President biden imposes limits on u. S. Investments in china. Alibaba returns to growth across all of the main divisions, defying chinas economic turbulence. We will take a deeper look at the Supreme Court ruling in the epic case siding with apple, at least for now. The other big story was inflation, gaining 0. 2 last month. The slowest pace of gains for two years. The market starts thinking about the fed and then says maybe the fed will skip a rate hike in the next meeting. Why do we care about the fed . Higher rates discount the valuations for future cash flows for names on the nasdaq 100. The main text the main tech index outperforming but we are basically treading water. The other big risk as it is bitcoin. We are the same level we have out for two weeks. The u. S. 10 year yield climbing back up. Remember the story we keep reiterating. Yields have been coming slightly lower from 4. 2 on the 10 year to now nero took now nearer to 4 . The earnings story is disney. So many stories in it. Raising prices for streaming. The loss on the streaming must error than forecast. This is the bob iger effect. Spending this year be 27 billion for content instead of the 30 billion they usually spend. That is something the market reacted to as well as the financial forecast they gave. Lets get to our media and entertainment editor Chris Palmeri who joins us from los angeles. What were some of the other Key Takeaways from that disney print . Chris the big headline as they have implemented the big costcutting effort. It is dovetailing with the writers and actors strike so they are saving money on production. Companies are spending too much on content. The lowerthanexpected losses on streaming, people call that good. Dramatic price increases for the disney plus and hulu services as they try to get to profitability next year in streaming as they promised. Ed you mentioned the loss, a half 1 billion, 512 million on the streaming business. Your go it was 1 billion. Disney plus subscribers fell 7. 4 in the quarter but the main story is disney plus hot star. Explain what happened. Chris they lost the streaming rights to India Premier Cricket League which was a big deal. A big survivor in india and a couple other countries. You are seeing the impact of that for a few quarters. A dramatic decrease in subscribers locally. Ed what did bob iger and co. Say about the writers and actors strike and how that will impact the contents late . Chris it was woven into the 3 billion in content reduction. They did not specify how much was due to the strikes as much as an overall reduction in spending. It is a significant enough number and we have seen similar numbers from all of the Big Media Companies in recent weeks. Billions of dollars in savings as they dont have to make new tv shows and films right now. Ed Chris Palmeri. The other big news is disney racing streaming prices. It is a 27 hike for the ad free version of disney plus. Goes to 14 a month from 11. Lets keep the conversation going. Ross gerber, an investor in disney. That is a lot to take in. It is very rare you see four red headlines on the bloomberg terminal from a single earnings report. What was the main point for you . Ross the main point is what youve been focused on, rightsizing the amount of spending done in hollywood with the revenue coming in from direct to consumer sources. They started out in a race for subscribers similar to online gambling. Lots of acquisition costs. Now the businesses have matured and they have almost 200 million plus subscribers. When you look at the business they are very close to profitability. These are the changes that need to be made. When you look at netflix profitability with over 3. 5 billion Free Cash Flow and growing, what the potential is for disney even if they do not have subscribers is to see profits from the streamers into the next year. Ed for the benefit of our audience, i am looking at the bloomberg terminal. You have around 150,000 disney shares on june 30. You are a big bob iger fan. Has your perception of him and his job changed based on what you heard last night . Ross not that his job has changed. He has a very challenging job but he has the help i was hoping he would with kevin mayer and john sachs. I know kevin mayer and i am always impressed by his ability get projects done in hollywood. I see bob iger making a move on candle media and bringing these executives back into the fold. The big news about espn getting into the gambling business, they kicked portnoy out and they added espn. This was a huge win for espn, but getting out of the consumers in a meaningful way and ultimately a sports app that could rival any app out there. There are some exciting things but ultimately bob iger needs to focus on content. They need good movies. What bob igers main goal is besides cutting costs is improving content. Ed there are two competing forces for they try to have cost discipline and reduce content spending. The contents late is impacted because of the strikes. People want good stuff to watch. How does disney get the balance right, making sure they have things that get eyeballs without overspending . Ross the movie business is very hit and miss and there is no real formula for success. Over the years disney has had a great run over its longterm and finding tremendous talent. What is happening with the strike, and we are hoping the strike ends at the end of the summer. Once everyone is done with their vacation they will realize they need to make money again. I think the strike will end soon and we will not see too much of an impact. There been so much content made, none of us have seen close to all of it. This is what the writers and actors are miscalculating, and maybe there is a shortterm effect of their strike, but there is so much content in the hopper, there is international content, they are even green lighting independent projects. 100 productions greenlighted by sag during the strike and some of them are for big streamers. The strike is posturing in the industry after an amazingly profitable period of time. These Companies Need to make money. It is a bad time for a strike and need to cut costs and do what is necessary. It is a changing time and we are seeing it in technology and entertainment as we right size in the postpandemic era. Ed michael morris, an analyst at guggenheim who covers the company asked bob iger on the call what are the chances of a Big TechnologyCompany Buying disney. Bob iger said im not going to comment about that. The rumor has been there for so long. What you think about that . Ross i think if apple ed i did not say apple. Ross i think apple wouldve bought netflix and tesla and they have had several attempts at disney and they should take this attempt but they are not going to. Apple is not that company. I think the one to look at is amazon and google. I think the future of entertainment will be led by tech giants, not media giants. As we see this transition, there is a high likelihood somebody might bid for all or parts of disney. That said i think the company is fine the way it is. You need to fix the problems you have which are fixable and the stock has tremendous value for longterm investors despite poor performance. If you look at the 10 years before it has been a phenomenal performer under bob iger. We have had a step back and i think it is time for investors, it is in the top 15 holdings for us and i am a longterm investor in disney and i am not planning on changing that. Ed really quick on the tech perspective. Disney was talking about how they have the technology to assess password sharing and going into the next year it will be more of a priority. That was a factor for netflix. How do you think about password sharing in the context of disney plus . Ross i was surprised how successful netflix was to getting users to sign up with a password sharing and have little backlash, i thought they could have severe backlash. In hindsight if the content is good people will pay for it. The debate over will people pay for x and social media platforms versus paying for entertainment platforms like netflix or disney plus. What we are seeing is people will pay and we have the technology to hold people accountable. That is a winwin for all involved stop at the beginning it served everybody but now it doesnt. Ed ross gerber, president and ceo of gerber kawasaki. Coming up on Bloomberg Technology, what President Bidens executive order means for china tech in the u. S. Tech center. We will talk about that with Joanne Feeney. That is coming up next. This is bloomberg. I did have hearing aids from another company. I was just frustrated. I almost gave up. With miracle ear its all about service. Theyre personable. Theyre friendly. Im very happy with them. We provide you with a free lifetime of aftercare. Meaning free checkups, cleanings, and adjustments. I see someone new. Someone happy. Its really made a difference. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Ed joe biden enacted an executive order yesterday on basing restrictions on chinas tech sectors, for example quantum tech and ai systems. This will restrict companys ability to develop nextgeneration military and surveillance technologies and could threaten u. S. National security. Lets bring in Joanne Feeney, partner and Portfolio Manager at Advisors Capital management. You have a global view and we know you as someone with a long history with the chip sector. The chip sector as a target of this initiative. What is your reaction to the executive order . Joanne this is yet another move by the u. S. Government over the last many years to try to limit the flow of technology to china. For many years we basically gave our technology away by looking the other way when china was acquiring technology through dubious means, through trade relations, through manufacturing operations. Now at the Previous Administration and this one, the professionals within those departments are trying to curtail that and this is another way. By restricting venture capitalists ability to make new investments in china and private equitys ability to make new investments the hope is not the deprivation of that money will slow china innovation. It is more the stopping of those people providing help to those companies. It is not really about the money involved because it is very little as the whole of China Investment in new technology. Ed you make a good point that is so relevant to the Bloomberg Technology audience that this is a restriction on private capital audience. As a Public Market investor does it sour the attractiveness of any of the chinese adrs that trade on u. S. Exchanges . Joanne there are a lot of reasons to be concerned about specific chinese adrs. We recognize the Political Tension between the u. S. And china is not likely to ease any time soon and that does help guide the investments we are willing to make in china and other parts of asia. It does not discourage us entirely. Our International Group is on the ground looking for ideas. In our balance strategy we still Like Taiwan Semiconductor despite the political risks we acknowledge are out there. Taiwan semiconductor serves the Global Demand for semiconductors and they are at the leading edge of advanced manufacturing and they serve so many u. S. Designers of chips and they are an integral part of that, from nvidia to amd to broadcom and others. Ed later in the show we will talk about Tokyo Electron, which is a japanese ship your maker. They are getting a lot of demand from china because at the same time china is trying to react to this. Think about some of the names we are interested in. Nvidia has circumvented the other restrictions by producing a lowpower gpu. What is your perspective on how u. S. Technology names who want to do business in china can get around some of these executive orders. Joanne for a while i think Companies Like nvidia and amd will continue to sell to china. As nvidia has done they will have to sell less capable chips than elsewhere in the world. As you saw not just what Tokyo Electron said about the continued demand for equipment into china, china will want to build up its own Semiconductor Manufacturing capabilities, encouraged by all of these restrictions, not just from the u. S. But from europe. In addition we saw that according to the Financial Times nvidia is receiving 5 billion worth of orders from Chinese Companies because they are afraid the restrictions will only get more severe. China remains an opportunity even if they are constrained. They will want to get as high level chips and as highlevel equipment in the Semiconductor Industry as they possibly can. It is pretty clear china has been making its own investments in design capabilities, in manufacturing capabilities. A lot of the people they have on staff have been trained in the u. S. And have worked for u. S. Companies. They have a lot of knowledge to work with. Ed on any metric or scale you like, what is your assessment on the health of the u. S. China relationship . Where do we stand . Joanne on a scale of one to 10, one being least healthy, i would say we are around 83. It is not a good place we are around a 3. It is not a good place because of our goals in the u. S. To prevent china from creating military capabilities that would be a threat to us are in conflict with china goals. In that level of tension, im not an expert, but i do not see that level of tension easing. From everything ive read that will not get better. Can we cooperate outside of those areas . Yes, and we should hope for the sake of our companies and our consumers who benefit from getting cheaper goods out of china that the restrictions do not spread beyond those essential areas that is needed for our security. Clearly that is the case. Look at what other Companies Continue to be able to sell, whether it is Tokyo Electron or applied materials. There are still plenty of opportunity in china. It is just a lower margin now than it was before. Ed the u. S. China relationship on a 3 10 on the Joanne Feeney scale. Good to catch up on Bloomberg Technology. Coming up, Virgin GalacticJust Launched its first flight to private space tourists. All of the details next. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Let Innovation Refunds help with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy. I run a wax museum. Let Innovation Refunds help you get started on your erc tax refund. Stop waiting. Go to innovationrefunds. Com you really got the brows. Ed chinese chipmakers are speeding up investments in mature Semiconductor Equipment as the u. S. And its allies tighten export controls to cut hstech edge to cut asias tech edge. It is in strong investment in china and winning new customers according to the name Tokyo Electron edit ceos. Alibaba returning to growth across its main divisions, this is the first step forward to a longawaited comeback after more than a year. Chinas Online Shopping leader reporting the betterthanexpected 14 rise in revenue during the quarter when the worlds number two economy struggled to Gain Momentum after years of covid zero restriction. Shares up more than 5 in u. S. Training. Lets head to space. 3, 2, 1. Release. Ed that is the first set of private tourism passengers embarking on the right of a lifetime to outer space on Virgin Galactics special commercial spaceflight. Showing us is Bloomberg News reporter on all things space lauren gresh. 20 years later Virgin Galactic gets tourists into space. Give us the details. Lauren it has been leading to this moment. I know i said this during the last fright last flight but this is the one that sent tourists to space and that is the one that is the reason Virgin Galactic was founded in the first place. One of the passengers has been waiting almost two decades. He has had his ticket that long and finally got to make good on that promise that Virgin Galactic made for him. This is why it was such a big moment capping off does gate decades two decades of developing for the companies and capping off it will be months for the tourists hereafter. Ed originally ticket prices were 250,000. They closed them when they put a pause on operations. On board we had three customer tourists astronauts. Two of them were not paying customers. They won these tickets in a charity drop. Loren that is correct. Only john was one of the original ticketholders. Ed and he competed at the 1972 olympics. What we know about the cadence of launches . How do they get going. Loren the ideal is to do monthly launches from here out so we should