His First Official trip overseas. Global news 24 hours a day, powered by 2600 journalists in 120 countries. Im Alisa Parenti. This is bloomberg. Bloomberg technology is next. Carolyn im Caroline Hyde. This is Bloomberg Technology. The manchester terror attack brings the battle over encryption front and center. A snapchat snapshot. Why muddy waters founder says snap may be a short. Billion bets 4 on invidia. The chip makers successful entry into the automotive market. First, lets get some fresh news straight out of washington. The Congressional Budget Office is just out to claire revised plan to repeal and replace part of the Affordable Care act. It reportedly reduce the federal deficit over the next 10 years and that is 32, billion less than an earlier version of the legislation. Lets head to the white house with the reporter. Shannon, remind us how this particular legislation, the undoing of obamacare was different from the original. On people may remember we did have a Congressional Budget Office report for a previous bill. The mos significant amendment is that it would allow statest to opt out of providing certain benefits and change the way they charged people premiums. With that change, as you mentioned, it still has a 119 billion reduction to the deficit that is 32 billion less than an earlier version and it would leave 23 Million People expected to lose their Health Insurance by 2026, 1 million fewer than the previous bill. They also mentioned in this report that these changes to the amendment made would destabilize the Insurance Market in some places by allowing these waivers and allowing states to opt out of benefits. Of thet about 1 6 population to be living in places where the market would actually become more destabilized, which is already an issue that republican seven talking about current about the concerns about stability in the Insurance Market. Shockingthis is quite to be leaving 23 million stranding without Insurance Coverage and 10 years. How does this bode for the political process, for a getting ratification to the rest of the houses . I think everybody in congress in the house knew this bill was going to leave millions of people uninsured, but would go to reducing the deficit. The senate is not willing to let this many people go uninsured. That is one of the issues they have been grappling with, trying to come up with a system where they do not have summary people losing Insurance Coverage. Thats going to be difficult to do because whatever the Senate Passes is going to have to go through the house and they are going to have to mesh those two. Paul ryan, the architect behind his bill, put out a statement touting the benefits this bill provides as reducing the deficit. And he also reiterated a point which he keeps repeating that the obamacare marketplaces are not sustainable, they are not working for people. So they have to do something. But as the republicans always leave out here is that hthey h ave done everything they could to d stabilize the obamacare market. And cause insurers to want to pull out because of all of the risk and uncertainty about what the system is going to look like a few years from now. While there have been fundamental problems going on with the obamacare marketplace, republicans have been exacerbating them and they use that as a talking point for why then you need to agree to their plan. Carolyne the battle continues. Thank you very much, indeed. Now lets turn our attention back to technology. Carlosoton block raises concern about snapchat. In an interview with Erik Schatzker, he had this to say about snap. We are not short snap at present. We might be short in the future. Three areasock has of concern, including governance issues, company ethics, and the strength of snaps Business Model. Joining us in San Francisco is a medications analyst and cory johnson. Is a communications analyst. Carson block, i am looking at the bloomberg fontaunction. 35 million is the Short Interest out of snap, 14 of the equity float. Much more than facebook but twitter has got double that, 63 million. Lets face it. Carson block would not be the only one with a Short Interest in the stock. That, first of all, the size of the short, 15 is a lot but lets keep in mind the stock has come off quite a bit. A lot of people may have been short the stock earlier in taken their money and run. I think that carsons right to look at some sort of fundamental problems in the Business Model of snap, some things that were looking like theyre Getting Better leading to the ipo and allowed optimistic business analysts to look at the model and say, things are Getting Better. Their First Quarter got worse and that is disconcerting. The user number growth has been really anemic since the introduction of the competition from facebook, both in Instagram Stories on the facebook stories. But if you look at the user growth numbers, what you see as the numbers are not growing that much anymore. They had been growing in double digits and those numbers now in the bloomberg terminal, 166 million users at the end of the last quarter. While that was a 5 increase, it had been growing at doubledigit rates before the introduction of stories. Theres a fundamental problem there with adding new users in the face of bigger user base that facebook and whats app and so on. Caroline they talked up a lot that it was not about the amount of users they had but it was the level of addiction, the use of this particular app. Well, thats what the bulls are banking on. The engagement growth by these tv shows, exclusive content, that part of the audience is becoming harder to address. If you look at the tv viewership it is been on the decline. Look, this is it not is difficult that io get. We have it on a platform so we may be able to convince advertisers longerterm. What cory mentioned about user growth, that is a big concern. Either they have to shift investor focus to provide better engagement metrics on a consistent basis so that at least investors can see it is still a show me story. Caroline the addressable market. B. I. They have done some great charts showing that actually if you snapat the age rang e that targets, you go worldwide and they will never become a one billion player and the same way that facebook is and maybe twitter aimed to be. User growtht how differs from those two big players. Cory the focus on it young users limits the size of the audience. The real problem is not necessarily the audience or the size of the audience, but the ability to monetize that. We have this amazing thing that this company has valuation, negative margins but not negative operating margins. The actual product itself, which should be really cheap to provide, costs more than the revenues they are taking in. The Gross Margins, they are losing money with every single sale. Just the Gross Margins are negative. While those are Getting Better got ag into the ipo, they lot worse afterwards. It starts to suggest this company cannot actually control the gross margin issues. There was some commentary in the the cost ofbout what they are playing to google for cloud hosting and amazon and the longterm contracts they have there. Youou look at those costs, see those negative Gross Margins, it is disconcerting because it is expensive to provide all of those really arsuableb bunny era filters and rainbows. Is expensive stuff. Caroline we will see if that becomes a reality with carson block. Yourer, great to have insights. Popping an extended trading as much as 9 . The Company Reported earnings that showed accelerating sales amend them in the Second Quarter as pcs delivery growth for the first summit half a decade. Revenues rose to 12. 5 billion. And it forecast Third Quarter profits that may exceed productions did automotive tech i s in a gold rush as companies on cars. In ia will hear from an nvid exec next. This is bloomberg. Caroline softbank has amassed a 4 billion stake in nvidia. This, according to people familiar with the situation. Softbank is closed is 93 billion vision find. At the time disclosed it owned an unspecified stake in californias nvidia. The chip makers stock is up 30 this year. Given the company a market value of 80 billion. An much of nvidias games are being driven by expanding into new markets such as automotives. Nvidias revenue from that unit dropped 24 from the same period a year ago but competition is growing from other tech giants and automakers. We are joined from San Francisco. Danny, thank you. Revenue growth, 24 is an attractive part of the business. What about the partnerships . Just joined forces with toyota. We have been working with the many different automakers, Mapping Companies in many startups. In fact, creating a self driving car is a very complex problem. All of the technology, our hardware in the software, is the Foundation Upon which many automakers and other partners are developing self driving vehicles, cars, tracks and shuttles. Caroline so, it is all about the Autonomous Vehicle, and before it seems to be the entertainment of a car that you thisdine out on, but is going to be your revenue, autonomous driving . What youre seeing over the years, which is over a decade now, is driving those touchscreens and cars like the tesla, the audis and hondas. So, we bring a lot of computing horsepower into the vehicle, originally for graphics but now to process all the information coming into the car. So, an semi Autonomous Vehicle will have a lot of sensors coming in. Where working with volvo, her sadie spence and tes and mercedesbenz and tesla. Baydu in china for mapping. The technology we have developed is enabling a whole new revolution in transportation for processing all of the data from cameras and radar. That all has to have to be understood much like a human would understand that information but we are doing that inside a supercomputer. Caroline what is amazing is, of course, the spectrum of companies youre working with but also the competition is heating up, mobilized by intel. How does this make it a more crowded space . This is a brandnew industry, really. The whole self driving space is wide open. We have been focused on taking supercomputing technology, our hardware and software, like google and amazon and facebook for really High Performance computing. Now were bringing that into the car. Nobody else really has the technology to, the hardware or software from the Auto Industry to do that. It is coming from outside. And we are partnering with the automakers to bring this to market. Caroline i think what is fascinating is also the simulations you are doing. Theyre much spoken by waymo, the miles on these self driving companies. A lot of companies are using this to simulate this sort of data. Can you tell us how it works and if the regulators are going to like it . I think they will. Basically to train a car how to drive like a human you need to give it a lot of data. And that comes in the form of video from cars driving around, mapping data is used in this process. But the reality is we need to simulate all these different possible scenarios what could happen while cars are driving. So, were going to use the combination of actually driven miles and using deep learning, we are training these neural nets to understand how to react in hazardous situations. We dont always see hazards while we are driving but we can simulate those hazards. Using our graphics technology, we can produce potentially dangerous scenarios. Kids walking in front of vehicles, running a red light, somebody driving recklessly. All that can be done inside the computer and we can iterate and simulate much faster than realtime. So we can simulate millington lines of miles of driving in just one day. Caroline danny, therefore, is your business ready and able and where it needs to be to take on this mammoth task . If you have got the talent inhouse, are you struggling to bring yet more in . What about research and develop it and the like . Great questions. The reality is nvidia is an a. I. Company. Whether it is automotive or even finance, our hardware and software, our deep learning expertise has revolutionized all of these types of industries. So we have a lot of a. I. Talent inhouse. We are always hiring more. What we are also doing is helping to train others. Incident. Eep learning we work with many universities who are changing their curriculum to train a whole new wave of engineers and data scientists will understand deep learning, understand Artificial Intelligence and how the gpu, our graphics processing units, hoping to revolutionize all these industries. Caroline we look forward to therning how loved how revolution continues to the u. K. Is on its highest level of alert in the wake of a terror attack in manchester. The potential conflict is brewing between tech giants and authorities. And what they can access in and corrupted. We will discuss that next. A feature i would like to bring to your attention is our new interactive tv fountain. You will find it on tv go. If you miss an interview, you can go back to it and send out a message. It out. Check. This is bloomberg. Caroline the u. S. Government has given an update on expanding its current laptop ban o flights. Nthe Department Homeland security has decided not to widen the ban in airline cabins to flights leaving the u. S. For other countries or on domestic legs. However, the agency has not made a decision about incoming flights from europe. Meanwhile, the u. S. Airline travelers will face more scrutiny of. Electronics larger than mobile phones in a dozen domestic airports the tsa says passengers be asked to send Large Electronics including tablets through xray screenings sen. Lee from their carryon. Separately from their carryon. The screening may be extended nationwide. Meanwhile, theres continued fallout from the worst terror the United Kingdom in a decade. They raised the threat to its highest level. The minister reinforce the demand to allow access to encrypted messages as part of its investigation, urging facebook and twitter to go after terror posts on their sites. Early we spoke with jeremy karn about the next step. Jeremy they have said two things. Mediawould like to social companies to do a much better job of trying to police content on their sites, taking down posts from terrorists or terrorist sympathizers, those who would be encouraging extremism. They really want the social Media Companies to close down those accounts. To delete this content, remove users who are repeatedly reposting any content that would praise these attacks. The other thing is that the home secretary has said she would Like Companies to end end to end encryption. This is a messaging service like app, that are encrypted across the communication chain so the government cannot access them. She would like these companies to be responsive in particular requests where they want access to this information that government begin at access. The companies always say they cannot do this but she is asking them to come up with a way where they can meet these requests. Caroline this feels like deja vu. We think of San Bernardino and the u. S. And apple taking on the u. S. Government. What argument are we likely to hear from those who have the end what are weption, going to hear and respond . Y themselves do not have access to this information. In order to meet this request, they would have to build a back door. That is what you saw tim cook saying in the apple case, what the fbi was asking for was a back door. If they do that, they say it is not just government that can use this. This could fall into the hands of someone else. And you could end up with hackers having access. We just had this ransom are attack that use and exploit the National Security agency had come up with. You will see something social Media Companies saying if we do this, youre opening up a can of worms and allow a Common Element to use this as well potentially. Caroline yet, have we heard much of a response from Technology Companies . Overseas, they can lightly highlight the efforts they have had to tampa and down terrorist activity. And the misuse of their social Media Outlets they have had to tampen down the terrorist activities. Jeremy they have not yet. They very well may. A talking point for amber rudd or for the government come i think you will have to see response from the tech companies. Caroline that was some of my conversation with our Bloomberg Technologys reported. Coming up, a short seller carson block is raising concerns about snapchats parent company. We will dig into his research on snap. If you like bloomberg news, check us out on radio. You can listen on the Bloomberg Radio app and on xirius xm. This is bloomberg. Alisa minority house leader nancy pelosi called a new cbo on the obamacare replacement bill devastating, and says it points to potential consequences after the cbo estimate sho