Dominate the top pay tier. We will discuss why the chipmaker chose now to release the information. And automation transportation. A selfdriving semi makes its first crosscountry freight run. We will hear from the company who performed this feet. But first to our top story. Stocks barely moved on the day as investors continue to wait for news on the potential december 15 tariffs. On the year, it is a different picture. Joining me to talk about this years big gains for stocks and tech in particular is abigail doolittle. The tech sector up 40 this year. S p up only 25 or so. Why are traders looking past all the tech macro headwinds . Abigail great question. Maybe climbing that wall of worry. Those gains are simply extraordinary. The s p 500 up only 25 . But it pales in comparison relative to tech, up 40 as you mentioned. Hardware doing especially well. Since 2009. Sector that was coming out of the financial crisis. At that point, stocks were on a bargainbasement sale. That is the kind of buying we are seeing this year. Really pretty amazing. Behind it again probably climbing that wall of worry for investors, taking advantage of the terrible Fourth Quarter last year. A little bit of a sale from the Fourth Quarter, going for the highgrowth names. Seeing traders continuing to go into the chip base permit a piece of that has to do with expectations that the cycle is turning back up. Taylor abigail, back to apple. We talk to somebody who continues to say apple is the bellwether in terms of sentiment on where we are in the trade fight. How is apple doing amidst all the headlines . Abigail record highs, taylor. They seem to be shrugging off the fact that apple could get hit if the december 15 tariffs come into place against smartphones and electronics and other items. It will be interesting to see whether the tariffs go into place. If so, it could hit the company with this 20 revenue contribution. Of course, as you were mentioning, dan mentioning there is a risk there could be a 4 hit for their margins or . 50 in 2020. That could cause some slowing that investors might not like. But right now, investors looking at one point that could be the ceo of apple, tim cook, has met with president trump. So perhaps investors and traders thinking if the tariffs go in place, maybe apple get an exemption for the iphone. Taylor we talk about the iphone and the components of that, i was looking at qualcomm, some of the big chipmakers that go into apple, got a big upgrade as well. Interestingly enough, huawei has been taken out of the picture. If you put that back in the story, could continue the upside surprise. Analysts taking that all the way out of estimates. Where are some of the chipmakers with big exposure to apple, china . Abigail the apple suppliers you were talking about, on the possibility of a big 5g upgrade cycle, specifically yesterday, bank of America Merrill lynch upgraded those double upgraded, i should say. Ae equivalent from a sell to buy. There could be 1. 4 million smartphones that will need to be switched over to 5g from 4g. Several hundred million devices. Both are apple suppliers. Maybe that is another reason we have apple up an amazing 70 this year. Investors not that worried knowing that is likely to come next year. They will debut a 5g smartphone in 2020. Taylor if anyone can do trendlines in technicals, it is you. That is why i wanted you on this program to pick us up. Take a look at the chart i am showing in my terminal. When we talk about who needs the trade deal more, u. S. Or china, you have this chart that shows the relative performance of the shanghai composite to the s p. What i was looking at . Abigail that is very kind of you on the trendlines. You can dry it anyway you like to, but this is squarely going down. That is the shanghai composite to the s p 500. China starts doing terrible 500tive to the s p since the start of the trade war. The s p 500 over that time, up 18 . The shanghai composite down 11 . Investors really thinking china is being hit more, maybe never really recovering from the vte ban, that phone equipping company, that ban in 2018. Perhaps getting some leverage around huawei. The chart was starting to bottom. If the downtrend line should bottom, investors are area. G for the beaten not just trade, it could be monetary policy. The u. S. Perhaps more accommodative than china. Taylor thank you, wrapping it all up for us. That was bloombergs of the guilty little. Now i want to go to the battle over encryption. The government wants in but big tex is saying no. On tuesday, representatives from apple and facebook class with senators over granting Law Enforcement access to encrypted data. Joining us from washington is bloombergs at cybersecurity reporter who was at the hearing today. What did you learn today . The battle over encryption was reinvigorated today at this hearing on the hill. It was at the Senate Judiciary committee. What was interesting today is some of those on both sides of the issue, including republican Lindsey Graham and democrat Dianne Feinstein really seemed to come down to an agreement on this issue. They say if we can have a come weto search, how cannot have search warrants when it comes to phones . The reason for that is phones are encrypted, so there is not a way to get into funds without companies help. Meanwhile, represented ofs from facebook and apple made their case. They said, look, it order to get into these devices, we need to build a back door. While that may be helpful to Law Enforcement, that also creates a huge vulnerability because hackers or bad actors or others seeking to do harm using these backdoors could utilize them for purposes outside of Law Enforcement. It really comes down to a fundamental interpretation where Tech Companies see this as a Security Risk where lawmakers from both sides of the aisle see this as an important thing for lawmakerss ability to do their job. Taylor this is not the first time we have seen a clash between government and tech officials. I want to start with both sides of that argument. What have locked what are Law Enforcement officials are doing here . Alyza the argument on the lawenforcement side is we need to do our job. Criminals will operate on the phones and we have no way to get into these encrypted devices. Thatr we should note facebook in particular was responding to that, as you had alluded to. If we create a backdoor access, you cannot just do it for Law Enforcement. Everyone that has a backdoor access in. Does that argument hold up . Alyza facebook seemed to be doubling down on that this week. They responded to a request by attorney general barr as far as officials as well as officials in the u. K. And australia. They requested a backdoor access. Facebook said this is not a good idea. They again laid out their claims that the backdoor is abler ability, so why would they do that when they are trying to create secure products . Taylor taylor finally here, what stage, what inning are we in when it comes to this battle . Alyza this has been a long clash between Silicon Valley and washington dc where things really came to a head and played out on a National Stage in 2016 in the wake of the mass shooting in San Bernardino when the fbi sought access to one of the terrorists phones, and apple refused to help them. Eventually, they were able to hack into the phone at considerable cost. And so, we saw this play out in a really dramatic fashion in 2016. 2015, im sorry. Now, years later, we are seeing it come to the forefront again where lawmakers and Law Enforcement, the department of justice are really saying, you know, we need the capability. And Tech Companies are again pointing to the vulnerabilities they believe it will create. Taylor bloombergs alyza, thank you for joining us. Toing up, according bloomberg intelligence, facebook will remain the top target of advertiser spending in 2020. So how much of the credit goes to instagram . We will discuss, next. If you like bloomberg news, radio. S out on the you can listen on the uber app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. This is bloomberg. Taylor Instagram Stories are now making significant contributions to facebook, according to a report. Instagram is drawing almost 10 of all ad spending on the companys properties at the end of the third quarter. The report also stated that advertiser spending on Instagram Stories jumped almost 70 from the year prior. To discuss, we are joined by eric. Also with us, sarah frier, who covers facebook for us. Sarah, we were looking at revenue for facebook. 70 billion in projected revenue this year. 10 alone just from stories on instagram. Sarah and it really goes to show that advertisers are starting to catch on to this new User Behavior because people increasingly are posting to these more immoral forms like stories where it is more casual, there is not as much pressure. On stories, advertisers have been slow to catch on. We have seen people talk about that in their earnings calls, that we should not expect advertisers to fully be participating in the format for a while now. This is a good time for facebook that the revenue is catching up. Taylor eric, and your opinion, how much is this tied to relative years . Were first off, stories not watched o in 2016 on instagram. They only started monetizing them this year so the growth is rapid. Instagram has grown 60 in 2019 alone and will account for between he percent of facebooks worldwide revenue, that will be higher in the u. S. At around 30 . When you look at Instagram Stories, most is happening in the u. S. So it is going very rapidly. Taylor so, sarah, to play off of that, if the stories are really monetizing well in the u. S. , do we expect the next logical move would be to go overseas . When do we see the monetization abroad . Sarah i think you will see a lot more monetization in general. The problem is that users are increasingly migrating to this moral format. The main news feed and instagram feed have asked that are much more expensive for facebook, so the overall pricing has been depressed because of this shift to stories. Maybe once it becomes more natural for advertisers to do stories, we will see that improve over time. Taylor eric, is this a good sign frankly that as long as i dont care if it is on the feet or stories as long as we are monetizing it and the ad revenue is rising, is that what matters . Eric there was a fear that stories for a while given their lowerpriced and cpm would catalyze some spend from instagram newsfeeds, which takes a much higher price currently. That really has not happened. Advertisers are generally increasing their spend across the board, whether it is on instagram newsfeed, Instagram Stories, or of course the normal facebook blue app as well. Taylor eric, do these things actually work . I see ads, but are people clicking on them and buying products when they see the ads . Is it translating into actual dollars . Eric well, first off, facebook, instagram, all those properties, they have great tools for advertisers to prove spend and prove roi. They are ahead of the pack in a lot of ways. You can tighten it back if somebody saw an ad on instagram to whether or not they made a purchase on your store. Tropical ads are even more important for instagram moving forward as well. That is something even closer to the consumer as well. A lot of these ads on stories are more brand building so they are not necessarily trying to prove spend, but there are a ton of options and tools for direct response advertisers who really need to prove roi and prove their advertising is effective. Taylor sarah, what does this mean for facebook as a whole . The big platform. Particularly when it comes to calls for breaking up facebook, spinning off instagram, whatever regulators want. What does this show know about how closely tied facebook needs to keep instagram . Sarah facebook has become increasingly reliant on instagram to drive its revenue growth. There is still growth on facebook in terms of sales, but a lot of that rapid acceleration is coming from instagram. Specifically, the stories format. Facebook has been looking for some alternative to the Facebook Newsfeed because that is what is saturated with advertising. They are looking for new areas of growth. Investors have been pressuring them every quarter permit ok, it is great you have been growing on your normal properties, flagship properties, but what is next . What will the future look like . The fact that this is going well for them is a good sign, but it does show how invested they are going to have to be in growing instagram in the future to make up for the slowing growth on facebook. Taylor eric, bank of america yesterday was talking about how facebook even more so than alphabet will outperform given the buyer in 2020. Is this a strong facebook story or strong advertising environment going into 2020 . Eric looking at the Digital Advertising market, there is a couple pieces driving growth. Digital advertising is growing double digits, growing very rapidly. Within that industry, social Media Advertising like facebook as well as video advertising like facebook, like Instagram Stories, video ads with in the newsfeed, so they are really latching onto these trends and making a lot of growth as a result. Taylor not to mention those political ads that we increasingly talk about on this program all the time. Technologysmberg sarah frier, think he was for joining me. Bloomberg technology is livestreaming on twitter. Check us out. Be sure to follow our global breaking news network at quicktake on twitter. This is bloomberg. Theor podcasts are paving way for the second golden age of audio and it is making money, too. That is according to the founders of gimlet media. They sold their company to spotify earlier this year for a reported 230 million, and they now had up the podcast unit. They spoke to bloomberg after being named in this weeks business week 50. If you look over the whole history of media, every time a new medium comes about, a new Media Company gets built, so 100 years ago, the new medium was radio. That is when cbs got built and nbc got built. We thought ondemand digital podcasts were a new medium and we wanted to build the defining new brand. Is fascinating because it is like radio in terms of just listening to a great story being told . Thing but itsimple is great but it harkens back to radio, right . Or further back than that. If you think about what we are doing in contrast, a lot about we are doing is one of the oldest media and Human History is telling stories to one another. We have been telling stories to one another before media was available. Many of the oldest stories in Human History were oral stories before they were ever written down. They were doing that before written language was invented. It is very deep and very primal. I think that was one of the issues when we were for starting this company. It is just talking, right . No. It is on the backs of the new technology and the new tools we bring to it. So where are we in the evolution here . Because you guys, as we said, were early. A lot of people have piled in, it feels like. We have a podcast, everybody has one. Everybody sitting around us probably has a podcast. Where does it go next . Matthew we are just at the very beginning. I think he has been using is we are at the dawn of the second golden age of audio. The first golden age of audio was in the 1930s and 1940s. It was when broadcast news was born. It was when you saw fiction, like the shadow of orson welles, come out. Audio has not evolved that much in the last 60, 70 years until now. Now you have a couple of Big Technology changes. You have smartphones in every pocket. You have connected cars coming online. Listening happens in cars. You have Smart Devices that people are listening at home and even talking to their dashboard when they are in their car. All these things have combined for this full new listening kind of experience is to come out and new storytelling, so it is a whole generation of creators being borne out. For this medium, it is like radio but more intimate. Right. There is something about putting on your headphones. one listening to a podcast, it feels like you are listening to your best friend hanging out with you and telling a story to you. Everybody has a podcast. What is it that makes a podcast stand out . There is so much content out there. Alex if we told you that, you would start your own. [laughter] welcome actually. Is it a great story . Alex you are asking the question at the heart of every content company. Yes. Right. Alex the very truth is not as an essential mystery. We can do our best and have been successful so far and will continue being successful on getting that right a bunch of times, but it is hard. The thing that is true about audio, though, is it is two things above everything else. There is a very frugal way. It drives a narrative. If you can tell a simple story, just for example, if i say to you i got up this morning, i looked out the window, and then i stopped, you are like, what happened . All of a sudden, you want to listen to the third one. There is something that deep in terms of hearing his story that it really grips you. So i think that is one of the key things that audio if you get that right over time, that is what people want to listen to. Lets talk a little of the business side of this because we all love telling stories. We love listening to them. We like telling them. We like listening to ourselves talk as we do it for hours every day, but you guys figured out a way to make a real business out of this. Something spotify was able to do and willing to pay you a lot of money for. Clearly, they see a business here. How does distribution ultimately work in a profitable way . Matt . Matthew that is a good question. We did build a business here. Gimlet was mainly an advertising business. Thisrns out podcasting is intimacy and audio that makes it great for storytelling and advertising. We are reaching a very unique consumer that