Markets Weigh Widening War, Big Tech Earnings | The Asia Trade 7/23/2026

SHERY: THIS IS "BLOOMBERG THE ASIA TRADE." THE TOP STORIES THIS HOUR. TECH EARNINGS KICKOFF. ALPHABET SLIDING AS IT FLAGS HIGHER SPENDING IN THE RACE TO BUILD AI COMPUTING POWER. IBM CONFIRMING A CUT TO ITS FULL YEAR SALES OUTLOOK. TESLA MRS. WALL STREET'S EXPECTATIONS FOR THE QUARTER, SHARES FALLING AS ELON MUSK WARNS THE COMPANY'S PUSH INTO ROBOTICS WILL NOT BE EASY. THE ESCALATING MIDDLE EAST WAR SINCE BRENT CRUDE PRICES HIGHER WITH INFLATION WORRIES LIFTING BOND YIELDS. HAIDI: TAKE A LOOK AT THE TRADING ACROSS ASIA. THE FIRM FOCUS IS ON THESE TECH EARNINGS. THE NEXT CATALYST EXPECTED FOR THE CHIPMAKER STOCKS IN THE AI SPACE AFTER WHAT HAS BEEN WEEKS AND MONTHS OF WHIP SAWING VOLATILITY. TAKE A LOOK AT HOW WE ARE SHAPING UP WHEN IT COMES TO U.S. EQUITY INDEX FUTURES. LOOKING PRETTY MILD TO THE DOWNSIDE ON THURSDAY TRADING. INVESTORS WEIGHING NUMBERS FROM AI HEAVYWEIGHTS, LOOKING FOR THE FURTHER EVIDENCE THAT THE SHEER AMOUNT OF CAPITAL SPEND HAS BEEN PAYING OFF AND IS TRANSLATING INTO GROWTH. THE ALPHABET GUIDANCE IN A MOMENT FOR HIGHER CAPEX. IT WILL BE INJECTING MORE ENTHUSIASM INTO THE SEMICONDUCTOR TRADE THAT HAS BEEN WOBBLING. WE ARE TALKING ABOUT THE KOREAN MARKET. KOSPI FUTURES UP. WATCHING THE IMPACT OF DOLLAR-YEN. A LITTLE BIT OF BRIEF RESPITE ON THE CHANGING OUTLOOK. THE PROSPECT POTENTIALLY OF FASTER HIKES FROM THE BANK OF JAPAN. OPEN TO RAISING RATES AT A FASTER PACE THAN CONSENSUS AMONG ECONOMISTS. THE MONEY MARKETS ARE ADDING TO WAGERS WHEN IT COMES TO HIGH BY THE OCTOBER OF THIS YEAR. LOOK AT THE GEOPOLITICS PART. WE WATCH CRUDE AND BROADER ENERGY AND COMMODITIES PRICES. BRENT CRUDE LAST RATED HIGHER BY ALMOST 3.5%. YOU ARE TREATED CREEP UP BY 1.25%. RAMPING UP MOMENTUM TO THE UPSIDE AFTER WE HAD HOUTHI MILITANTS TARGETING TANKERS IN THE RED SEA. THIS IS A DESTRUCTION BUT -- DISTRACTION BUT THERE'S A LOT TO PARSE THROUGH THE TECH NUMBERS. SHERY: LET'S DELVE IN. THE BIG TECH EARNINGS OF THE SEASON. ALPHABET SHARES FALLING IN LATE TRADE AS A RAISED ALREADY SKYHIGH ESTIMATES FOR CAPITAL SPENDING. OTHERS REPORTING UP TO THE BELL, INCLUDING IBM AND TESLA. MANDEEP SINGH IS THE HEAD OF TECHNOLOGY RESEARCH AT BLOOMBERG INTELLIGENCE IN JOINS US NOW. WE ALSO GOT A LITTLE BIT OF A MISS WHEN IT CAME TO SEARCH ADS. CLOUD REVENUE WAS BLOCKBUSTER SU RGE. IS IT JUST SKYHIGH EXPECTATIONS AT THIS POINT? MANDEEP: THERE ARE A LOT OF MOVING PARTS. WHEN YOU COMPARE THE ALPHABET FROM TWO OR THREE YEARS TO NOW, WE ARE TALKING ABOUT THE CLOUD BUSINESS GROWING AT 82% AND $100 BILLION RUN RATE. JUST PHENOMENAL. ALPHABET USED TO BE A CONSUMER ADS COMPANY. THAT IS HOW MUCH THINGS HAVE CHANGED FOR THEM. THE JUSTIFICATION FOR THE HIGHER CAPEX IS THAT THEY ARE SEEING SO MUCH GROWTH AND DEMAND ON THE CLOUD SIDE THAT NOW THEY ARE SELLING THEIR STANDALONE SYSTEMS IN ADDITION TO WHAT THEY ARE SELLING THROUGH THE CLOUD SEGMENT. THAT IS WHERE THERE IS A LOT OF RUNWAY. THE BACKLOG SEATED $500 BILLION. SOME PEOPLE COULD BE SLIGHTLY DISAPPOINTED WITH THE SEQUENTIAL GROWTH AND BACKLOG. THERE IS NO DOUBT WHEN A COMPANY HAS A SEGMENT AND A BACKLOG WHICH IS FIVE TIMES THE SEGMENT REVENUE, IT IS A LOT OF RUNWAY. THAT IS WHY YOU WILL SEE BIG INCREASE IN 2027 CAPEX FOR ALPHABET. HAIDI: WE DID NOT GET THAT MUCH VISIBILITY GOING INTO 2027. THEY TALKED ABOUT SUPPLY CONSTRAINED WHICH IS BULLISH FOR THAT IDEA THAT DEMAND IS GOING TO KEEP GOING UP. DO YOU HAVE THE EXPECTATION THAT THE CONFIDENCE THAT SPEND WILL ALSO KEEP GOING UP AS WELL? MANDEEP: LOOK AT THIS QUARTER. THE DOUBLED FROM LAST YEAR AND THE CLOUD REVENUE GROWTH WAS 82%. ALL SIGNS ARE THAT CLOUD REVENUE GROWTH WILL ACCELERATE FOR THE REMAINDER OF THE YEAR. THEY DID TALK ABOUT SOME MARGIN HEADWINDS ON THE CLOUD SIDE EVEN THOUGH THE CLOUD SEGMENT HAD THE BEST MARGINS SINCE THE INCEPTION OF THAT SEGMENT. I TALKED ABOUT THIRD PARTY RENTALS FROM COMPANIES LIKE SPACEX AND NEO-CLOUDS, AND THE FACT THEY ARE SELLING THESE STANDALONE TPU SYSTEMS. THEY ARE COMPETING WITH NVIDIA BY SELLING THESE COMPLETE SYSTEMS NOW TO THE DATA CENTER COMPANIES. FROM THAT PERSPECTIVE THEY ARE MAKING THESE BIG INVESTMENTS. IT WILL BE REFLECTED IN 2027 CAPEX, WHICH MY NUMBER IS $300 BILLION. I THINK THEY WILL PROBABLY GO HIGHER BASED ON WHAT WE HAVE HEARD ON THE CALL TODAY. SHERY: WE ALSO GOT THE RESULTS FROM IBM, WHICH SOME SAY WAS BETTER THAN FEARED. DOES THIS JUSTIFY CONCERNS AROUND THE SOFTWARE SECTOR ITSELF? MANDEEP: WE ARE COMPARING A COMPANY THE GROUP LOW SINGLE-DIGIT. THEY PREANNOUNCED A COUPLE OF WEEKS BACK. REALLY THEY CUT THEIR GUIDANCE. FROM THAT PERSPECTIVE THEY ARE CAUGHT IN THIS WAVE WHERE THINGS REALLY AREN'T GOING VERY WELL FROM A BUSINESS STANDPOINT. MAINFRAMES IS THE KEY SEGMENT WHICH HAS DISAPPOINTED THIS QUARTER. THERE IS NO DOUBT THEY ARE UNDER PRESSURE AND THEY TALKED ABOUT SOFTWARE DEALS CLOSING. THEY HAD SOME SLIPPAGES BUT WHEN YOU COMPARE THE TWO PRINTS FROM ALPHABET AND IBM, THEY ARE OPPOSITE IN TERMS OF THE TOPLINE GROWTH EXPECTATIONS. HAIDI: DOES THAT MEAN WE WILL SEE FURTHER DOWNSIDE WHEN IT COMES TO SOME OF THE SOFTWARE COMPANIES, EVEN ONES THAT ARE AS POTENTIALLY DEFENSIVE AS IBM? MANDEEP: OVERALL I THINK IT LOOKS LIKE YOU WILL SEE MORE PRESSURE ON SOFTWARE AND SERVICES NAMES THIS EARNINGS SEASON. IT IS REALLY THE CLOUD COMPANIES THAT SHOULD COME OUT ON TOP GOING BY THE ALPHABET PRINT. THE TRICKLE-DOWN EFFECT OF INCREASED CAPEX SHOULD BENEFIT THE SEMICONDUCTOR NAMES. I THINK COMPANY STILL FEEL THEY ARE SUPPLY CONSTRAINED, THE ONES THAT ARE AT THE FOREFRONT OF THIS AI INFRASTRUCTURE BUILDOUT. THEY WANT TO ADD AS MUCH CAPACITY AS THEY CAN, AT LEAST FOR THE SECOND HALF OF 2026 AND POSSIBLY GOING INTO 2027 AS WELL. SHERY: GLOBAL HEAD OF TECHNOLOGY RESEARCH MANDEEP SINGH WITH A WRAP ON THOSE NUMBERS OUT OF ALPHABET AND IBM AS WELL. WE ARE WATCHING TESLA. SHARES ARE LOWER IN LATE TRADE AFTER SECOND QUARTER PROFIT MISSED WALL STREET ESTIMATES EVEN AFTER A STRONG QUARTER OF AUTO SALES. ADJUSTED EARNINGS OF $.33 A SHARE FELL WELL SHORT OF THE $.51 AVERAGE OF ANALYST ESTIMATES COMPARED -- COMPILED BY BLOOMBERG. ELON MUSK GIVE A FEW UPDATES WHEN IT COMES TO THE MUCH ANTICIPATED ROBOTAXI PLANS AND ONE SCALING PRODUCTION OF ITS OPTIMUS HUMANOID ROBOT WILL BE DIFFICULT. WE DIVE INTO THE EARNINGS AND THE OUTLOOK IN A FEW MINUTES WITH MICHAEL DUNN, WHO SAYS THE COMPANY REMAINS ON A PERMANENT HIGH-STAKES ROLLER COASTER. IT'S ALL ABOUT TECH EARNINGS BUT LET'S NOT FORGET WE STILL HAVE THE GEOPOLITICAL CONSEQUENCES OF THE WORSENING U.S.-IRAN WAR. BONDS AND FOCUS TODAY. MY CRANFIELD JOINS US NOW. WHAT YOU MUST FOCUS OR IN TERMS OF THE PRIORITY. THAT FOR THE PRIORITY FOR TODAY'S TRADING ACTION? MARK: A BIT OF EVERYTHING YOU JUST MENTIONED. THE ATTACK IN THE RED SEA BY THE HOUTHIS ON TANKERS IS A NEW DEVELOPMENT WHICH IS PUSHING UP OIL PRICES. THAT IS SOMETHING TRADERS HAD NOT HAD TO DEAL WITH. THEY WERE USED TO PROBLEMS IN THE STRAIT OF HORMUZ AND NOW WE MIGHT HAVE TO TAKE THE RED SEA VERY SERIOUSLY AS WELL. THAT'S A NEW DIMENSION THAT NEEDS TO BE PRICED IN THE MARKETS. IT WILL DEFINITELY AFFECT EQUITIES BUT PARTICULARLY BOND MARKETS. BOND MARKETS ARE EDGY. THERE'S A BIG STORY ON BLOOMBERG ABOUT 30-YEAR YIELDS ABOUT 5% FOR THE LONGEST PERIOD SINCE THE GLOBAL FINANCIAL CRISIS. THIS WILL NOT HELP IN THAT REGARD. IF YOU LOOK AT WHERE THE FEDERAL RESERVE PRICING IS IN RELATION TO INFLATION EXPECTATIONS AND WHERE OIL PRICES ARE, TRADERS ARE STILL UNDER PRICING THE IMPACT FOR THE FED IN TERMS OF RAINING AND INFLATION. THAT WILL PLAY OUT IN A STEEPER CURVE HIGHER LONG-TERM YIELDS. THAT IS IN PLAY. YOU TALK ABOUT THE TECH SECTOR, PARTICULARLY THE LOSS AND FREE CASH FLOW EARNINGS. ALPHABET WENT NEGATIVE. THAT IS SOMETHING THAT HAS BEEN A VERY BIG POSITIVE FOR MARKETS AND HELPED THE KOREAN AND TAIWANESE MARKETS AS WELL. WHEN THEY SEE THE RISK THAT SPENDING BY HYPERSCALERS HAS GONE INTO NEGATIVE TERRITORY, THAT MAY PUT A DAMPENER ON ANY MOVE THEY HAVE IN KOREA. THEY MAY NEED TO DRAW BACK AND SPEND LESS ON SOME OF THEIR INPUT OVER THE NEXT FEW MONTHS OR YEARS. THAT'S A BIG QUESTION MARK FOR MARKETS. THE UNREALIZED PROFITS ALPHABET IS TALKING ABOUT IN TERMS OF THE AI INVESTMENTS MADE. WHEN YOU LOOK AT THE WAY SPACEX HAS CRASHED SINCE ITS IPO, IT SUGGESTS VALUATIONS ON AI BEFORE THEY COME TO MARKET ARE REALLY OPTIMISTIC. THAT'S A NEGATIVE FACTOR ACROSS THE MARKET. THAT'S A LOT FOR INVESTMENTS -- INVESTORS TO JUGGLE. LOOKS LIKE IT WILL DAMPEN THE MOOD AND BE SOMETHING WHICH IS NOT GREAT FOR EQUITY MARKETS WHEN THEY GET GOING IN ASIA THIS MORNING. SHERY: IT DOES NOT HELP WE ARE NOT GETTING ANY CLUES COMING FROM THE FED. KEVIN WARSH'S NO FORWARD GUIDANCE APPROACH. HOW LIVE ARE THE NEXT FEW FOMC'S GOING TO BE AND SHOULD WE COUNT NEXT WEEK'S AS WELL? MARK: IT IS PROBABLY TOO CLOSE TO THE JULY MEETING TO REALLY CALL IT ALIVE ONE. IT WILL BE SURPRISING IF THEY MAKE A HUGE CHANGE. WHAT BE LIKE IT IS MORE DISSENT. THERE MIGHT BE MORE FED PEOPLE CALLING FOR ACTION BUT UNABLE TO AGREE ON WHEN THE TIMING OF THAT IS. IT CERTAINLY MEANS THROUGH THEIR MESSAGING AND THROUGH THE PRESS CONFERENCE THEY MAY WELL START TO LEAD A LOT MORE HAWKISH LY THEM PEOPLE ARE PRICING FOR. CHANCES ARE THE FED WILL HAVE TO DO A PRECAUTIONARY INTEREST RATE HIKE, PARTICULARLY IF WE GET HAWKISH MESSAGING FROM THE EUROPEAN CENTRAL BANK TODAY. THEY ARE AHEAD IN THE STAGE OF THE CYCLE. THEY MAY PUT MORE PRESSURE ON THE FEDERAL RESERVE BY EITHER RAISING RATES OR TALKING ABOUT ANOTHER RATE HIKE TO COME FROM THE ECB. THAT IS SOMETHING ELSE THAT NEEDS TO BE FACTORED IN BY THE FOMC NEXT WEEK. EVERYTHING IS SHIFTING TOWARDS THE IDEA THAT THE U.S. WILL NEED TO RAISE INTEREST RATES THIS YEAR. IT COULD BE WELL BEFORE DECEMBER. IT COULD BE SEPTEMBER OR OCTOBER. THAT IS MOVING FORWARD AND THAT IS SOMETHING YOU CAN SEE IN THE TWO-YEAR YIELD. PEOPLE ARE TALKING ABOUT 30-YEAR TREASURY YIELDS. IF YOU WATCH THE GRADUAL INCREASING TWO-YEAR TREASURY YIELDS, THEY ARE THE HIGHEST FOR A LONG TIME. THAT IS WHERE TRADERS ARE REALLY WARNING THE CENTRAL BANK YOU ARE GETTING BEHIND THE INFLATION CURVE AND YOU NEED TO STEP UP AND DO SOMETHING ABOUT IT QUITE QUICKLY. SHERY: IT'S THE SAME STORY FOR THE TWO-YEAR YIELD, RIGHT? BLOOMBERG HAS LEARNED BOJ OFFICIALS COULD BE THINKING OF MOVING FASTER TO HIKE RATES THAN PREVIOUSLY EXPECTED. I HAVE TO ASK, WILL THIS HELP IN ANY WAY WITH THE JAPANESE YEN GIVEN IT DOESN'T NECESSARILY SEEM TO BE JUST A BOJ ISSUE? IT'S A JAPANESE CREDIBILITY ISSUE AT THIS POINT. MARK: YEAH, EXACTLY. YOU CAN TELL THE FOREIGN EXCHANGE TRADERS ARE QUITE SKEPTICAL ABOUT THE IDEA THAT THE BANK OF JAPAN WILL REALLY MOVE A LOT MORE QUICKLY THAN THEY HAVE IN THE PAST. IF YOU LOOK AT WHERE DOLLAR-WON IS, IT'S ABOUT 163. WE SAW IT DIPPED BRIEFLY OVERNIGHT. IT WENT BELOW 163 FOR A FEW MINUTES AND THEY CAME ALL THE WAY BACK UP AGAIN. CLEARLY TRADERS ARE NOT CONVINCED THE BANK OF JAPAN IS REALLY GOING TO CHANGE DYNAMICS VERY MUCH. AT THE MOMENT THERE IS INDICATION THE OCTOBER PRICING, THE MEETING FOR THE BOJ IN OCTOBER IS LOOKING MORE LIKELY THAN THE DECEMBER MEETING. IT IS NOT FULLY PRICED IN. IT IS TIME FOR THE BANK OF JAPAN -- IF THEY WANT TO MOVE THE YEN, IF THE AUTHORITIES ARE SERIOUS ABOUT ALL GETTING ON THE SAME PAGE AND CHANGING THE NARRATIVE IN TERMS OF THE YES, IT NEEDS TO BE A CURRENCY PEOPLE WANT TO OWN AND NOT SELL. IF THEY WANT TO DO THAT, IT IS TIME FOR SHOCK AND AWE. THE BANK OF JAPAN NEEDS TO DO SOMETHING REALLY SURPRISING. A GOOD PLACE WOULD BE THE PRESS CONFERENCE NEXT WEEK WHEN THEY SPEAK FREELY ABOUT WHAT HE SEES GOING ON. A GOOD THING FOR HIM TO DO WOULD PUT ON THE TABLE THE IDEA THAT THE BOJ MOVED BY 50 BASIS POINTS, NOT 25 BASIS POINTS. IF HE THROWS THAT INTO THE MARKETPLACE, HE CAN SEE THE REACTION PRETTY QUICKLY AND THAT WILL GIVE THE CENTRAL BANK THE IDEA THAT TRADERS BELIEVE THEY CAN BE SERIOUS ABOUT CHANGING IT. IF THEY KEEP GOING FOR 25 BASIS POINTS OVER A STRETCHED PERIOD, THEY WILL NOT GET TO THE REGIONAL RATE UNTIL 2028 AND THAT WILL NOT CHANGE THE DIRECTION OF THE YEN. THE REST OF THE WORLD IS ALREADY MOVING UP WITH INTEREST RATES. DIFFERENTIALS WILL STAY MUCH AS THEY ARE. IT IS REALLY TIME FOR SHOCK AND AWE. NEXT WEEK WOULD BE A GOOD TIME FOR TO DO IT. SHERY: MARK WILL BE WATCHING NEXT WEEK. WE ARE WATCHING THE JAPANESE YEN. WE ARE ALSO WATCHING THE KOREAN WON BECAUSE WE HAVE SEEN WEAKNESS IN THIS ECONOMY WHEN IT COMES TO THE CURRENCY SPACE. WE ARE SEEING THESE MASS EXPORTS OF SEMICONDUCTORS HELPING THE ECONOMY, THE SECOND QUARTER GDP COMING IN RIGHT NOW. THE KOREAN WON HAS NOT NECESSARILY BUDGED THAT MUCH. IT IS A SURPRISE TO THE UPSIDE. -- EXPANDING 0.6% QUARTER ON QUARTER. THE ESTIMATE WAS GROWTH OF 1.4%. THE AI CHIP BOOM IS SUPPORTING THE CASE AND THE ECONOMY FOR SOUTH KOREA. NOT NECESSARILY THE BLOWOUT NUMBERS WE GOT IN THE FIRST QUARTER WHERE WE SAW THE FASTEST GROWTH SINCE LATE 2021. BUT STILL INCREDIBLE NUMBERS FOR AN ECONOMY OF COURSE THAT IS HEAVILY DEPENDENT ON SEMI CONDUCTORS RIGHT NOW,, ALMOST TWO COMPANIES RUNNING THE ENTIRE KOSPI, THE SK HYNIX STOCK AND SAMSUNG. HAIDI: ALSO THE ENERGY STORY HAS COME BACK INTO THE FRAY, BECAUSE OBVIOUSLY THESE COMPANIES HAVE HUGE ENERGY RESOURCE DEMANDS. WE ARE STARTING TO SEE AGAIN THE INKLINGS OF POTENTIALLY ANOTHER ENERGY CRISIS WITH OIL PRICES CONTINUING TO GAIN MOMENTUM TO THE UPSIDE. CONTINUING TO RISE IN THE EARLY PART OF THE TRADE TODAY. IRAN-BACKED REBELS SAID THEY HIT TWO TANKERS IN THE RED SEA. WE CONTINUE TO SEE ESCALATION WHEN IT COMES TO THE INVOLVEMENT OF THESE PROXIES IN THE REGION. WE HAVE THE DETAILS AHEAD. THIS IS BLOOMBERG. ♪ HAIDI: TAKE A LOOK AT HOW TESLA IS TRADING IN THE AFTER HOURS A SESSION AFTER THE PROFIT FELL SHORT OF ESTIMATES. WE ARE SEEING RISING COSTS, EARNINGS OF $.33 A SHARE, $.51 WAS THE AVERAGE FOR ANALYST ESTIMATES, COMPILED BY BLOOMBERG. THAT IS A FIRST QUARTER NEGATIVE FREE CASH FLOW, MORE THAN TWO YEARS BURNING THROUGH JUST ABOUT $1.1 BILLION. WE ALSO SAW AN ALMOST 50% SURGE IN OPERATING COSTS AS WELL. LET'S TAKE A LOOK AT THE OUTLOOK FOR TESLA WITH THE CEO OF GLOBAL ELECTRIC AND AUTONOMOUS VEHICLE FIRM DUTCH INSIGHTS. THE PROPENSITY FOR A HUGE MARKET FOCUS ON SOME OF ELON MUSK'S OTHER PROJECTS, SPACEX BEING THE DOMINANT FOR HEADLINES, HAS TESLA TAKEN A LITTLE BIT OF A BACKSEAT FOR THIS QUARTER? >> THERE WAS A MOMENT DURING THE EARNINGS CALL WHEN HE SAID SOMETHING THAT REALLY STRUCK ME. HE SAID WE DON'T WANT OPTIMISTS HUMANOID ROBOTS TO GO HAYWIRE. HE SAID I NEED MORE TIME. THIS IS NOT A CASE OF TESLA REPLACING GASOLINE ENGINE CARS WITH ELECTRIC BATTERY POWERED CARS. IT'S A FUTURE IN WHICH CARS DRIVE THEMSELVES, HUMANOID ROBOTS DO THE WORK IN FACTORIES AND OTHER PLACES. IT'S A JUMP OF A MAGNITUDE HE HAS NOT ENCOUNTERED BEFORE IN THE MAIN MESSAGE TODAY ON THE CALL WAS I NEED MORE TIME TO GET THIS EXACTLY RIGHT, THE STAKES ARE INCREDIBLY HIGH, IF THIS WORKS IT IS GOING TO BE AMAZING AND NEED MORE TIME. HAIDI: MORE TIME WHEN IT COMES TO THE NASCENT ROBOTAXI BUSINESS AS WELL? BECAUSE THAT WAS ALSO DISAPPOINTING. MICHAEL: ALWAYS WITH A LOAN, HE LIKES TO DEFY INVESTORS BY PROMISING A GLORIOUS FUTURE AND DELIVERING LATE. THERE WAS A PROMISE OF ROBOTAXIS. IN SAN FRANCISCO, THEY ARE ON THE ROAD AND BEING TESTED. THEY ARE AMAZING LOOKING. TWO DOOR COUPES WITHOUT ANY STEERING WHEELS OR PEDALS. IT IS ALL BASED ON A.I. AND PHYSICAL A.I. AND HE WANTS TO MAKE SURE HE GETS IT EXACTLY RIGHT. HE HAS EMPHASIZED THAT LIKE WITH THE HUMANOID WERE ABOUT OPTIMISTS -- ROBOT OPTIMISTS, WE DON'T WANT THESE THINGS TO MAKE MISTAKES. SO GIVE ME MORE TIME. THAT IS THE BOTTOM LINE. [LAUGHTER] HAIDI: YOU MAKE A FAIR POINT. WE HAVE TALKED ABOUT THE OPTIMIST HUMANOID ROBOTS AND ROBOTAXIS, FULL AUTONOMOUS DRIVING IS THE AMBITION. ENERGY STORAGE AS WELL. THERE IS SO MUCH GOING ON. IS IT IN A SENSE UNFAIR? TO WE NEED TO MOVE BEYOND JUDGING THIS COMPANY ON JUST THE STAND CALCULUS OF EV SALES NOW? MICHAEL: THAT'S RIGHT, CARS AS A BUSINESS HAVE TAKEN A BACKSEAT AT TESLA. IF YOU LOOK AT THE VALUATION, TESLA IS FIVE TIMES MORE VALUABLE THAN THE NEXT MOST VALUABLE AUTO COMPANY, THAT WOULD BE TOYOTA. WE ARE REALLY TALKING ABOUT, AND ELON HAS SAID THIS, WE ARE AN A.I. AND ROBOTICS COMPANY. THAT'S WHERE ALL THE CHIPS ARE BEING PLACED. BATTERY AND OTHER BUSINESSES ARE GOOD BUT THE GOLD MINE WILL BE WHEN AUTONOMY IS PERFECTED. HAIDI: ONE OF THE BIGGEST CRITICISMS AND CONCERNS OVER ELON MUSK, EVEN AMONGST HIS SUPPORTERS, IS THAT HE HAS GOT A LOT GOING ON, RIGHT? PERHAPS DISTRACTIONS WITH PARTICULARLY SPACEX AND DATA CENTERS IN SPACE. DO YOU SEE A POINT WHEN TESLA AND SPACEX WILL EVENTUALLY MERGED TO BECOME ONE COMPANY -- MERGE TO BECOME ONE COMPANY? MICHAEL: THAT'S THE BIG BET OUT THERE, THE VISION IS TO BRING SPACEX AND HAS TOGETHER. AND OFFER AN ARRAY OF WHAT THEY CALLED THESE DAYS PHYSICAL A.I. PRODUCTS AND SERVICES. YOU'VE GOT STARLINK, THE ROCKETS, AUTONOMOUS CARS, YOU HAVE EARTHLINK. YOU HAVE SO MANY BUSINESSES THAT WOULD REVOLVE AROUND THIS FUTURE COMPANY CALLED TESLA-SPACEX. HE HAS GONE OFF TO SAY THAT IT WILL BE MORE VALUABLE THAN EVERYTHING ELSE ON EARTH. THAT'S THE VISION. NOW IT IS A QUESTION FOR INVESTORS, DO YOU BELIEVE HIM? HOW MUCH TIME DO WE GIVE HIM? OR IS IT A BRIDGE TOO FAR? HAS HE OVERSTEPPED EVEN HIS OWN CAPABILITIES? HAIDI: HOW DO YOU ASSESS FAIR VALUE IN THAT CONTEXT? MICHAEL: YES, I THINK OVER THE LAST 10 YEARS, WE HAVE SEEN THIS ZIGZAG -- DRAMATIC UPS AND DOWNS IN THE STOCKS. BUT OVER TIME GOING HIGHER. THAT IS MY EXPECTATION FOR THE SECOND HALF OF THIS YEAR AND BEYOND. HE IS NOT WANT TO BET AGAINST. HE IS A FORCE -- ONE TO BET AGAINST. HE IS A FORCE THE LIKES WE HAVE NOT SEEN 100 YEARS IN THIS COUNTRY. I WOULD NOT BET AGAINST HIM. THEY WILL FIND A WAY TO GET THIS DONE AND DELIVER. HAIDI: AND I LIKE THAT YOUR TALKING POINT IS THAT HE IS NEVER COMFORTABLE UNLESS HE IS DARING INVESTORS TO BET AGAINST HIM. ELON MUSK, NOTHING ABOUT ULTIMATELY ALWAYS A CONTRARIAN. RIGHT? BUT IF THE EV CAR UNIT SALES IS AS YOU SAY, TAKING A BACKSEAT ON THE PUN, DOES THAT MEAN WE CAN CONTINUE TO CUT OF EXPECT MORE OF A BULLISH POSITIONING FOR COMPANIES LIKE BYD, IF THAT IS NO LONGER THE MAIN COMPETITIVE PRIORITY FOR TESLA? MICHAEL: THAT'S RIGHT, IT DOES RELIEVE A LOT OF CHINESE AUTOMAKERS AT TESLA IS MOVING BEYOND THE CORE BUSINESS OF CARS, THAT IS DEFINITELY TRUE FOR BYD AND OTHERS. AT THE SAME TIME THEY HAVE THEIR OWN SORT OF CHALLENGES. THAT IS THAT THEY ARE SURROUNDED BY LARGE NUMBERS OF COMPETITORS INSIDE CHINA WHO ARE TAKING MARKET SHARE FROM BYD INSIDE CHINA AND FURTHER REDUCING MARGINS. SO YES, IT IS GOOD NEWS TESLA HAS MOVED OUT OF THE PICTURE, THE TOUGHER NEWS IS HOW DO WE MAKE PROFITS IN AN ENVIRONMENT WHERE EVERYBODY'S ALL IN AND DRIVING MARGINS DOWN MONTH BY MONTH AND WEEK BY WEEK, WHAT IS THE ENDGAME? HOW DO WE SURVIVE THIS ENDLESS PRICE WAR AND GET BACK TO MAKING PROFITS? THAT IS A CHALLENGE IN FRONT OF MOST CHINESE AUTOMAKERS INCLUDING BYD TODAY. HAIDI: BECAUSE OF COST CUTTING GOING ON WITH BYD AT THE MOMENT. REALLY GREAT TO HAVE YOU WITH US, MICHAEL DUNN, CEO OF DUNNE INSIGHTS. THERE'S MORE COMING UP ON "THE ASIA TRADE." THIS IS BLOOMBERG. HAIDI: COMMODITIES AND FOCUS AS WE SEE BROAD ESCALATION OF THE U.S.-AROUND TENSIONS. SURGING AFTER WHO THE RED SEA. WATCHING THAT AS WE SEE THE NEW YORK TRADE CRUDE CLIMBING BY OVER 1%. WATCHING GOLD AT THE MOMENT WHAT THAT DIP BUY WEIGHING ON INFLATION CONCERNS. SHERY: BIG TECH EARNINGS HAVE KICKED OFF IN THE U.S. WE ARE WATCHING SUPPLIERS ACROSS ASIA. WE HAVE THE NUMBERS FROM ALPHABET WHICH WAS REALLY INTERESTING. WE ARE SEEING THE DOWNSIDE PRESSURE IN THE LATE SESSION. WE HAD THIS HUGE BEAT WHEN IT CAME TO THE CLOUD REVENUE SURGING MORE THAN 80%. THEY RAISED ALSO THEY ARE 2026 CAPEX GUIDANCE. THAT IS HURTING THE STOCK. PEOPLE WANT TO SEE WHETHER ALL THIS AI INVESTMENT WILL ACTUALLY PAY OFF. WHAT'S INTERESTING IS WE COULD SEE SOME UPSIDE FROM ALL OF THIS. THE HYPERSCALERS WILL START SPENDING MORE, THE PICKS AND SHOVELS STOCKS WE HAVE ACROSS ASIA, SK HYNIX, SAMSUNG, PARKS COMPONENTS MAKERS, ALL COULD SEE A LITTLE BIT OF A BOOST. RIGHT? WE ARE FOLLOWING THE FUTURE SPACE. WE ARE SEEING AN UPSIDE AND ASIAN STOCKS. IBM AN EXAMPLE OF THE DOWNSIDE PRESSURE ON SOFTWARE. THE COMPANY INSISTS THE INFRASTRUCTURE SOFTWARE IS NOT REALLY EASILY REPLACEABLE BY A I. WE SAW THEM CUT THEIR FULL-YEAR GUIDANCE AFTER MAINFRAME SALES PLUNGED MORE THAN 40%. HAIDI: THERE'S NO INDICATION THE PRESSURE ON SOME OF THE SOFTWARE COMPANIES, EVEN LIKE IBM ARE GOING TO ALLEVIATE ANY TIME SOON. THE PRESSURE WHEN IT COMES TO FUTURES, THE NASDAQ 100 FUTURES OFF BY ABOUT HALF A PERCENT. REALLY COMING INTO HOW HIGH THESE INVESTOR EXPECTATIONS ARE WHEN IT COMES TO THE EXTRAORDINARY AMOUNT OF SPENDING THAT'S BEEN PLUNGED INTO THIS AI PROJECT. WHEN IT COMES TO ALPHABET, NOT A LOT OF VISIBILITY GOING INTO 2027. THERE'S CONFIDENCE WHEN THEY TALK ABOUT THE SUPPLY CONSTRAINTS, SUGGESTING CLOUD DEMAND WILL REMAIN ROBUST. PERHAPS INVESTORS WANTING MORE DETAILS. ELSEWHERE WE HAVE ALSO GOT THE MIDDLE EAST CONFLICT CONTINUING TO BROOD WITH THE FURTHER INVOLVEMENTS OF THE IRAN-BACKED HOUTHI MILITANTS TARGETING TANKERS IN THE RED SEA. IT'S OPENING UP A NEW FRONT OF CONCERN WHEN IT COMES TO BROADER ENERGY MARKETS. WE ARE SEEING THE CONTINUED MOMENTUM FOR NEW YORK TRADE CRUDE. WE ARE LOOKING AT SOME UPSIDE WILL BEGIN INTO THE START OF TRADING IN THE ASIAN -- IN ASIA, SHERY. SHERY: WE DIVE IN WITH POLITICS EDITOR ROMY BARDI'S. THOSE ATTACKS WHEN IT COMES TO THE RED SEA, WHAT ARE WE GETTING FROM WASHINGTON AT THIS POINT GIVEN THIS CONFLICT SEEMS TO BE NOW EXPANDING FROM THE REALMS OF JUST THE STRAIT OF HORMUZ TO OTHER SHIPPING ROUTES AS WELL? ROMY: YOU SAID IT. WE ARE SEEING A SIGNIFICANT EXPANSION OF HOSTILITIES. TONIGHT THE U.S. CENTRAL COMMAND ANNOUNCED ITS LAUNCHING A 12TH STRAIGHT NIGHT OF ATTACKS INSIDE IRAN. WE HAVE SEEN THE HOUTHIS ATTACKED TWO OIL TANKERS IN THE RED SEA. THIS IS VERY SIGNIFICANT, THE HOUTHIS ARE BACKED BY IRAN. TANKERS HAD BEEN USING THE RED SEA TO GET AROUND IRAN'S EFFECTIVE CLOSURE OF THE STRAIT OF HORMUZ. YES, WE ARE SEEING A SIGNIFICANT EXPANSION IN HOSTILITIES AND RHETORIC FROM BOTH SIDES. THERE IS NO INDICATION OF NEGOTIATING RIGHT NOW. SHERY: TELL US A LITTLE MORE ABOUT THAT. BOTH SIDES, PRESIDENT TRUMP SAYING THE IRANIANS ARE GETTING HIT SO HARD BUT IS NOT NECESSARILY READY FOR A DEAL. TEHRAN IS PUSHING BACK THAT ANY CONVERSATIONS ARE HAPPENING. WHAT WILL BRING THEM TO THE TABLE? ROMY: IT LOOKS VERY TOUGH RIGHT NOW. THE U.S. WANTS TO SEE THE STRAIT OF HORMUZ OPEN. THEY WANT TO SEE IRAN STOP ATTACKING OIL TANKERS IN THE STRAIT OF HORMUZ. IRAN HAS SHOWED IT HAS A LOT OF LEVERAGE HERE. A DEAL BECOMES MUCH MORE DIFFICULT WHEN YOU SEE IRAN SAYING IT WANTS TO RETAIN SOME SORT OF CONTROL OVER THE STRAIT OF HORMUZ, OVER TRANSIT THROUGH THE STRAIT OF HORMUZ. SHERY: WE KNOW THAT THE CONFLICT WITHIN THE U.S. AND IRAN HAS CAUSED MANY CAUSAL TEAS AND DEATHS. WE ARE HEARING THE -- CASUALTIES AND DEATHS. WE ARE HEARING THE U.S. HAS SPENT $30 BILLION WHEN IT COMES TO THE TOTAL COST OF THE CONFLICT. TELL US A BIT ABOUT -- WALK US THROUGH THE DAMAGES THIS IRAN WAR HAS CAUSED ON AMERICA. ROMY: MOST SIGNIFICANTLY THE CASUALTIES. WE HAVE HAD FOUR U.S. SERVICE MEMBERS DIE THIS PAST WEEKEND ALONE. THE UNITED STATES HAS SEEN DAMAGE TO ITS BASES. THE STOCKPILES OF U.S. INTERCEPTORS. THEY ARE RUNNING LOW. IT IS ACTUALLY $37.5 BILLION THAT THE U.S. HAS SPENT ON THIS CONFLICT. TAKING A STEP BACK, IRAN HAS SHOWN THE WORLD IT CAN EFFECTIVELY FIGHT THE UNITED STATES, THE WORLD'S GREATEST MILITARY SUPERPOWER WITH DRONES AND MISSILES. THE STRAIT OF HORMUZ ISN'T EVEN OPEN. THIS IS QUITE A TOLL, ESPECIALLY FOR AMERICANS WHO DID NOT SUPPORT THIS WAR. THEY SUPPORT THE GOAL OF A RUN NOT HAVING A NUCLEAR WEAPON. THAT IS A FACT TRUMP SEIZES UPON. THE WAR IS INCREASINGLY UNPOPULAR WITH AMERICANS IN A MIDTERM ELECTION YEAR. SEEING THE IMAGES OF CASKETS RETURNING TO THE UNITED STATES IS A REALLY STARK IMAGE FOR AMERICANS TO SEE. HAIDI: ROMY WITH THE LATEST. WHITE HOUSE OFFICIALS ACCUSED CHINA'S MOONSHOT OF IMPROPERLY USING U.S. AI MODELS AND NVIDIA CHIPS TO CREATE IT'S KIMI K3 SYSTEM. THEY PROBABLY ACQUIRED THE GB 300 SERVERS WHICH ARE BANNED FROM BEING SOLD THE CHINESE COMPANIES. THE INFORMATION IS REPORTING THE U.S. COMMERCE DEPARTMENT AGENCY IS NOW FORMALLY INVESTIGATING WHETHER CHINESE FIRMS LIKE MOONSHOT ARE ACCESSING ADVANCED U.S. AI CHIPS. CHINA SAYS IT'S READY TO WORK WITH THE U.S. TO IMPLEMENT THE CONSENSUS REACHED BY PRESIDENTS XI AND TRUMP IN BEIJING. THE FOREIGN MINISTRY WAS REQUESTING FOR -- ANSWERING A REQUEST FOR COMMENTS. ESTABLISHING A DIALOGUE ON A I WAS ONE OF THE OUTCOMES OF TRUMP'S TRIP TO CHINA. U.S. SENATE COMMERCE COMMITTEE HAS ADVANCED BIPARTISAN LEGISLATION THAT WOULD EFFECTIVELY BLOCK CHINESE VEHICLES FROM THE AMERICAN MARKET. IT WOULD BAN VEHICLES DESIGNED FOR WIRELESS CONNECTIONS BEGINNING IN JANUARY. MOVEMENT ON THE PROPOSAL WHICH ALSO COVERS CARS TIED TO RUSSIA, IRAN AND NORTH KOREA AS U.S. AUTOMAKERS FACE GROWING COMPETITION. THE U.S. AND INDIA ARE PUSHING TO REACH A FINAL TRADE AGREEMENT AS WASHINGTON ISSUES NEW TERROR THREATS ON PHARMACEUTICAL PRODUCTS. BOTH COUNTRIES TOP DIPLOMATS HAVE MET ON THE SIDELINES OF THE AUSSIE AND MEETING IN MANILA. MINMIN LOW IS AT THE EVENT AND JOINS US NOW. WHAT DID WE GET IN TERMS OF DELIVERABLES IN THE MEETINGS BETWEEN THEM? MINMIN:.NOT A LOT THEY DISCUSS ONCE AGAIN THERE INTERIM DEAL WHICH HAS BEEN UNDER NEGOTIATIONS FOR MORE THAN A YEAR BUT U.S. OFFICIAL TELLS US IT COULD BE CONCLUDED WITHIN THREE TO FOUR MONTHS, MOST STICKING POINTS HAVE BEEN SETTLED EXCEPT FOR ONE STUMBLING BLOCK, THE SECTION 301 INVESTIGATION INTO INDIAN GOODS AND TO OVERCAPACITY. THAT COULD LEAD TO A 12.5% TARIFF ON INDIAN GOODS. YOU MENTIONED YES YESTERDAY THE U.S. HAD ANNOUNCED A 100% TARIFF ON GENERIC DRUGS BEING EXPORTED TO THE U.S. THAT'S AN TWO YEARS TIME UNLESS THE COMPANIES MOVE THEIR PRODUCTION TO THE U.S. AT THIS POINT IT IS NOT CLEAR WHETHER INDIA WOULD BE ABLE TO SECURE EXEMPTIONS AS PART OF THAT INTERIM TRADE DEAL. THE SIDES ALSO DISCUSSED FINAL DETAILS AROUND THIS DEFENSE AGREEMENT THAT BOTH SIDES AGREED ON LAST YEAR WHEN PRIVATE IS REBELLION PRESIDENT TRUMP MET. SOME OF THE PROJECTS STALLED. WE ARE SEEING A LITTLE BIT OF A ROCKY RELATION BETWEEN THE U.S. AND INDIA. THAT IS WHY THE UNION FOREIGN MINISTER MET WITH THE ASEAN COUNTRIES AND SAID HE WILL CONTINUE ENGAGING WITH ASEAN, PARTICULARLY TO DIVERSIFY SUPPLY CHAINS AND BOOST THE ECONOMIC RESILIENCE AMID ALL THIS GEOPOLITICAL HEADWINDS. HAIDI: ROCKY IS THE RELATIONSHIP BETWEEN CHINA AND THE PHILIPPINES AT THE MOMENT. MINMIN: THAT'S RIGHT. THAT'S ANOTHER ROCKY ONE. THE LEADERS MET YESTERDAY AND LODGED PROTESTS AGAINST EACH OTHER AFTER THE LATEST INCIDENT IN THE SOUTH CHINA SEA ARE BOTH SIDES ACCUSE EACH OTHER'S NAVAL SERVICEMEN OF ATTACKING THE OTHER WITH EITHER WOODEN BATONS OR PADDLES FROM A RUBBER BOAT. CHINA CALLED IT MALICIOUS HARASSMENT. THE PHILIPPINES SAY IT'S AN ACT OF VIOLENCE. YESTERDAY THE PHILIPPINE FOREIGN AFFAIRS SECRETARY ALSO RAISED THE ISSUE OF THIS AI GENERATED VIDEO PUBLISHED BY STATE LINK MEDIA CHINA DAILY. THE VIDEO DEPICTED THE PHILIPPINES AS A MONKEY BEING MANHANDLED BY THE U.S. AND THE JAPANESE AND IS A METAPHOR TO SHOW HOW THE PHILIPPINES IS PANDERING TO THE OTHER POWERS. SHE RAISED IT YESTERDAY AGAIN. SHE HAS PREVIOUSLY MENTIONED THIS WAS DEHUMANIZING AND DISRESPECTFUL AND CALLED CHINA TO TAKE IT DOWN. THE CHINESE FOREIGN MINISTER -- MINISTRY HAS DISTANCED THEMSELVES, SAYING IT DOES NOT REPRESENT THE OFFICIAL STANCE. STILL THE PHILIPPINE SIDE SAID THIS WAS A CONSTRUCTIVE MEETING WITH BOTH SIDES UNDERSCORING THE NEED FOR PEACE AND STABILITY IN THE REGION. IT'S IMPORTANT THE TWO SIDES ENGAGE WITH EACH OTHER, PARTICULARLY AFTER CHINA SANCTIONED THE PHILIPPINES DEFENSE MINISTER. SHERY: YOU SUSPECT WITH THE -- YOU ALSO SPOKE WITH THE CANADIAN FOREIGN MINISTER YESTERDAY. OVER THE TAKEAWAYS? -- WHAT WERE THE TAKEAWAYS? MINMIN: I ASKED HER ABOUT CHINA. SHE DID ME WITH THE CHINESE FOREIGN MINISTER AND THE AUSTRALIAN FOREIGN MINISTER. WE HAVE SEEN HOW CANADA-CHINA TIES HAVE STABILIZED WHERE THEY LEFT TO THE 100 CENT TARIFFS ON CHINESE EV'S. CHINESE INVESTMENTS SEEM TO BE A BIT OF A SENSITIVE ISSUE. HAVE A LISTEN. >> WE HAVE RESOLVED CERTAIN TRADE TENSIONS WITH CHINA. WE DID THAT EARLIER THIS YEAR WHEN PRIME MINISTER CARNEY MET PRESIDENT XI IN BEIJING. WHAT THAT ALLOWED WAS MORE CANOLA LEAVING CANADA FOR CHINA. MORE BEEF AND SEAFOOD PRODUCTS FROM CANADA BEING IMPORTED INTO CHINA. THE WORK WE ARE DOING ANOTHER SECTORS, INCLUDING AUTO, IS VERY CONSTRAINED IN THE SENSE THAT WE PUT A SPECIFIC CEILING ON THE NUMBER OF EV'S THAT WOULD BE COMING FROM CHINA TO CANADA AT ABOUT 49,000. THAT IS A VERY TIGHTLY STRUCTURED AGREEMENT BETWEEN CANADA AND CHINA TO RESOLVE TRADE TENSIONS. OUR RELATIONSHIP WITH CHINA THOUGH IS BROADER THAN THAT SET OF ISSUES I JUST DESCRIBED. WE ARE CERTAINLY ELEVATING OUR RELATIONSHIP TO A STRATEGIC PARTNERSHIP. WE ARE COOPERATING IN CERTAIN AREAS. FOR EXAMPLE, IN THE AREA OF ENERGY COOPERATION. IN THE AREA OF PEOPLE TO PEOPLE TIES AND ENSURING THAT THE POPULATIONS OF OUR COUNTRIES CAN DEVELOP AND TRAVEL AND SEE EACH OTHER MORE FREQUENTLY. THOSE OF THE TYPES OF OTHER TOPICS THAT ARE ALSO ON THE AGENDA. MINMIN: WOULD YOU WELCOME OR CHINESE INVESTMENTS OR AS NATIONAL SECURITY GOING TO TAKE PRECEDENCE? >> WE WILL ALWAYS TAKE THE STEPS NECESSARY TO PROTECT AND DEFEND CANADA'S NATIONAL SECURITY. WE ARE VERY CLEAR ABOUT THAT. OUR RELATIONSHIP WITH CHINA, LIKE WITH OTHER COUNTRIES, IS NUANCED. WE ARE GOING TO ALWAYS STAND UP FOR CANADIAN INTERESTS IN THE AREA OF SECURITY, IN THE AREA OF DOMESTIC PROTECTION OF OUR POPULATION CENTER DEMOCRACY. STANDING AGAINST TRANSNATIONAL CRIME. AS WELL AS MAKING SURE THAT OUR ECONOMY GROWS AND WE DOUBLE NON-US TRADE OVER THE NEXT 10 YEARS. IT IS A NUANCED RELATIONSHIP AND WE MUST APPRECIATE THE COMPLEXITIES INVOLVED. MINMIN: AS SHE SAID, IT'S A PRETTY NUANCED RELATIONSHIP AND IS COMING AT A TIME WHEN THE TRUMP ADMINISTRATION IS HITTING CANADA WITH MORE TARIFFS. THAT IS WHAT SHE SAID SHE IS PRIORITIZING THEY FOREIGN POLICY. SHE HAS TRAVELED FROM BRAZIL TO PAKISTAN TO THE ASEAN COUNTRIES, REVIVING THESE OLD TIES AS CANADA LOOKS TO INCREASE NON-US EXPORTS OR DOUBLE THAT IN THE NEXT 10 YEARS. THIS IS PART OF HER DIVERSIFICATION AGENDA AS SHE ENGAGES WITH ASEAN COUNTRIES AND LOOKS TO TRY DATA SCIENTIST FREE TRADE AGREEMENT BEFORE THE END OF THE YEAR. HAIDI: MOREHEAD ON THE ASIAN TRADE. THIS IS BLOOMBERG. SHERY: PARAMOUNT SHARES CLOSED HIGHER IN THE U.S. AFTER ITS $110 BILLION TAKEOVER OF WARNER BROS. UNCONDITIONAL APPROVAL FROM THE EUROPEAN UNION. THE GREEN LIGHT COMES AFTER BOTH COMPANIES AGREE TO ADDRESS COMPETITION CONCERNS, BUT THE MERGER STILL FACES A U.S. LAWSUIT THAT THREATENS ITS PROGRESS OVER CONCERNS THE DEAL COULD HARM COMPETITION IN FILM AND CABLE DISTRIBUTION. TEXAS INSTRUMENTS FELL AFTER THE CHIPMAKER REPORTED SECOND-QUARTER RESULTS THAT BEAT THE STREET BUT FAILED TO IMPRESS INVESTORS. THE COMPANY SAYS REVENUE FOR THE NEXT QUARTER WILL COME IN AROUND $5.6 BILLION TO $6.1 BILLION, BUT IT IS CONFRONTING OUTSIZED EXPECTATIONS AFTER A 70% STOCK GAME THIS YEAR. BROOKFIELD ASSET MANAGEMENT IS BUYING A BATTERY OPERATOR FROM BLACKSTONE. THE COMPANY HAS BENEFITED FROM RISING NORTH AMERICAN DEMAND FOR POWER INFRASTRUCTURE TIED TO THE GROWTH OF AI DATA CENTERS. SAMSUNG IS REVAMPING ITS FOLDABLE PHONES LINED UP WEEKS AFTER APPLE IS EXPECTED TO MAKE ITS FIRST ENTRY TO THE MARKET. THE KOREAN COMPANY IS OFFERING THREE MODELS WITH A MID TIER FEATURING A SHORTER AND WIDER DESIGN THAT'S BETTER FOR WATCHING VIDEOS AND GAMING. TAKE A LOOK AT HOW FUTURES OF SAMSUNG ARE TRADING AT THE MOMENT, POINTING TO UPSIDE AFTER A LOWER CLOSE. WE DID HAVE SK HYNIX ADR'S BEING SUPPORTED. WE DID SEE ALPHABET'S GUIDANCE PROVIDING MORE DYNAMISM TO THE SEMICONDUCTOR TRADE. IF THEY ARE GOING TO SPEND MORE, WE COULD SEE MORE SUPPORT FOR THESE PICKS AND SHOVELS FOR THE BUILD OUTS, SO WE ARE WATCHING THESE STOCKS AS WE ALSO WATCH THESE LABOR UNIONS ACROSS SOUTH KOREA RALLY. THIS COMING AFTER EARLIER PROTESTS FORCED SAMSUNG TO PAY BONUSES OF MORE THAN $400,000 TO SOME EMPLOYEES. WORKERS AND OTHER COMPANIES ARE SEEKING SIMILAR PROFIT SHARING DEALS. KAT BARTON JOINS US NOW. HOW WIDESPREAD ARE THESE LABOR PROTESTS, AND WHAT IS THE SIGNIFICANCE OF THEM RIGHT NOW FOR SOUTH KOREAN SOCIETY? >> THEY ARE FAIRLY WIDESPREAD, ACTUALLY. YOU CAN SEE WHEN YOU ARE WALKING AROUND THE CAPITAL CITY, BUT IT IS AN INTERESTING PHENOMENON BECAUSE THEY ARE SPREADING NOT JUST THROUGH THE TABLE LIKE HYUNDAI MOTORS WHERE THERE HAS BEEN A PARTIAL STRIKE THIS WEEK, BUT THEY HAVE ALSO MOVED TO THE BIG TECH COMPANIES. WE HAD THE FIRST EVER STRIKE AT COOKOUT LAST MONTH. EVEN THE COUNTRY'S BIGGEST INTERNET SEARCH PROVIDER, THE UNION THERE IS MANEUVERING TO TRY TO GET A STRONGER NEGOTIATING POSITION SO THEY CAN GET A BETTER SHARE OF THE PROFITS. SHERY: WE HAVE SOME OTHER COMPANIES AS WELL, BUT AT THE SAME TIME, THERE ARE NOT NECESSARILY THESE TECH COMPANIES FACING THESE HUGE GAINS IN THE SEMICONDUCTOR TRADE. WHAT IS THIS ISSUE REALLY ABOUT? WHAT WILL IT TELL US ABOUT THE FUTURE OF HOW SOUTH KOREAN SOCIETY PERHAPS FACES ARTIFICIAL INTELLIGENCE AND AUTOMATION? >> IT IS A REALLY INTERESTING PHENOMENON. OBVIOUSLY, IT IS A SPILLOVER EFFECT FROM THESE HUGE BONUSES WE SAW AWARDED AT BOTH SAMSUNG ELECTRONICS AND SK WHERE AT SAMSUNG, BONUSES COULD BE UP TO 400,000 U.S. DOLLARS PER SEMICONDUCTOR WORKER, WHICH IS HUGE. EXACTLY AS YOU SAY, EVEN COMPANIES NOT DEALING WITH ARTIFICIAL INTELLIGENCE, WORKERS ARE STARTING TO SAY, BUT HOW ARE WE GETTING A SHARE OF INCREASED PROFITS AND EFFICIENCIES? TRADITIONALLY, BONUSES TEND TO GO TO C-SUITE EXECUTIVES, AND NOW WE ARE SEEING THAT WORKERS ARE SAYING, WE DESERVE A SHARE OF THIS, AND IT IS SOMETHING THE GOVERNMENT ITSELF ALSO HAS BEEN TALKING UP. THE GOVERNMENT HAS STARTED A DEBATE ABOUT WHAT TO DO IF WE ARE GETTING HUGE EXCESS TAX REVENUES. HOW CAN WE BE SURE THAT THIS IS SHARED FAIRLY THROUGHOUT ALL OF SOCIETY AND NOT JUST GOING TO A VERY FEW PEOPLE. WE ARE SEEING WORKERS ACROSS MANY INDUSTRIES THAT ARE NOT TRADITIONALLY INVOLVED IN AI ALSO SPEAKING UP. SHERY: GOOD TO HAVE YOU WITH US. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. >> BACARDI GROUP'S CEO WILL STEP DOWN AMID FALLOUT FROM A DECISION TO HIRE A SCANDAL-HIT AUDITOR, KPMG. IT IS A LEADERSHIP CHANGE LARGELY EXPECTED? >> INVESTORS WE HAVE SPOKEN TO THIS MORNING SAY YES. THE CEO HAS BEEN IN THE ROLE FOR EIGHT YEARS AND IS A HIGH-PROFILE ROLE IN AUSTRALIAN FINANCE. I HAVE SEEN THE CEO SPEAK COUNTLESS TIMES. SHE LEAVES WITH A MIXED LEGACY. THERE WAS CELEBRATION AT THE TIME ABOUT A FEMALE LEADING A GLOBAL BANK, BUT THERE HAVE BEEN A STRING OF REGULATORY BREACHES AND ISSUES UNDER HER WATCH. SHE WILL BE LEAVING US THE BANK COMES TO ONE OF ITS MOST PROFITABLE YEARS ON RECORD, SO IN THAT SENSE, DEFINITELY COMING OFF A HIGH. IT IS A SPRAWLING BACK NOW, WHICH IS ONE OF OUR MAJOR ASSET MANAGERS FOR FOUR POINT $4 TRILLION PENSION SYSTEM IN AUSTRALIA, BUT THERE'S ALSO PERSONAL BANKING, A BIG COMMODITY-TRADING BUSINESS, AND MANY FACETS TO THE BUSINESS. FRANK WARD, A VETERAN OF MCQUARRIE, WILL BE TAKING THE HELM -- VETERAN OF MACQUARIE. IT'S FAIR TO SAY IT WAS ALREADY SET TO BE AN ACTION-PACKED MEETING. I FEEL LIKE IT IS A LITTLE BIT DIFFERENT TO A YEAR AGO. THERE WAS FAR MORE SCRUTINY OVER PAY. THIS YEAR, THE BOARD IS LIKELY TO FACE A RANGE OF QUESTIONS PRIMARILY AROUND THE APPOINTMENT OF KPMG AS THE BANK'S AUDITOR, WHICH IS NOT A CONTRACT THAT STARTS UNTIL 2028, AND THAT APPOINTMENT WILL BE VOTED ON NEXT YEAR, BUT THERE'S SET TO BE LOTS OF QUESTIONS. KPMG EMBROILED IN LOTS OF CONTROVERSY OVER THE MISUSE OF CONTROVERSIAL CLIENT DATA . THERE IS ALSO BEEN SOME REPORTING IN LOCAL PRESS AROUND THE CULTURE IN THE DIVISION OF MACQUARIE CAPITAL. THERE ARE SOME INVESTORS WE HAVE INTERVIEWED WHO ARE SEEKING ASSURANCES OVER THE MANAGEMENT OF THESE KINDS OF ISSUES. AND THEN, LASTLY, BUT NOT LEAST, OF COURSE, THERE'S TWO RESOLUTIONS ON CLIMATE THAT ARE BEING PUT FORWARD IN THE MEETING TODAY BY ONE OF THE PENSION FUNDS IN AUSTRALIA. HAIDI: THE MARKET OPENS IN SYDNEY, SEOUL, AND TOKYO ARE NEXT. THIS IS BLOOMBERG. SHERY: THIS IS "BLOOMBERG THE ASIA TRADE." THE REACTION AFTER BIG TECH EARNINGS OVER THE U.S., WE SAW ALPHABET RAISING THEIR GUIDANCE AGAIN FOR THIS YEAR. TESLA DISAPPOINTING, THE STOCK FALLING. WHAT DOES THAT MEAN FOR SUPPLIES ACROSS ASIA WHEN WE ALSO HAVE HIGHER OIL PRICES AGAIN BECAUSE OF THE IRAN-U.S. WAR? HAIDI: SO MUCH FOR INVESTORS TO BE CONTENDING WITH. THE FOCUS REMAINS FIRMLY ON THE NEXT CATALYST FOR THIS AI SEMICONDUCTOR ROTATION TRADE WE CONTINUE TO SEE. INTERESTING TO WATCH THAT DISPERSION WHEN IT COMES TO SOME OF THE KOREAN, JAPANESE AND TAIWANESE PLAYERS. TESSA WAS A DISAPPOINTMENT. IBM AS WELL. THAT COULD CARRY THROUGH TO MORE THAT PRESSURE ON SOFTWARE NAMES AS WELL. SHERY: WE WILL BE WATCHING A LOT OF THOSE NAMES ACROSS ASIA, ESPECIALLY JAPAN WITH ATTACK SEMICONDUCTOR NAMES. COMPONENT MAKERS. YOU CAN SEE THE NIKKEI GAINING .4%. TOPICS NOT DOING MUCH OF THE MOMENT BUT WHAT WE ARE WATCHING AS THE JAPANESE YEN HOLDING AT THAT 163 LEVEL AGAINST THE U.S. DOLLAR. THIS IS AROUND A 40-YEAR LOW AGAINST THE BLUEBACK BUT BLOOMBERG HAS REPORTED THAT THE OJI OFFICIALS ARE ACTUALLY LOOKING INTO FASTER PACE OF RATE HIKES THAN THE MARKETS EXPECTED. USUALLY YOU WOULD GET A BIT OF A POP IN THE JAPANESE YEN. WE REALLY DID NOT GET THAT. IT WAS A PRETTY MUTED REACTION. IT GOES TO SHOW YOU WE ARE SEEING A LITTLE BIT OF A CREDIBILITY ISSUE WITH JAPANESE AUTHORITIES. WHETHER IT IS THE BANK OF JAPAN HIKING RATES FASTER OR THE WARNINGS COMING FROM THE FINANCE MINISTRY ABOUT POTENTIAL INTERVENTION IN THE MARKETS. JGB'S HOLDING AT THE 275 LEVEL. TWO-YEAR TRADING ROUTE HIGHS WE HAVE NOT SEEN SINCE 1995. IT IS NOT AS HIGHER OIL PRICES, IT IS THE CHEAPER YEN AND THIS PRESSURE ON JGB'S. WE WILL SEE THE BIG REACTION WHEN IT COMES TO THOSE SUPPLIERS TO THE BIG TECH EARNINGS. WE ARE SEEING THE KOSPI A LITTLE HIGHER BY 2% BUT THIS IS SUCH A VOLATILE MARKET. WE ARE TALKING ABOUT VOLATILITY IN THE KOSPI SURPASSING VOLATILITY IN BITCOIN. THE KOREAN WON A LITTLE STRONGER AGAINST THE U.S. DOLLAR. WATCH OUT FOR SAMSUNG UP 3%. WE HAVE NOW SEEN THEIR THREE NEW FOLDABLE PHONES SO WE HAVE A NEW PRODUCT LINEUP. SK HYNIX, WE HAD THE ADR'S FROM THE OVERNIGHT SESSION. THEY WERE DOWN IN THE PREVIOUS SESSION SO WE ARE SEEING A LITTLE BIT OF A REBOUND. HAIDI: TAKE A LOOK AT WHAT AND COMES TO THE TREASURY SPACE. YOU MENTIONED EARLIER IT'S ABOUT THESE SHIFTING EXPECTATIONS, ABOUT CEMENTING EXPECTATIONS FOR WHAT WE GET FROM THE FED. CERTAINLY ON THE LONGER END OF THE CURVE THERE IS A LOT OF MOVES. 30-YEAR REALLY RAISING THE ALARM AS WE SEE THE LONGER STREAK ABOVE THAT 5% LEVEL SINCE 2007. WE HAVE SEEN 27 DAYS ABOVE THAT 5% LEVEL NOW IN 2026. THIS IS REITERATING INVESTOR CONCERNS ABOUT GROWING DEBT BURDENS IN THE U.S., STICKIER THAN EXPECTED INFLATION AS WELL. THE FISCAL PICTURE IN PARTICULAR BECOMING A LITTLE BIT MORE WORRISOME. WE ARE WATCHING OIL. WE CONTINUE TO SEE THE ESCALATION. I THINK YOU CAN CHARACTERIZE THIS AS A BROADENING OF THE HOSTILITIES ACROSS THE MIDDLE EAST. WE HAD THAT CONFIRMATION FROM THE IRAN-BACKED HOUTHI MILITANTS SAYING THEY TARGETED SAUDI TANKERS IN THE RED SEA, THREATENING DEEPER SUPPLY DISRUPTIONS BE ON THE STRAIT OF HORMUZ AND INTO A POTENTIAL VIOLATION OF A BLOCKADE IMPOSED IN THE RED SEA. WE WATCH ARE MANY REACTION FROM THE U.S. AND IRAN. BOTH SIDES HAVE BEEN DOWNPLAYING A RETURN TO PEACE TALKS. BRENT CRUDE JOINING THE TRADE UP BY 1.5% ALONG WITH THAT RISE IN WTI. IN SYDNEY WE ARE KICKING UP HIGHER. .8%. ONE STOCK IS MCCOURY, THE FINANCIAL NAME. A NUMBER OF ELEMENTS HERE, INCLUDING A CHANGE IN LEADERSHIP WITH GREG WARD INSPECTED TO TAKE OVER AS THE NEXT CEO. THIS IS COMING AT A PRETTY CHALLENGING TIME FOR MCCOURY AT THE MOMENT WITH A SUSTAINED PERIOD OF PROFITABILITY BUT ALSO SCANDALS THAT HAVE DRAWN REGULATORY IRE. WE ALSO WATCH THE AGM TODAY WITH SCRUTINY EXPECTED FROM SHAREHOLDERS ON ACCOUNT OF THE DECISIONS MADE WHEN IT COMES TO KPMG, HIRING KPMG AUSTRALIA AS ITS AUDITOR WITH ONGOING ALLEGATIONS AGAINST THE FIRM. THERE ARE LIKELY QUESTIONS ABOUT MCCOURY'S SENIOR LEADERSHIP BEHAVIOR IN THE DEALMAKING. LOTS OF LOCAL COVERAGE WITH SHORT COVERINGS. BUT WE ARE VERY MUCH FRONT AND CENTER WATCHING THE AI TRADE AND HOW THAT PERMEATES THROUGH THE ASIAN SESSION. LOOKING FOR THE CATALYST, THE SURGEON CAPITAL SPENDING TRANSLATING AND THE GROWTH. ED LUDLOW HAS MORE ON WHAT ALPHABET AND TESLA'S GUIDANCE MEANS FOR INVESTORS BETTING ON AI. ED: ALPHABET, TESLA, TWO VERY DIFFERENT COMPANIES BUT THE STORY BETWEEN THEM, CAPITAL EXPENDITURES AND AI. ALPHABET RAISED ITS GUIDANCE FOR 2026, SPENDING WILL BE $205 BILLION. THERE'S ALSO EVIDENCE THE AI DEMAND FOR GOOGLE IS REAL. CLOUD REVENUE SURGED 82%. IF THERE WAS AN AREA OF DISAPPOINTMENTS LET THE IT WAS IN SEARCH. THERE WAS A MODEST MISS AGAINST EXPECTATIONS. NO EVIDENCE THAT SEARCH IS DISRUPTED TOO MUCH FROM CONSUMERS USING CHATBOTS INSTEAD OF GOING TO GOOGLE. IT WAS AN ASSESSMENT OF GROWTH VERSUS COST AND INVESTORS WEIGHING BOOMING CLOUD DEMAND AGAINST EVER HIGHER INFRASTRUCTURE SPENDING. THE NEXT TEST WHETHER AI REVENUE GROWTH GROWS FAST ENOUGH. TESLA WILL STAY AT $25 MILLION CAPEX 426. THE COMPANY THINK IT WILL GO UP OVER THE NEXT TWO TO THREE YEARS. THEY ARE NOT EVEN ON TRACK HALFWAY THROUGH THE YEAR TO MEET THE 2020 $5 BILLION -- 25 PHILIDOR GUIDE BUT MUSK TALKED ABOUT THEY WOULD RATHER MOVE MORE QUICKLY THAN TARGET CAPITAL EFFICIENCY. THE DIFFERENCE WITH TESLA IS NOT THE SAME EVIDENCE THAT IN THE WORLD OF AI, FUTURE BUSINESS LINES, ROBOTAXI, HUMANOID ROBOTICS, THEY DON'T HAVE MUCH TO SHOW YET. THE APPEAL WAS FOR PATIENCE. THESE ARE LONG SHOTS OF THE BIG BILL THAT AHEAD. THIS IS ED LUDLOW IN SAN FRANCISCO. SHERY: LET'S DISSECT THE BIG EARNINGS OF THE U.S. AND HOW THAT WILL REALLY FEED INTO THE ASIAN SESSION AND BRING IN THE ASIAN EQUITIES PORTFOLIO MANAGER AT MNG INVESTMENT. REALLY GOOD HAPPY WITH US. WE HAVE A NUANCED AI TRADE RIGHT NOW COMING FROM THE U.S.. WE SAW THIS MAJOR CLOUD BEAT. WE HAD TESLA DISAPPOINTING. WE HAD IBM CUTTING GUIDANCE. HOW DOES IT NECESSARILY TURNS IT INTO THE ASIAN TRADE? >> GOOD MORNING. THAT'S A GOOD PLACE TO START. THERE ARE A FEW TAKEAWAYS. THE INCREASE IN SHOULD NOT COME AS A SURPRISE BUT FOR THOSE WHO ARE EXPECTING THE $750 BILLION TO GROW PERHAPS TO $1 TRILLION FOR THE BIG FIVE SPENDERS IN THE U.S. FOR CALENDAR 2027 AND EARLY 2028, WE ARE PROBABLY NOT HEADING TOWARDS THAT NUMBER YET. SECOND, WE HAVE BEEN INVESTING IN THE PICKS AND SHOVELS OF THE AI TRADE THIS YEAR. THE PICKS AND SHOVELS OF THE PICKS AND SHOVELS. WHAT IS THAT MEAN? BENEFICIARIES -- COMPANIES THAT WILL BENEFIT EVEN IF THE OVERALL HYPERSCALER CAPEX POOL DOES NOT GROW MUCH. A NETWORKING COMPANY. SOME OF THE ADVANCED PACKAGING COMPANIES. THE UNDERLYING SHIFTS IN TECHNOLOGY UNDERWAY. THERE ARE PLENTY'S OF OPPORTUNITIES -- PLENTY OF OPPORTUNITY STILL WITH THE AI TRADE IN THE LAST FOUR YEARS. I WOULD SAY THERE'S A LOT OF NOISE THESE DAYS. IF YOU LOOK BACK TO APRIL OF LAST YEAR WITH THE TRUMP TARIFFS ACROSS THE WORLD, THERE HAVE BEEN A FEW GENUINE SIGNALS. ONE OF THE REAL SIGNALS IN RECENT MONTHS WAS LAST WEEK WITH THE KIMI K3 MODEL. OUR VIEW IS THERE WILL BE A DIVERGENCE BETWEEN COMPUTE AND MEMORY DEMAND. COMMUTE WILL BECOME MORE EFFICIENT. WE ARE REVISITING OUR HOLDINGS IN THE MEMORY SECTOR WHERE WE HAVE BEEN QUITE OVERWEIGHT LAST YEAR. WE HAVE BEEN OVERWEIGHT IN MORE RECENT MONTHS BUT WE ARE REVISITING THAT. A LOT TO LOOK AT IN ASIA. I WOULD SAY THE OVERALL TAKE AWAY IS THAT WE MIGHT SEE A DECELERATION IN AI CAPEX HYPERSCALER CAPEX BUT THAT IS UNCHANGED THE OPPORTUNITY SET FOR LONG-TERM ACTIVE MANAGERS. SHERY: IT IS VERY LAYERED IN NUANCE WHAT YOU ARE SAYING. WE WOULD SEE A SLOWDOWN BECAUSE IT WAS HAPPENING ACROSS CHINA. YOU WILL REVISIT MEMORY BUT AT THE SAME TIME YOU ARE INVESTING IN THE PICKS AND SHOVELS OF THE PICKS AND SHOVELS. FOR INVESTORS WHO WANT TO UNPACK THIS, ARE THERE ANY REGIONS OR MARKETS WHERE YOU WOULD FIND MORE OPPORTUNITIES? WHEN IT COMES TO FUTURE INVESTMENTS, WOULD YOU GO INTO THE CHINESE TECH SECTOR ITSELF DESPITE SOME OF THE MORE FUNDAMENTAL ISSUES WITH THAT ECONOMY? VIKAS: YES. TO ANSWER THE LAST QUESTION FIRST, WHETHER IT IS INVESTORS LOOKING TO ALLOCATE MORE CAPITAL TO AI AND TECH HARDWARE OR JUST THE COMPANY'S OF THE FUTURE, OR IF YOU JUST WANT TO UNDERSTAND WHAT'S HAPPENING IN THE WORLD, YOU NEED TO START WITH CHINA. THE CENTER OF GRAVITY OF AI HAS ALREADY BEEN SHIFTING TOWARDS ASIA OVER THE PAST TWO YEARS. THAT SHIFT IS ACCELERATING AND MOVING FROM HARDWARE AND MEMORY TO MODELS THEMSELVES. IF YOU LOOK AT THE RECENT ANNOUNCEMENTS OVER THE PAST YEAR OR SO, FIRST FROM DEEPSEEK IN JANUARY AND FEBRUARY LAST YEAR AND NOW FROM MOONSHOT A FEW DAYS AGO, THE PACE OF THE ACCELERATION IN CHINESE TECH DEVELOPMENT IS ASTONISHING. THAT WILL HAVE IMPLICATIONS FOR ALL THE SECTORS THAT TOUCHES. YES, WE ARE SPENDING MORE TIME IN RELEGATING MORE CAPITAL TO ACCELERATORS, GPU ACCELERATORS AND CHINA TO THE SEMICONDUCTOR PRODUCTION EQUIPPING COMPANIES IN CHINA. ALSO ALL THIS CAPITAL ALLOCATION AND THE TIME AND RESEARCH ON CHINA IS YIELDING A LOT OF LEARNINGS FOR JAPANESE COMPANIES, FOR A AND KOREAN COMPANIES. MANY OF WHOM ARE NOW MORE VULNERABLE THAN THEY HAVE BEEN IN THE PAST. THERE IS A SHIFT UNDERWAY IN PORTFOLIOS. A LITTLE MORE CAUTION ON SOME OF THE NORTH ASIAN NAMES OUTSIDE OF CHINA AND WERE CONSTRUCTIVE USE ON CHINA. DESPITE HEADLINE TOP-DOWN SLOWDOWN WE ARE SEEING, THERE'S A BROAD UPSET AND CHINA AND IS NOT JUST ABOUT THE AI. SAME FOR OTHER MARKETS. JAPAN, WE REMAIN CONSTRUCTIVE ALTHOUGH WE ARE MORE THAN A DECADE PAST THE LAUNCH OF ARROWS. THIS MIGHT BE THE MOST SLOWLY REPRESSING EQUITY STORY THE WORLD, THE CORPORATE GOVERNANCE TRANSFORMATION IN JAPAN. IF YOU LOOK AT INSTABILITY IN Q2 AND INDIA AFTER Q1. THERE'S A LOT TO LIKE IN INDIA. EVERY SECTOR YOU CAN IMAGINE IS LISTED IN INDIA. THE BIG THREE MARKETS IN ASIA ARE EXCITING FOR US. IF WE HAVE TAKEN CAPITAL WEIGHT IN RECENT WEEKS AND MONTHS, IT'S BEEN FROM -- TO THE OTHER LARGE MARKETS IN NORTH ASIA, TAIWAN AND SOUTH KOREA. HAIDI: DO YOU THINK THERE IS A TECH OUTPUT IN CHINA WITH THE NATIONAL TEAM RETURNING WITH INTERVENTION? VIKAS: THAT'S A FAIR QUESTION. I WOULD AIR ON THE SIDE OF SAYING YES -- ERR ON THE SIDE OF SAYING YES. WHY ARE VALUATIONS IN CHINA SO MUCH HIGHER THAN IN RECENT YEARS? BECAUSE OF THE ACCELERATION AND TECH SPENDING ON THE PROGRESS WE ARE SEEING COMING INTO THIS YEAR. THE EXPECTATIONS FOR WFE, WAIFER FAB EXPENDITURES WAS $10 BILLION TO $21 WITH THEM TO GROWTH IN CHINA. SIX MONTHS INTO THE YEAR WE ARE SEEING SIGNIFICANT INCREASES TO THOSE ESTIMATES OVERALL. ESPECIALLY SO IN CHINA. THIS IS WHY THE PREMIER ARE EXPANDING CHINESE COMPANIES. IT IS NOT TO SCARCITY PREMIUM. THEY ARE DOING WELL AND TAKING SHARE. THE JAPANESE AND TAIWANESE AND KOREAN COMPANIES WE SPEAK TO, WHETHER THEY ARE WAY FOR COMPANIES, SP COMPANIES, EVEN MEMORY COMPANIES ACKNOWLEDGE THERE ARE VULNERABILITIES IN THEIR BUSINESS MODELS ON LONGER-TERM VIEW. WHETHER IT IS DRAM, CONVENTIONAL MEMORY, OR THE DEPOSITION EQUIPMENT IN WHICH THE JAPANESE AND AMERICAN COMPANIES HAVE A LEADERS FOR A LONG TIME. START WITH CHINA, SPENT TIME THERE, SEE WAS GOING ON. IT IS NOT JUST AI. PRETTY MUCH ANYTHING HAPPENING WITHIN CHINA IS TOUCHING SECTORS OUTSIDE OF CHINA. YOU LOOK AT HEALTH CARE, PHARMA AND BIOTECH, DEFENSE, AEROSPACE, AND THEN OF COURSE AUTOS AND RENEWABLES. THE LIST IS VERY LONG. HAIDI: A QUESTION IS WHEN IT COMES TO THE BROADER LANDSCAPE FOR CHINESE EQUITIES, IT IS HELPFUL TO HAVE NATIONAL POLICY SUPPORT AND THE NATIONAL AI AMBITIONS AS WELL. DO YOU REQUIRE A STRONG ECONOMIC FUNDAMENTAL SITUATION WHICH PERHAPS HAS NOT COME THROUGH YET WITH THE RECENT SLOWDOWN? VIKAS: IT WOULD NOT HURT. IF YOU LOOK AT ARE CHINA STRATEGIES IN THE PORTFOLIOS IN CHINA, THE TOP HOLDINGS ARE NOT AI RELATED COMPANIES. IT'S A BROAD OPPORTUNITY SET WE ARE SEEING. SINGLE-DIGIT PES, DOUBLE-DIGIT FREE CASH FLOW YIELD, HIGH AND RISING DIVIDEND YIELDS, REASONABLE EARNINGS GROWTH, VERY SMART CAPITAL ALLOCATION. MUCH SMARTER THAN WE HAVE SEEN OVER THE PAST 5, 10, 15, 20 YEARS. OUR PORTFOLIO AND CHINA, THE LARGEST EXPOSURES ARE IN BANKS SHIPBUILDERS, AND RETAILERS. YES, WE HAVE EXPOSURE TO TECH HARDWARE AND WE ARE DOING OUR WORK ON A BROADER UNIVERSE OF NAMES AS WELL. THE OPPORTUNITY SET IN CHINA IS VERY BROAD. FOR LONG-TERM ACTIVE MANAGERS THIS IS THE RIGHT TIME TO LOOK AT CHINA. IF YOU LOOK AT THE CHINA CONTRIBUTION TO GLOBAL TRADE IN THE ECONOMY, THERE'S A MATERIAL DISLOCATION BETWEEN THAT AND THE ALLOCATION TO CHINESE EQUITIES AND GLOBAL PORTFOLIOS. WE THINK THAT SHOULD NORMALIZE OVER TIME. IF IT DOESN'T, IT EXTENDS THE OPPORTUNITY SET FOR LONG-TERM MANAGERS LIKE US. SHERY: BEFORE WE LET YOU GO, SUPER QUICKLY I WANTED YOUR TAKE ON WHAT WE ARE SEEING FROM THE BOJ. SOURCES TELLING BLOOMBERG THAT THEY COULD ACTUALLY CONSIDER GOING EVEN AT A FASTER RATE AND PACE WENT HIKING RATES. WITH THAT ALTER YOUR INVESTMENT CASE FOR JAPAN -- WITH THAT ALTER YOUR INVESTMENT CASE FOR JAPAN? ED: NOT REALLY. WE HAVE SEEN THE YEN GO FROM 80 TO NOW 160. WE DON'T INVEST IN THE MARKET. WE INVEST IN STOCKS. WE ARE NOT IGNORANT AT THE MACRO. IT MIGHT IMPACT HOW WE SEE SOME EXPORTERS PERHAPS BUT OUR VIEW IS IF YOU DO YOUR HOMEWORK AND BET ON THE RIGHT MANAGEMENT TEAM AND ECONOMICS, YOU WILL WIN EVERY TIME. AS YOU WERE MENTIONING BEFORE I CAME ON THEBUT AS YOU WERE MENTIONING JUST BEFORE I CAME ON AIR, THERE IS A CREDIBILITY QUESTION. THEY ARE BEING TRANSPARENT, BUT THE YEN CONTINUES TO WE CAN. WE HAVE OUR EYE ON THAT, BUT IT DOES NOT WEAKEN OUR ENTHUSIASM FOR JAPANESE EQUITIES. SHERY: GOOD TO HAVE YOU WITH US. TAKE A LOOK AT WHAT WE ARE WATCHING ACROSS THE ASIA SESSION. THOSE TECH EARNINGS FROM THE U.S. WILL HAVE IMPLICATIONS ACROSS ASIA, ESPECIALLY ACROSS SUPPLIERS. WE HAD HIGHER CAPEX GUIDANCE FROM ALPHABETIC AND, TESLA MISSING PROFIT EXPECTATIONS. SOME OF THE SUPPLIERS WE WILL BE WATCHING ACROSS THE DAY. THIS IS BLOOMBERG. HAIDI: WE CONTINUE TO WATCH THE RISE IN CRUDE PRICES AS WE HAVE THE IRAN-BACKED HOOPTY MILITANTS CAN -- WHO THE -- HOUTHI MILITANTS CONFIRMING THEY ATTACKED A TANKER. WE ARE SEEING BRENT CRUDE ONLINE 2% HIGHER. WE ARE SEEING MIRRORED GAINS, ONE POINT 5% HIGHER FOR WTI AS WELL. WE HAVE ALSO SEEN THE RESUMPTION OF GAINS FOR EUROPEAN NATURAL GAS PRICES EXTENDING THAT MASS RALLY TO MORE THAN 4%, .6% HIGHER. WE ARE SEEING GAS RESERVES IN EUROPE JUST OVER 50% UP FROM A FIVE-YEAR AVERAGE OF 70%, SO CLEARLY, AND A LOT OF CONCERNS PLAYING OUT ABOUT PRICE VOLATILITY GOING INTO THE COLDER MONTHS. WE HAVE SEEN FUNDS AND OTHER SPECULATORS BOOSTING LONG POSITIONS IN EUROPEAN NATURAL GAS, THAT STRONG CONVICTION THAT POTENTIALLY PRICES WILL CONTINUE TO RISE. LET'S LOOK AT THE LATEST WHEN IT COMES TO THIS U.S.-IRAN SITUATION. OUR BREAKING NEWS EDITOR JOINS US WITH MORE. WE KNOW THAT IRAN IS GOOD AT THE WAITING GAME, RIGHT? BUT PRESIDENT TRUMP ALSO DOES NOT SEEM TO BE THAT HASTENED IN TERMS OF RETURNING TO TALKS OR ANY KIND OF NEGOTIATING TABLE. >> YEAH, YOU ARE RIGHT. IT HAS KIND OF BEEN, AS FAR AS YOU CAN SAY, BUSINESS AS USUAL. THE U.S. MILITARY STARTED THEIR 12 NIGHT OF STRIKES A LITTLE LESS THAN THREE HOURS AGO AND IT HAS NOT REALLY ESCALATED BEYOND THAT POINT. WE HAVE NOT SEEN ANYTHING BEYOND MILITARY TARGETS BEING HIT, BUT WE KNOW TRUMP HAS THREATENED TO UP THE RHETORIC AND LOT -- A LOT . HE SAID THAT IF IRAN STRIKES A BOAT, HE IS PREPARED TO HIT BIGGER TARGETS SUCH AS NUCLEAR OR BRIDGES. WE WILL HAVE TO WAIT AND SEE WITH THE LATEST WITH THE ATTACK, AS YOU HAVE BEEN SAYING. THAT POSES A DIFFERENT PROBLEM FOR TRUMP IN THAT IT IS NOT A DIRECT IRAN ATTACK ON A SHIP IN THE STRAIT OF HORMUZ, BUT HE HAD SAID BEFORE THAT HE WOULD TAKE CARE OF THINGS, IN HIS WORDS, IF THERE WERE ANY ATTACKS BY THE HOUTHIS. WE HAVE NOT SEEN A DIRECT RESPONSE TO THAT. WE ARE KIND OF IN WAIT AND SEE MODE TO SEE WHAT HAPPENS. HAIDI: THIS IS CLEARLY A CONSTERNATION FOR GULF ALLIES, BUT WE ARE SEEING A STRENGTHENING OF TIES BETWEEN THE U.S. AND SAUDI ARABIA. >> YOU ARE RIGHT. THE U.S. ENERGY DEPARTMENT JUST ANNOUNCED THEY SIGNED A NUCLEAR SHARING DEAL WITH SAUDI ARABIA. THIS IS KIND OF A BIG DEAL. IT ALLOWS FOR THE SHARING OF INFORMATION AND TECHNOLOGY, COULD ALLOW FOR AMERICAN COMPANIES TO BUILD REACTORS IN SAUDI ARABIA AS WELL. YOU ARE RIGHT, I THINK TRUMP'S STRATEGY IN GENERAL IS TO USE INVESTMENT AND MONEY TO STRENGTHEN TIES WITH OTHER COUNTRIES. HE IS DOING THAT WITH SAUDI ARABIA. HE IS OBVIOUSLY LOOKING FOR DIFFERENT WAYS TO STRENGTHEN ENERGY, AND HE ALSO SUPPORTED A SYRIAN-IRAQ OIL PIPELINE, SO HE IS THINKING OF DIFFERENT WAYS TO TRY TO MITIGATE THE IMPACT OF ENERGY AND OIL PRICES BECAUSE OF THE ONGOING CONFLICT WITH IRAN. SHERY: HERE ARE SOME OF THE OTHER GLOBAL HEADLINES WE ARE FOLLOWING -- A WHITE HOUSE OFFICIAL HAS ACCUSED CHINA'S MOONSHOT OF IMPROPERLY USING U.S. AI MODELS AND NVIDIA CHIPS TO CREATE ITS SYSTEM. SCIENCE AND TECH POLICY DIRECTOR SAYS THE COMPANY PROBABLY ACQUIRED THE SERVERS, WHICH ARE BANNED FROM BEING SOLD TO CHINESE COMPANIES. THE U.S. COMMERCE DEPARTMENT AGENCY IS NOW FORMALLY INVESTIGATING IF CHINESE FIRMS ARE ACCESSING ADVANCED U.S. AI CHIPS. CHINA SAYS IT IS READY TO WORK WITH THE U.S. TO IMPLEMENT THE CONSENSUS REACHED BY PRESIDENTS XI AND TRUMP AT THEIR MAY SUMMIT IN BEIJING. ESTABLISHING A DIALOGUE ON AI WAS ONE OF THE OUTCOMES OF TRUMP'S TRIP TO CHINA. THE U.S. SENATE COMMERCE COMMITTEE HAS ADVANCED BIPARTISAN LEGISLATION THAT WOULD EFFECTIVELY BLOCK CHINESE VEHICLES FROM THE AMERICAN MARKET. THE BILL WOULD BAN VEHICLES DESIGNED FOR WIRELESS COMMUNICATIONS BEGINNING IN JANUARY. MOVEMENT ON THE PROPOSAL WHICH ALSO COVERS CARS TIED TO RUSSIA, IRAN, AND NORTH KOREA, COMES AS U.S. AUTOMAKERS FACE GROWING INTERNATIONAL COMPETITION. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. SHERY: BLOOMBERG HAS LEARNED SOME TRUMP ADMINISTRATION OFFICIALS ARE DISCUSSING USING AN EXTERNAL REVIEW OF THE 2023 FAILURE OF SILICON VALLEY BANK TO PROVIDE LEGAL BASIS TO REMOVE FED GOVERNOR MICHAEL BARR. WHAT ARE THE IMPLICATIONS OF REMOVING GOVERNOR BAR HERE? >> FIRST OF ALL, WE ARE NOT ANYWHERE CLOSE TO IT. WHAT WAS REPORTED JUST NOW WAS THAT THE WHITE HOUSE OR TRUMP ADMINISTRATION OFFICIALS AND ALLIES SEEK AN ONGOING REVIEW OF THE SILICON BANK FAILURE IN 2023 AND -- AS PROVIDING ONE POTENTIAL PATH TO REMOVING BARR. PRESIDENT TRUMP HAS SAID PUBLICLY HE WOULD LIKE A "MAJORITY" ON THE BOARD OF FED GOVERNORS, AND IF WANT TO GOVERNOR STEPS DOWN AND HE WERE TO APPOINT SOMEONE AND THE SENATE APPROVED THAT APPOINTMENT, HE WOULD HAVE HIS FULL MAJORITY OF GOVERNORS WHO ARE ALIGNED WITH HIS ECONOMIC THINKING. SHERY: AT A TIME WHEN WE ARE SEEING MORE EFFORTS FROM THE WHITE HOUSE TO RESHAPE THE FED, WHAT IS THE SIGNIFICANCE OF THIS? >> WHAT WE HAVE SEEN IN THE PAST 18 MONTHS IS THAT THE PRESIDENT LOOKED AT JAY POWELL, THEN CHAIR OF THE FED, TO SEE IF HE COULD BE OUSTED OVER THE RISING COST OF BUILDING RENOVATIONS AT THE FED'S HEADQUARTERS IN WASHINGTON. THAT DID NOT WORK. A DOD CRIMINAL INVESTIGATION WAS LAUNCHED, AND THAT DID NOT FORCE HIM OUT OR FIND A WAY TO GET HIM TO VACATE HIS SEAT ON THE BOARD. THERE WAS ALSO AN EFFORT LAST SUMMER, AND THAT HAS CONTINUED, TO GET LISA COOK, A BIDEN APPOINTEE, TO BE OUSTED OVER ACCUSATIONS OF MORTGAGE FRAUD BEFORE SHE JOINED THE FED BOARD. IF THE ADMINISTRATION GOES AFTER BARR, THAT WOULD BE A THIRD GOVERNOR THEY ARE TRYING TO REMOVE. SHERY: WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. SHERY: BROUGHT UPSIDE ACROSS JAPANESE TECH STOCKS. MORE THAN 3% OF THE MOMENT, ESPECIALLY AROUND ANYTHING RELATED TO SEMICONDUCTORS, TO COMPONENTS. WE HAVE SEEN THE ALPHABET HIGHER GUIDANCE FOR CAPEX FOR 2026. THAT COULD LEAD TO MORE MOMENTUM FOR THESE PICKS AND SHOVELS STOCKS THAT ARE SUPPLYING AND SELLING TO ALL THESE BIG TECH GIANTS. WE ARE ALSO FOLLOWING THE JAPANESE YEN. WE HAVE SEEN INCREDIBLE WEAKNESS AGAINST THE U.S. DOLLAR BUT WEEKS HAD SOME NEW REPORTS THAT THE BOJ MIGHT CONSIDER GOING FASTER. IF YOU SWITCH UP THE BOARD, YOU CAN SEE WHAT'S HAPPENING WITH THE YEN AND SEE WHAT'S HAPPENING WITH JGB'S BECAUSE THE TWO YEAR YIELD IS AT THE HIGHEST LEVEL SINCE 1995. FOR MORE, LET'S BRING IN OUR MARKETS REPORTER ANTHONY STEVENS. WHAT SHOULD WE BE LOOKING AT BECAUSE FROM THE TECH TRADE TO THE YEN TRADE IN JGB'S? ANTHONY: IT IS INTERESTING WITH THE TWO THINGS TOGETHER HOW THE YEN HELPS THIS TECH TRADE AND HELPS JAPAN REMAIN COMPETITIVE IN THE AI ECOSYSTEM VERSUS KOREA VERSUS TAIWAN AND CHINA. THIS YEN WEAKNESS IS NOT A BAD THING FOR EQUITY MARKETS. SECONDLY, VERY INTERESTING TO SEE THE YEN REACT TO THOSE DOJ REPORTING. THAT WAS A LITTLE BIT OF AN IMMEDIATE STRENGTH THAT WAS RECOURSE TO THE DAY. THE MARKET IS SKEPTICAL THAT THE DOJ WILL ACCELERATE THE RATE HIKE CYCLE. IT SHOWS WHERE THERE IS NOTHING PRICED FOR THE NEXT TWO MEETINGS. WE HAVE THIS REAL DICHOTOMY IN JAPANESE YEN VOLATILITY. AFTER THAT HEADLINE, JAPANESE YEN FALLS AND AS A RESULT, THE SPREAD BETWEEN THE ONE YEAR AND ONE MONTH IS AT THE HIGH END OF THE RATE. THAT MEANS PEOPLE THINK THAT THE VOLATILITY IN THE YEN IS GOING TO BE BACKLOADED AT THE BACK END OF THE YEAR. SHERY: IS THAT JUST ABOUT THE SKEPTICISM ABOUT WHAT JAPANESE AUTHORITIES WILL DO? IT IS A FACT WHAT EVERYONE AROUND THE WORLD WILL DO. IF EVERYONE STARTS HIKING RATES, WHAT IS TO CHANGE WHEN IT COMES TO THAT IMMENSE PRESSURE YOU ARE SEEING ON THE YEN? ANTHONY: CORRECT. THAT IS WHY SOME MARKET COMFORTED HER'S -- COMMENTATORS ARE ASKING JAPAN TO FOCUS ON YIELD CURVE. JAPANESE GROWTH NEEDS AND ANCHORED YIELD AND THAT IS MUCH MORE IMPORTANT ASPECT OF JAPANESE GROWTH THAN THE CURRENCY IS. THERE IS SOME VALIDITY TO THAT. THE GROWTH BEING SEEN IN THE TECH SECTOR AND EXPORT SECTOR SHOULD BENEFIT FROM HIGHER YIELDS WITH RAGE IS THE COST OF CAPITAL FOR THIS ECONOMY. IT CANNOT AFFORD THAT SO EARLY IN THE ECONOMIC CYCLE TO BENEFIT FROM THE AI BOOM. WHICH LEVER JAPAN TENDS TO GO WITH WHILE THE TAKAICHI ADMINISTRATION IS TO TRY TO FIGURE OUT HOW TO SUPERCHARGE GROWTH, THAT WILL BE THE KEY JAPAN MACRO IN THE BACK END OF THIS YEAR. SHERY: AREN'T WE JUST GOING BACK IN TIME AT THIS POINT FOR JAPAN? EVEN CAN WE GIVE AND WE HAVE ALL THESE OTHER FISCAL CONCERNS AS WELL? ANTHONY: THAT IS A GLOBAL THEME. THIS THEME OF FISCAL CONTROL VERSUS YIELD CONTROL VERSUS DO PEOPLE ACTUALLY CARE ABOUT FISCAL SUSTAINABILITY VERSUS SUPERCHARGING GROWTH? THIS IS A GLOBAL THEME WHERE YOU HAVE MULTIPLE ACTORS THAT ARE RACING TO GET THESE AI GAINS SOLIDIFIED AND SPREAD OUT THOSE GAINS. HOW MUCH FISCAL RESPONSIBILITY IS POSSIBLE IN THAT ENVIRONMENT. THAT IS VERY MUCH A BIG GLOBAL EVENT. CHINA IS STILL TRYING TO UNWIND SOME OF THE DAMAGE OF THE PROPERTY BUBBLE AND CANNOT DO STIMULUS. IN THE U.S., KOREA AND JAPAN TO, IT IS A SLIGHTLY DIFFERENT POSITION FOR EXPANSIONARY FISCAL. THIS IS A VERY IMPORTANT BACK TO THE FUTURE MOMENT. HAIDI: SPEAKING OF CHINA, THE BIG QUESTION IS WHETHER THE NATIONAL TEAM, THE FORCEFUL INTERVENTION OF ETF BUYING WE ARE SEEING IS HERE TO STAY. WE CAN SEE A REPEAT OF THAT. CHINESE INVESTORS HELPING THAT RESURGENCE OF ETF BUYING WILL BE REPEATED TO KEEP THAT UP TO HIM MOMENTUM WE HAVE SEEN. -- TO KEEP THAT MOMENTUM WE'VE BEEN SEEING. WE HAVE BEEN SEEING STEADY ROTATION AWAY FROM CONSUMER STOCKS INTO AI. NAMES LIKE SEMICONDUCTOR MANUFACTURING INTERNATIONAL. SOME OF THE LOCAL SEMI CHINESE NAMES ARE COMING INTO FAVOR. IT ALSO HAS THE VULNERABILITY ASPECT IN TERMS OF WHETHER WE SEE THAT VOLATILITY REPEATED IN CHINA THAT WE HAVE IN THE AI AND SHIP SPACE ELSEWHERE. WHITE HOUSE OFFICIALS HAS ACCUSED CHINA'S MOONSHOT OF IMPROPERLY USING AMERICAN AI MODELS AND NVIDIA CHIPS TO CREATE ITS SYSTEM. IT IS THE LATEST ACCUSATION FROM THE U.S. A POSSIBLE IP THEFT FROM CHINESE AI PLATFORMS. LET'S BRING IN STEPHEN ENGLE IN HONG KONG. IT IS A GOOD THING WE ARE HEARING THERE IS SUPPOSED TO BE TALKING ABOUT THIS BEFORE THAT SEPTEMBER VISIT. STEPHEN: RIGHT. THIS OPENS UP ANOTHER FRONT IN THE DIFFERENCES BETWEEN CHINA AND THE UNITED STATES, THE DIFFICULTIES, AND WHETHER THEY WILL GO AHEAD AND FIND SOME COMMON GROUND IN WHAT WE'VE BEEN REPORTING THAT THE TWO SIDES WILL GET TOGETHER AND CREATE A DIALOGUE ON THE XI-TRUMP CONSENSUS ON AI AHEAD OF THE SUMMIT THAT IS PLANNED FOR SEPTEMBER 24 IN WASHINGTON. THIS AT A LOT OF COMPLEXITY BECAUSE LET ME TAKE A COUPLE OF STEPS BACK. WHEN I TALK ABOUT MOONSHOT AI OF CHINA, THEY HAVE REALLY UPENDED THE GLOBAL ASSUMPTION, ESPECIALLY FROM THOSE IN THE U.S., THAT CHINESE LARGE LANGUAGE MODELS ARE WELL BEHIND. THEY ARE CLAIMING THE KIMI K3 MODEL OUTPERFORMS ALMOST EVERY RIVALS EXCEPT FOR ANTHROPIC AND OPENAI. NOW, U.S. OFFICIALS, WE HEARD SCOTT BESSENT YESTERDAY SAY THEY ARE INVESTIGATING WHETHER THERE IS I PET IP THEFT INVOLVED. NOW THE DIRECTOR OF WHITE HOUSE OFFICE OF SCIENCE AND TECHNOLOGY POLICY IS ACCUSING CHINA'S MOONSHOT AI SPECIFICALLY. BESSENT DID NOT MENTION MOONSHOT AI SPECIFICALLY BUT HE IS POSTING ABOUT WHAT HE IS SAYING AS A THEFT OF TECHNOLOGY THROUGH ARTIFICIAL AI DISTILLATION PROCESS. TO PUT IT IN A NUTSHELL WITHOUT GETTING TOO TECHNICAL, IT IS WHERE A SMALLER MORE EFFICIENT LARGE LANGUAGE MODEL WOULD BE ABLE TO TRAIN FROM THE LARGER ONES. STEPHEN BESSENT IS SAYING THEY HAVE FOUND THE DIGITAL WATERMARKS ON THE CHINESE MODELS THAT SHOW THEY ARE POTENTIALLY FROM AMERICA'S PROPRIETARY AI MODELS, LIKE OPENAI, LIKE ANTHROPIC. HE SAYS MOONSHOT ACQUIRED SERVERS AND HAS ACCUSED -- ACCESSED CHIPS IN THAILAND, LIKELY TO TRAIN ITS AI MODELS. THIS OPENS ANOTHER FRONT ON THE DIFFICULTIES THESE TWO SIDES ARE GOING TO FIND AT REACHING CONSENSUS ON GOVERNANCE, ON EVERYTHING AI RELATED IF THE U.S. IS GOING TO POTENTIALLY SANCTION THE CHINESE FOR WHAT THEY SAY IS POTENTIAL IP THEFT. HAIDI: THE DEPENDENCY ASPECT IS VERY INTERESTING FROM BOTH SIDES BUT I WONDER DOES THIS OVERSHADOW ANY ACHIEVEMENTS WE HAVE SEEN ON FINDING COMMON GROUND? MAYBE THEY SHOULD RECOGNIZE THERE IS CODEPENDENCE FROM BOTH SIDES WHEN IT COMES TO THIS TECHNOLOGY. STEPHEN: YEAH, SO I GUESS WE ARE GOING TO HAVE -- THEY WILL WORK TOWARDS FINDING THAT COMMON GROUND. DONALD TRUMP DEFINITELY WANTS TO GO FORWARD WITH FINDING AND PROPELLING THIS CONSENSUS FOR WE WANT DETAILS ON WHAT THE CONSENSUS WILL BE. THE CHINESE ARE COMING OUT AND SAYING THEY WANT TO MEET FACE-TO-FACE WITH THEIR U.S. COUNTERPARTS TO TALK ABOUT THIS XI-TRUMP CONSENSUS ON AI. TO COMPLICATE THINGS EVEN FURTHER, WE ARE HEARING ON THE FIRST PART OF THIS REPORT THAT THE INFORMATION IS REPORTING THAT THE U.S. BUREAU OF INDUSTRY AND SECURITY, WHICH IS UNDER THE COMMERCE DEPARTMENT, IS NOW FORMALLY INVESTIGATING WHETHER CHINESE MODELS ACCESSED ADVANCED U.S. AI CHIPS. AGAIN, WHAT CONSENSUS CAN THEY FIND WHEN THERE ARE THESE ALLEGATIONS OF THEFT AND ILLEGAL OR IMPROPER USE OF U.S. CHIPS AND THE BLACKWELL ARCHITECTURE WHICH WOULD VIOLATE THOSE EXPORT CONTROLS BY THE UNITED STATES. HAIDI: OUR CHIEF NORTH ASIA CORRESPONDENT STEPHEN ENGLE THERE. AS WE WATCH TESLA SUPPLIERS IN THE A SUGGESTION WITH THE DISAPPOINTING NUMBERS, SPACEX'S SLUMP HAS SOUR THE MOOD OF HYPED UP IPO'S IN THE U.S. CHINESE AUTHORITIES ARE ACTING PREEMPTIVELY TO STOP THE SAME THING FROM HAPPENING, SAYS OUR RESEARCHER. THIS ANOTHER FACET OF WHAT WE'VE SEEN IN TERMS OF WHAT THE NATIONAL TEAM MIGHT BE TRYING TO DO TO ENSURE SUPPORT STAYS STEADY FOR THESE AI NATIONAL CHAMPIONS? >> ABSOLUTELY. IT HAS EVERYTHING TO DO WITH CXMT. CXMT IS CHINA'S LARGEST DRAM MEMORY CHIPMAKER AND PREPARING TO GO PUBLIC WITH SHANGHAI'S SHIP HEAVY STAR BOARD, SEEKING TO RAISE AS MUCH AS $10 BILLION. WHAT YOU ARE SEEING MONDAY, THE $9 BILLION PAYMENTS WERE DUE FROM INVESTORS LOOKING TO BUY INTO CXMT'S IPO. ON THE SAME DAY, YOU SEE THE SHADOWY NATIONAL TEAM PUMPING BILLIONS OF DOLLARS INTO THE MARKET INDEXES THAT TRACK THE TRCHIP BOARD. IT IS CLEAR THAT THE CHINESE GOVERNMENT IS VERY WORRIED ABOUT HOW THIS MEGA IPO WILL DRAIN MARKET LIQUIDITY. THERE IS THE CONCERN ABOUT VALUATION. CXMT IS GOING PUBLIC AT 2.4 TIMES BOOK, WHEREAS THE CHIPMAKERS ON THE STAR INDEX TRADE EASILY OVER EIGHT TIMES. SO, INVESTORS ARE WORRIED THIS RALLY HAS GONE TOO FAR. WHAT CHINA IS SAYING DON'T WORRY, WE HAVE YOUR BACK. HAIDI: IS IT A SURE BET? THE NATIONAL TEAM HAS RETURNED FROM TAKING BREAKS SINCE 2024? SHULI: I WOULD NOT SAY IT IS A SURE BET. WHAT HAPPENED IN 2015, THE NATIONAL TEAM CAME IN AGAIN AND AGAIN AND THAT MARKET KEPT TANKING. IT DEPENDS ON HOW MUCH MONEY THE CHINESE GOVERNMENT IS WILLING TO SPEND. THE MARKET IS QUITE BIG. THE CHINESE STOCK MARKET HAS BECOME REALLY BIG SINCE 2015. I THINK THE CHIP SENTIMENT IS STILL VERY WEAK AND YOU ARE SEEING IT IN YESTERDAY'S TRADING. THE STOCK MARKET OPEN HIGH AND WENT LOW AGAIN. HAIDI: BLOOMBERG OPINION COLUMNIST SHULI REN WITH THE LATEST. MORE AHEAD. THIS IS BLOOMBERG. >> CANADA AND THE UNITED STATES HAVE BEEN CLOSE TRADING PARTNERS FOR DECADES AND DECADES. WE ARE BOUND TOGETHER BY GEOGRAPHY. THE PRIME MINISTER SPOKE WITH THE PRESIDENT YESTERDAY, AND THEY AGREED TO INTENSIFY TALKS RELATING TO TRADE, AND THAT WILL BE UNDERTAKEN BY OUR MINISTER FOR CANADA-U.S. TRADE AND OUR CHIEF TRADE NEGOTIATOR. SHERY: THE CANADIAN FOREIGN MINISTER SPEAKING TO US AT THE ASEAN FOREIGN MINISTERS MEETING IN MANILA. PRESIDENT TRUMP HAS THREATENED AN ADDITIONAL 50% TARIFFS ON CANADIAN GOODS OVER A LEDGE AND UN-TREATMENT OF AMERICAN ALCOHOL, CARS, AND DARE -- DAIRY. BLOOMBERG ECONOMICS SAYS MOST OF THE LATEST MEASURES ARE UNLIKELY TO MATERIALLY ALTER THE OVERALL TARIFF LANDSCAPE, BUT THE RENEWING UNCERTAINTY FOR SEVERAL KEY TRADING PARTNERS. LET'S BRING IN THE HEAD OF TRADE POLICY AT THE HEINRICH FOUNDATION. ALWAYS GOOD TO SEE YOU. PRESIDENT TRUMP KEEPS FINDING NEW WAYS TO THREATEN TARIFFS. HOW EXPENSIVE ARE THESE LEGAL TOOLS THAT ARE STILL AVAILABLE TO HIM? >> VERY EXPANSIVE. ONE OF THE THINGS WE SAW WAS REACHING BACK INTO THE TOOLKIT FROM 1930 UNDER WHAT WAS THEN CALLED SMOOT-HAWLEY THAT STARTED PART OF THE GREAT DEPRESSION, USING A TOOL FROM THAT TOOLKIT TO APPLY TO CANADA, THE U.S.'S LARGEST AND OLDEST ALLY, I THINK IS A NEW TWIST IN THIS TRADE AND TARIFF SAGA DRIVEN OUT OF THE WHITE HOUSE. SHERY: YOU SAY THAT THIS SECTION 338 IS BECOMING ALIVE. WHAT DOES THIS REALLY SAY FOR OTHER ECONOMIES THAT ARE DEALING WITH THE UNITED STATES THEN? >> THAT SUGGESTS THERE IS ANOTHER, MUCH MORE POWERFUL TOOL THAT MANY PEOPLE HAVE IGNORED BECAUSE, AGAIN, IT HAS NEVER BEEN USED AND HAS BEEN SITTING DORMANT SINCE 1930. UNDER SECTION 338 OF THIS ACT FROM 1930, AS LONG AS THE UNITED STATES CAN SHOW THAT THERE WAS DISCRIMINATION AGAINST U.S. COMPANIES OR U.S. BUSINESSES, THAN THE PRESIDENT IS AUTHORIZED TO IMPOSE TARIFFS OF UP TO 50%. THERE ARE REALLY NO PROCEDURES. THE STATUTE IS INDEFINITE -- IN OTHER WORDS, IT DOES NOT COME TO AN END. IT IS NOT A TEMPORARY MEASURE. THE FACT THAT THE UNITED STATES HAS THREATENED AND AGAINST CANADA I THINK MEANS IT IS AVAILABLE TO BE USED AGAINST EVERY OTHER TRADING PARTNER WHENEVER TRUMP GETS AGGRAVATED ABOUT WHATEVER AGGRAVATES TRUMP IN THE MOMENT. SHERY: WHEN YOU CONSIDER ALL THESE NEW TARIFFS COMING ALIVE, THE OVERALL U.S. TARIFF RATE MIGHT ACTUALLY FALL. DOES THAT MAKE THE SITUATION BETTER OR DOES THIS JUST MEAN WE DON'T KNOW WHERE THE TRADE WAR IS ACTUALLY HEADED AND WE WILL SEE MORE UNCERTAINTY FROM HERE? >> WE ARE SEEING MORE UNCERTAINTY, AND I THINK WE SHOULD EXPECT EVEN GREATER UNCERTAINTY THROUGH THE REST OF THIS YEAR, AT LEAST, AND PROBABLY THE REST OF TRUMP'S ADMINISTRATION. THAT UNCERTAINTY IS IN SOME WAYS MORE DAMAGING THAN THE TARIFFS THEMSELVES BECAUSE FIRMS ARE NOT CERTAIN WHAT THEY NEED TO DO. THE PROCESSES TO BE USED UNDER EACH OF THESE DIFFERENT TARIFF RULES IS DIFFERENT, SO YOU NEED TO MAKE SURE AS A COMPANY THAT YOU ARE TRAINING FOR STAFF ON THE OPTIONS, THAT THEY MAKE SURE THAT THEY KEEP THE RIGHT PAPERWORK, THAT THERE IS A LAWYER INVOLVED IN ORDER TO SUE IF NECESSARY OR BE PART OF ONGOING LAWSUITS. THE COMPLEXITY JUST CONTINUES TO GROW. FOR COMPANIES, THAT LEVEL OF UNCERTAINTY, THE COST ATTACHED TO COMPLIANCE CONTINUES TO ESCALATE, SO EVEN IF THE TARIFFS THEMSELVES APPEAR TO BE LOWER THAN THEY WERE -- REMEMBER THAT, HEADING INTO THE TRUMP ADMINISTRATION, THERE WAS A 2% TARIFF ON AVERAGE ACROSS THE BOARD. WE ARE ALREADY CLOSER TO 20%. EVEN IF THAT DROPS TO, LET'S SAY 12% ON AVERAGE, THE UNCERTAINTY COSTS NEED TO BE FACTORED IN AS WELL AND THE COMPLIANCE COSTS. IT'S ALSO THE DAMAGE BEING DONE TO COMPANIES TRYING TO ENGAGE IN TRADE WITH THE UNITED STATES. SHERY: THERE IS ALSO UNCERTAINTY ABOUT THE TIME FRAME. ALL OF THESE DEADLINES ARE DIFFERENT. WHEN IT COMES TO THE CANADIAN TARIFFS, IT IS WITHIN THE MONTH. WHEN IT COMES TO THE PHARMA TARIFFS, I WAS SURPRISED THAT IT WAS UNTIL 2028. WHY ARE WE SEEING THIS DIVERGENCE AND WHAT IS THE TRUMP ADMINISTRATION TRYING TO ACHIEVE THROUGH THIS? >> IN SOME CASES, THEY WANT IMMEDIATE APPLICATION OF TARIFFS. THE ONE CAUSING MANY COMPANIES HEARTBURN IS THAT TOMORROW, THE U.S. TEMPORARY TARIFFS UNDER SECTION 122 EXPIRE, SO THE QUESTION IS -- WHAT HAPPENS AFTER THAT? THEY ARE TRYING TO MOVE PEOPLE TO A DIFFERENT STATUTE ALTOGETHER CALLED SECTION 301. THAT HAS NOT BEEN ANNOUNCED YET. IT COULD STILL BE AT ANY MOMENT. OR IT EXPIRES AND GETS REIMPOSED UNDER ANY STATUTE NEXT WEEK. THE COMPLEXITY IS VERY HIGH, PARTICULARLY FOR SUPPLY CHAIN AND PROCUREMENT PEOPLE, THIS IS REALLY COMPLICATED BECAUSE IT'S NOT JUST WHAT IS THE STATUTE, BUT WHAT DOES IT APPLY TO? WHAT ARE THE RULES? IN SOME CASES, THEY APPLY TO GOODS THAT ARE ON THE WATER. IN SOME CASES, THEY DO NOT. I THINK YOU ARE FINDING SUPPLY CHAIN FOLKS THAT ARE JUST GROUND DOWN AFTER A YEAR AND A HALF OF NONSTOP TARIFFS AND TRADE CHANGES. SHERY: IF EXPERTS CANNOT FIGURE IT OUT, I DOUBT THE AMERICAN PUBLIC WILL BE ABLE TO UNDERSTAND THIS. HOW MUCH ARE THEY GETTING FROM THESE TARIFF HEADLINES THAT COULD MAKE A MATERIAL DIFFERENCE WHEN WE SEE MIDTERM ELECTIONS IN NOVEMBER? >> WELL, TRADE NEVER RANKS HIGH ON VOTERS' LIST OF PRIORITIES, BUT WHAT DOES RANK HIGH'S INFLATION FIGURES AND CONCERNS ABOUT COST OF LIVING. HIGHER TARIFFS ON CERTAIN TARIFFS, CHANGING SUPPLY CHAINS AND MARKET CONDITIONS TO FEED INTO TARIFFS, AND THOSE ARE THE KINDS OF THINGS VOTERS DO SEE, SO EVEN IF THEY DO NOT IMMEDIATELY CONNECT WHAT IS HAPPENING ON THIS TRADE AND TARIFF DISRUPTION TO THEIR OWN BOTTOM LINE WHEN THEY GO TO THE POLLS IN NOVEMBER, MANY OF THEM I THINK WE'LL BE THINKING HARD, MUCH HARDER THAN NORMAL ABOUT THE STATE OF THE ECONOMY AND THEIR RELATIONSHIP IN IT. I THINK IT IS AN INDIRECT EFFECT, BUT TRADE WILL HAVE AN IMPACT, I THINK, ON ELECTIONS IN NOVEMBER. SHERY: WHEN IT COMES TO CHINA, WE HAVE SEEN A LITTLE MORE CONSENSUS IN WASHINGTON. WE ARE EXPECTING PRESIDENTS XI AND TRUMP TO MEET IN SEPTEMBER. WHAT SORT OF BREAKTHROUGH CAN WE EXPECT, AND HAVE WE SEEN ANYTHING MEANINGFUL IN THAT RELATIONSHIP, GIVEN THAT A LOT OF IT SEEMS TO HAVE STAYED ON THE BACK BURNER GIVEN THE IRAN WAR? >> I'M NOT EXPECTING A GREAT BREAKTHROUGH, BUT THERE ARE SOME ADDITIONAL TENSIONS THAT NEED TO BE NAVIGATED. ONE OF THEM IS AS WE END THIS TEMPORARY SECTION 122 TOMORROW AND PIVOT TO NEW SECTION 301 AUTHORITIES, WHAT HAPPENS TO THE RELATIONSHIP WITH CHINA? CHINA IS CURRENTLY, LIKE SIX THE OTHER TRADING PARTNERS, BEING TOLD THEY WILL HAVE TO PAY TARIFFS FOR FAILURE TO ENFORCE RULES ON FORCED LABOR TRADE ACTIVITIES, BUT ALSO THEY ARE IN LINE FOR A SECOND 301 WITH ANOTHER 16 TRADING PARTNERS FOR WHAT THE U.S. CALLS STRUCTURED EXCESS CAPACITY, AND THE TWO TARIFFS COMBINED IS AN IMPORTANT FIGURE THAT COULD EASILY DERAIL ANY KIND OF COOPERATION NEXT MONTH BECAUSE THOSE TARIFFS ON CHINA COULD ESCALATE RAPIDLY FROM WHAT HAS BEEN A RELATIVELY STEADY RATE TO A MUCH HIGHER RATE OR POTENTIALLY NOT. AGAIN, WE ARE UNCERTAIN WHERE THIS WILL GO, AND I THINK THE CHINESE ARE ALSO UNCERTAIN ABOUT WHERE WASHINGTON WILL ULTIMATELY LAND. IT LOOKS LIKE WASHINGTON WANTS TO HAVE STABLE RELATIONS WITH CHINA, BUT BECAUSE THERE ARE AGAIN A NUMBER OF PRESSURES, BOTH TARIFF AND NON-TARIFF, AHEAD, I THINK IT'S UNCLEAR IF THIS RELATIVE TRUCE CAN HOLD. SHERY: REALLY GOOD TO SPEAK TO YOU, AS ALWAYS. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. HAIDI: ASIAN SHARES BROADLY ON THE RISE DESPITE SOME CONSTERNATION WHEN IT COMES TO THE AI AND CHIPMAKER TRADE WITH MAJOR CATALYSTS COMING THROUGH FOR INVESTORS LOOKING FOR THE NEXT SIGNS OF IF WE WILL SEE THAT ENORMOUS DAY I SPEND TRANSLATE INTO BEING ABLE TO PAY OFF, BUT AT THE MOMENT, WE ARE SEEING GAINS. REGIONAL CHIPMAKERS ARE GAINING ON THESE EXPECTATIONS THAT THEY WILL BENEFIT IN THE -- THAT THAT BENEFIT FROM THE BILLIONS SPENT IN AI WILL START TO COME IN SOON. TAKE A LOOK AT SOME OF THE TOP CORPORATE STORIES WE ARE TRACKING THIS HOUR. SAMSUNG IS ADAPTING ITS AFFORDABLE PHONE LINE UP JUST WEEKS BEFORE APPLE IS EXPECTED TO ANNOUNCE ITS NEW LINEUP. A MID-TEAR PHONE FEATURES A SHORTER AND WIDER DESIGN BETTER FOR WATCHING AND GAMING. TEXAS INSTRUMENTS SAYS REVENUE FOR THE NEXT QUARTER WILL COME IN AT AROUND $5.6 BILLION TO 6.1 BILLION DOLLARS, BUT IT IS CONFRONTING OUTSIZED EXPECTATIONS AFTER A 70% STOCK GAIN THIS YEAR. SHERY: TAKE A LOOK AT HOW FUTURES ARE TRADING AS WE SEE A MORE RISK ON TRADING SESSION AFTER ALPHABET'S HIGHER CAPEX SPENDING - FOR THE YEAR. STAY TUNED FOR A BIG CONVERSATION COMING TOMORROW WHEN AVRIL HONG SITS DOWN WITH CAMBODIAN PRIME MINISTER AS WELL AS OTHER MEMBERS OF THE CAMBODIAN CABINET FOR EXCLUSIVE INTERVIEWS IN PHNOM PENH. HE WILL DISCUSS THE COUNTRY'S BORDER ISSUES WITH THAILAND AND MUCH MORE. THAT IS IT FOR "THE ASIA TRADE." ROCKETS COVERAGE CONTINUES AS WE LOOK AHEAD TO THE MARKET OPENS IN SHANGHAI, HONG KONG, AND SHENZHEN -- MARKETS COVERAGE CONTINUES. "THE CHINA SHOW" IS NEXT. THIS IS BLOOMBERG.