With aerial investments. Good morning to you both charles, ill start with you tech stocks have had a very strong start to the year can that continue . Well, full disclosure, ive been skeptical of these stocks for a long time and ive been wrong. And i think there are a couple of reasons that i cam concerned the first is theyve been drive higher the s p is dominated by these large companies. As more money goes into the s p and index funds, these funds buy these stocks for no fundamental reason i do worry if theres a reversal in those flows, these stocks will be hit hard the second thing i worry about is regulation. Theres almost nothing that republicans and democrats agree on the one thing they do agree on is that Big Tech Companies have too much power i think theres a real risk of regulatory pressure. Were going to dig into that a little bit more, im sure. Walter, if you look at whats been the best performer in the dow so far to start this week, its been apple. How much of that is related to the u. S. china trade truce a lot of it has to do with that obviously, thats been a huge concern for them, given the amount of phones that are made out of that are made in china and the number of products that are sold in the u. S. That could be impacted by, you know, any type of incremental tariffs from those types of products. So thats been a big positive. The other issue here for apple is, are they making some progress on services is this upgraded rate thats been really ploroviding a stiff headwind for several years now about to abate they dont have a 5g product that could be an issue in terms of helping them stimulate that rate of return into growth but this is the lowest upgrade rate people are holding on to their phones longer than they have before there might be an opportunity for that to deflect later on this year. Walter, is there a fundamental issue over at apple. That wall street journal report earlier this week saying johnny ives departure triumphs innovation over design and questioning the innovation going forward. Is that a concern . Look, the numbers speak for themselves weve talked about this for some time back in 2012, the company spent about 3 billion on r d and was only 2. 2 of revenue since that time, the r d budget has quadrupled and the Revenue Growth has only grown 60 . Obviously, thats good overall growth, but theyre investing a lot more in what everyones hopeful to be new products everyone keeps saying, okay, if the iphone can grow a little bit, maybe well drop some new innovative product but year over year, we havent seen anything that innovative. But you cant invest in apple on the hope that this massive r d budget thats quadrupled since 2012 and now represents whatever, 5, 6 of revenue up from 2 of revenue, is going to deliver a product. You have to invest on the basics is the iphone replacement cycle going to stop lengthening . Are service s going to resonate with their 900 million active iphone users globally . And if they deliver something innovative, great. That will be additional gravy for investors. I mean, it is interesting to watch the stock at twomonth highs. Were almost at the highs of the year it feels like, walter, this is a classic case of climbing the wall of worry. The skepticism is actually healthy. Johnny ives, questions about innovation, questions about the next big hit, questions about the sales slowdown how many analysts have taken down their numbers on china this year, and yet the stock is at new highs . Its amazing and this has happened before, back in 2016, the last time the company had a decline in revenue, you know, the following year, grew it 5 and then 16 so i think there is a core belief that, look, this is a product where the customer retention rate is super high, 99 . Customers arent, when they upgrade their phones, theyre not moving to android or samsung, theyre staying with apple. So theres a belief that with this strong user base, that the company can leverage either more sales in the future or some type of services through that customer base. And i think ultimately, thats what helps the stock gain investors, even when things look really bleak right now in terms of whats happening in china charles, you can make some of the same arguments about some of the other big tech names facebook, for example, up 48 since the start of the year, despite all of these looming regulatory risks and, you know, focus on privacy and how they handle misinformation, et cetera investors who werent buying into these stocks have missed out on quite a run here. Is there any reason to think that all the regulatory headlines were getting now is going to change that it would have to be actual action it cant just be hearings, it cant just be Elizabeth Warren making angry statements. I think, i happen to believe there is a real risk that the Trump Administration will get tired of the power that some of these companies are exercising some of it is about predatory pricing. Some of these companies have been offering products at zero revenue and driving competitors out of business. That was the original rationale for the a p antitrust regulations and i do think the government can make it difficult for somebody like facebook if they decide that theyre exercising too much power. I think thats a real possibility, but i admit, i predicted that last year and so far it hasnt shown up in the numbers. Charles, when you talk about the field of f. A. A. N. G. S that are climbing that socalled walls of worry, one that is not is alphabet. You had that article talking about youtube and facebook and misinformation around medical treatments why has alphabet been the underperformer and what do you expect for the second half of the year this would be the name where a lot of people are angry about the policies that the company has been following and i think its across the political spectrum i do think people do not like Media Companies having centralized power. And i think that alphabet is the company that you could point to that does have the most centralized power. It is the name that people worry about the most, frankly. And so some of it is regulatory, and frankly, of course, a lot of the International Issues that weve been talking about, a lot of markets are being closed off to them, places like china are amongst the most heavily censored and just dont fit the alphabet model as well as other developed western countries do lastly, walter, when you talk about regulatory risks, the other names that come to mind are the ridesharing companies, uber and lyft. You have buy ratings on both why . I mean, to us, its a tenyear call in terms of what autonomy is going to play. I mean, this is selfdriving cars are going to happen at some point and this is something thats going to change our economy more than many things have in the past 50 or 100 years. And these companies, i think, are in a position. Because its not going to happen overnight. Its not our belief that waymo or tesla will all of a sudden provide us with full autonomy on day one. That it will require the networks that lyft and uber can provide. They are in a key position right now to benefit the valuation is fine in what they do today, which is basically just taxi replacement, but the true attraction for these companies is getting to that full autonomy and i think they will be able to manage through the regulatory issues that they exist in getting to autonomy and the employment issues that they have now in california, which makes them, i think, great investments for investors over the longterm. Certainly the big longterm focus on that socalled path to profitability. Walter, charles, thanks for joining us today thanks for having us when we return, the u. S. Chip company sued by huawei over trade secrets. Alan astngrmro with us on that big win on the other side of this break stay with us dows up 17 points most of us dont know how much data we use, but we all know were paying too much for it. Enter xfinity mobile. Americas best lte with the most wifi hotspots, combined for the first time. When youre near an xfinity hotspot, youre connected to wifi, saving on data. When youre not, you pay for data by the gig. Use a little, pay a little. Use a lot, just switch to unlimited. Get 400 back when you buy the new lg g8. Call, visit or click today. Welcome back President Trump expected to meet with Senior Security officials this week as the administration considers easing pressure on the Chinese Telecom giant huawei meantime, a federal jury in texas has rejected huawei claims that a Silicon Valley chip startup backed by microsoft and dell stole its trade secrets and poached its employees. Joining us now, the companys cofounder and ceo of ccnex lab, Alan Armstrong now, youve worked directly with huawei in your opinion, does the company pose a Larger NationalSecurity Risk to the u. S. . Well, you know, im not a politician, but what i can say is that in our case, the jury found that they had misappropriated our ap and they had a policy of posing as a customer and feeding that information into their internal chip development, which is not acceptable its not a practice that anybody should do. In terms of their National Security threat, i think ill leave that so, you know, the professionals in the government and im confident that theyll do the right thing but, alan, from what you have seen from the company, you said that they have stolen your trade secrets. They have made the distinction that no court has ever concluded that it has engaged in malicious i. T. Theft is that an important distinction . And you were not awarded any damages, so are you happy with the outcome . Im happy with the outcome. I think that theres some key discovery in this case that maybe didnt get in for a lot of legal reasons, but for us, its just good to have this cloud of, you know, when you found a company, you dont dream of a big legal battle, but we were cleared of everything they accused us of. And they were shown to have misappropriated our ip i think the lack of damages is because were not in production yet, were just starting to ramp production and, you know, they were that was a technicality. Alan, was there malicious intent behind it, though and you know, this is like i said, the distinction that they make do you think that thats important here because you guysarent the onl ones, certainly, that has accused huawei of stealing trade secrets. Theres a large case right now with tmobile. Yeah, i think, from the beginning, what this case was about was them wanting to get our ip we started almost three years ago and the actual lawsuit happened 18 months ago and as we were fighting this, we found that they were very interested in the ip that we had and i think they tried to use the u. S. Court system to get it and lucky for us, our jury system works and the jury saw through that, saw what they were trying to do and made the right decision alan, this conversation that were having around ip and ip theft right now, how much of this do you think is specifically a huaweirelated situation versus a broader industry, sector, state situation within china and i ask that, because it really sort of strikes the heart of these u. S. china trade talks right now. Yeah, i dont view it as an issue. We have a lot of employees in china. Theres Great Chinese Companies that we would love to do business with that act with integrity. I think huawei is a specific case and there may be others, but i dont think this is a country issue. I think any company can get that aggressive type of spirit of attaining technology for any reason and i think that can happen in any country. And it just needs to stop. So i think huawei was taught a hard lesson by the good people of texas, and hopefully that i think we were an easy fight to pick in the fact that even though were small, we fought a hard fight and we won. That will send a pretty strong message to huawei. If im just looking at this, alan, it seems to me it has everything to do with the u. S. china trade fight huawei is literally at the center of this and has been used as a bargaining chip just this weekend in g20. If told you me an American Company was getting sued by huawei in a texas court, i would expect the American Company to prevail. Well, you know, they they fought a hard fight. They spent a lot of money going after us with some pretty crazy accusations and i think weve prevailed because our jury system works, and they saw through what huawei was trying to do and they saw what huawei took from us so, you know, i i went into it, you know, knowing that it was a fight for our lives and we ended up prevailing. But it wasnt easy we spent a lot of money. Its not easy for a small startup to fight a big conglomerate certainly, alan thanks very much for your time in coming on today Alan Armstrong from cnex labs. Sticking with china, white house trade adviser Peter Navarro joined us last hour. It was his first interview since returning stateside from that g20 have a listen to what he said. Well work closely with our allies around the world to make sure that huawei 5g is not in those countries. But in the meantime, a small amount of lowlevel chips are going to be sold to keep systems going and thats not a bad thing, when it gets us back to the bargaining table with china and with china committing to immediate and significant purchases of agricultural goods. And lets see if they deliver on that jeff moon, founder and president of China Moon Strategies former u. S. Trade representative to china joins us now. Welcome, jeff. So the capitulation on huawei, what did it signal about the administrations approach with china right now . Well, it signaled that the Administration Made an overly hasty and overly broad determination about the National Security threat of huawei. Mr. Navarro told us that the administration believes that huawei may constitute some threat with regard to 5g. The previous is that huawei writ large was a problem. This is what happens when we make policy by tweet and the administration also, really, i think, has failed to analyze rigorously the National Security, trade, and Law Enforcement dimensions of this case the centuries task with regard to huawei is to define precisely what constitutes any National Security threat. The trade task is to narrowly task and tailor any trade measures to address that precise National Security threat and the Law Enforcement task is to prosecute any criminal violations whether it be violations by the cfo or otherwise and what i hear in much of the analysis and what i hear from the administration is these three issues mixed up and confused and unless we separate them out, analyze them rigorously and try to address them, we are not going to get to the bottom of the huawei case and resolve it to the benefit of both countries. You just hit on a lot of points, jeff, but i want to go back to the one you made at the very top of your comments right now about this idea that the original designation on huawei was hasty. How do you know it was hasty it seems to me and im playing devils advocate here. It seems to me, you put an overall ban on a company, you have a lot more leverage coming into those trade talks well, i mean, traditionally, we have talked about National Security and trade in two different lanes. The president , for the first time, has linked them. And i think were seeing the implications of that are not necessarily wise and we are setting precedents that in the longterm are going to be very problematic. So i think we really do need to define precisely as opposed to just tarring companies writ large. You know, the chinese could do the same thing with regard to American Companies and we would find that equally unacceptable jeff, do you really believe that as navarro said this morning that its only going to be lowlevel tech given exemptions in this reprieve . I mean, is the administration really going to let the qualcomms, microns, even grade school googles android operating system prevent it from working with huawei . The markets are certainly giving us mixed signals i think this is part of the lack of clarity that the Administration Needs to resolve. We have known that huawei has been considered by many people in the National Security community as a threat for pretty much a decade. There are plenty of studies and information out there and its astounding to me that the administration was not more precise in the definitions that it gave. Im not so sure that having lowlevel or cheap huawei phones with android operating systems is a threat to the u. S. National security and there may be other instances where there arent threats to National Security. But i understand that a higher level, 5g and some other technologies could be a threat but its the task of regulators to sort all of this through and to do the right thing and address National Security threats. And we should not be using this as a trade weapon. Jeff, i want to shift gears the protests weve seen in hong kong that have been ratcheting up in terms of intensity, how does this play out for china how does this play out for Business Sentiment in a place like hong kong whats the longterm takeaway here in terms of the risks the most important point here is that from the chinese perspective, hong kong is a sovereign territorial issue, completely an internal issue and the trade dispute, for example, is a Foreign Relations issue. My point is that hong kong is much more sensitive. I was involved in the hong kong negotiations in 1997, with the state department, and we worked very hard to try to preserve hong kongs special autonomy so the United States ought to try to do that we should not even think of abolishing the Hong Kong Policy act, which preserves that separate autono