I'm Caroline High and Blue Mugs World headquarters in New York, and this is Blue Mug Technology. We talked layoffs, salesforce and video on the latest to announced cuts in an effort of curb spending. We break down the most vulnerable areas in tech this year. Meanwhile, Tesla rebounds after Kathy would vise the dip. We'll dig into the ball in the bear case for the ev maker and generative tech. It's already the next big thing in Silicon Valley. We discussed the risks and rewards for AI based platforms like chat GPT, but first, so far ahead of investment strategy, Lizzie Young is with us to talk all about well, really the moon music around investors at the moment. There is caution, there is worry, there is more macro headwinds to come. It feels like, yeah, there is, But none of this is really new. I think a lot of this has left or from December, and we had a really rough month in December, especially at a time when it was supposed to be this year end rally possibility. None of that actually came to fruition. So investors heard again from the FED today about their determination to keep rates higher. Again, not new news, So anybody that was caught flat footed on those minutes, I think maybe hasn't really been paying attention. So, yes, they're going to keep rates higher. But here's the good news. We may know by the end of the first quarter whether or not they're done hiking. Right now, the only thing that's baked in is twenty five basis points in February and another twenty five in March, and then that might be the end of raising rates, and then we just have to figure out how long they pause for to that end. Have we seen enough of that starting to be baked into the overall valuations, particularly in the world of technology, we have seen some of the big tech names, Apple for example, really rolling over. How have we baked in enough of the bad news when it comes to interest rate heights. I think we've baked in the idea of monetary tightening, so that happened largely in obviously the huge drawdowns that we saw, particularly in growthy areas of the market, So we've baked in basically the FEDS hawkishness. What is not yet baked in is whether or not we're going to confirm a recession. So if we do confirm a recession, and I think we would know that by labor markets actually starting to crack, then stocks likely need to go down further. Usually recessionary drawdowns are beyond and the furthest we've gotten so far. As The other thing that I don't think is quite baked in yet is when earnings revisions come down even further. Right now, they're still showing estimates for three as you're over your growth being pretty flat compared to two. I can't imagine that that's going to end up being the case In an environment where revenues are likely to come down, wage pressures are likely to stay sticky, and companies are going to see their bottom line and their margins get pressured. So I would expect earnings revisions to come in and show more of a contraction somewhere in the range of five to ten percent for the year. I don't think that's all priced in yet either. Well said and in fact sort of agreeing with you is Mike Wilson, of course, a bit of a perma bear. The right bear it was last year in terms of some of his calls is over a Morgan Stanley. He had this to say when we heard the news out of salesforce, the job cuts, and indeed, whether or not big tech is a good cost cutter, just take a listen list. I think the concerns about tech companies, John, is that they're not good cost cutters traditionally, right there, their growth companies, they tend to want to invest into these downturns. They they want to invest, you know, aggressively through all periods of time, and they're just not good at cost cutting, and so they're gonna be late on that. They're probably not going to do enough, and so it will take me longer than you think, and so the margin degradation can be more severe in those areas as you're racing for more cost cutting and and indeed perhaps not that effective cost cutting coming from big tech. Well, look, I have a lot of respect for Mike. I've been called a perma bear this year and for the last twelve months because I continue to be cautious. So I align with a lot of the things that he's saying. Now, tech companies cutting costs, He's probably right that they're not used to doing that. He is right that growth companies do tend to reinvest in the business. That's the idea of a growth company. That's why you also don't find a lot of growth companies that pay out dividends or engage in stock buybacks, because they're taking that capital that's available and reinvesting it into the growth of the business. Where I think any business is going to suffer ine is in what he said if they wait too long to cut costs, because if and when the labor market starts to show signs of weakness, the consumer likely pulls back. That can happen very quickly, and if companies are only modeling out one quarter one half of the year at a time, they might not cut costs quickly enough in order to pivot and catch sort of that revenue degradation that could happen as a result of lower consumer spending. What are some of the upside risks is the up side risks so that if we do have a recession, what we need to continue paying attention to is that it would reset the business cycle. I said that in Outlook, I'm going to keep saying that probably for the entire first half of the year, we do need to reset the business cycle. We are decidedly late cycle right now in order to get back to early cycle. A recession would reset it, and then we can start talking about where are the opportunities, What are the opportunities that we would see in a classic coming out of a recession scenario. And in that case, I would be looking at cyclicals, I'd be looking at small cap value. If the market gets down below thirty, I'd start looking at cyclical parts of tech like semiconductors. So we can start to think about that. The other thing that's positive is that bonds are again a decent option and they are trading at really good valuations. But the time is now before a recession is confirmed. You talking treasuries here, or what about Coote predict because actually some of bug intelligence are anticipating a whole load row perhaps corporate debt to be issued by some of the big tech companies. Yeah, that good. Good idea to distinguish that I am talking about treasury is the time is now in treasuries, particularly two year treasuries, before a recession is confirmed. Corporate debt. However, the way that we look at that is typically the spreads, and you can look at the spreads over the ten year treasury for example, corporate debt has not shown recessionary valuations at this point, So I would say corporate debt is kind of in that equity market camp where it's shown some valuation compression but not enough to say that, Okay, we're ready for the recession to be here, or that we're we have actually priced in a recession. So I would expect corporate debt and credit spreads, particularly in the high yield space, to blow out wider before they start to come back in again. And let's just for of you, whether they be a retail investor whether it be more of an institutional investor. Are you thinking in the next once we've got so much uncertainty, still upside risk, sanity downside, more cautious trading upon us. Is it best to be broad or is it better to be doing your fundamental analysis on individual companies. Is it well the earnings that you start to look at, or is it more the macro in the data that you're going to be focused on. Year was absolutely a year of the macro. Is a very macro driven environment, is likely to have some macro forces still hanging over our heads. Obviously in the middle of a rate hiking cycle. But the good news about that is that I think the rate hiking cycle is beginning to mature, so some of those macro forces won't be as interesting to the market anymore. Like we've already discussed, I think a lot of that monetary tightening has really been baked in, so it is important to look at the fundamentals. It's definitely important to look at the quality of a company and their ability to generate revenue, their ability to cut costs and manage not only what they're reinvesting in the business, but what they're able to return to shareholders. And that's why dividend strategies have been so popular, because it has been this returning some of that value to shareholders. Fundamentals are absolutely important. Valuations are probably the most important part of the fundamental story in smart words as we look ahead to what's going to be another turbuline here. I'm sure Lizzie Young, we always appreciate your time so far ahead of investor strategy stay well. The way to think of this is there was the Stewapoli between Google and Meta. They now control less than half of the advertising money, so that their overall control that's supplient as other areas have grown, and so what has happened is television with connected TV streaming is digital also, and it's now benefiting in the same way that digital advertising benefited Google and Meta, and so you see this growth occurring there more customers coming into the market, they're spending more. It's diversifying the customer base away from just a thousand or two thousand advertisers to many. War and so television is coming on strong as his third big scale channel that's now a true digital channel. Mountain CEO there Mark Douglas talking about the advertising industries shift away perhaps and Meta and Google to those new players in the media arena. And in fact, some of those media names that offer streaming profit offerings are really rallying and they've been running hard on the day, Paramount and more than eight percent, Warner Brothers up more than eight percent as well. Analysts even though still seem to see weak ad demand eluser streaming profitability. In fact, mcquarie was the latest to cite such concerns on the day. So what is the ball the bear case of media companies and which streaming offerings are likely to win out? Got the perfect take for you. An analyst of course, who had the charge on Netflix, upgrading it to a buy from Cell in the previous week, Ken ley On as a director of equity research over at cfr A and Ken just talk to us about the immediate short term rallies that we're seeing in some of these companies. I mentioned Warner Brothers paramounts. Does it take you by surprise? So it's really looking at the business and whether this is a market that's going to grow and there's going to be winners and losers. And we're coming off where the industry movies and entertainment stocks are down, so that serves as a bottom, if you will. Then it's a question for analysts to really figure out could there be a winner in a highly competitive, new disruptive area, which is video streaming and what that does to their business, including the legacy areas whether they be broadcast or pay TV or film. It's complex and we had to sell on Netflix most of two. We switched to a buy because doing some soul searching and maybe we were a little too severe on the valuation. Say Netflix shouldn't trade at a premium to a Water Brothers Discovery paramount or is they? But we think today they should because they are really focused on winning. Okay, talk to us about the focus on winning. Talk to us about whether enough pain, enough stress, enough cutting out of the extra fat and the margin is preserved over a Netflix, particularly as they've got this added edition of advertising revenue coming forward. The download looks very good for three and twenty four for this company because they're going to have new revenue streams importantly coming from advertising going from zero, but taking some fair share away from some of the companies you mentioned Google and Meta, but also the traditional broadcast area. There is a secular shift to streaming, and Netflix has a management that's been in place for ten years. They've organically grown a global based technology platform and library and shows that people want to watch. They also have a wide range of rain plants today with a new add pay plan of six ninety nine, but most of the affluent viewers are paying for higher features and high death Add to that, well, what are the competitors doing? Each of these has changing managements, They're dealing with complex mergers, they're not sure what they want to keep or what they want to sell, and they're also trying to figure out really in terms of how are they going to win the streaming as they hold on to either legacy businesses and broadcasts or other areas like parks. That's very difficult to do. So I think Netflix has the chance to outrun its competitors, and we're definitely going to see it in It's interesting that you said changing management. Of course, it's sort of revolving in some way, particularly when you think about the company that does indeed have parks one Disney. How wou do you think is Bill Bigo a net positive in general for that business at the moment, particularly when it comes to the focus on dreaming. So I haven't covered Disney or these companies for ten years, but you know, my observation is Bob Iger's coming back to do the job he was unfulfilled. He made an enormous acquisition back two thousand nineteen. Disney has high debt. They're trying to generate higher cash flow and earnings and return to shareholders. They don't pay a dividend, they don't buy backstock. But this is Disney h stocks cheap trading below ninety So we have a view that I could probably will do things that will be positive for shareholders. Well, we're not sure what it is. They have a put coal with Comcast for Hulu. That's a big number. They have to decide from activists like low what to do with ABC or espn uh. And it's complex and at the end of the day, the heart of this company is not video streaming Disney plus Uh. It's going to be challenging compared to Netflix, which is organically a hundred percent focus on video streaming and that's where viewers are going. Advertisers are following a little bit slower, but they're switching over to the streaming market and that's really going to benefit the stronger players. Well, there's another strong day for Netflix trading as well. On the day I'm almost five percent Kenny on It is great to catch up with you, stay well, Director Equity Research over at c f R A with that or double rays for Netflix last week to a buy. Meanwhile, another story we continue to watch and we stick on kind of the focus on advertising because Facebook's pair at Meta platforms then find four million dollars by the European Union's main privacy watchdog. The penalty has to do with the way users data is used for personalized ads on Facebook and Instagram. Meta has three months to ensure the processing of such information complies with eating rules coming up or shares a salesforce. They rose after a pretty painful announcement, and that's about cutting stuff by about ten percent. More of the company's restructuring plans. That's next, And as we had to break, let's take a little look at Apple shares losing shine after an argly month. The stock fell top percent in December, taking the company's market value below that are two trillion dollars. Now, investors are concerned that matters could get worse because of course delays in iPhone production. What's of course continue with China's COVID and weakening demand as the economy slows down from New York and look, they keep on coming layoffs and the tech industry, this time Salesforce announcing it will cut about ten percent of its workforce and indeed reduce real estate holdings. Joining us now as Bloomberg technophor to Brodie Ford who helped and analyze what was put out as a statement by the company, and do we have any hints of wear or or or you know, geographies of anything around these sorts of cups. It appears to be very broad based at this time. I've spoken that people from legal to philanthropy to sales recruiting I think when we see a big layoff like this, we assume all you cut all the recruiters, all the sales people, but there are some engineers in there too. It appears pretty broad. Um, everybody knows Salesforce is one of the biggest employers in San Francisco. If it is an equal layoff across their geographies, that would mean about a thousand people cut from San Francisco at a time when obviously their downtown is struggling. And to that end, do be therefore worry about San Francisco in the real estate therefore that they have there, if they're going to be sort of coming to an end of some of their leases. Well, what's funny about this is that they're talking about they're cutting leases, but at the same time they're saying, we're forcing some people back to the office. Right. Salesforce has said, you know, a year or two ago, Benny Office, I was saying, we're never going back, but there are some sales people being forced back to the office. Management is increasingly focused on product to the and these kinds of measures. So, you know, are they cutting some real estate? Yeah, but the tower is not going anywhere. Even if it was sinking at one point around that is this it intense of announcements, do you think? And more to the point, how does it dent the culture or actually take away some of that anxiety because there was commult were reporting with you almost on a daily basis last year about changes at the top of this business, and now it's going to be filtering down. I would say almost no one is surprised that there was a layoff. I mean, everybody I spoke to said that there was that kind of fear in the air. Um, the scale of it is higher than's unexpected. I think I was hearing the number around five thousand a little more often it was eight thousands. So it was large. And of course no one wants new rolling layoffs. I don't think management is planning to do another big layoff tomorrow. But hey, it's a worsening macro. They're doing this because they're seeing slow in growth and they need better profits. So I mean, I don't think we can confidently say that this is it. I mean, and our viewers would agree. We took to Twitter asking really whether the worst is behind us? Will take layoffs? And no, fifty three let's called. I think still there's more to come. You cover a broad range of companies, is it those most focused on selling into corporate businesses? We were just hearing about, of course Microsoft, the downgrade from ubs today, the warriors about Azure and they sort of the weak parts of the tech space right now. Well, what's funny is for a while it was if you were enterprise, you are good. It was the consumer facing market that's the one that was in danger. But as those consumer businesses have gotten more in trouble, but people whom sell those companies software are seeing it too, So it's kind of trickling up now to those places that were a little safer. Your Salesforce is your Microsoft. So as long as the picture is worsening in terms of consumer demand, I think it's still will hit the enterprise players. Brodie, thank you bringing us all in the analysis and this news, Brodie forward And of course Salesforce isn't the only company out with layoff news. Even on the day. On Wednesday, Video announced it will elevens global full time workforce, also to focus on the company's sustainable, profitable growth. Shares of the video software company rose about to see fight sent on the news. I use it every day. It makes driving safer less stressful. Uh and and I'm less tired after driving. It's a great product. And by the way, it improved yesterday while it was sitting in my driveway. The car I owned today is better than the car I owned yesterday. It's the pragmatic case. I mean, like, let's be honest, this is a world class um product that people love and that makes them safer and gets him to and from places faster and easier. Uh. And I don't expect it that that hasn't changed. Uh And so we expected to continue. Welcome back to Rebot Technology. I'm Counterline Herd in New York. And that, of course was our chief futurist Brett Winton, who Tuesday was talking about that the bull hey sequeled at the Pragmatic case. The bull case of Tesla, which has been under pressure after announcing a delivery miss. Another ball is Brett's foss Cathy Wood, who has bought the dip no doubt helping the bounce back. On Wednesday, I want to dig into Tesla a little bit more about well, really, where this price is going, where the fundamentals are going. The Morning Star equity strategist Seth Goldstein seth great to catch up with you, and look, you've got to buy on this stock. And like many others, you see the price basically doubling to about two or thirty one is where the general price target is for this year in the next twelve months for Tesla and you have about two twenty. Can you talk us through the reasoning why you think this is a by the dip moment. Yeah, so so tepla and shifting into a lower growth mode. The growth is still there in the fact of that a reason more price right now? You know a lot of the lot of the antillary businesses like fullth self driving and essentially growth of the insurance are being heavily dipcounted, as well as future card saving that management can still implement as they're ramped up at factory and had accused a battery day goals that will still drive marked than higher fie popper growth in accept the revenue growth even if revenue growth is more in the I teams over the next ten years instead of manage target. So we feel out of upside in the stock at current pre is it then a story of show me stock? What's interesting is yes, they did miss the targets their own internal targets to deliver more than growth in terms of deliveries last quarter, and they missed it. They got in is still strong? Do we need to have more clarity, more real sort of basic analysis and future guidance coming from Tesla so we can set our sites a little bit more realistically. Yeah, I think that certainly would help management. Just for saying that we effect the growth fifty percent a year and delivery over a multi year period does not really help with yearly year guidance, especially as Tesla is now big enough to start seeing a demand impact from an economic slowdown. You know, now that they've got there at one point three million vehicles annually, they're gonna start to see some consumers who may want to hold off on that big ticket item and then wait till the next year while we're gonna slowdown. So, you know, I think management guidance and the more the more sort of confidence they can give us around specific targets and numbers from a year to year basis will certainly help the stock. As I think investors right now we're searching for what is the right growth rate, and with a high growth stock like Tesla, even small changes in a growth rate assumption can materially change your valuation for the stocks. Yeah, I mean talk to us about the incentives that will be having to be dangled in front of a US buya is that a warrior? Is that shining a light on the fact that the price point is going to have to change. We do think there's gonna be some small price cuts as Tesla is gonna want to make sure that as many of its vehicles as possible physically some model threeason model why we'll ultimately fallify for the inflation reduction that tet credit and heading into an economic Florida, and I think that's given me away. Test can generate strong demand growth. So we are modeling some pipe decreases for that of Platform next in this year to help generate demand growth. And they're that's going to help Test for grow to what we're forecasting and lull over one point six million deliveries in twenty three. So with all the daily sort of tussles that you get, whether it's on social media or whether it's on on ad like this, whether it's about the worries of whether is still a pretty good growth rate, whether or not we should be looking at deliveries rather than demand from real perspective, what is the main thing that we should focus our rise on now when it comes to Tesla. Is it China, is it deliveries? Is it demand? Which side should we be looking at. I think there's two key things that we should continue to focus on. One is, as we go into three, what will the growth rate be? You know, I don't expect etan double digit growth. I'm forecasting twenty four ward, then growth next year in delivery, and then to what do the proper electrics look like? If you remember back in the first quarter of last year, Pepera achieved nearly a thirty percent growth margin in the automotive segment. That was before the opening of the Berlin and Austin factory. Our production ramps up in those factories, I do affect the growth. Poperate margins will improve stfuentially and so if tethlic and continue to show profit improvement, I think that helps get profident that that the doc can still work and still be a growth dock. Monty South South Girls team, thank you, was ever talking about the growth stock that is Tesla. Let's look at We'll look at the competitive side of it all. Because electric vehicles aren't just wholly at Tesla. There's so much competition and front and center is going to be on display at the CS convention in Las Vegas. Most Keith Norton reported on this on Tuesday and joins us now and Keith, you know, we're used to basically car companies being the main proponents and main areas of display at technology companies have been the case for the a few years. What is it going to be like at CES this year? Or we're gonna have a little bit more sort of reasonable growth stories for these as companies. Yes, CS is getting real Caroline. What we're seeing this year is displays of not fanciful things, you know, flying robotaxis. We're seeing you know, electric vehicles that are either on the road today or they're about to be on the road because everybody's trying to catch Tesla, right, And so this year at CES, it's all about pragmatism and profitability, not so much about potential and profits that may come someday or not at all. People want to know, you know, what can you show me that will deliver return on investment? Now? Oh boy, pragmatism and profitability. I think it's basically the turn of phrase for every single company for the rest of twenty twenty three, whether it's a car company or not. But talk to us about there for the big intros, what are we going to be seeing unveiled at this year? So the bit One of the big e V unveilings will be Stillantis, the company that makes Jeep and Ram pickup trucks. They're gonna show a concept of an electric Ram pickup truck. This will be the one that will take on Ford's F one fifty Lightning Electric take on their new Rivian R one t and Tesla's cyber truck when that eventually comes out. So that's one of the big intros. But we'll also see another electric pickup truck, the Endurance from Lordstown Motors. We'll see some digital concepts from from VMW and Mercedes UM. But all of these things will be things that consumers can get their hands on soon. They're not just some research project in the lab. Well, talking of research products in a lab, ones have actually been more evidently on the road has been self driving and we know the way moods of this world, and indeed tails that have been trying very hard in this space are we gonna get anything in this particular focus point. Yeah. Again, pragmatism will rule the day. So what we have now, Carolina is instead of sort of the free range robotaxis that will take us anywhere, we're gonna see a self dryving tractor from John Deere. So that is the sort of thing that autonomy is is focused on. It's these use cases that are needed today and that will generate a return. Now, it doesn't mean that Weymo isn't still out there or cruise, but the thing is is that the inflection point was Argo, the self driving unit of Ford in VW going down. That's that's made this CES far more Sober people are really looking at you know, how can I make a profit today not tomorrow. Sober, pragmatic, I'm not sure either those things are gonna be summing up the enthusiasm we'll get from Ed Ludlow on the ground in Las Vegas. But Keith, he set us up wonderfully for tomorrow. Keith Norton, we thank you and do not forget. Thursday Friday, Full of Energy is going to be Bloomberg Technology Live from the Consumer Electronics Show in Las Vegas. We're gonna be chatting with so many leaders Delta see you at Bastion. He's a key speaking that sees the director Jenn Easily, siemens Us CEO Barbara Hampton's and Calcolm CEO Cristiano Alon do not want to miss it. I mean, while coming up in here and the now, the generative AI is all of us and Silicon Valley. So what are the risks, what are the actual rewards and the best strategy to invest. We're going to have NFX general partner James Career here. This is willing Berg. So the US government has seized or is in the process of seizing, hundreds of millions of dollars worth of robin Hood shares. It is all part of the fraud case against Sam Bangmin. Freed and the ft X founder bought a seven percent stake in robin Hood last year. The shares, now worth more than four d and sixty million dollars, have been claimed by various creditors of f t X who filed court cases to try and control them. This is all part of the government's fraud case against Batman, Freed, and other top f t X officials. Meanwhile, well maybe it was crypto. There's a hot thing two now calls the whole thing is AI, and we've all been playing with it, talking about and now Microsoft is reportedly upgrading its search engine with it. The Generative AI. Of course, chat, gpt dally other AI tools have got us all pondering kind of the implications for use cases as we create text, we create images, video software, code, music, three D models. My next guest is thinking on this more than most and been investing in the space more than most. NFX General partner James Currier is here to explain well the fact that back in October, before we all started got completely engrossed in it. In various Twitter trends, you said that the biggest change the Internet is already upon us, and you said it was AI and the applications. Just talk us through your thinking. Yeah, thanks for having us on. You know, as you know, NFCTS is one of the largest seat funds in the world, and our job is to be sort of on the front edge, and I would say this is on the front edge. We started investing about two years ago. It really took off, as you said, about three months ago. So we're really early in this process where we're heavy into it because we do think that it's going to affect every industry. So there's gonna be a number of unicorns and dected corns built over the next four or five years in this area. And so we've been investing heavily in it, and we uh yeah, so we published this of it which are the most fruitful at the moment, because I mean I can see copy idities and many people being somewhat concerned about the future job descriptions. But which are the most practical use cases right now that you've seen already the millions the flu into companies that are building in that space right right. So on NFX dot com, we have published the largest generative tech and generative AI market map out There is about four and seventy seven companies today and it's growing every day. About of the billion dollars it's already been invested in those companies has gone into general AI, into general AI models that are now powering. And we think of this like we would think of fiber optics in the late nineties that laid the groundwork for the Internet, and uh, going forward, we think that there's going to be more invested in the upper layer of that stack. And so um, we think they're gonna be three big winners. The first is gonna be the companies that move very fast to build sas software to do things people would expect, like copyrighting or video editing, and we're seeing that already with companies like Jasper were just raised five million dollars to do marketing and copyrighting. The second group is going to be companies that use generative AI at the core of things like marketplaces and payment structures, but not but aren't exactly delivering the AI to the customer. They're actually building it in to create a more competitive business to compete market And then the third one is going to be the visionaries who do businesses that we haven't even thought of yet, and that's typically the way these things roll out. How do you seek out the vision rais to that end, James, I mean, I know what's interesting, NFX. If you've got the false program, Basically, you take a whole load of generative technology companies, the founders there, you get them to pitch, and within a very swift turnaround, you aside whether there are a business model that you want to be funding. Is that the way to sort of find out where is it? The cutting edge that maybe people haven't thought about the practical application. That's right. We we've interviewed over a hundred generative AI companies over the last two months, and we're getting a really good sense of where the things are moving and where things are getting a little bit stuck. Um the thinking of the founders yet hasn't moved past sort of a lot of the obvious ideas. So in the market, match got a hundred companies doing text based stuff like Jasper and copy ai. Um. They're all doing very something very similar. They've got to take that next leap, and what we're doing in these conversations is to figure out who's got the ability to take that leap to the next level for what's going to be successful next summer and the end of two thousand twenty three, because what we're seeing now is sort of copycats of things that were successful a year, a year and a half ago. James was interesting about this fast program is well, the fact that it's fast, the pace in which you are able to decide that you want to cut a check. I'm interested in as we've learned some of the repercussions of all the money in the world and perhaps not some of the safety pets in place, that the governance that we'd like to see at sending businesses. I mean, we were just talking about f t X. How are you ensuring that you're getting those sorts of rules of the road in place when you write that sort of a company money. Yeah, So the FAST program writes a million, a million and a half and two million dollar checks to early stage startups with two people to tend people. So we're not putting a ton of money into these companies, so we're not giving them so much that they can start behaving badly. The second thing is that we actually sit down with them and talk with them about how to publish and follow on their values and the things they're going to adhere to. Because look generative a I like, the Internet itself can be used for good or for ill, and whether it's you know, racist or sexist comments or whether it's going to be um, you know, using it to generate images that just are unseemly. You've got to have some rules of the road that you published, you commit to your community, and then you want to behave along those lines that we help the founders put those in place. I mean, yeah, boy, we just think of how Microsoft was slightly bidden by that AI generative function and the way in which unfortunately humanity used it to start expludging hate speech. Basically, I'm interested, James, Therefore, is there any does this need to come from a federal level? This is need to come from a international organization level, to think about how we put the rules in place that we are building purposeful AI. Then, indeed, is a net positive never in any way a negative contribution. Yeah, we think so. We think that it starts out with our community. Look, we want the generative AI community, generate tech community do a lot better job than the social networking groups did a laying out the principles and values that they need to adhere to. And that's always the first step because as we explore these technologies, we who are building the technologies understand their strengths and weaknesses the best. But long term, we do need to have federal and international guidelines that we can all adhere to. And hopefully we're going to get that in crypto pretty soon because we can see what the results of not having it is. Very briefly, j when you're looking at all these different companies, where are they being built? Uh, we're seeing a lot of them in Europe, a lot of them in Israel, but the most of them are being built here in the US, on top of the great efforts to Google and open AI and others have done over the years UH to to build up a foundation of machine learning and artificial intelligence people. We've got a lot of universities here, We're putting out a lot of PhDs and masters in this area, and those people like to stay here in the US, and so we've got a lot of great teams going after this whole area, as we have for the last five or six years. It's just the processing power and the cost has come down so much in the last twenty four months that are really exploded in the last three months. James, it's been great speaking with Thanks for taking us through what seemed to be pretty much cool ahead of the n f X General partner, James Carrier. There time now for going viral, and you've seen it trending on a well countless hashtags hashtag House of Representatives, hashtag Kevin McCarthy, hashtag c SPAN. Even Wednesday, GOP leader Kevin McCarthy failed for the sixth time to rally House Republicans behind his bid for Speaker, and the House is at a stand still basically until the election of the speaker, and which means business will not be conducted until it is settled. But current chaos aside, what can McCarthy leading the House look like for technology in general? Well, McCarthy is the man leading the GOP's battle against big tech. His agenda looks to provide greater privacy and data security protections. Is going to equip parents, he says, with more tools to keep their kids safe online, and aims to stop companies from putting politics ahead of people, so they say a nod. Of course, the Republican concerns about political censorship, which we have seen big changes, are already at least over at Twitter. Remember since they must take over, former President Donald Trump has been reinstated on the platform, and just yesterday the company announced an easing of its political ads BAM. And while McCarthy's agenda doesn't specifically talk to issues like antitrust, suppose is going to be something Silicon Valley or keep an eye on now that does it for this edition of Bluebeck Technology, Stay tuned for those votes still to come. I'm sure there's gonna be more rounds of it coming from Washington. But tomorrow all eyes turned to Las Vegas. They turned to one Ed Ludlow, who is going to be joining us again in conversation of course, with CrowdStrike CEO George Kurtz alive in the hour when three Cybersecurity Outlook. You do not want to miss it. Plus, don't forget to check out a very own podcast. You'll find it on the terminal. You can find it online on Apple, Spotify, an i Heeart, and plenty more. In terms of these markets still to come. After Wednesday's rally from New York, thisibly back

I'm Caroline High and Blue Mugs World headquarters in New York, and this is Blue Mug Technology. We talked layoffs, salesforce and video on the latest to announced cuts in an effort of curb spending. We break down the most vulnerable areas in tech this year. Meanwhile, Tesla rebounds after Kathy would vise the dip. We'll dig into the ball in the bear case for the ev maker and generative tech. It's already the next big thing in Silicon Valley. We discussed the risks and rewards for AI based platforms like chat GPT, but first, so far ahead of investment strategy, Lizzie Young is with us to talk all about well, really the moon music around investors at the moment. There is caution, there is worry, there is more macro headwinds to come. It feels like, yeah, there is, But none of this is really new. I think a lot of this has left or from December, and we had a really rough month in December, especially at a time when it was supposed to be this year end rally possibility. None of that actually came to fruition. So investors heard again from the FED today about their determination to keep rates higher. Again, not new news, So anybody that was caught flat footed on those minutes, I think maybe hasn't really been paying attention. So, yes, they're going to keep rates higher. But here's the good news. We may know by the end of the first quarter whether or not they're done hiking. Right now, the only thing that's baked in is twenty five basis points in February and another twenty five in March, and then that might be the end of raising rates, and then we just have to figure out how long they pause for to that end. Have we seen enough of that starting to be baked into the overall valuations, particularly in the world of technology, we have seen some of the big tech names, Apple for example, really rolling over. How have we baked in enough of the bad news when it comes to interest rate heights. I think we've baked in the idea of monetary tightening, so that happened largely in obviously the huge drawdowns that we saw, particularly in growthy areas of the market, So we've baked in basically the FEDS hawkishness. What is not yet baked in is whether or not we're going to confirm a recession. So if we do confirm a recession, and I think we would know that by labor markets actually starting to crack, then stocks likely need to go down further. Usually recessionary drawdowns are beyond and the furthest we've gotten so far. As The other thing that I don't think is quite baked in yet is when earnings revisions come down even further. Right now, they're still showing estimates for three as you're over your growth being pretty flat compared to two. I can't imagine that that's going to end up being the case In an environment where revenues are likely to come down, wage pressures are likely to stay sticky, and companies are going to see their bottom line and their margins get pressured. So I would expect earnings revisions to come in and show more of a contraction somewhere in the range of five to ten percent for the year. I don't think that's all priced in yet either. Well said and in fact sort of agreeing with you is Mike Wilson, of course, a bit of a perma bear. The right bear it was last year in terms of some of his calls is over a Morgan Stanley. He had this to say when we heard the news out of salesforce, the job cuts, and indeed, whether or not big tech is a good cost cutter, just take a listen list. I think the concerns about tech companies, John, is that they're not good cost cutters traditionally, right there, their growth companies, they tend to want to invest into these downturns. They they want to invest, you know, aggressively through all periods of time, and they're just not good at cost cutting, and so they're gonna be late on that. They're probably not going to do enough, and so it will take me longer than you think, and so the margin degradation can be more severe in those areas as you're racing for more cost cutting and and indeed perhaps not that effective cost cutting coming from big tech. Well, look, I have a lot of respect for Mike. I've been called a perma bear this year and for the last twelve months because I continue to be cautious. So I align with a lot of the things that he's saying. Now, tech companies cutting costs, He's probably right that they're not used to doing that. He is right that growth companies do tend to reinvest in the business. That's the idea of a growth company. That's why you also don't find a lot of growth companies that pay out dividends or engage in stock buybacks, because they're taking that capital that's available and reinvesting it into the growth of the business. Where I think any business is going to suffer ine is in what he said if they wait too long to cut costs, because if and when the labor market starts to show signs of weakness, the consumer likely pulls back. That can happen very quickly, and if companies are only modeling out one quarter one half of the year at a time, they might not cut costs quickly enough in order to pivot and catch sort of that revenue degradation that could happen as a result of lower consumer spending. What are some of the upside risks is the up side risks so that if we do have a recession, what we need to continue paying attention to is that it would reset the business cycle. I said that in Outlook, I'm going to keep saying that probably for the entire first half of the year, we do need to reset the business cycle. We are decidedly late cycle right now in order to get back to early cycle. A recession would reset it, and then we can start talking about where are the opportunities, What are the opportunities that we would see in a classic coming out of a recession scenario. And in that case, I would be looking at cyclicals, I'd be looking at small cap value. If the market gets down below thirty, I'd start looking at cyclical parts of tech like semiconductors. So we can start to think about that. The other thing that's positive is that bonds are again a decent option and they are trading at really good valuations. But the time is now before a recession is confirmed. You talking treasuries here, or what about Coote predict because actually some of bug intelligence are anticipating a whole load row perhaps corporate debt to be issued by some of the big tech companies. Yeah, that good. Good idea to distinguish that I am talking about treasury is the time is now in treasuries, particularly two year treasuries, before a recession is confirmed. Corporate debt. However, the way that we look at that is typically the spreads, and you can look at the spreads over the ten year treasury for example, corporate debt has not shown recessionary valuations at this point, So I would say corporate debt is kind of in that equity market camp where it's shown some valuation compression but not enough to say that, Okay, we're ready for the recession to be here, or that we're we have actually priced in a recession. So I would expect corporate debt and credit spreads, particularly in the high yield space, to blow out wider before they start to come back in again. And let's just for of you, whether they be a retail investor whether it be more of an institutional investor. Are you thinking in the next once we've got so much uncertainty, still upside risk, sanity downside, more cautious trading upon us. Is it best to be broad or is it better to be doing your fundamental analysis on individual companies. Is it well the earnings that you start to look at, or is it more the macro in the data that you're going to be focused on. Year was absolutely a year of the macro. Is a very macro driven environment, is likely to have some macro forces still hanging over our heads. Obviously in the middle of a rate hiking cycle. But the good news about that is that I think the rate hiking cycle is beginning to mature, so some of those macro forces won't be as interesting to the market anymore. Like we've already discussed, I think a lot of that monetary tightening has really been baked in, so it is important to look at the fundamentals. It's definitely important to look at the quality of a company and their ability to generate revenue, their ability to cut costs and manage not only what they're reinvesting in the business, but what they're able to return to shareholders. And that's why dividend strategies have been so popular, because it has been this returning some of that value to shareholders. Fundamentals are absolutely important. Valuations are probably the most important part of the fundamental story in smart words as we look ahead to what's going to be another turbuline here. I'm sure Lizzie Young, we always appreciate your time so far ahead of investor strategy stay well. The way to think of this is there was the Stewapoli between Google and Meta. They now control less than half of the advertising money, so that their overall control that's supplient as other areas have grown, and so what has happened is television with connected TV streaming is digital also, and it's now benefiting in the same way that digital advertising benefited Google and Meta, and so you see this growth occurring there more customers coming into the market, they're spending more. It's diversifying the customer base away from just a thousand or two thousand advertisers to many. War and so television is coming on strong as his third big scale channel that's now a true digital channel. Mountain CEO there Mark Douglas talking about the advertising industries shift away perhaps and Meta and Google to those new players in the media arena. And in fact, some of those media names that offer streaming profit offerings are really rallying and they've been running hard on the day, Paramount and more than eight percent, Warner Brothers up more than eight percent as well. Analysts even though still seem to see weak ad demand eluser streaming profitability. In fact, mcquarie was the latest to cite such concerns on the day. So what is the ball the bear case of media companies and which streaming offerings are likely to win out? Got the perfect take for you. An analyst of course, who had the charge on Netflix, upgrading it to a buy from Cell in the previous week, Ken ley On as a director of equity research over at cfr A and Ken just talk to us about the immediate short term rallies that we're seeing in some of these companies. I mentioned Warner Brothers paramounts. Does it take you by surprise? So it's really looking at the business and whether this is a market that's going to grow and there's going to be winners and losers. And we're coming off where the industry movies and entertainment stocks are down, so that serves as a bottom, if you will. Then it's a question for analysts to really figure out could there be a winner in a highly competitive, new disruptive area, which is video streaming and what that does to their business, including the legacy areas whether they be broadcast or pay TV or film. It's complex and we had to sell on Netflix most of two. We switched to a buy because doing some soul searching and maybe we were a little too severe on the valuation. Say Netflix shouldn't trade at a premium to a Water Brothers Discovery paramount or is they? But we think today they should because they are really focused on winning. Okay, talk to us about the focus on winning. Talk to us about whether enough pain, enough stress, enough cutting out of the extra fat and the margin is preserved over a Netflix, particularly as they've got this added edition of advertising revenue coming forward. The download looks very good for three and twenty four for this company because they're going to have new revenue streams importantly coming from advertising going from zero, but taking some fair share away from some of the companies you mentioned Google and Meta, but also the traditional broadcast area. There is a secular shift to streaming, and Netflix has a management that's been in place for ten years. They've organically grown a global based technology platform and library and shows that people want to watch. They also have a wide range of rain plants today with a new add pay plan of six ninety nine, but most of the affluent viewers are paying for higher features and high death Add to that, well, what are the competitors doing? Each of these has changing managements, They're dealing with complex mergers, they're not sure what they want to keep or what they want to sell, and they're also trying to figure out really in terms of how are they going to win the streaming as they hold on to either legacy businesses and broadcasts or other areas like parks. That's very difficult to do. So I think Netflix has the chance to outrun its competitors, and we're definitely going to see it in It's interesting that you said changing management. Of course, it's sort of revolving in some way, particularly when you think about the company that does indeed have parks one Disney. How wou do you think is Bill Bigo a net positive in general for that business at the moment, particularly when it comes to the focus on dreaming. So I haven't covered Disney or these companies for ten years, but you know, my observation is Bob Iger's coming back to do the job he was unfulfilled. He made an enormous acquisition back two thousand nineteen. Disney has high debt. They're trying to generate higher cash flow and earnings and return to shareholders. They don't pay a dividend, they don't buy backstock. But this is Disney h stocks cheap trading below ninety So we have a view that I could probably will do things that will be positive for shareholders. Well, we're not sure what it is. They have a put coal with Comcast for Hulu. That's a big number. They have to decide from activists like low what to do with ABC or espn uh. And it's complex and at the end of the day, the heart of this company is not video streaming Disney plus Uh. It's going to be challenging compared to Netflix, which is organically a hundred percent focus on video streaming and that's where viewers are going. Advertisers are following a little bit slower, but they're switching over to the streaming market and that's really going to benefit the stronger players. Well, there's another strong day for Netflix trading as well. On the day I'm almost five percent Kenny on It is great to catch up with you, stay well, Director Equity Research over at c f R A with that or double rays for Netflix last week to a buy. Meanwhile, another story we continue to watch and we stick on kind of the focus on advertising because Facebook's pair at Meta platforms then find four million dollars by the European Union's main privacy watchdog. The penalty has to do with the way users data is used for personalized ads on Facebook and Instagram. Meta has three months to ensure the processing of such information complies with eating rules coming up or shares a salesforce. They rose after a pretty painful announcement, and that's about cutting stuff by about ten percent. More of the company's restructuring plans. That's next, And as we had to break, let's take a little look at Apple shares losing shine after an argly month. The stock fell top percent in December, taking the company's market value below that are two trillion dollars. Now, investors are concerned that matters could get worse because of course delays in iPhone production. What's of course continue with China's COVID and weakening demand as the economy slows down from New York and look, they keep on coming layoffs and the tech industry, this time Salesforce announcing it will cut about ten percent of its workforce and indeed reduce real estate holdings. Joining us now as Bloomberg technophor to Brodie Ford who helped and analyze what was put out as a statement by the company, and do we have any hints of wear or or or you know, geographies of anything around these sorts of cups. It appears to be very broad based at this time. I've spoken that people from legal to philanthropy to sales recruiting I think when we see a big layoff like this, we assume all you cut all the recruiters, all the sales people, but there are some engineers in there too. It appears pretty broad. Um, everybody knows Salesforce is one of the biggest employers in San Francisco. If it is an equal layoff across their geographies, that would mean about a thousand people cut from San Francisco at a time when obviously their downtown is struggling. And to that end, do be therefore worry about San Francisco in the real estate therefore that they have there, if they're going to be sort of coming to an end of some of their leases. Well, what's funny about this is that they're talking about they're cutting leases, but at the same time they're saying, we're forcing some people back to the office. Right. Salesforce has said, you know, a year or two ago, Benny Office, I was saying, we're never going back, but there are some sales people being forced back to the office. Management is increasingly focused on product to the and these kinds of measures. So, you know, are they cutting some real estate? Yeah, but the tower is not going anywhere. Even if it was sinking at one point around that is this it intense of announcements, do you think? And more to the point, how does it dent the culture or actually take away some of that anxiety because there was commult were reporting with you almost on a daily basis last year about changes at the top of this business, and now it's going to be filtering down. I would say almost no one is surprised that there was a layoff. I mean, everybody I spoke to said that there was that kind of fear in the air. Um, the scale of it is higher than's unexpected. I think I was hearing the number around five thousand a little more often it was eight thousands. So it was large. And of course no one wants new rolling layoffs. I don't think management is planning to do another big layoff tomorrow. But hey, it's a worsening macro. They're doing this because they're seeing slow in growth and they need better profits. So I mean, I don't think we can confidently say that this is it. I mean, and our viewers would agree. We took to Twitter asking really whether the worst is behind us? Will take layoffs? And no, fifty three let's called. I think still there's more to come. You cover a broad range of companies, is it those most focused on selling into corporate businesses? We were just hearing about, of course Microsoft, the downgrade from ubs today, the warriors about Azure and they sort of the weak parts of the tech space right now. Well, what's funny is for a while it was if you were enterprise, you are good. It was the consumer facing market that's the one that was in danger. But as those consumer businesses have gotten more in trouble, but people whom sell those companies software are seeing it too, So it's kind of trickling up now to those places that were a little safer. Your Salesforce is your Microsoft. So as long as the picture is worsening in terms of consumer demand, I think it's still will hit the enterprise players. Brodie, thank you bringing us all in the analysis and this news, Brodie forward And of course Salesforce isn't the only company out with layoff news. Even on the day. On Wednesday, Video announced it will elevens global full time workforce, also to focus on the company's sustainable, profitable growth. Shares of the video software company rose about to see fight sent on the news. I use it every day. It makes driving safer less stressful. Uh and and I'm less tired after driving. It's a great product. And by the way, it improved yesterday while it was sitting in my driveway. The car I owned today is better than the car I owned yesterday. It's the pragmatic case. I mean, like, let's be honest, this is a world class um product that people love and that makes them safer and gets him to and from places faster and easier. Uh. And I don't expect it that that hasn't changed. Uh And so we expected to continue. Welcome back to Rebot Technology. I'm Counterline Herd in New York. And that, of course was our chief futurist Brett Winton, who Tuesday was talking about that the bull hey sequeled at the Pragmatic case. The bull case of Tesla, which has been under pressure after announcing a delivery miss. Another ball is Brett's foss Cathy Wood, who has bought the dip no doubt helping the bounce back. On Wednesday, I want to dig into Tesla a little bit more about well, really, where this price is going, where the fundamentals are going. The Morning Star equity strategist Seth Goldstein seth great to catch up with you, and look, you've got to buy on this stock. And like many others, you see the price basically doubling to about two or thirty one is where the general price target is for this year in the next twelve months for Tesla and you have about two twenty. Can you talk us through the reasoning why you think this is a by the dip moment. Yeah, so so tepla and shifting into a lower growth mode. The growth is still there in the fact of that a reason more price right now? You know a lot of the lot of the antillary businesses like fullth self driving and essentially growth of the insurance are being heavily dipcounted, as well as future card saving that management can still implement as they're ramped up at factory and had accused a battery day goals that will still drive marked than higher fie popper growth in accept the revenue growth even if revenue growth is more in the I teams over the next ten years instead of manage target. So we feel out of upside in the stock at current pre is it then a story of show me stock? What's interesting is yes, they did miss the targets their own internal targets to deliver more than growth in terms of deliveries last quarter, and they missed it. They got in is still strong? Do we need to have more clarity, more real sort of basic analysis and future guidance coming from Tesla so we can set our sites a little bit more realistically. Yeah, I think that certainly would help management. Just for saying that we effect the growth fifty percent a year and delivery over a multi year period does not really help with yearly year guidance, especially as Tesla is now big enough to start seeing a demand impact from an economic slowdown. You know, now that they've got there at one point three million vehicles annually, they're gonna start to see some consumers who may want to hold off on that big ticket item and then wait till the next year while we're gonna slowdown. So, you know, I think management guidance and the more the more sort of confidence they can give us around specific targets and numbers from a year to year basis will certainly help the stock. As I think investors right now we're searching for what is the right growth rate, and with a high growth stock like Tesla, even small changes in a growth rate assumption can materially change your valuation for the stocks. Yeah, I mean talk to us about the incentives that will be having to be dangled in front of a US buya is that a warrior? Is that shining a light on the fact that the price point is going to have to change. We do think there's gonna be some small price cuts as Tesla is gonna want to make sure that as many of its vehicles as possible physically some model threeason model why we'll ultimately fallify for the inflation reduction that tet credit and heading into an economic Florida, and I think that's given me away. Test can generate strong demand growth. So we are modeling some pipe decreases for that of Platform next in this year to help generate demand growth. And they're that's going to help Test for grow to what we're forecasting and lull over one point six million deliveries in twenty three. So with all the daily sort of tussles that you get, whether it's on social media or whether it's on on ad like this, whether it's about the worries of whether is still a pretty good growth rate, whether or not we should be looking at deliveries rather than demand from real perspective, what is the main thing that we should focus our rise on now when it comes to Tesla. Is it China, is it deliveries? Is it demand? Which side should we be looking at. I think there's two key things that we should continue to focus on. One is, as we go into three, what will the growth rate be? You know, I don't expect etan double digit growth. I'm forecasting twenty four ward, then growth next year in delivery, and then to what do the proper electrics look like? If you remember back in the first quarter of last year, Pepera achieved nearly a thirty percent growth margin in the automotive segment. That was before the opening of the Berlin and Austin factory. Our production ramps up in those factories, I do affect the growth. Poperate margins will improve stfuentially and so if tethlic and continue to show profit improvement, I think that helps get profident that that the doc can still work and still be a growth dock. Monty South South Girls team, thank you, was ever talking about the growth stock that is Tesla. Let's look at We'll look at the competitive side of it all. Because electric vehicles aren't just wholly at Tesla. There's so much competition and front and center is going to be on display at the CS convention in Las Vegas. Most Keith Norton reported on this on Tuesday and joins us now and Keith, you know, we're used to basically car companies being the main proponents and main areas of display at technology companies have been the case for the a few years. What is it going to be like at CES this year? Or we're gonna have a little bit more sort of reasonable growth stories for these as companies. Yes, CS is getting real Caroline. What we're seeing this year is displays of not fanciful things, you know, flying robotaxis. We're seeing you know, electric vehicles that are either on the road today or they're about to be on the road because everybody's trying to catch Tesla, right, And so this year at CES, it's all about pragmatism and profitability, not so much about potential and profits that may come someday or not at all. People want to know, you know, what can you show me that will deliver return on investment? Now? Oh boy, pragmatism and profitability. I think it's basically the turn of phrase for every single company for the rest of twenty twenty three, whether it's a car company or not. But talk to us about there for the big intros, what are we going to be seeing unveiled at this year? So the bit One of the big e V unveilings will be Stillantis, the company that makes Jeep and Ram pickup trucks. They're gonna show a concept of an electric Ram pickup truck. This will be the one that will take on Ford's F one fifty Lightning Electric take on their new Rivian R one t and Tesla's cyber truck when that eventually comes out. So that's one of the big intros. But we'll also see another electric pickup truck, the Endurance from Lordstown Motors. We'll see some digital concepts from from VMW and Mercedes UM. But all of these things will be things that consumers can get their hands on soon. They're not just some research project in the lab. Well, talking of research products in a lab, ones have actually been more evidently on the road has been self driving and we know the way moods of this world, and indeed tails that have been trying very hard in this space are we gonna get anything in this particular focus point. Yeah. Again, pragmatism will rule the day. So what we have now, Carolina is instead of sort of the free range robotaxis that will take us anywhere, we're gonna see a self dryving tractor from John Deere. So that is the sort of thing that autonomy is is focused on. It's these use cases that are needed today and that will generate a return. Now, it doesn't mean that Weymo isn't still out there or cruise, but the thing is is that the inflection point was Argo, the self driving unit of Ford in VW going down. That's that's made this CES far more Sober people are really looking at you know, how can I make a profit today not tomorrow. Sober, pragmatic, I'm not sure either those things are gonna be summing up the enthusiasm we'll get from Ed Ludlow on the ground in Las Vegas. But Keith, he set us up wonderfully for tomorrow. Keith Norton, we thank you and do not forget. Thursday Friday, Full of Energy is going to be Bloomberg Technology Live from the Consumer Electronics Show in Las Vegas. We're gonna be chatting with so many leaders Delta see you at Bastion. He's a key speaking that sees the director Jenn Easily, siemens Us CEO Barbara Hampton's and Calcolm CEO Cristiano Alon do not want to miss it. I mean, while coming up in here and the now, the generative AI is all of us and Silicon Valley. So what are the risks, what are the actual rewards and the best strategy to invest. We're going to have NFX general partner James Career here. This is willing Berg. So the US government has seized or is in the process of seizing, hundreds of millions of dollars worth of robin Hood shares. It is all part of the fraud case against Sam Bangmin. Freed and the ft X founder bought a seven percent stake in robin Hood last year. The shares, now worth more than four d and sixty million dollars, have been claimed by various creditors of f t X who filed court cases to try and control them. This is all part of the government's fraud case against Batman, Freed, and other top f t X officials. Meanwhile, well maybe it was crypto. There's a hot thing two now calls the whole thing is AI, and we've all been playing with it, talking about and now Microsoft is reportedly upgrading its search engine with it. The Generative AI. Of course, chat, gpt dally other AI tools have got us all pondering kind of the implications for use cases as we create text, we create images, video software, code, music, three D models. My next guest is thinking on this more than most and been investing in the space more than most. NFX General partner James Currier is here to explain well the fact that back in October, before we all started got completely engrossed in it. In various Twitter trends, you said that the biggest change the Internet is already upon us, and you said it was AI and the applications. Just talk us through your thinking. Yeah, thanks for having us on. You know, as you know, NFCTS is one of the largest seat funds in the world, and our job is to be sort of on the front edge, and I would say this is on the front edge. We started investing about two years ago. It really took off, as you said, about three months ago. So we're really early in this process where we're heavy into it because we do think that it's going to affect every industry. So there's gonna be a number of unicorns and dected corns built over the next four or five years in this area. And so we've been investing heavily in it, and we uh yeah, so we published this of it which are the most fruitful at the moment, because I mean I can see copy idities and many people being somewhat concerned about the future job descriptions. But which are the most practical use cases right now that you've seen already the millions the flu into companies that are building in that space right right. So on NFX dot com, we have published the largest generative tech and generative AI market map out There is about four and seventy seven companies today and it's growing every day. About of the billion dollars it's already been invested in those companies has gone into general AI, into general AI models that are now powering. And we think of this like we would think of fiber optics in the late nineties that laid the groundwork for the Internet, and uh, going forward, we think that there's going to be more invested in the upper layer of that stack. And so um, we think they're gonna be three big winners. The first is gonna be the companies that move very fast to build sas software to do things people would expect, like copyrighting or video editing, and we're seeing that already with companies like Jasper were just raised five million dollars to do marketing and copyrighting. The second group is going to be companies that use generative AI at the core of things like marketplaces and payment structures, but not but aren't exactly delivering the AI to the customer. They're actually building it in to create a more competitive business to compete market And then the third one is going to be the visionaries who do businesses that we haven't even thought of yet, and that's typically the way these things roll out. How do you seek out the vision rais to that end, James, I mean, I know what's interesting, NFX. If you've got the false program, Basically, you take a whole load of generative technology companies, the founders there, you get them to pitch, and within a very swift turnaround, you aside whether there are a business model that you want to be funding. Is that the way to sort of find out where is it? The cutting edge that maybe people haven't thought about the practical application. That's right. We we've interviewed over a hundred generative AI companies over the last two months, and we're getting a really good sense of where the things are moving and where things are getting a little bit stuck. Um the thinking of the founders yet hasn't moved past sort of a lot of the obvious ideas. So in the market, match got a hundred companies doing text based stuff like Jasper and copy ai. Um. They're all doing very something very similar. They've got to take that next leap, and what we're doing in these conversations is to figure out who's got the ability to take that leap to the next level for what's going to be successful next summer and the end of two thousand twenty three, because what we're seeing now is sort of copycats of things that were successful a year, a year and a half ago. James was interesting about this fast program is well, the fact that it's fast, the pace in which you are able to decide that you want to cut a check. I'm interested in as we've learned some of the repercussions of all the money in the world and perhaps not some of the safety pets in place, that the governance that we'd like to see at sending businesses. I mean, we were just talking about f t X. How are you ensuring that you're getting those sorts of rules of the road in place when you write that sort of a company money. Yeah, So the FAST program writes a million, a million and a half and two million dollar checks to early stage startups with two people to tend people. So we're not putting a ton of money into these companies, so we're not giving them so much that they can start behaving badly. The second thing is that we actually sit down with them and talk with them about how to publish and follow on their values and the things they're going to adhere to. Because look generative a I like, the Internet itself can be used for good or for ill, and whether it's you know, racist or sexist comments or whether it's going to be um, you know, using it to generate images that just are unseemly. You've got to have some rules of the road that you published, you commit to your community, and then you want to behave along those lines that we help the founders put those in place. I mean, yeah, boy, we just think of how Microsoft was slightly bidden by that AI generative function and the way in which unfortunately humanity used it to start expludging hate speech. Basically, I'm interested, James, Therefore, is there any does this need to come from a federal level? This is need to come from a international organization level, to think about how we put the rules in place that we are building purposeful AI. Then, indeed, is a net positive never in any way a negative contribution. Yeah, we think so. We think that it starts out with our community. Look, we want the generative AI community, generate tech community do a lot better job than the social networking groups did a laying out the principles and values that they need to adhere to. And that's always the first step because as we explore these technologies, we who are building the technologies understand their strengths and weaknesses the best. But long term, we do need to have federal and international guidelines that we can all adhere to. And hopefully we're going to get that in crypto pretty soon because we can see what the results of not having it is. Very briefly, j when you're looking at all these different companies, where are they being built? Uh, we're seeing a lot of them in Europe, a lot of them in Israel, but the most of them are being built here in the US, on top of the great efforts to Google and open AI and others have done over the years UH to to build up a foundation of machine learning and artificial intelligence people. We've got a lot of universities here, We're putting out a lot of PhDs and masters in this area, and those people like to stay here in the US, and so we've got a lot of great teams going after this whole area, as we have for the last five or six years. It's just the processing power and the cost has come down so much in the last twenty four months that are really exploded in the last three months. James, it's been great speaking with Thanks for taking us through what seemed to be pretty much cool ahead of the n f X General partner, James Carrier. There time now for going viral, and you've seen it trending on a well countless hashtags hashtag House of Representatives, hashtag Kevin McCarthy, hashtag c SPAN. Even Wednesday, GOP leader Kevin McCarthy failed for the sixth time to rally House Republicans behind his bid for Speaker, and the House is at a stand still basically until the election of the speaker, and which means business will not be conducted until it is settled. But current chaos aside, what can McCarthy leading the House look like for technology in general? Well, McCarthy is the man leading the GOP's battle against big tech. His agenda looks to provide greater privacy and data security protections. Is going to equip parents, he says, with more tools to keep their kids safe online, and aims to stop companies from putting politics ahead of people, so they say a nod. Of course, the Republican concerns about political censorship, which we have seen big changes, are already at least over at Twitter. Remember since they must take over, former President Donald Trump has been reinstated on the platform, and just yesterday the company announced an easing of its political ads BAM. And while McCarthy's agenda doesn't specifically talk to issues like antitrust, suppose is going to be something Silicon Valley or keep an eye on now that does it for this edition of Bluebeck Technology, Stay tuned for those votes still to come. I'm sure there's gonna be more rounds of it coming from Washington. But tomorrow all eyes turned to Las Vegas. They turned to one Ed Ludlow, who is going to be joining us again in conversation of course, with CrowdStrike CEO George Kurtz alive in the hour when three Cybersecurity Outlook. You do not want to miss it. Plus, don't forget to check out a very own podcast. You'll find it on the terminal. You can find it online on Apple, Spotify, an i Heeart, and plenty more. In terms of these markets still to come. After Wednesday's rally from New York, thisibly back