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- [00:00]
Joe Weisenthal
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Caitlin Legacy
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Joe Weisenthal
Do that with the all new Adobe Acrobat Studio. Learn more@adobe.com do that with Acrobat.
- [00:34]
Bloomberg Audio Studios Podcasts Radio news.
- [00:40]
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:57]
Great to have you with us here on the Wednesday edition of Balance of on Bloomberg TV and Radio with breaking news from Washington. Multiple reports now about a Pentagon watchdog report into the Signalgate scandal, finding that Defense Secretary Pete Hegseth violated some of the department's regulations when he shared sensitive information from his cell phone on signal and in fact may have endangered troops in the process. We're going to have a lot more on this when we spend some time with Nick Wadhams. And coming up as well, Jane Harmon will join us in studio with our eyes on on tomorrow's testimony from the admiral that ordered the second strike on the alleged drug boat coming out of Venezuela. This was of course, a big topic of conversation as President Trump held his final cabinet meeting of the year yesterday and sitting right next to him was the Defense Secretary, Pete Hegseth, who made clear that he was not in fact the one who ordered that second strike. And while he was watching the attack live on a live video feed, he had left the room before it was clear that there were survivors in the water who were then killed by the second strike. President Trump was asked about this before Hegseth even got into details and clearly not concerned about the way this all unfolded. Here's what the commander in chief had to say. I would say this. They had a strike. I hear the gentleman that was in charge of that is extraordinary, extraordinary person. Let Pete speak about him. But Pete was satisfied Pete didn't know about second attack having to do with two people people and I guess Pete would have to speak to it. I can say I want those boats taken out and if we have to, we'll attack on land also, just like we attack on sea, hegseth said. We're just beginning attacks like these tomorrow. As I mentioned, Admiral Frank Bradley, who ordered that second strike, will testify before the Senate Armed Services Committee as members of Congress try to get answers that were not delivered yesterday in the Cabinet meeting. Nick Wadhams, who runs our national security coverage here in Washington, is with us in studio with more on this. Nick, when you add everything up here, the questions about Venezuela, the testimony tomorrow, this Signalgate IG report that just dropped, this is probably not a fun day for Pete Hegseth. By the way, he's lighting the Pentagon Christmas tree a few hours from now.
- [03:16]
Rick Davis
Right. And we will be watching that one. I mean, listen, there are a couple things going on here. One, it is undeniable that he has had a series of controversies and mishaps dating back to even before the administration took office. His confirmation hearing was fraught. He cleared by a single vote. There were a lot of reports about alcohol use, allegations of assault, all sorts of unsavory things in there. And that's been followed by a repeated string of things. The signal situation and then this argument that he essentially was not there to see the second strike on this vessel that killed some survivors in what some legal experts are saying is war crime. At the same time, president continues, at least publicly, to say he remains satisfied with Pete Hegseth and what you have, what the president has in his defense secretary is an official who has been unstintingly loyal, has really pushed the MAGA agenda, has gone after DEI and woke what he sees as woke policies, has been on board with the president's push to revamp procurement, budgeting, all sorts of stuff within the Pentagon. So so far at least, it appears that President Trump believes that the positives outweigh the negatives when it comes to Secretary Higseth.
- [04:39]
Joe Weisenthal
Wow. Will we see a clarified policy when it comes to Venezuela following these investigations? Armed Services committees in both chambers looking into this, once they get the admiral's take on this, I assume there'll be some sort of report. What follows?
- [04:56]
Rick Davis
Well, you know, I think you actually have seen a more clear policy in the sense of what hasn't happened, because after that initial strike, that was the first strike that the US did on, on September 2nd, and the reporting we have gleaned since then, and what officials have confirmed is that there were two, at least two hits, maybe even more on that, on that boat, one to take it out of action and then a second to fully destroy the boat and also kill survivors. What we do know since then is that they have not done secondary or tertiary strikes to kill survivors. So you had the case some weeks ago where they actually then went in and collected people who had survived the strike and sent them home.
- [05:42]
Joe Weisenthal
So that was based on the findings from the strike.
- [05:45]
Rick Davis
We don't know what happened there exactly. But putting together those two events, the experts we have spoken to suggest that would indicate a change in policy, that there may have been a recognition that the initial version got them into very, very thorny legal trouble, moral trouble. Geneva Conventions explicitly say, you cannot do this, that that is a violation of international law. So just based on the actions that they have taken, we have not seen a pattern that was Rep. Least publicly that we know of, based on what happened on that September 2nd.
- [06:29]
Joe Weisenthal
Just to be clear, it's important what you just said, and everyone is a little bit too cool for school, walking around Washington talking about this double tap strike. Right. You've got survivors in the water. That a double tap violates the Geneva Convention.
- [06:41]
Rick Davis
Yes. I mean, so what's happened is there. I mean, and the whole. And there is an argument that any strike whatsoever on these boats is a violation of international law. Because they. There's a real challenge of the President's argument that these pose an imminent threat to the United States. And for years, the US has interdicted these boats, arrested the people on them, seized the drugs. Now, the President says they pose a mortal threat to the United States, and he has the right to. He calls the people on the boats narco terrorists. So there's the broad umbrella of the fact that there are a lot of very serious questions about whether these strikes are legal in the first place. But there is very little doubt that if you take out the boat, it is no longer a threat and you have survivors clink to the boat. Yes, it would be the same thing as you would see in war, where the laws of war prevent you from going around and executing the people who have been wounded in your attacks. You can't do that.
- [07:36]
Joe Weisenthal
Right.
- [07:37]
Rick Davis
So that's how we now find ourselves in this situation.
- [07:43]
Joe Weisenthal
Admiral Halsey is going to have some interesting things to say as well.
- [07:46]
Rick Davis
He is. And it'll be really interesting to see the line he walks because you've seen this from the President and also from Pete Hegseth in his repeated commentary where he says, hey, I wasn't there. I didn't see that happen. So sort of distancing himself, but also saying, I support the guy who made the order. He did the right thing. So he's walking a very fine line. So, Bradley, it'll be really interesting to see what he says tomorrow in terms of, hey, I was just following orders. Will he say, I believe this order may have been legally questionable. We just don't know.
- [08:18]
Joe Weisenthal
Will that be made public or. We don't know that.
- [08:19]
Rick Davis
That testimony, but I am not sure at this point. We don't know. I don't think there will be a public hearing. Everything. It may have to open up.
- [08:27]
Joe Weisenthal
Yeah. Thank you, Nick. My pleasure to see you as always. Nick Wadham's got his hands full these days running our national security team here in Washington with much more to consider here. We're going to bring Jane Harmon in on this conversation coming up next. But there's an important story in the Washington Post today that I'll point you to. It might get some eye rolls from folks who support what's going on in the Caribbean right now, but the family of a Colombian man who was killed In a strike September 15th has filed a complaint with the Inter American Commission on Human Rights alleging the US committed human rights violations in an extrajudicial killing. I just mentioned this because it's the first time a name has been attached to any of this. Alejandro Andres Karana Medina, 42 year old, a fisherman, killed, as I mentioned, in the strike off the Colombian coast on September 15th. He's. He's got a family, turns out, and they've got a lawyer. Grieving family left without their chief breadwinner. As we, as we read here, Carranza's family seeking compensation. I guess he had kids. Very unclear to see if they have the power to enforce any recommendations that are made. I told you Jane Harmon was coming. And she's with us in studio today. Former Democratic congresswoman from California, importantly, former ranking member of the Intelligence Committee. And it's great to see you in the flesh.
- [09:48]
You too, Joe.
- [09:50]
So if you were running the Intel Committee right now, either as chair or ranking member, what questions would you be asking about what is happening in the waters off Venezuela? And would you even get a briefing? Because as the Democrat on that panel, from what I understand now, you still would not have heard from the administration.
- [10:09]
Well, I think Mark Warner has said they got very unsatisfying briefings. He was the chair. He's now the ranking member on the Senate side. I'm not sure what's happened on the House side, but what would I be doing? I would be raising hell. I think Congress not only has a right to be briefed, but I think Congress is abdicating its role. I would give good marks to three Republicans, at least that I can think of. Rand Paul, I guess he's a Libertarian. Roger Wicker, chair of the Senate Armed Services Committee, and Mike Rogers, who chairs the House Armed Services Committee. And they have been pushing back. But where's the rest of Congress? Congress is on trial here and Congress is really on trial with respect to Ukraine. That's why I wore my scarf carried back from Kiev.
- [10:54]
Yeah, well, I'd like to get into that in a moment because these are both evolving, both of these stories before.
- [10:59]
Our eyes here, the IG report, I'm just.
- [11:02]
Well, there's another one for you. But in terms of the admiral who ordered this second strike, based on what you understand, what's he going to tell these committees when he goes to testify tomorrow? How damaging could that be?
- [11:12]
Well, I think he.
- [11:14]
Should have followed the advice of the six Democrats who said never follow an illegal order.
- [11:19]
Do you believe that was an illegal order?
- [11:21]
I believe it was and I believe he should have known that. I'm not sure what he did. Let's be sure we know what the timeline is. It's a little bit, to me, eye scratching.
- [11:33]
To believe that Hegseth didn't give the order and was too busy to see it executed in a case like this.
- [11:42]
Surprise, surprise.
- [11:43]
What did you make of that yesterday? The Pentagon's a busy place. I had to get to a meeting.
- [11:46]
He said, yeah, it is a busy place and maybe he needs to get a little busier about being on top of the workload there. Just saying that rumors are rampant. It doesn't mean they're true, that his days are numbered and that Trump maybe doesn't want to do the deal personally and wants it somehow to evolve, but I think it is. He's not well liked in the building. He's not well respected. And I think former military and I talk to lots of them are really pretty, pretty worried about the civilian leadership at the Pentagon.
- [12:22]
A lot of folks pointed out the fact that he was not sent to Kyiv or Russia for that matter. The army secretary was in Kyiv, Dan Driscoll, talking with Ukrainians. But we're still waiting, Jane, for a readout on this meeting with Vladimir Putin. And I want everyone to hear first what Marco Rubio, the Secretary of State, had to say about this negotiation in the president's cabinet meeting yesterday. Let's listen. Every day is a challenge, but it's.
- [12:46]
Been driven personally by the President.
- [12:48]
It's the reason why we're involved in.
- [12:49]
This whole Ukraine, Russia conflict. That's not our war.
- [12:52]
It's not the president's war. This war started. It never would have happened if you'd been president. Even as we speak to you now, Steve Woodkoff is in Moscow trying to find a way to end this war to save lives of 8,9000 people. Mr. President, as you want to know.
- [13:05]
Are dying every week. More people are dying a week in.
- [13:08]
That war than have died in the entirety of the U.S. s involvement in Afghanistan or Iraq. Just think about that, how bloody and destructive it is. But here's what we've not heard from the White House, anything about the meeting. The Russians have said a lot, but there's no readout from the administration, which is extremely unusual. How do you read into it?
- [13:27]
Well, a couple of comments. First, about Rubio. I was in Halifax at the Halifax Security Forum a couple of weekends ago when the codel, led by Jeanne Shaheen, but also having Republican members, got a call that evening, the Evening that the 28 point plan surfaced from Rubio, saying, well, it's just a draft.
- [13:48]
It's not cooked yet. He wasn't in the room. He had nothing to do with it or probably had nothing to do with it. And I think it's dead on arrival. I mean, I brought some props. I don't want to surprise you, but this was from Senator Mitch McConnell when that plan was was released. Quote, putin has spent the entire year trying to play President Trump for a fool.
- [14:09]
This is a tweet, right?
- [14:10]
This is a Tweet from Mitch McConnell on X. And this one was from Roger Wicker, whom I just mentioned as chair of the Senate Armed Services Committee. Quote, any suggestion that we can pursue arms control with a serial liar and killer like Putin should be treated with great skepticism, unquote. So I think that Rubio is trying to make his best case. He is the Secretary of State. He is the one who should be leading the negotiations. This other team, I'm not saying they're terrible people. I'm sure they're trying to make a deal and wouldn't it be nice for the war to end? But let's remind everybody that Russia was the aggressor and Ukraine is the victim, and rewarding Russia and punishing Ukraine is the wrong outcome.
- [14:52]
Well, everything in that plan looks like it would be a reward. Right? So do you trust Steve Witkoff and Jared Kushner running this conversation?
- [14:59]
Well, I don't want to talk about trust, but I. The plan, as explained to me, looked like there were some oops in there. There was some bad translation from the Russian. Looks like exactly what Mitch McConnell said, that Putin is playing Trump and I, if we're not talking about it. Then I'm, I'm betting nothing very much good came today except for Russia blasting Europe and threatening, you know, some, some action against Europe. The sadness is NATO's meeting today. Rubio has, has for the first time in a century or something.
- [15:34]
What do you make?
- [15:34]
Blown off.
- [15:35]
He sent a deputy.
- [15:36]
I think it's, it's a message to NATO.
- [15:38]
Yeah. And it's a. Russia or Europe will have no input on how this ends.
- [15:43]
It's a very bad. Well, let's see. It's a very bad message to Naito. We are a member of Naito. We're not a bystander here. We're a leader of NATO. And I think that's a terrible message. And one more point. I said con. Congress is on trial. There is a Graham Blumenthal bill to impose secondary sanctions on all countries. All.
- [16:05]
Isn't Lindsey Graham talking to Trump about this on the golf course?
- [16:08]
That deal with Russia, it has 85 plus co sponsors in the Senate. That is a veto proof majority. Which means if Lindsey Graham, I'm sure Blumenthal would like to do this, calls up that bill, that bill passes. And it will, I'm guessing, pass the House too. And then that is real pressure on Putin. Is Congress for Ukraine or is Congress just again hiding and out of the game? The Republicans in Congress.
- [16:36]
Well, let's see if the President feels like he's being strung along by Putin enough to greenlight that sanctions bill. Jane Harmon, I love that you printed out the X Post. I'm picturing you back in Congress with the easels set up in the garden.
- [16:50]
Read this one.
- [16:51]
I wish we had time to do that. Oh, no, I saw that column this morning. Moral slum. That's conservative. George Will.
- [16:58]
Yeah, this is quite something.
- [16:59]
She's made for television and radio. There's only one Jane Harmon, former Democratic congresswoman from California. Thank you, Jane, for the insights. I'm Joe. Matthew, this is Bloomberg. Stay with us. On balance of power. We'll have much more coming up after this.
- [17:14]
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- [18:17]
Joe Weisenthal
You'Re listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [18:33]
With our eyes on Tennessee and Republican Matt Van Epps. He had the endorsement of Donald Trump and had the full weight and thrust of the Republican Party behind him. The speaker of the House was there stumping and the Republican Party put a lot of money into this race. Congratulations on Truth Social to Matt Van Epps and his big congressional win in the great state of Tennessee, President Trump last evening. But if you talk to a Democrat, they see this a lot differently because he won by single digits and this was a district that Donald Trump won by 22 points. You wouldn't know it by listening to Mr. Van Epps, who address supporters after the race was called last night.
- [19:13]
Rick Davis
Listen, tonight you've sent a message loud and clear. The people of Middle Tennessee stand with.
- [19:20]
Joe Weisenthal
President Donald J. Trump. To President Donald J. Trump.
- [19:23]
Rick Davis
Thank you, sir. Tonight we showed running from Trump is how you lose.
- [19:30]
Joe Weisenthal
Running with Trump is how you win.
- [19:32]
Rick Davis
President Trump was all in with us.
- [19:34]
And it made the difference in Congress.
- [19:38]
I'll be all in with him.
- [19:41]
Joe Weisenthal
All right, so there you go, plus one for Mike Johnson. But if you're a Democrat looking at the road to the midterms here, you're looking at this very differently. Because the fact of the matter is Democrats cut the margin here. I already told you, do the math. Cut the margin by 15 percentage points. Right? Trump won by 22. Vaneps won by 9. Is this the problem? Is it even a bellwether? Because you're going to hear a lot of national Democrats and Republicans talk about this today. How about our panel right now? Rick and Caitlin are back with us, Bloomberg Politics contributor Rick Davis, Republican strategist partner at Stone Court Capital, alongside Democratic strategist Caitlin Legacy, senior fellow at Third Way. How are you looking at this, Caitlin? Is it a moral victory for Democrats?
- [20:26]
Caitlin Legacy
I don't believe in moral victories. I do think that it's a very positive sign for the party that the district swung as much as it did. There are currently about 40 other Republicans that.
- [20:40]
Are sitting in House seats that they won by less than the 8 point margin that we saw last night. So all of those seats should now be considered gettable. But I do think as well that, you know, the candidate in this race on the Democratic side did not benefit from nationalizing this race. And it really underscored the importance of Democrats nominating candidates who are aligned with the views and the beliefs of the districts they're running in and to really focusing on the local issues that matter, rather than trying to turn everything into, you know, cable TV fodder or what's going to play best with the Twitter audience.
- [21:22]
Joe Weisenthal
Interesting. Rick, I'm curious if you're going as far down the road as some political strategists are after last evening. I was struck by the quote from Matt Whitlock, Republican in Politico this morning. Quote, if every House district in the country shifted left by this same amount, we would be looking at a blue wave far worse than 2018. Is he right?
- [21:44]
Rick Davis
You know, I think he's close to being right. I think Caitlin nailed it.
- [21:49]
You'd rather win than anything. So kudos to the Republicans for pulling out a victory here with the margins they have in the House. It's really important to the only way to calculate this midterm is looking at what Trump vote doesn't show up consistently both in the elections, you know, last, you know, November, this last November. And then in this election, I mean, solidly, a minimum of 10% of the Republican Party doesn't show up unless Donald Trump's on the ballot. And Donald Trump won't be on the ballot in 26. So I would actually even expand the margin. It's not just 8%.
- [22:27]
You know, where if the district was plus Republican 8, you've got a, you got a horse race. I'd say it's 10 to 15 because there are now plenty of precedents to show that there is. Half the Republicans in these districts will only show up when Donald Trump's on the ballot. So, buddy, in the House, you're on your own. And I would say that her advice, Caitlin's advice to the Democrats. Exactly right. Don't get candidates who are just going to run against Donald Trump. His vote's not showing up anyway. Get candidates who can actually make a case in their district and then you got something to work with.
- [23:04]
Joe Weisenthal
You know, President Trump Said she despises country music. Caitlin, it could have been as simple as that. But enter political strategist Ron DeSantis, the governor of Florida on X. Producer James just put this in front of me. This is remarkable. Ron DeSantis writes special off year and midterm elections historically benefit the party out of power because its voters are motivated to vote, while voters of the incumbent party become more complacent. He goes on to write, this is more glaring for today's GOP because a chunk of voters who put them in power in 2024 are Trump specific voters. They will vote GOP down ballot when Trump is running, but won't turn out to vote for a typical congressman in a midterm when Trump isn't running. Caitlin is like Ron DeSantis was channeling Rick Davis. What do Republicans then do in the midterms?
- [23:55]
Caitlin Legacy
I mean, they, their goal is, if they're in a state or district that favors Trump, is to bear hug him and do everything they can to nationalize this race, to make it about Donald Trump, to turn out his voters. But I think the reality of the situation is that Trump's approval ratings keep going down. That's becoming an even riskier proposition and it's going to just be harder for, for a lot of members to fight, fight those waves. And so the question for Democrats then becomes, how do you actually leverage that and like, put forward candidates who are in a position to win and represent these districts?
- [24:33]
Joe Weisenthal
Mm. Well, I'll tell you what, Rick, when it comes to strategy, if you were launching a campaign, and granted a lot of them are waiting to find out what the maps are going to be for the midterms. How would you take last night's lessons in Tennessee and try to exploit them next November?
- [24:55]
Rick Davis
Yeah, so I think, you know, Republicans need to take the same advice Caitlin was giving to Democrats. You can't rely on the Donald Trump vote to turn out. You've got to be very granular on the issues. You really, in this case, want to localize the election as much as possible. You don't have much to run on. The big beautiful bill, which is your signature legislative accomplishment, is not popular. And as Caitlin said, Trump's approval rating isn't going to get better between now and next November. There's just nothing on the horizon that shows that he's going to have a big win somewhere. So the reality of it is is you're on your own, buddy, and you better find votes the old fashioned way. You know, I'd go to the ground, knock on Doors. I would find issues locally, education, health, things that are not typical Trump related issues that you can find common cause with, especially suburban voters. The rural voters will likely be there for you, just not in the same margins as a presidential election year.
- [25:59]
Joe Weisenthal
Interesting. This really does make me look forward to campaign season. Talking this out with you guys is always fascinating to me. But let's talk about the immediate impact, Caitlin. Mike Johnson now has 220 House Republicans again. So it's like we're starting the year all over and obviously we've got a long time before we're talking about actual midterm races. So this brings us immediately to the congressional agenda. And it might have just gotten a little more difficult for Democrats in the House to pass any extension of Obamacare subsidies. What do you think?
- [26:34]
Caitlin Legacy
I think that you're increasingly going to see a number of Republicans who are looking for ways to show their independence from both House leadership and Donald Trump as part of an effort to kind of stanch the bleeding in the midterms. So I actually think that last night's results actually may give Democrats a couple of spots to work with Republicans who are in these suburban districts where ACA is very popular to get some of these key provisions across the finish line, simply because I think a lot of members in these frontline districts, they're either going to retire or they're going to look for ways to separate themselves from the national party. And this is a really easy way to do it.
- [27:17]
Joe Weisenthal
Interesting. What do you think about that, Rick? Does this additional seat matter for Mike Johnson?
- [27:24]
Rick Davis
Look, everything matters with these slim margins and, and it's just more leverage that he gets. It's incremental, but it's a big, it's a good thing, right? I think Republicans really have to figure out how to get out of this trap because the trap is they look like they are stopping health care from reaching Americans without a plan to replace it with anything. And as much as I like Senator Cassidy, the idea that we're going to just, you know, give people another health account is not going to cover it with the, with the voters. So if I were Republican strategists, I'd be finding an exit door fast to get this done before the end of the year so that you can look at next year without having to talk about this all day long.
- [28:11]
Joe Weisenthal
Well, that sounds like an opportunity for Democrats. Caitlin, what do you think?
- [28:16]
Caitlin Legacy
I agree. I think Rick should take over all strategy for the Republican Party these days.
- [28:23]
Rick Davis
It didn't work out.
- [28:24]
Joe Weisenthal
I don't think that's an endorsement, Rick?
- [28:27]
Yeah, he had that job.
- [28:28]
Caitlin Legacy
I agree with everything.
- [28:31]
Joe Weisenthal
Let's not go too far.
- [28:35]
In our remaining moment. Caitlin, the point that you made with regard to Tennessee about nationalizing the race, the fact is the Democrat in this case, Afton Bain, was called the AOC of Tennessee. President Trump said she hated country music and she despised Christians. Isn't that national politics?
- [28:56]
Caitlin Legacy
Yeah. And I think, you know, part of what's challenging is that when you look at the Senate map and you look at some of these frontline districts.
- [29:04]
You have, you know, either primaries or candidates where you're choosing between somebody with local roots and local experience, where the people know them, they know what they stand for and candidates that are more popular online and we should be opting for the former.
- [29:19]
Joe Weisenthal
Well, this is a great conversation and I appreciate both of your insights. Caitlin Legacki and Rick Davis together as our great panel today for the Wednesday edition. Stay with us. On Balance of Power. We'll have much more coming up after this.
- [29:34]
Odoo Advertiser
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- [30:36]
Joe Weisenthal
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [30:55]
It's great to see you. Welcome to the early edition on this Wednesday as we turn our attention to the air race. Talk of a Bubble being renewed today or at least maybe a little bit of a slowdown. We're going to get to this Report about Microsoft in a moment when we spend some time with Caroline Hyde. But I want to start with something called Gain AI. This is not a new AI company, it's not a new mining company. It's actually a piece of legislation that would limit foreign exports of high tech chips. Look no further, of course, than in video, which is trading a bit lower today along with Microsoft. These two stories collide in a tough way for high tech in today's market. Of course, Nvidia is pretty close to the White House. Jensen Huang calls Donald Trump a friend. The president says the same about him. And the White House is not too sure about Gain AI or its inclusion in the annual defense authorization bill that's making its way through Congress right now. Jensen Huang has made his way back to Washington today. He's actually in the Capitol meeting with members of the Senate Banking Committee who are looking at this legislation right now. This is not a full blown hearing. You're not going to watch it on C Span. And I'll be very curious to hear if he does any public facing interviews or anything else around this because he's trying to make a point here, of course, with the idea of export controls already in the background when it comes to China. This is where we start with. Caroline Hyde, the co host of Bloomberg Tech is with us from world headquarters in New York. Caroline, it's always my great pleasure to see you and I'm wondering how persuasive Jensen Huang can be in this room today. What do you think?
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Caroline Hyde
He's a persuasive guy, isn't he? And we've seen him really try to persuade before that to win the race. The answer is not to ban the most sophisticated technology from China. It's in fact to allow him to export his sophisticated chips because then China becomes ever more dependent on his infrastructure rather than being pushed to build that of Huawei, for example. There's a real tussle at the top within the administration. And who's got the ear of the President as to which side? Are you? Are you hawkish? Are you saying more broadly that no, none of our US Technology should be allowed in the hands of the Chinese and you should fulfill the demand of homegrown cloud data infrastructure first. That's why you've seen some of the big hyperscalers actually say, we kind of like this gain I act. We kind of want to have first dibs on Nvidia's most sophisticated chips before you start exporting them out to China. Now remember at the moment, Nvidia CEO has said that they get 01 big fat 0% of any revenue from China thus far. So he hasn't been able to export even with the idea that that 15% revenue share could be going to the government for him and amd to be able to export those dumbed down chips that aren't Blackwell architecture but previous architecture. He couldn't even get that to be interesting to the Chinese government. He hoped his Blackwell architecture if indeed just restricted to fit certain current export limitations. Maybe he could then get China to buy in because the big tech giants do want his chips but the government doesn't. So thus far he's got a lot of persuading to do. Not only of lawmakers and as you say is the banking committee that signs off on these export controls. Can he persuade them that it's better to win the race with his chips and what sort of limitations that he would put in place place to allow U.S. demand to be satisfied but also to gain access to what once once his most important market in many ways.
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Joe Weisenthal
Well, you bring up a great point. The stock has already priced in no China business. Right. So a pretty muted response here. It's down about a half percent right now. Why is Jensen Huang so concerned about this legislation when Donald Trump is probably going to have the final say on this anyway? Right. The White House wants to be able to dictate this, not Congress.
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Caroline Hyde
I'm sure they would like to be able to dictate many things and I think that really for the White House, they have time and time again shown their focus on infrastructure on the build out. Look, just this week we had the news that they're taking helping have $150 million being allocated towards Pat Gelsing, his new startup, which is all about taking on asml, the European chip equipment manufacturer. And with Light X, it's all about lasers. We're seeing at the moment more broadly, Joe, whether that would be a part of the supply chain here in the United States. But we know that they've wanted to put money into Rare Earth, we know they want to put money into Quantum. They know that they want to win what they see on national security, real races upon their hands. They would like to ensure that really Jensen Huang and Nvidia remain the number one talk of the town. And it really is a tussle between the hawks and those that do feel that maybe to have access to China is important in this overall air race.
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Joe Weisenthal
You have to understand how fun it is for a political wonk like me in Washington to talk lasers with Caroline Hyde. So let's talk about this Microsoft report. You know, everyone's looking for an excuse to bail on the whole narrative here, right? That's been the story for the past couple of weeks. So in this case, the information shows up and everybody freaks out here. Microsoft has lowered expectations for getting business customers to to spend money on the cloud units marketplace for AI models and agents. I frame that as you want. We've got a little bit of a warning here and you know, anyone tied to Open Air right now, and there's no bigger name really than Microsoft, there seems to be getting a second look. Does this simply confirm the worries that were already out there? How should we be looking at this?
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Caroline Hyde
I really think that on any other given day when we're not in perhaps lower liquidity holiday trading at and if anxiety wasn't still looming, we'd kind of abated this report off. But at the moment, as you say, everyone's looking for breadcrumbs that feed into the thesis that productivity isn't there. We've got this whole bubble narrative and circular financing narrative continuing that. Are we spending too much on infrastructure? If people don't want to use it and they don't want to spend to use it, this report coming from the information is really putting a highlight on say, Carlyle Group, big private equity equity player that has a deal, we understand with Microsoft to use Copilot within its offerings, to be able to scrape data from all of its other software and be able to build and churn out Microsoft Excel reports that much easier. The problem is it's hard to access the data. Maybe you got some of it in Salesforce, suddenly you got it in some of your other pockets. How are we seeing these companies managing to walk companies through, handhold them as to how to make productivity gains? Carlyle basically just said, look, we want to cut our costs on AI and we're perhaps going to move away a little bit from what had been some of our overall spending. This then feeds out writ large. How much are we seeing sales members in Microsoft trying to sell GitHub or Copilot? Are they having to curtail what they thought was going to be stratus enormous demand? We just had Octa CEO on now Octa CEO builds basically a way in which your agents will be known by the company to be the right agent accessing the right data at the right time. Now he's saying, look, he's never seen scale like it, adoption like it, interest like it, but at the moment they're stuck because you are getting these pools of data in different places and everyone needs to work together. So is it a question that you just need more help for your clients or is it actually that people aren't willing to spend? We'll get Salesforce after the bell today. Big question mark. Is that agent force actually able to drive revenue? Are people willing to spend a of time, lot, lot more for it, Joe? I think that's the key question and it becomes a key question on whether you still want to be building our infrastructure. Quite the clip you are.
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Joe Weisenthal
Well, so you're pointing us to use cases here, right? And this comes just days after Gemini jumped off the page here and became the greatest thing. You're talking about Salesforce, the Benioff tweet that went around the world and it's coming at the expense of open AI, which just yesterday saw Chief Executive officer Sam Altman declare a code red. When you see Altman after all these deals and what I'm assuming are hundreds of billions now in announced investments, declare a code red. Are we getting over our skis?
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Caroline Hyde
I think it just shows you how competitive this whole space is, Joe, because this is a company that has 800 million weekly users of chat GPT and it's worried about Gemini 3. It's worried about the latest innovations. Remember we've just had Runway, which is a New York based generative AI video company come out and it's top of the leaderboard with its own video generator in the latest iteration of models. Their argument is that David's can beat Goliath's. Out here at the moment people are going to want ever more specific, unique types of models. Are we going to become commoditized when it comes to our large language model providers? Or is that really winner takes all? Here we see Sam Altman being realizing that he needs to stop being perhaps distracted by subscription focus or advertising models that might substantiate his revenue growth and actually get the product right. And I think that's why he's calling this so called code red. Reassign some of the resources that he has to stop going into different directions and come back to what is that key core product Chachi Beat that needs to work effectively and win out versus Gemini or indeed Anthropics Claude or whoever else that you might lean on with perplexity as well. There really is quite fierce competition out there.
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Joe Weisenthal
Well, with apologies to Jack Nicholson. Is the code read about simply making a better product to better compete with Gemini and the others? Or is it about taking a different look at this and favoring maybe business to business? The Industrial, industrial applications over the consumer facing ones.
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Caroline Hyde
I think they've really been trying to talk up about the adoption in companies, a million companies that are currently using ChatGPT and OpenAI's large language models. That is really, that's where the enterprise and the growth and the money is likely to be coming from. And that's really where Anthropic has been winning. Claude has always been much more focused on the business, sales, sales particularly on coding and its prowess there. And that's managed to keep investors, VCs and others very interested. Can we see OpenAI now being put into Amazon Bedrock? Will that give it the scale that it needs to go into more B2B offerings? Will it be able to work with partnerships, all companies adopting at the scale that they'd like to see? I think you're really right that this is a code red of just trying to understand for now how does the core product work, how does it compete and will they end up winning versus some of the other competition. From a revenue perspective, it looks as though in a way Sam Altman's kind of putting that debate on ice by saying, look, let's not focus on advertising, but let's focus on making the core competency that is just insurmountable, just unbeatable. And I think that's why he's really doubling down there.
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Joe Weisenthal
Wow, are we in a world now then It's Microsoft and OpenAI versus Google, Google and Broadcom and Nvidia just takes money from everybody. How do we look at these alliances?
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Caroline Hyde
Frenemies. I think this is one big game of frenemies because remember, we've just had that, as I say, the jolt with Alphabet suddenly showing its prowess from its vertically integrated company. It not only has great models, but it trains them on its own in house chips and is then able to give it to you and I via Gemini or whether even we're using a Pixel phone that suddenly becomes music to other people's ears. Maybe it's a matter who suddenly wants a TPU because it's slightly cheaper than an Nvidia. But remember, Alphabet's quick to say we still want a video chips, we still want to be able to use that in our Google Cloud offering. So I do think there's an element that all can win and we'll get more specific for what chips we want, in which scenario, which model we want, in which scenario. And eventually that will give us a productivity gains we all keep wittering on about out. But for now it is a question of Marvell doing well today. Look, earnings came out yesterday. This is a company that makes chips for application specific uses. They make Trainium 3 with Amazon, for example. There are going to be many winners in this, but we're still going to question quite the size of the winning.
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Joe Weisenthal
God, we didn't even get to Amazon. Can you come on every day? Can I ask producer James to make that happen? I would appreciate it if we could do this, I'm sure. Caroline, it's great to see you. Thank you for your readout on this fascinating moment in time when we keep our eyes on the AI space. Caroline Hyde Only on Bloomberg.
- [42:56]
Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington D.C. at noontime eastern@bloomberg.com if a Lenovo gaming computer is on your holiday list, don't shop around, just go directly to the source lenovo.com you'll find exclusive deals on the gaming PCs you want, like the Lenovo Legion Tower 5 Gen 10 Gaming Desktop and Lenovo Lock Gaming Laptop.
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Caroline Hyde
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Caroline Hyde
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