The stand at the google trial. Caroline we will get estate on the eve of industry. Lets check on the broader public markets. We are dictated by macros and all eyes on Jerome Powell having his roundtable. The nasdaq is up bite zero. 3 . The 10 year yield can probably take some of that rally, 12 basis points on the high side of the 10 year. The focus and where the Federal Reserve has to relay the pressure to fight off inflation. Some pressures are coming off of commodities today. This is a question of growth. Lets move on to the risk asset thats up three and 4 on bitcoin which is a stellar rally to start this new quarter with maybe some repositioning at the moment. Ed we got Third Quarter delivery numbers for the ev space, tesla and rivian fell in premarket trading. The numbers and come back and we are notably higher compared to where we year where we were. Tesla, 435,000 evs delivered in the quarter. Downtime for factors as they root tool as they retool. That impacted some of their production figures but deliveries missed estimates. Rivian beat expectations from production and deliveries but maintain guidance at 52,000 units for 2023. Some are saying you can do better than that. Maybe there is hope they would update their guidance. We started this week much like how we ended last week and thinking about antitrust and the make a cap tech names. The news we will get into shortly is that microsoft see eo is on the stand in the google antitrust trial the government has put focus on search. We will bring you details later in the program. Caroline we have to look at what it means for market thats been so under pressure. That stock was off 5. 8 this past month. What does october bring . Danny fisher is with us. We have these headwinds pointing out the regulatory headwind but will there be a buying opportunity to technologies for october . Its hard to tell on a monthtomonth basis. Clearly, september was a difficult month. It was a confluence of events. The 10 year continues to rise and thats generally a headwind for stocks. Secondly, the 10 year is not going up because Economic Growth is robust. Its going up because inflation pressures continue to persist. The fed has indicated its going to be higher for longer. Investors needed to digest that. Where we go from here is earnings. October brings earnings season. Its going to be a tugofwar, i would call it depending on idiosyncratic stories and if we look at the most recent reports from Companies Like adobe and accenture that had august quarter ends, accenture was much more muted, more Macro Economic headwinds associated with their results. Adobe has some unique drivers in its business. Its on their front foot with ai. They put a very nice numbers. Expectations are strong going forward. Its going to be a casebycase basis. Ed one session a market does not make but lets look at the mega caps. We talked about ai and we know about the macro picture right now. Its the kind of aceptance that rates will be higher for longer. Did th share prices on your screen ha any basis or priced in reflecting antitrust, whats happening in the courtroom now . There absolutely has to be. The one name that is not on that screen is apple. Google, microsoft, apple are all intertwined in this as it relates to default search. Its important because google effectively pays apple an exorbitant amount of money. There are many estimates as to what it is to actually be the default search provider on ios. Those of the most important consumers in the world. Its a very virtuous relationship. Microsoft would love to be able to compete for that business given their investments into being and chatgpt as well but the reality is, google has been able to corner the market and that is the governments case. They say google is exercising or alphabet is exercising market power in this default relationship. The hard part is apple is the one thats actually the toll taker here in terms of actually dictating the terms. Also, its a result of the idea that alphabet has the best Consumer Experience research. Its not as though consumers are being harmed. Thats where the antitrust laws and these cases are evolving. They are different than what weve seen historically. Ed this is interesting for you in particular because you look at your portfolio and you have exposure to microsoft and apple. Which one are you most concerned about . There are number of possible outcomes of course but which one carries the most risk . That would be apple. Apple is generating whats called traffic acquisition costs from alphabet today. 100 gross margin and they fall to the bottom line and thats apple money that they can reinvest and it would been be material gains. Today microsoft gets nothing. Microsoft can pay twice the amount that alphabet pays to be the default search provider and it would be incremental to the business. The challenges being does not have the creek bing does not get the same advertising revenues. There are a lot of things to think about but its all upside for microsoft. It could be downside for apple and clearly would be downside for alphabet if it was the most onerous outcome. Caroline its interesting about the timing about the all of this. Alphabet searches having a run from for its money from generative ai and people wondered whether bing would come to the fore. Of the names you put your attention on, when you have such a large exposure to microsoft, youve also got nvidia in their andasml. These companies have an ai uplift here but is it priced in yet . With the market, its interesting, coming into this year, nothing was priced into these stocks as it related to ai. Then we got a lot that was priced in. If we actually look at the estimates and the valuations of these companies, they are all still fairly reasonable. If you go back to september, 2022, the market expected nvidia to earn around five dollars in 2024. Market now is expecting nvidia to earn 16 or 17 meaning the estimates have gone up three times in the stock actually hasnt gone up that much so you could argue nvidias cheaper today than it was in september of 2022 despite the move. Microsoft is now back to one of its most reasonable valuations we have seen in some time. Alphabet still trades sub 20 times earnings. You look at these and they are not egregious by any means. The fundamentals actually continue to be just fine for all of these companies. It may not be robust like nvidia. Caroline it feels as though you are aligning with Goldman Sachs in terms of valuations might look quite high but when you look at the fundamentals of this business, they are still relatively opportunities. Where is the risk factor when you look at companies being eroded by the opportunity of ai . There are companies, we go through this exercise of draw a line down the middle of the whiteboard and whos on the right and who is on the wrong side of time as far as ai. I mentioned adobe earlier as a company that if we go back nine months ago, was viewed as being on the wrong side of time. As they been able to actually communicate with the street more clearly as to their product roadmap and deliver on products, and put up results, the company is firmly on the right side of ai. One of the things i think is interesting in this market is we have the obvious winners and i think we have obvious losers and then we have some companies that may are perceived as losers that can move into the winners bucket and we are focused on finding some of those as well. Ed we love the winners and losers conversation here. Thank you. Coming up on the show, the trial of Sam Bankmanfried is coming up this week and we will be joined by Duke UniversitysCampbell Harvey about the significance of this trial for the industry. This is bomberg. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Ed Sam Bankmanfried is getting ready to trial for what prosecutors allege was one of the biggest financial frauds in u. S. History. We are going to bring in Campbell Harvey, professor of finance at Duke University who was asked to be an expert for the defense in this case. Professor harvey, you declined to give expert testimony. Why did you declined . I have to admit, i was very tempted. Its such a fascinating trial. To be teaching my classes from the courtroom on zoom could be pretty entertaining for my students, but the bottom line is there were a few reasons i declined. Probably the biggest reason is that if i do this type of testimony, the deal is that i tell the jury what i believe. And that usually knocks me out. Ed why would that be a problem . The idea would be you be called as an Expert Witness to assess a Bigger Picture rather than of the individual. Why would that be a problem . Its often the case that experts are engaged to support the point of view of whoevers hiring them. Given my reputation which i consider very important, im just going to tell what i believe area this was going to be a big Time Commitment and its not my main job. My main job is to do research and to teach at Duke University. Caroline lets dig into what you believe if you are being potentially called on by the defense. You would defend what has occurred in the world of decentralization. Your argument was that this was not a decentralized problem, just an old school problem. Thats correct. People believe this is a crypto problem. There are some connections here but this is like a traditional finance problem. This is a problem weve got people running an exchange who have no idea as to how to run an exchange. They have no experience and Risk Management. And most importantly, the comingling of funds which is the main thing in the case where client money is used to bailout hedge a hedge fund. These are problems that could happen in traditional finance, but given that crypto is essentially unregulated with a lot of uncertainty over regulations, many of these exchanges exist offshore. B ftx,inance are examples of exchanges that are offshore to avoid Regulatory Oversight and that creates problems with spx but its not the only exchange that has suffered two failures and Risk Management and other things. Caroline from the experts and founders and builders we speak to, it doesnt feel as though the Regulatory Environment is tempting people to continue to build within the United States. It seems more being driven offshore. Is there some way in which the United States could meet could be more attractive to ensure that people can interweave themselves and can safely use an exchange and whether they use it as an asset class or a way to develop technology . We are in a bad situation right now. There are very few regulations and whatever regulations, its kind of like regulation by enforcement. Given the uncertainty as to what the regulations will be, Many Companies are deciding that its not worth locating in the u. S. No country wants to lose their best ideas to some other country. I think there is a risk that innovation moves offshore in the next big thing in this space is not trading with ftx where you are trading bitcoin or ether, the next big thing is how this technology is deployed in regular companies so the Top Companies today. This is the idea of web3 where this technology can enable many things that were not possible before. Think of your computer, how much of the cpu and gpu do you use per day . Probably less than one hour. Why not rent out the other unused capacity and get paid for it . That is what web three is able to do. Im quite concerned given the harsh sort of regulatory enforcement, the lack of regulations that we cannot participate in this innovation. We have two disruptions going on now, ai and this decentralized technology disruption. Ed professor harvey, you had a book that was published on the future of finance. Have you been able to carry on your writing present day . What impact has spx had on the impact ofdefi . Whats important to understand is thatspf and ftx is not derfi. It is centralized finance. You dont give custody of your asset to anybody. You are the person who holds custody. You do not delegate. With ftx, customers delegated their custody and allegedly those funds were taken and used for a hedge fund. Thats the socalled comingling. Decentralized finances sharply i think this whole scandal within ftx and the other bankruptcies, we have had many crypto bankruptcies and almost all of them are centralized. Either an exchange ftx or lenders were not experienced in lending or Risk Management. I think this shifts the focus away from centralized finance to decentralized finance. Caroline great to have some time with you. We await the trial starting tomo. From new york and San Francisco, this is bloomberg technology. [mo] if youre thinking about going back to school, this is for you. I ended up spending less money my entire time at snhu than i did in just one year at my other university. [juan] my time at snhu has given me more confidence. Now i can go for that promotion. If youre ready to go back to school. You can do it. Southern New Hampshire university has changed my life. And it can change yours too. [announcer] visit snhu. Edu. Caroline time now for talking tech. Google will make its chrome laptops in india. The deal is viewed as a win for all parties. Production in india can help hp avoid curves on imports and india gains more production value. In the u. K. , top talk is selling to work against looming debt maturities that need to be refinanced in coming months. In an effort to test its capacities, elon musk streamed himself playing diabloiv. The first few minutes were setting things up. The 1300 viewers tuned in with 20,000 total by the end. Theres been plenty of other announcements coming from x today. Ed there is also partnership with paris hilton with fashion related video content. The ceo of microsoft is calling out google for its stake in the Search Market. He took the stand earlier this morning in the google antitrust trial, leaving no doubt about his perception of googles dominant. He warned the judge in this case about how Artificial Intelligence could give google a larger lead in the Search Market. He basically said there is choice in the Search Market and it was a bogus idea. Caroline he has also been one of the key people in the drive to make things substantive in the world of search. They didnt get there and there might be lots of reasoning and blaming us to why that wasnt the case. Suddenly, he will try to give context to the idea that maybe they could offer more money than two google than apple is currently potentially being offered to be a competitor in the space. Ed lets get more context from the Bloomberg Intelligence senior tech analyst. There is choice but is just the consumers are using one browser . To be honest, when i read the news, was laughing because only a few months ago, satya had a massive offense with the browser wars with openai and the ai for bing. The market cap took quite a bit of loss in the weeks to follow and now he says these guys have an advantage even in ais so its pretty amusing to me. Caroline he went on to say that google could extend their search dominance into ai that hasnt been the feeling on a day to day discussion. As we said, the timing of this trial is interesting because its money google searches is getting from generative ai. I talked to a lot of investors about this. Apple has apple maps and is pretty popular and im never used it. I still open up an app that has google maps in it to do any navigation. If i dont have a google default search on my browser or my phone, i may be forced to download an app and i could search that way. Google search is far better than anything else out there. I think thats what google is trying to make a case of here. Caroline thank you very much indeed. Coming up, could we be heading toward a 3. 5 Day Work Week . Jamie dimon thinks we could be. Maybe thats the allure of Artificial Intelligence and more about where he thinks the kids are heading. This is bloomberg technology. jennifer the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. 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Ed lastly, the 100 just got a gain the nasdaq 100 just got a gain. It that the mega caps doing a lot of the work to keep this index in the green. One surprise move is the upside from a place perspective that is tesla missing on its deliveries and production numbers for the Third Quarter just gone. When the news hit in premarket, the stock fell. It has rebounded up 0. 7 . It is now down 0. 2 , trading all over the place. It be to production and deliveries in the corner by some distance but maintain