Bloomberg TechIntel Scraps Tower Deal, Tencent Falls After Earnings
Bloomberg's Ed Ludlow and Caroline Hyde discuss the implications of Intel and Tower Semiconductor scrapping their $5.4 billion deal. Plus, they recap Tencent's earnings and what is says about China's technology sector. And, cryptocurrency company BitGo inks a $1.75 billion valuation after raising $100 million in its Series C funding round.
From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
And Caroline Hyde at Bloomberg's world headquarters in New York, and I met Ludlow in San Francisco.
This is Bloomberg Technology coming up.
Intel well, it scraps that five billion dollar deal for his Radi semiconductor firm Tower after failing to win approval in China. Will break down the implications.
Plus, China tech firms report earnings with ten cent missing revenue estimates amid an uncertain economy. Will break down the results and look at WHYJD dot Com is bucking the slowdown.
Speaking of slowdowns, from Buckingham, crypto custodian Bitgo defies the broader industry pullback to raise one hundred million dollars in securing one point seven five billion dollar valuation. So Mike Welsh's going to be joining us later to discuss how and why they did it.
The top story, though, is clear.
It is Intel walking away abandoning a deal to buy Tower Semi for five point four billion dollars. The concern is the timeline and the regulatory hurdle of China that they were not able to get approved Caro. It goes to the core of their foundry business. We're going to be talking to one of our guests about what this means for the foundry side later in the show. But you can see the impact on the market. Tower semi clearly down more ten percent, Intel down two point seven percent. By the way, Bloomberg reported this before the company confirmed it, Let's.
Get to one of those reporters please to say a Leanna Baker is here with us and it was a scoop, but actually maybe the market had seen it coming because Tower had been selling off for what months before this.
Basically it wasn't a total surprise. It was just about catching that finale. And even when we put out the story, we were wondering, what could happen if there's a hail Mary China's watchdog. They update their website at all hours of the night here in the US, so it was possible even at the last minute, they could have approved the deal.
But once it became a.
Parent that wasn't happening, it felt worth to publish that this was dead.
Leanna walk us through the mechanics and timeline of the deal because there were multiple jurisdictional or regulatory challenges, China the main one. But Intel seems so confident when they announced this deal that they would get it done by a deadline.
They announced the deal back in February of twenty twenty two, so that was already eighteen months ago, so it had really been dragging on.
China is often.
The last regulatory hurdle that you'll see in transactions. They really have jurisdiction over so many deals that have any connection to China. So anything right now in semiconductors is really hard to touch because it's just such a black box, this regulatory watchdog in China.
It's not going away.
I think any deal right now in semiconductors could face similar risks.
And maybe other industries. We know that there's this overarching concern about AI, about chips when it comes to basically geopolitics at play. Does it all come down to geopolitics? Is that anything that Intel can see a silver lining and all.
Of this wrong anything with chips, electric vehicles, AI, it's all very sensitive. It seems like the US and China, given all the geopolitical tensions, are in some kind of arms race so I would say any deal in that space is going to face a lot of scrutiny. Other deals that need China approval, maybe things in clothing and other sectors, those are probably safe for now and the reviews will be more straightforward. But certainly anything in technology, it's going to be a really rough road and traders are not going to like what happens.
All right, bluem both Leanna Baker, who leads our deal's team in New York, thank you very much. I want to get some comments from Intel CEO Pat Gelsinger. In this statement, he said, we are executing well on our roadmap to regain transistor performance and power performance leadership by twenty two five, building momentum with customers in the broader ecosystem, and investing to deliver the geographically diverse and resilient manufacturing footprint.
The world needs.
What does this mean for the foundry business as bringing Daniel Newman the future and group CEO that for me, Dan is the story. How does this impact Intel's big plan to become a foundry offering of choice.
We have a global title prize fight right now that's going on between China and the US for semiconductor and basically global technology leadership. And we'll talk about that in a minute, but right now you've got to look at the situation for Intel and say there's a silver lining. There's nothing against Intel partnering with Tower and moving forward. The profits in the foundry space are in the leading edge the analog and some of the specific capabilities that this would have given them would have certainly made them a full service boundry ed. But as I see it, there is plenty of opportunity for partnership. China is going to be incredibly complex, and as long as we continue to posture and put our microaggressions to maintain our technology leadership and push China, you can expect deals like this are never going to.
Make it through.
Well exactly so, I mean, Caroline Pat Gelsinger would tell me that they're super confident that Intel will become the leader again in manufacturing. One way to get there organically. The other is to go shopping. Shopping seems to be off the table.
And to that point, Dan, it's so interesting is shopping off the table in the US as well. We don't want to see big tech chance get ever more bigger, but then equally international, and particularly when it comes to any sort of hot topic for China.
Yeah, I mean, China's going to be a problem for the US for some time, and the US is gaining leadership.
It's the moves it's made.
With ASML, with EUV and these are the leading edge process capabilities have certainly put China on the defense. And you know, they've used some of the you know, different you know, components for semiconductors to hold against the US. But I see this move as something that's largely gonna be okay for Intel.
Like I said, I see the partnership.
And by the way, you can't take something like a Global Founderies deal, at least the consideration of something of that, because you remember Global Founderies exited a significant participation in China, so there's another opportunity there. And if Intel really wanted to go shopping, that could happen without necessarily needing China's approval. So I don't see this. I think Intel is going to win the markets. You know, they're going to adore Intel more if Intel.
Can win at the leading edge. The lagging edge has been a problem.
It has caused issues in the supply chain, but I'm not as negative about this. I do see this as maybe a cash flow benefit for the company, and the right partnership could end up being a winner.
Dan the benchmark that Intel sets itself, the benchmark is TSMC. They're pretty candid about it. Do you still think they can get there in the end of catching out with TSMC?
A one step approach, the acquisition of Tower is not going to immediately make Intel on the same plane as TSMC as a global foundry. Having said that it was a step forward, it did give them a more complete set of capabilities. I think if you even speak to and I have spoken to Pat Gelsinger, he will say it's a multi step process. The company providing more resiliency option for fabulous companies here like in Nvidia and Qualcomm AMD in the United States, to help us reduce the risk of future supply chain issues that we saw during COVID. I think the immediate opportunity is for Intel to be a foundry here, to lessen the United States and parts of the world's dependency on Asia and TSMC to compete, and of course, to help its own balance sheet and income statement with a new source of higher margin revenue. We've seen the pressure on Intel's margins and if it can win more at the leading edge, that's where the margin opportunity is.
I think it can be a number two.
I think it's a long way from being on TSMC's level as a global foundry and provider.
I'm talking of global foundry. Just go back to global foundries. I mean you say that there's some sort of partnerships or a need deals that could be done, but can they be done even internally in the US at the moment down do you think?
Yeah, the US environment is complex with what Lena Khan has been looking at, and of course the DJ looks at some of these deals. Having said that, a lot of the deals ultimately have been able to be completed. We've seen China stop big deals in the past before this one. NXP is a good example. Of course, we're seeing the US go through a high amount of scrutiny. However, if you stop M and A, you could be putting at risk the United States technology leadership. And remember the Chips and Science Act, and the whole purpose behind this Act was to make sure we were defending the United States global technology leadership in semi so, a strong INTEL is good for the world, and it's certainly good for the United States.
Daniel, real quick, We've been tracking thirteen f's. In the deadline, Intel saw the second biggest decrease in aggregate shares held by hedge funds.
Your reaction to that Intel.
Has been under continuous pressure. I mean, look, I don't see.
I haven't had a chance to review the exact positions and the changes in the positions. What I would say is Intel's had a nice run. It's shown some promise. It did have a better quarter, but the outlook, the complexity and of course China as a whole, China's economy as a whole continues to make a lot of the technology plays a little bit risky in the near term.
Current standing and what fifteen percent of all the ratings from analysts on Intel are currently a cell. We keep an eye on that.
Stop.
Meanwhile, Dan Newman, we thank you as always. Fear analysis is of course some future and group. Meanwhile, speaking of chips, we've got to stick on end because we're watching shows a Samsung. Look the ADR's at the moment company cutting its stake in European giant ASML by more than half in the second quarter. Look at selling out of this because it actually wants to use the proceeds of those that chip equipment maker to invest in itself in chip production lines, as the world's well currently largest miomrii maker is trying to beef up its own guess what chip making business. So quite the theme. Hey, we've got to talk China because you know the rising economic turbulence currently in the country and it's actually weakening the consumer demand. All of that weighing are some of the key tech players. We keep an eye on ten Cent, for example, the giant reported revenue that missed and assessments. We're looking at the ADRs currently having well down three and a half percent and the lowest we've seen since May thirty. First, all of this as we see yet more Chinese tech firms coming out, and we want to see who's winning, who's losing. We want to get to it with Henry Wren in London and Isabel Lee here in New York. We can do a great round table, and Henry, I go to you first because the details the nuances within ten Cent, Where was outperforming, where was lackluster?
Yes, so two elements are in play here. Advertising, So Tensent is seeing gains in advertising basically because it's pushing through its TikTok like video stream and its super app called Rechat. So basically that's the gaining part. But so the disappointing part is in gaming. So when we talk about gaming, it's about domestic games, it's about international games. So both gaming revenues at home and at abroad or lower than analyst estimates. So Tansent was saying, like, this is a temporary phenomenon and they should these revenue should rebound in the third quarter because they're pushing They're less pushy about in game commercialization for these gamers, for these players during the quarter to protect the game longevity. But it remains to be seen obviously for the third quarter.
At the company level, JD with a very different story sales b estimates and Henry will go to you in a second on the specifics. But you look at the ADRs, the US listed shares of both, they're both markedly lower.
Is a bell.
Investors are basically very concerned here about the strength of the Chinese consumer and the Chinese economy exactly.
Like Tencent is one of the biggest companies in China. It's business portfolio spence, finance, entertainment, and because it's seen as a barometer of China. What does it tell us and China's China's growth has really spotted us of late.
It's almost kind of a be careful.
What you wish for a kind of situation, because in the beginning of the year, everyone was hoping for this big rebound to spur global growth. But then when that didn't happen, investors were hoping that, Okay, maybe we can wish for a little weakness so that the Chinese Central Bank will inject liquidity and spur the economy. But now we have data after data showing weakness in China, and obviously investors aren't liking that. And I think these two tencent and even Ali Baba which reported last week, are just really a concrete example or the epitome of the Chinese growth in general, which has been lackluster.
Henry, the story with JD is one about e commerce and the six eighteen or June eighteen festival.
What were the numbers?
The numbers are looking pretty good, so seal speed estimates for headline financials, so JD dot com definitely beating estimates, beating expectations here, Remember it's just Isabelle said the expectations has been pretty low so far because the consumers UH data, the retail sales haven't been doing so well out of China. But so when you drill deeper, it's actually another picture. So JD dot COM's retail margin actually was below estimates. So that's why JD's stock is trading down in US trading today as we see. So basically the concern has been the competition has been pushing higher because Ali Baba is pushing its market share.
It's definitely losing market share.
To some other players like Bytdowns, like JD, like Pindord. Also it's going heavy on its value for money investing campaigns. So basically that's the concern here. So the margin is a bit disappointing and is.
Well, we ain't done yet. There's gonna be other telltale signs other companies giving us their earnings and what more could we glean? Do you think from mage one on the life?
I think people are just really going to look at the other tech companies because there are many big players in China and it's an economy that's largely very domestic. But if you think that this doesn't matter in other economies like the US, you may want to think again. We have Bloomberry Economics saying that, Okay, yes, if it's a cushion growth, it may not affect the US so much. But if China really underdelivers and stimulus, and if growth really spirals down, then it may tip the FED to cut rates sooner than expected. So it's really China's a big player. It's the second largest economy, and whatever happens in that nation is really something the whole world closely watches.
Wow, team covered a lot of ground there. As Carrie said, we ain't done yet. More to come this week. Bloomberg's Isabel Lee and Henry Wren thank you coming up here on today's Bloomberg Technology. Why recruitment companies are pulling back their annual guide because well, the labor market is squeezing its clients. Plus Nick mac ceo Rachel Tippograph is joining us to discuss the biggest takeaways from the retail sector. We've had target, we get Walmart, the e commerce story continues.
This is Bloomberg all right.
Time for work shifting, where we look at the changing landscape of the labor market amid advances in technology. First up recruitment companies are abandoning annual earnings forecasts. Amit a squeeze which has been spurred by a softening labor market in which employers are paying for fewer job listings. Zip recruiter withdrew its annual guidance, citing atypical hiring patterns in the first half after cutting twenty percent of its own staff in May, and the owner of Indeed and glass Door warned it was not sure yet whether growth would return, despite expecting five hundred million dollars of annual cost savings after chopping about twenty four hundred jobs, including about fifteen percent of Indeed's workforce, and in an effort to narrow the gap between operations in China and India, Fox con will begin production for the iPhone fifteen in its plant in southern India. Sources say the factories preparing to deliver the newest devices only weeks after they start shipping from factories in China. Before the iPhone fourteen, Apple with only a sliver of its iPhone assembly in India, which lagged China output by six to nine months. That delay was drastically reduced last year, and Apple produced seven percent of its iPhones in India at the end of March, and Amazon is imposing a new fee on merchants who don't use the company's logistics services. It is to change many of these sellers consider surprising, since the US government is poised to file an antitrust lawsuit against the e commerce giant. Thousands of third party sellers whose ship products themselves will start paying a two percent fee on each sale starting in October. That is, according to documents reviewed by Bloomberg. Were going have more on that story later in the out of Caroline we Ah.
Meanwhile talking about Amazon that's drill into commerce, shall we? Because the news has been thick, has been fast July, the retail sales coupling and pretty strong, and today we've had earning from target profit gain for the company. We're really trying to understand where is the consumer, how is it shifting, how is it spending in this inflationary environment. Please to say we've got an expert for you. Rachel Tibograph is with US founder CEO of the e commerce platform, mickmac who just has such a bird sye perspective with how well ultimately companies are feeling right now and how people are spending, are you surprised by the resilience of the US.
Consumer, I'm not because Americans love to spend, they don't like to see.
So what we're.
Seeing play out is exactly that you know. To quote my dear friends Shutrita Kodali, who's the lead analyst at Forrester, what we're seeing in the market is that consumers still have half a trillion dollar still pent up from the pandemic to spend through and they're doing it, and they're doing it in despite that the brands and retailers are raising prices. So what we're seeing happen in these earnings is that retailers have incredible margins right now because consumers are spending at a higher rate and they're keeping the margin.
And that. It's interesting, isn't it? Because Target everyone seems to focus on, for example, that profit beaten. This calls are just gone, but they look still nervous looking forward. What are e commerce players seeing and how much are we spending of our wallet online or experientially instead?
Yeah, I think Target's nervous for all the right reasons. What we're seeing right now is that consumers are spending on essentials. They're spending on groceries, on alcohol, on personal care, pet care, beauty. They're not spending on non essentials so fashion, consumer electronics. That discretionary spend is going towards travel and dining out.
So for Target, if they.
Want to be optimistic about their future, the big question that they need to answer is how are they going to beat Walmart at grocery?
Exactly.
That's really the name of the game right now. It's a focus on grocery to drive that habitual weekly shopping behavior.
So I spotted something on that note that I think is relevant. I was going through the Earning school transcript because I love it and getting the magnifying out glass out and getting closed. But they said there was a favorable mix of same day services through the digital channel, in other words, people logging on buying something for there. And then is that something that Target can use to take on a Walmart because I know having covered that company, the e commerce strategy is definitely like in the moment pick it up.
Yeah, absolutely, So it's what the industry likes to call buy online, pick up in store, and it's really profitable. So the retailers want to encourage consumers to shop that way, and Target is trying.
To to do that.
You know, they're encouraging people to come into store with Starbucks pickup, but Walmart has made a major push. A big perk of becoming a Walmart Plus subscriber is essentially having even faster pickup, even faster delivery. So Target again has to answer the question, how are they going to beat Walmart at buy online pickup in store?
Nick Maxio rage with Tippo Grab.
Always great to have you here.
Welcome back to Blueback Technology. I'm Caroline Hyde in New York and a.
Med lovelow here in San Francisco. Carry quick check on the markets. There's a little bit of red on the screen. I'm afraid now's that one hundred software by six tens of one percent. It's a really tech heavy index. It's why we always go to it. But we're trading at our lowest level in around a month. As we've discussed, part of it's the earning story dragging us down. Part of it is a big global macro discussion about the health of economies, particularly China. Looking at tech stocks largely moving to the downside in the session. The one name that I'm looking at more closely is Coinbase we're getting signs now of progress for regulatory approval, but the stocks down one point four percent, down for a sixth straight session. It's worst streak of declines since April. We started the session higher, as you can see right behind me, but we quickly fell away. Get the details on the regulatory for progress, and then understand the reaction with Bloomberg Shnali Bassak, who joins me from New York, explain both to me, Snali, this was supposed to be a really big move to the industry, and then you look at shares lower hard to understand.
Well, our Oh, things start and end with where crypto is going, and bitcoin itself has also been under pressure the last several days.
ED.
But if you think about it also, the point that we're making is what does it mean for coinbase to become a future's clearing merchant. To remember, the idea of this was that they have tried for the for a couple of years, and the derivatives market, the futures market, in particularly around bitcoin in itself, has become very, very very large, and for Coinbase to become a futures cleaning merchant adds another player in a market that has coin funds. Chris Perkins has pointed out online has become smaller over the years in the broader derivatives markets. For Coinbase to be doing this also makes this option more available to more retail traders and institutions, as we know that coinbase is a large institutional product. But to the point you're making, this is not something that's going to be rolled out tomorrow. It will be offered in the becoming weeks, and the performance is going to have to prove for itself.
So approval to sell crypto futures in the US in the era of tech showdowns and cage fights, there is one relationship that we do pay attention to, which is Coinbase in the SEC. Does this represent a sort of turn in the road for that relationship, Well.
Let me put it another way. Back on Wall Street, there's this view about the cage fight that exists between the SEC and the CFTC, the two big regulators on Wall Street, one kind of being housed under agriculture when it comes to Congress, and one being housed under the world of banking and finance. And so for the CFTC to move faster just more allows more crypto products to be allowed under the wing of the CFTC rather than the SEC. But when we look at the lawsuits between at the SEC and Coinbase as well as their world in the booming landscape of ETF applications tied to bitcoin. You look at Boomberg Intelligences Eric al Belchunas and he gives it a sixty five percent chance that applications are approved by the end of the year, and the CFTC relationship the positivity behind it as one of the reasons why there is some optimism even for Coinbase is very you know, on the surface sour relationship with the SEC. However, on the bottom line, this ability for them to be working on another part of the industry that could face approvals this year.
Bloomberg Shnali Basset, thank you very much, Caroline.
Yeah, let's just stick with the world of cryptos, shall we. Because crypto custody firm Go guess what, just raised a load of money one hundred million dollars for a serious d round that values the company we understand at one point seventy five billion. We're going to talk about how they did it. Mike Belshi's with us, Biggo CEO. I mean in time where we're talking about crypto concerns and a tightening of money you managed to raise. How is it all about growth or what else did you have to prove?
Well?
Thanks for having me. It's definitely a tough time in the market. So I think you can talk to various investors, venture folks, et cetera, and you'll hear that it's pretty brutal out there. But I think Biko does stand apart a little bit and it comes to kind of an excess of four things for us.
I mean, first off, everybody's talking.
About regulatory safety at this point right Certainly we have a backstop of a macro economy that is really struggling in a bunch of different ways. The last thing you want is to have your investments in crypto be on the wrong side of.
The regulators.
So Biko's been building around regulated custody for longer than anybody started this back in twenty seventeen. We have for trust companies around the planet today.
Can I just jump in there a moment, though, because within regulatory concerns and headwinds comes well a lack of clarity. Does that affect your business particularly or is actually you're saying it's a boon for you rather than a bust.
Well, the lack of clarity has mostly been centered around what the SEC considers to be securities and what is not. We're just talking about the CFTC and the SEC a moment a moment ago, and there's a debate there. As a custodian, we can hold securities, we can own commodities. That's not an issue for us. We are not an exchange. We don't get hit by that part of the market. So folks that are looking to be able to participate in these asset classes can hold with bicko and a custodian and there's literally no worry about our regulatory standing.
Mike, one hundred million dollars, nice chunk of change. What are you going to use the funding for?
Well, Look, the business demand around the globe is continuous. We've been in this industry for over ten years. We're a bit of a bedrock, Okay, I think in the in the world today for crypto. We are expanding here in the US for expanding abroad. Like I said, we have four trust companies tow in the US too. In Europe, We've got some coming in in Southeast Asia. We hope soon as well as in the Middle East, so we hope to put that together as well as robust defy, if that's a word for our product line, make sure that we're picking up some adjacent, adjacent products and services that can really round out the service of a custodian.
You have some interesting history in M and A or attempted M and A, So I wonder if you go shopping and you try and do some M and A, how will you do it differently this time around to pull off a deal.
Well, look, I mean you do diligence in deals, and if somebody expects that you know everything is perfect before you do the diligence, they probably don't understand that the process works. But as long as we've got diligence that is uncovering the problems and finding it before we get into anything, then that's certainly not an issue. So I'm sure you're talking about prime trust and look, our diligence was great. Indeed, we found everything that was there and we're like, yeah, this is.
It going to work.
What's interesting, of course, on the M and A front was also the fact that you were going to be bought at a low evaluation, that you are now, which is quite amazing considering the turbulance that we've seen since twenty twenty one when Galaxy Digital was looking to buy you and how that unwound. How are you bringing transparency to your investors and can you bring us a little bit of transparency of your investors because you haven't said who they are, but you've had the ogs of Pantera backing you before and then Goldman and the institutions. Is it people who are crypto native who want to invest in you, or is it other institutions around the world.
Well, certainly we've seen investment interests from kind of all segments. So your gold and Sacks has been an investor for quite some time as well with relation to Galaxy, they're still an investor. Also, back in twenty twenty one, when we coined that deal or signed that deal, it would have made a great strategic sense. We're trying to bring together some of the best of Wall Street and the best of technology and crypto Bicco had. Look, the SEC wasn't ready to help Galaxy be public in the United States. They're a Canadian listed company, they're not US listed, and the SEC is still struggling about how to have, you know, US public companies. So Coinbase got through the door, you know, a little bit before the current administration. Now you know that's locked up, and there's been no crypto companies through the SEC recently.
As that turns, you know, big will be here, will be a lot bigger.
I'm very excited about the opportunity we have going forward. Sure, we had liked the Galaxy deal at the time that we signed it.
Times have changed.
We've grown a lot, We've expanded in market share pretty much across all segments. I think Galaxy's got its own struggles. Wish them very well, but we're happy to be running it on our own and we're in good shape.
Mike, I want to stick with with Caroline's question, one hundred million dollar round, one point seventy five billion dollar valuation, entirely new investors in the round, So who are they, Well, we.
Haven't revealed that yet, so we'll reveal it when it makes sense.
For giving you the opportunity to do that now money.
Thank you, I appreciate it. We'll get back to that.
But you know, look, it's all good investors are outside outside investors, they're new. You'll recogonist some of the brand names, and when it makes sense for us to do so business wise, we will absolutely share.
Is there an element though, that you're seeing global interest in your company? Is it largely in US interest? How has that changed given the regulatory environment?
Yeah, this is both international and US investors.
Look, I think the regulatory landscape, you know, we talk about the US version of it like all the time, but every regulator in every country, every region is looking at how to deal with digital assets right now, and they're coming up with similar but often different answers. So we suddenly have find ourselves in the world where we have to be able to meet each of those and it's it's going to be interesting challenge because.
Prepared for it that.
You know, if each regulator requires custody on the ground in their country, it's a little bit odd and unusual, and I think we're going to have kind of a wave of sorting out of the the base what are the right regulations and there's could be some normalizations, some differences, but there's a lot of work that's going on abroad, and yeah, we absolutely want to hit that. We think there's going to be more growth outside the US than inside the US. Unfortunately the US still looks to be you're dragging the markets frankly by not getting ahead on the regulatoryfront.
Well, we thank you for talking us through this deal, the regulatory environment, how you're managing to raise and of course with your experience having been with Google Chrome and then billin Bitco. It's great to have you on the show. Thanks so much, Mike Belshie. I'll bit go there. Meanwhile, coming up, I've got to talk now quantum computing. We are geeking out friends. Phasecraft is going to be with us. It's a tech startups just raised well just sixteen million dollars. But it's all about developing quantum algorithms. We're going to dive into why that is important. This is blue Bog Technology.
Phase Craft, a British startup span out from University College London and the University of Bristol, has raised around sixteen million dollars to develop algorithms designed for quantum machinery and more. Joining us now from the UK. Ashley Montanaro, phase Craft CEO, a bit really excited about this one. You know, algorithms step by step sequence procedure to perform a calculation quantum on a quantum computer, superposition entanglement. Let's start with what is a quantum algorithm?
Right, Well, first, thanks so much for having me, it's great to be here. So a quantum algorithm is indeed an algorithm that runs on a quantum computer. And what quantum algorithms do is they take advantage of the unique features of quantum mechanics such as quantum superposition, being in more than one state at the same time, and quantum entanglement super strong correlations between separated systems in order to perform calculations that just can't be done on any standard computer what we call a classical computer. And this is incredibly useful as well as being an amazing sort of scientific fact, because there are some problems which we would really love to solve, in particular those involving modeling the sort of quantum systems that occur in nature, for example, in batteries and solar panels, which we just cannot solve in any reasonable amount of time on a normal computer. But quantum computers can solve these problems natively, and that's why they're incredibly important devices.
But largely they've been experimental, some might say impractical. How are your algorithms ultimately fixing that in some way to make useful, tangible steps forward.
Yeah, that's right.
So there's actually been really sustained and impressive progress in quantum computing hardware over the last couple of decades. I've been working in the field for around twenty years now, and the rate of progress has actually been really solid, really exciting. But yet we're still at the very early stages of the development quantum computing hardware. The way that we often think of it is that we're at the equivalent stage of like the nineteen forties or nineteen fifties with standard computers. And while there are still some important things that we could do with the sort of computers that we had in nineteen fifty, there was still relatively limited and that's why back then you needed to come up with incredibly efficient algorithms to get the most out of these devices. And that's exactly what we're trying to do now with today's quantum computers. So we're developing the algorithms which cut down the resource requirements for the quantum computers absolutely dramatically by factors of perhaps a million or more, to enable us to really solve useful problems on the sort of machines we have now or we might have in the next few years time.
Actually, what are your resource requirements? What will you use the money raised to do?
Right So, we're still very much at the R and D stage of our quantum computing, quantum algorithms designed right now, and that's what we're going to be doing over the next few years as we push towards this point that people call quantum advantage, so quantum computing outperforming classical computing for a problem of genuine practical interest. So we'll be using the funding that we've received at this latest funding round in order to build our amazing R and D team to really make these algorithmic improvements and breakthroughs that are going to get us to this point of quantum advantage.
And you talk about material discovery climate, and you were mentioning solar for example. I'm interested, Ashley, as to how the UK sits in all of this. We've got a tug of war who's got the most AI prowess at the moment, who's got the most quantum powers? Is there a lot of technical talent over there in the UK?
Right, So the UK is a great place to do quantum computing and to have a quantum startup. The UK government has been supporting quantum computing very extensively over many years, first with academic research funding and more recently also with support for the industrial sector as well. You may have seen it was recently announced that the next phase of the UK Quantum Technology program will be two and a half billion pounds, which is pretty substantial. There are other countries in the world which are also great places to do quantum computing, the US, Canada, for example, but the UK, I think is also very very strong, and this is reflected in the fact that there are around forty quantum startups in the UK, which is a very impressive number.
Actually, your field is broadly caught in the US technology export restrictions to China.
Do you worry about that your ability to.
Work with China or the future of your offering going into the Chinese market.
So firstly I would say, you know these export controls or potential export controls in the future. You know, sometimes these are implemented by governments for a variety of reasons. The only points I'd make about China in particular, firstly that there has been really impressive progress on the Chinese quantum hardware developments. In the last few years, They've gone from essentially a standing start to being one of the top quantum hardware players in the world, which is seriously impressive. And I'd also say that really the field of quantum computing has been marked by a very high degree of international cooperation in the past, and I'm hopeful that this will continue as long as it is possible.
Ashley, great to speak with you. Thank you very much, indeed, Ashley Montene from Phasecraft, CEO, co founder on their raise and what they're you need the money for.
Let's get back to Amazon.
Earlier in the hour, we mentioned the company will be imposing a you fee on merchants who don't use the company's logistics services, charging a new two percent fee on each sale they conduct. Bloomberg Technology spencer Soper broke that story, joins us now only reporting in the anti trust context, but explain this one.
Yes, so this new fee will apply to sellers who use what's called seller fulfilled prime. That means you don't use Amazon's logistics services, but you still get that prime badge on its site, which really increases your sales because people are more likely to buy things that they know that they'll receive within within a day or two. And so Amazon announced that beginning in October, they're going to impose a new two percent revenue fee.
So this is just kind of like a brand new fee.
Caught a lot of merchants off guard, especially given the anti trust scrutiny, and.
Merchants aren't sure what they're going to get for it.
I mean, dwell on that antitrust case because I thought there were these last minute negotiations behind the scenes where they come together and really try to put to bed any of the anxiety around competition. And meanwhile they go and do this because this is one of the criticisms from the FDC.
No, yeah, so this would be this would apply.
The anti trust argument against Amazon has been sprawling in all over the place, but this specifically was more about tying where you use your dominance in one industry. In Amazon's case, it's online marketplace that captures more than a third of all.
US spending online spending.
It's dominance in the marketplace to give itself an advantage in logistics where it's not so dominant, you know, where it's competing with ups where there's alternatives like the US Postal service. So if Amazon can use its marketplace to try to coerce more people to use its logistics services, that's potentially an antitrust no no called tying, and that's what kind of comes up here when you start charging a new fee on something that can kind of entice or coerce people to use your own services spender.
When we cover at earnings a couple of weeks ago, we made the point on the blog that Amazon is getting better at making money on the dot com stuff that's higher margin, in other words, ads and services.
Does this fee fall into that bucket? Yeah, exactly.
This falls into the Amazon on seller Services fee, which Amazon's third party seller services makes more revenue than Amazon Web Services, the cloud computing division, So it's a huge chunk of Amazon revenue and it grows more and more. We had a chart that shows you know, Amazon's online store sales where they're kind of serving as a as a retailer, you know, dropping from about sixty something percent back in twenty seventeen to like forty percent, and the seller services fee climbing from you know, slowly like seventeen eighteen percent of all revenue up above twenty so those two revenue sources are kind of converging, and Amazon's finding it much more profitable to charge people to sell things on the platform rather than to sell things itself.
Really fascinating. Spenser Sofa bringing it day after his birthday. Have a birthday for then we thank you. Meanwhile, Loop, you've got two Brits, well, one Welsh, one English on set. So what are we going to talk about football? Because you pointed out at Google trends showing search is for the fief for Women's World Cup. Absolutely searching, as well as one Lionel Messi too after heat did some pretty fancy footwork for Miami. But I've just got to shout out for the Lioness's at the moment, three to one they're going to take on Spain.
Yeah, incredible.
I do support Whales, but I'm backing the lion S's three to one victory over hosts Australia in Stadium Australia in Sydney, a first World Cup final for England's women. It is what people are talking about on not just Google trends in terms of search bit x, but I see Lionel Messy and into Miami everywhere at the moment. Yeah, every social platform and littered across Apple TV plus right now, we want to.
Hear about sporting powess, so we want to hear about extraordinary talent. We want to be able to discuss it across social media, whether it's via sort of anecdotes or quotes or patriotism like I was doing a little bit earlier because you know it might be coming home as they call it in New England. But it is notable that Lionel Messi has just been such a weird in for ultimately the MLS, for everything to do with interimentally with Miami.
It feels like, yeah, and Tim Cook name checked Messi on an Apple earnings call.
You know the impact that's held.
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