense that good news is coming through. You know, why is it that markets are doing quite well? And then the data comes through and say, oh, that's why the market was doing well, you know, because the probabilities of things happening become sharper towards as time goes on. And I think that's what we're seeing with this forecasting element. But doesn't it take you back to a big question about the FED? The FED is always data dependent. Well, if you're waiting for data to come through, it's too late. And maybe this is a problem with so many people in the FED being economists. Maybe you should have more bankers in the FED who actually spend their time looking forward and not back.

So the FED has obviously been a key theme. Another key theme has been artificial intelligence. We were talking about armholdings. We were talking about Apple a short while ago, getting ready to unveil some new AI features later in the year. How are you feeling about AI as a trade still? Does it have legs or would you be concerned maybe that things are a little overextended in certain areas and it would be prudent to remove a little bit of risk.

So the FED has obviously been a key theme. Another key theme has been artificial intelligence. We were talking about armholdings. We were talking about Apple a short while ago, getting ready to unveil some new AI features later in the year. How are you feeling about AI as a trade still? Does it have legs or would you be concerned maybe that things are a little overextended in certain areas and it would be prudent to remove a little bit of risk.

Well, the AI bubble reminds me a little bit of the dot com bubble of the two thousands, but you know, I don't think it's anything like that. I think it's a mere shadow of that. And yes, we don't really know what AI is going to do. We had maybe a bit of a clear impact of what the Internet was going to do, but we didn't really know. You know, is it going to be the most fantastic thing. Is it going to be a disaster. It'll be a bit of both. And I think we still have to learn how AI is going to work, like the early days of the automobile when a man walked in front of it with the red flag. So we're still looking at that. But I think that AI is clearly going to be important. There are new things happening. I mean, Apple is particularly interesting in that they're using their own chips for some of this stuff. And everybody thought Apple was dead about two weeks ago. You know, it was an exposure that China the ecosystem slid down, iPad slaying down, and all of a sudden, you have this new thing coming through where Apple actually does have a stake in it. So all of these things are happening at the moment. I don't think the AI bubble is over yet.

Well, the AI bubble reminds me a little bit of the dot com bubble of the two thousands, but you know, I don't think it's anything like that. I think it's a mere shadow of that. And yes, we don't really know what AI is going to do. We had maybe a bit of a clear impact of what the Internet was going to do, but we didn't really know. You know, is it going to be the most fantastic thing. Is it going to be a disaster. It'll be a bit of both. And I think we still have to learn how AI is going to work, like the early days of the automobile when a man walked in front of it with the red flag. So we're still looking at that. But I think that AI is clearly going to be important. There are new things happening. I mean, Apple is particularly interesting in that they're using their own chips for some of this stuff. And everybody thought Apple was dead about two weeks ago. You know, it was an exposure that China the ecosystem slid down, iPad slaying down, and all of a sudden, you have this new thing coming through where Apple actually does have a stake in it. So all of these things are happening at the moment. I don't think the AI bubble is over yet.

You keep referring to it as an AI bubble, and yet the earnings for a lot of these companies are growing into the valuations. I know that Doug Richard has done a PhD in market narratives, so he's quite an expert on narratives, and he got that PhD in his sixties, which is pretty pretty impressive.

You keep referring to it as an AI bubble, and yet the earnings for a lot of these companies are growing into the valuations. I know that Doug Richard has done a PhD in market narratives, so he's quite an expert on narratives, and he got that PhD in his sixties, which is pretty pretty impressive.

So last year, by the way, I.

So last year, by the way, I.

Know, it's really quite quite intense and amazing. But but you know, do you think you're jumping the gun a little bit with saying bubble because we have not seen yet, you know, the full ramifications, the full implications of official intelligence.

Know, it's really quite quite intense and amazing. But but you know, do you think you're jumping the gun a little bit with saying bubble because we have not seen yet, you know, the full ramifications, the full implications of official intelligence.

Well that's right, but we go back to what we were saying a moment earlier. You know, isn't the wisdom of the crowd picking out the potential benefits of these things early on. You know, why is the market moving in the way it is. Why does it have this risk on element when we've had two wars, we've had issues with China, sluggish growth, a load of risks out there, and yet the market still continues. There is an underlying narrative I think from AI that at the moment for markets is more positive than negative.

Well that's right, but we go back to what we were saying a moment earlier. You know, isn't the wisdom of the crowd picking out the potential benefits of these things early on. You know, why is the market moving in the way it is. Why does it have this risk on element when we've had two wars, we've had issues with China, sluggish growth, a load of risks out there, and yet the market still continues. There is an underlying narrative I think from AI that at the moment for markets is more positive than negative.

I'm still going back to the guy who stepped out in front of the Model T with the red flag. Was he run over or did the car stop? Well?

I'm still going back to the guy who stepped out in front of the Model T with the red flag. Was he run over or did the car stop? Well?

I guess when they changed into second gear. When they found the second gear, then he was in trouble.

I guess when they changed into second gear. When they found the second gear, then he was in trouble.

All right, Richard, we'll probably have to leave it there. Thanks very much for coming into the studios. Always an interesting conversation. Richard Harris is CEO of Port Shelter Investment Management.

All right, Richard, we'll probably have to leave it there. Thanks very much for coming into the studios. Always an interesting conversation. Richard Harris is CEO of Port Shelter Investment Management.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.