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China Urges Companies Not to Use Nvidia’s H20 Chips · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: All Right, I have to be honest with you. I'm
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  Speaker 2: having a hard time keeping up with this whole China
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  Speaker 2: in video AMDB, the fifteen percent tariffs? Can the chips?
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  Speaker 2: Are they welcome in China? Are they not? Can they
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  Speaker 2: sell them in China? Let's go to Ed Lolo. He's
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  Speaker 2: on top of this stuff. Ed loves the Bloomberg Technology
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  Speaker 2: co host. He's over in London right now. Hey, Ed,
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  Speaker 2: what's the latest here in China?
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  Speaker 1: Is?
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  Speaker 2: I guess they're urging firms not to use in video's
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  Speaker 2: H twenty chip. I thought things were kind of thawing
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  Speaker 2: out there.
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  Speaker 3: Yeah, this is fast moving. This is, you know, the
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  Speaker 3: only appropriate time of the phrase market whip saw that
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  Speaker 3: I've been able to use to date in this contact.
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  Speaker 3: The Information has reported that China's Internet regulator has ordered
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  Speaker 3: firm ordered specific technology companies Ali Barber, Tencent among them,
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  Speaker 3: to stop placing orders of in Nvidia's H twenty. The
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  Speaker 3: H twenty is the China specific chip that had had
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  Speaker 3: performance engineered out of it that was subject to export control.
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  Speaker 3: What we knew, by the way as of Monday morning
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  Speaker 3: was that Nvidia had not in any recent months shipped
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  Speaker 3: any H twenties to China anyway. But the problem with
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  Speaker 3: this latest report, which has been in the last hour
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  Speaker 3: or so, is that it's a much more extreme move
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  Speaker 3: by China than what Bloomberg had reported overnight, which was
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  Speaker 3: basically an advisory. Chinese authorities had strongly recommended to various
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  Speaker 3: Chinese technology companies not to use the H twenty in particular,
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  Speaker 3: as well as one chip from AMD. The market's reacting,
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  Speaker 3: that's all that matters.
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  Speaker 4: Right, So you're seeing shores of Nvidia down a touch,
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  Speaker 4: about eight tens of a percent here. Can you just
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  Speaker 4: speak a bit more about what are the implications here
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  Speaker 4: for in Nvidia in particular.
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  Speaker 3: Yeah, so the state of play is really important to understand.
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  Speaker 3: In Vidia's H twenty chip is not the best chip
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  Speaker 3: that a Chinese technology company can buy. Huawei, which is
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  Speaker 3: essentially China's domestic champion, has actually several generations of chip
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  Speaker 3: that have better performance and power not just more than
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  Speaker 3: the Age twenty, but of in Nvidia's H two hundred chip,
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  Speaker 3: which until very recently was the sort of cutting ed
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  Speaker 3: generation accelerator that many American companies used. They've since moved
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  Speaker 3: on to a later generation called Blackwell that's not available
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  Speaker 3: in China. The President, as you know, confirmed yesterday about
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  Speaker 3: twenty four hours ago, that he had cut a deal
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  Speaker 3: and ad hoc arrangement, a quid pro quo with both
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  Speaker 3: Nvidia and AMD where he would allow them to export
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  Speaker 3: these China specific chips with lower power performance in exchange
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  Speaker 3: for fifteen percent of the revenues gained from that market
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  Speaker 3: for Chinese AI accelerators. The problem is, like, what are
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  Speaker 3: we interpreting this as. Is China responding in this way
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  Speaker 3: because it's a tactic in the broader negotiations between the
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  Speaker 3: United States and China of trade overall, that is what
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  Speaker 3: the analyst community thinks. Or is China protecting its own
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  Speaker 3: domestic industry for AI accelerators making sure that Chinese tech
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  Speaker 3: companies buy a Chinese AI chip. Both are possible. The
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  Speaker 3: main conclusion of cross both is that now Wall Street
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  Speaker 3: has to reassess how likely it is that in Video
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  Speaker 3: and AMD do business in that market, at least in
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  Speaker 3: the near term.
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  Speaker 2: Ed I guess if I were an analy certain investor,
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  Speaker 2: I'd be saying, I think I have to factor into
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  Speaker 2: my model that the intro would be know that I
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  Speaker 2: can't imagine. Yeah, some of the advanced chips being allowed
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  Speaker 2: into China just doesn't feel like the political winds are
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  Speaker 2: blowing that way at this point.
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  Speaker 3: You know, there are certain sections of Wall Street the
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  Speaker 3: most bullish analysts in Video's next quarter coming up is
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  Speaker 3: the fiscal second quarter. Some people saw them doing seven
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  Speaker 3: billion dollars of sales in China on the basis that, Okay,
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  Speaker 3: President said, it's cool even if you have to pay
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  Speaker 3: a fifteen percent so called export tax, and there are
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  Speaker 3: questions about how constitutional that that rule would be, which
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  Speaker 3: we can get into shore. It's still better to have
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  Speaker 3: eighty five percent access to a market than zero. So
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  Speaker 3: everyone was like, they can do this quickly, like just
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  Speaker 3: turn the tap back on. I would wager I think
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  Speaker 3: I said this yesterday anyway, But twenty four hours on,
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  Speaker 3: given the newsflow, they're probably reassessing their model down and
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  Speaker 3: down and down closer towards zero.
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  Speaker 4: And we of course know that China is a major
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  Speaker 4: player here when we think about in video. But and
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  Speaker 4: Vida also holds a significant market share in the AI
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  Speaker 4: chip sector about ninety five percent. So tell us Abit
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  Speaker 4: how big of a deal this most recent news is
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  Speaker 4: and how does it kind of change how you look
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  Speaker 4: ahead of these earnings that we're going to be getting
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  Speaker 4: coming soon.
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  Speaker 3: Well, the thing is, and the reason why, you know,
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  Speaker 3: Paor and I back and forth over over the sellside
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  Speaker 3: over the last couple of days. As important is there's
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  Speaker 3: been zero business for nvideo in China, at least since
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  Speaker 3: the turn of the year. You know, they wrote down
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  Speaker 3: five billion dollars worth of chips that were specifically made
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  Speaker 3: for that market, and they haven't sent any of them there.
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  Speaker 3: Let's say they're just sitting in a warehouse somewhere. They
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  Speaker 3: probably are. However, when you think about the context of
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  Speaker 3: AI development, the number of researchers and companies working on models,
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  Speaker 3: about half of the world's activity is happening in China.
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  Speaker 3: It was an important end market. Will we return.
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  Speaker 2: Stay with us More from Bloomberg Intelligence coming up after this.
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• 5:51
  Speaker 2: Looking at the cannabis company, Kilray Brands, it's a name
• 5:54
  Speaker 2: we've been talking about a little bit this morning. Stacks
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  Speaker 2: up about nine ten percent here. That's a good news.
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  Speaker 2: The band news it is down about twenty five percent
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  Speaker 2: year to date, and I think it's up on part.
• 6:04
  Speaker 2: Looking at some of the Bloomberg reporting here, President Trump
• 6:07
  Speaker 2: made some comments that maybe he'd be open to reclassifying cannabis,
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  Speaker 2: maybe as a less restrictive drug their substance. So I
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  Speaker 2: went to bring in Ken Shay, he covers all this
• 6:17
  Speaker 2: stuff for Bloomberg Intelligence. Senior consumer products analysts for Bloomberg Intelligence.
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  Speaker 2: Ken talk to us about the comments that President Trump
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  Speaker 2: made as it relates to the cannabis industry and how
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  Speaker 2: impacko could that be?
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  Speaker 5: Yeah, Hi, Paul, sure. So what I understand is President
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  Speaker 5: Trump over the weekend made some comments with regard to
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  Speaker 5: a marijuana rescheduling in the US, a topic that's been
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  Speaker 5: very top of mine among this industry for a while,
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  Speaker 5: and apparently he said that the administration was going to
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  Speaker 5: be looking into it now, that's really a long way
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  Speaker 5: between that and actual rescheduling. But nevertheless, this beaten down
• 6:55
  Speaker 5: industry and the close observers too, it took that as
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  Speaker 5: a dose of old or you know, overdo good news.
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  Speaker 5: I mean, these stocks have have you alluded to before,
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  Speaker 5: are down, you know, over fifty percent or so of
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  Speaker 5: many of the big ones. So this hint of good
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  Speaker 5: news has led to a rally yesterday and today. But
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  Speaker 5: you know, I would advise observers to you know, temper
• 7:17
  Speaker 5: their enthusiasm because, as I mentioned, it's a long process
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  Speaker 5: between looking into it and actual rescheduling it, and it's
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  Speaker 5: even further to legalize it, which would really bestow the
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  Speaker 5: greatest benefits of all.
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  Speaker 4: So you mentioned how we've seen a lot of these
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  Speaker 4: stocks really taking a beating this year. Can you just
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  Speaker 4: kind of contextualize here for our listeners what has created
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  Speaker 4: this this lag?
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  Speaker 5: Yeah? Sure, so the market really had turned negative for
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  Speaker 5: the last couple of years actually with a lack of
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  Speaker 5: progress made on federal reform of this industry. You know,
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  Speaker 5: many states have taken it upon themselves to legalize either
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  Speaker 5: at the medical or adult use level. I mean some
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  Speaker 5: forty states now talking to a vast majority of states
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  Speaker 5: have now legal cannabis in some form, so they a
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  Speaker 5: lot of the industry players and the market thought it's
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  Speaker 5: just a matter of time that the federal government would
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  Speaker 5: retire these really old you know, the treaties that require
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  Speaker 5: cannabis to be a Schedule one drug and then really
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  Speaker 5: puts the handcuffs on this industry to do a lot
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  Speaker 5: of good things in terms of business. You know, consumer
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  Speaker 5: product companies in general have the benefits of the economies
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  Speaker 5: of scale because they have interstate commerce, they can advertise,
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  Speaker 5: they're not hurt by onerous taxes which these companies are
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  Speaker 5: subject to. So a lot of a lot of barriers
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  Speaker 5: facing this industry still given the current status, and so
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  Speaker 5: it's really over the prior to these comments over the weekend,
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  Speaker 5: I think there's really been a sense of throwing the
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  Speaker 5: towel in among investors with this group, and so that
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  Speaker 5: that's why you're seeing this at the magnification of response
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  Speaker 5: to this news today.
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  Speaker 2: So can if the majority of states have legalized cannabis,
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  Speaker 2: what's the what's the problem with the federal government coming
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  Speaker 2: around and doing the same.
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  Speaker 5: Well, the biggest thing, Paul, is because This is a
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  Speaker 5: treaty that was signed back in the seventies and the
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  Speaker 5: Nixon administration that again it's part of the anti drug
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  Speaker 5: wars back then, they set this in a stone basically,
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  Speaker 5: and only an Act of Congress can change that treaty
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  Speaker 5: to no longer include marijuana cannabis, uh, you know, as
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  Speaker 5: a Schedule one drug. So so I guess you know,
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  Speaker 5: Congress doesn't seem to be willing to act. I mean,
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  Speaker 5: that's the biggest thing that the biggest blockade to legalization,
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  Speaker 5: kind of the shortcut reclassification under the Controlled Substances Act.
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  Speaker 5: A lot of the industry is saying, look, you're you're
• 9:52
  Speaker 5: putting us at Schedule one, which is the same level
• 9:54
  Speaker 5: as you know, ecstasy and only these horrible harmful things.
• 9:57
  Speaker 5: And the definition for a Schedule one is there's no
• 10:00
  Speaker 5: proven medical value. Well, that kind of contradicts the own
• 10:04
  Speaker 5: FDA's decision a few years ago when it approved a
• 10:10
  Speaker 5: a cannabis drug called epidialects, which is used to treat
• 10:13
  Speaker 5: seizures in rare cases for epilepsy. So clearly the medical
• 10:18
  Speaker 5: use and it doesn't belong to the Schedule one if
• 10:20
  Speaker 5: it was your scheduled if it was rescheduled to three,
• 10:23
  Speaker 5: it would still remain illegal unless that treaties are changed.
• 10:26
  Speaker 5: It could at least alleviate something called two ade and
• 10:29
  Speaker 5: a tax code which basically says, look, if you're in
• 10:32
  Speaker 5: the drug business, maybe a bad thing, but we still
• 10:35
  Speaker 5: want your taxes. And so they don't allow these companies,
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  Speaker 5: these cannabis companies to deduct ordinary business expenses like rent, salary, marketing,
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  Speaker 5: and so as you can imagine, the taxation hit to
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  Speaker 5: these companies is just dramatic, and that's really their biggest problem.
• 10:52
  Speaker 4: So there was a time back in the early nineteen
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  Speaker 4: twenties when cigarettes were illegal and then of course we
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  Speaker 4: know now when we look at the industry, the tobacco
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  Speaker 4: industry globally, it's a multi billion dollar industry. So if
• 11:03
  Speaker 4: we think about cannabis stocks and a lot of these
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  Speaker 4: companies here, what's the bowl case.
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  Speaker 5: Well, the ball case is that at some point either
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  Speaker 5: gets rescheduled or legalized, and that's a long, long term
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  Speaker 5: Can I remember the market as a discounting mechanism is
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  Speaker 5: looking you know, well into the future. Now, if you're
• 11:23
  Speaker 5: a real bull, you look well into the future. You know,
• 11:26
  Speaker 5: these companies at the gross margin line are very profitably.
• 11:28
  Speaker 5: It's about forty to fifty sixty percent gross margins. That's
• 11:32
  Speaker 5: a pretty good business. But it's when you get below
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  Speaker 5: that they really get hurt, particularly the taxation line. So
• 11:39
  Speaker 5: if you're a ball on this industry, you say, you
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  Speaker 5: know what, these are pretty good companies. You need a
• 11:42
  Speaker 5: license to compete, so there's natural barriers to entry. We
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  Speaker 5: know there's a demand for this product. It's been around
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  Speaker 5: for a long time, so you know, I think we
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  Speaker 5: just get the regulation right, this could be a pretty
• 11:55
  Speaker 5: good business.
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  Speaker 2: Ken you also cover the big tobacco companies. How are they,
• 12:01
  Speaker 2: how have they been impacted or may they be impacted
• 12:04
  Speaker 2: with the various tariff discussions that are out there.
• 12:09
  Speaker 5: Well, the US tobacco industry is really a domestic business.
• 12:12
  Speaker 5: You know the big guys, you know Aultria, Uh, they
• 12:16
  Speaker 5: source virtue all the tobacco domestically for domestic use, so
• 12:21
  Speaker 5: they were only exposure to the tariffs is really very small.
• 12:25
  Speaker 5: Some of the materials they use, like they're smokeless tobacco cans,
• 12:29
  Speaker 5: ten metals, things like that. Then they you know, get
• 12:32
  Speaker 5: from suppliers offshore and that could be indirect problems. I mean,
• 12:35
  Speaker 5: you know, other suppliers could raise prices in a small
• 12:40
  Speaker 5: way for products for other inputs, but by and large,
• 12:43
  Speaker 5: they they've been skirt they've been they can skirt this problem,
• 12:47
  Speaker 5: and it's not really an issue for the US tobacco industry.
• 12:50
  Speaker 4: Quickly hopping off of that question, I'm going to ask
• 12:53
  Speaker 4: the same of cannabis. Is that more a domestic industry here?
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  Speaker 4: Any tariff concerns.
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  Speaker 5: No tariffs concerned. Matter of fact, it's illegal to import
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  Speaker 5: cannabis into the US, so it would only be to
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  Speaker 5: the extent where the vaporizers and the electronic goods and
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  Speaker 5: the you know, the ancillary products that are used with
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  Speaker 5: cannabis are subject to those import terrorists. But the planet itself,
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  Speaker 5: there's no tiriff issue.
• 13:20
  Speaker 2: Say with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 13:39
  Speaker 2: Looking at this market, we still got some greena on
• 13:41
  Speaker 2: at this reen here today I want to check in
• 13:43
  Speaker 2: with on rog run on a Bloomberg intelligence technology analysts
• 13:45
  Speaker 2: honorack I Steem remember something in the zeitgeist, as Tom
• 13:49
  Speaker 2: Keen would say, Elon Musk not real happy with Apple
• 13:52
  Speaker 2: and maybe even vice versa. I'm not sure what's going
• 13:55
  Speaker 2: on there.
• 13:56
  Speaker 6: Yeah, if you go back a few years ago, you know,
• 13:58
  Speaker 6: Elon made a big deal of about the fee that
• 14:02
  Speaker 6: they have to pay on for you know, X subscriber
• 14:04
  Speaker 6: to the thirty percent or so. I mean there was
• 14:06
  Speaker 6: a visible argument. But you know, in a few days
• 14:09
  Speaker 6: he was seen, you know, walking around with him cocaine
• 14:12
  Speaker 6: in the campus, and you know, the whole thing. I mean,
• 14:14
  Speaker 6: today's complain was a bit odd because apps on the
• 14:17
  Speaker 6: App Store don't go up just because Apple wants to
• 14:20
  Speaker 6: do it that way. I mean, they go up because
• 14:23
  Speaker 6: users are downloading one app over the other. In fact,
• 14:26
  Speaker 6: the other day, I remember the perplexity CEO was saying
• 14:29
  Speaker 6: that in India App Store, you know, his app is
• 14:32
  Speaker 6: above Chat, GPT and so forth. So I mean he's
• 14:35
  Speaker 6: basically complaining that, you know, Xai is not getting the
• 14:37
  Speaker 6: same love as Chad GPT is, which to me is
• 14:40
  Speaker 6: understandable given you know where the presence of that is
• 14:44
  Speaker 6: in terms of the ecosystem and the users. So I
• 14:46
  Speaker 6: think that's really, you know, some argument going there, but
• 14:49
  Speaker 6: I think it's it's just news. Frankly, it's it's there's
• 14:52
  Speaker 6: not much to it.
• 14:53
  Speaker 4: I mean, so you mentioned not much to it. So
• 14:55
  Speaker 4: where do you go from here? I mean, how what
• 14:57
  Speaker 4: steps forward would he need to make to see any
• 15:00
  Speaker 4: changes here?
• 15:02
  Speaker 6: He has to go prove the world that his grock
• 15:04
  Speaker 6: model is better than Chad GPT and their models. They
• 15:08
  Speaker 6: just launched a brand new model and they have to
• 15:10
  Speaker 6: go figure out whether it's better than that, And he
• 15:13
  Speaker 6: has to go and sell that to either enterprises or
• 15:17
  Speaker 6: the consumer application and become you know, have the same
• 15:20
  Speaker 6: number of users. I mean, you just can't say that,
• 15:22
  Speaker 6: you know, my product is not doing better because somebody
• 15:24
  Speaker 6: else is you know, not giving it the same amount
• 15:27
  Speaker 6: of love. Even Google's model Gemini is doesn't have that
• 15:31
  Speaker 6: level of user based right now. I mean, the first
• 15:33
  Speaker 6: movement advantage is open AI and Chad GPT, and the
• 15:37
  Speaker 6: user growth has just been phenomenal, you know, on that end,
• 15:40
  Speaker 6: and there isn't I you know, I don't think I
• 15:42
  Speaker 6: know anybody at this time who's not using Chad GPT
• 15:45
  Speaker 6: on their phone or any other device that they.
• 15:47
  Speaker 2: Have you can look at me, I don't use it.
• 15:51
  Speaker 2: Let's talk about Apple. I see the stock having this
• 15:53
  Speaker 2: nice move here, you know, during the month of August.
• 15:56
  Speaker 2: Here is this a sense that maybe they'll do something
• 16:00
  Speaker 2: to maybe get a little bit more in the game
• 16:02
  Speaker 2: as it relates to AI.
• 16:04
  Speaker 6: I think we to discuss this a few months ago,
• 16:07
  Speaker 6: when you know, the President came out and criticized them
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  Speaker 6: for building phones in India, and you know, the stock
• 16:12
  Speaker 6: really took a hte at that point. But I think
• 16:15
  Speaker 6: them could do the right thing. He announced the big plan,
• 16:18
  Speaker 6: He went to the White House, he you know, essentially
• 16:21
  Speaker 6: gave President Trump an assurance that he is working very
• 16:25
  Speaker 6: hard to bring whatever he can in the US. You know,
• 16:28
  Speaker 6: this was just glass at one point, but I think
• 16:31
  Speaker 6: that really made a huge pivot. The President was extremely
• 16:34
  Speaker 6: complimentary of the stuff that he's doing. So I mean,
• 16:36
  Speaker 6: since then, you can see stocks pin at a tier.
• 16:39
  Speaker 6: So there was danger that you know, it could they
• 16:42
  Speaker 6: could be additional surcharge on Apple or anything out there.
• 16:45
  Speaker 6: So you don't want to be against the president at
• 16:48
  Speaker 6: this point. So I think Apple's done a good job
• 16:50
  Speaker 6: of managing that. Now the question is whether iPhone seventeen
• 16:53
  Speaker 6: will deliver. We've heard it's got a really cool new
• 16:56
  Speaker 6: phone coming out, so I think things are looking good
• 16:59
  Speaker 6: for Apple from that, but I'm still waiting for one
• 17:01
  Speaker 6: particular element, that is the Google case and whether Apple
• 17:04
  Speaker 6: gets to keep the powers partially or somewhat of the
• 17:08
  Speaker 6: payment that it gets from Google.
• 17:10
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 2: Next guest had a fascinating story out Bloomberg Business Week
• 17:33
  Speaker 2: cover story Treasury Secretary Scott Bessant. The US Treasury sector
• 17:38
  Speaker 2: has the ear of an impulsive president and nervous investors worldwide.
• 17:42
  Speaker 2: Hope it stays that way. And Eric Schatsker has an
• 17:45
  Speaker 2: exclusive interviewed Eric Schatsker, Bloomberg New Economy Editorial director, Should
• 17:49
  Speaker 2: we just live here in on our Bloomberg and Active
• 17:51
  Speaker 2: Broker studio. Eric your setan Scott beston for an extended
• 17:54
  Speaker 2: period of time. What were some of your takeaways there?
• 17:56
  Speaker 7: Gosh, Well, first of all, the man is unbelievably busy.
• 18:00
  Speaker 7: Spent a day at the Treasury Department with ALCOHOLICU Dan Flatley,
• 18:04
  Speaker 7: and to observe how much he gets done in the
• 18:07
  Speaker 7: course of a day, including spending an extended amount of
• 18:10
  Speaker 7: time with US, gives you a window into the life
• 18:13
  Speaker 7: of the Treasury Secretary in the Trump administration. And it's
• 18:15
  Speaker 7: important to emphasize in the Trump administration because this particular
• 18:19
  Speaker 7: Treasury Secretary has been given a whole host of responsibilities
• 18:22
  Speaker 7: that go beyond that of the typical Treasury secretary. We
• 18:26
  Speaker 7: know that the Treasury Secretary in any administration is involved
• 18:29
  Speaker 7: in tax policy, is involved in economic sanctions, is involved
• 18:32
  Speaker 7: in financial regulation, and the like. But President Trump has
• 18:35
  Speaker 7: tasked Scott Bessen with trade negotiations with striking and not
• 18:40
  Speaker 7: just any old trade negotiations. China perhaps the most difficult
• 18:43
  Speaker 7: trade negotiation of all, Japan, which was successful, South Korea,
• 18:47
  Speaker 7: which was successful, Indonesia. The list goes on. He's also
• 18:52
  Speaker 7: the acting IRS Commissioner. He also crafted the deal that
• 18:56
  Speaker 7: the very novel and original deal that the United States
• 18:59
  Speaker 7: struck with Ukraine for a share of that country's mineral
• 19:03
  Speaker 7: resource wealth back in April. These are not and furthermore,
• 19:06
  Speaker 7: I have to add he was instrumental in getting the
• 19:09
  Speaker 7: One Big Beautiful Bill through opposition in both among Republicans
• 19:14
  Speaker 7: in both the House and the Senate in order to
• 19:16
  Speaker 7: meet the president's self imposed July fourth deadline. So Scott
• 19:20
  Speaker 7: Besson has taken on way more than your traditional Treasury
• 19:24
  Speaker 7: secretary does, and much of that is because the President
• 19:27
  Speaker 7: himself has asked him to do so.
• 19:30
  Speaker 4: And it seems as though a lot of people see
• 19:32
  Speaker 4: Besson as really having the president's ear here. And this
• 19:35
  Speaker 4: is a really fantastic story. Okay, what was the most
• 19:38
  Speaker 4: surprising element through your conversation with him?
• 19:41
  Speaker 3: Oh?
• 19:41
  Speaker 7: Well, there are so many surprises. I would say that
• 19:44
  Speaker 7: the thing I didn't fully appreciate and which he spelled
• 19:48
  Speaker 7: out for us, and which others spelled out for us,
• 19:51
  Speaker 7: is the degree to which this is something he sought
• 19:55
  Speaker 7: after going back many years. Besson told us that he
• 19:59
  Speaker 7: thought about joining the Trump campaign as early as twenty sixteen,
• 20:03
  Speaker 7: but at that time he just started a new hedge fund,
• 20:05
  Speaker 7: Key Square Group, and he didn't feel like he could
• 20:07
  Speaker 7: abandon his employees or abandon his clients. But what he
• 20:11
  Speaker 7: did do was start to get to know the people
• 20:14
  Speaker 7: close to Trump almost immediately thereafter, starting with Steve Bannon
• 20:19
  Speaker 7: and subsequently Peter Navarro, Stephen Moore, Kevin Hassett. For example,
• 20:24
  Speaker 7: Trump's close economic advisor's Art Lafer. He went down to
• 20:27
  Speaker 7: see Art Lafer in the South, made a pilgrimage of
• 20:31
  Speaker 7: starts to get Art Lafer's blessing for his ambitions to
• 20:37
  Speaker 7: become Treasury secretary, and these he didn't make known to
• 20:41
  Speaker 7: Trump until October of twenty twenty three. Excuse me, November
• 20:45
  Speaker 7: of twenty twenty three throws, So it was almost a
• 20:47
  Speaker 7: six year period in which he was maneuvering to position
• 20:51
  Speaker 7: himself for a shot at Treasury secretary. And when he
• 20:54
  Speaker 7: saw Trump in that November twenty twenty three meeting at
• 20:58
  Speaker 7: mar Alago, Trump asked him if he wanted the job,
• 21:01
  Speaker 7: if he was interested in being fed chair, and Besson said, no,
• 21:04
  Speaker 7: I have another job in mind.
• 21:06
  Speaker 2: Very good. The Street Eric gives Scott Besson a fair
• 21:11
  Speaker 2: amount of credit for walking to President back and maybe
• 21:15
  Speaker 2: some of the more difficult tariffs that were initially announced.
• 21:19
  Speaker 2: Is that a valid point that Scott Beson play a
• 21:22
  Speaker 2: big role in walking the president back a little bit,
• 21:25
  Speaker 2: and does he take credit for that or is he
• 21:26
  Speaker 2: kind of demure.
• 21:27
  Speaker 7: Besson insists that his job is not to explain things
• 21:32
  Speaker 7: to the president or to advise the president. It is
• 21:36
  Speaker 7: to present the president with a series of options. Here's
• 21:40
  Speaker 7: path one, here's path two, here's here's path three, and
• 21:43
  Speaker 7: I will explain to you where we get if we
• 21:45
  Speaker 7: go down one, if we go down two, or if
• 21:47
  Speaker 7: we go down three, and he leaves it ultimately for
• 21:50
  Speaker 7: Trump to make the decision. That's very I wouldn't say
• 21:54
  Speaker 7: that's unique to this president, but Trump has a very
• 21:57
  Speaker 7: particular view of his role as a decide in chief
• 22:00
  Speaker 7: in this administration that is perhaps different from what we
• 22:03
  Speaker 7: saw with Biden, or with Obama, or even going back
• 22:06
  Speaker 7: in history to other Republicans like George W. Bush and
• 22:09
  Speaker 7: maybe even Ronald Reagan. So Besont does not claim credit
• 22:13
  Speaker 7: for being the de escalationist, but it is clear talking
• 22:17
  Speaker 7: to people around him and to understanding how the market
• 22:20
  Speaker 7: thinks market psychology, if you will, which is you know,
• 22:24
  Speaker 7: one of his areas of expertise, having been a macro
• 22:27
  Speaker 7: hedge fund manager for almost forty years. That is where
• 22:30
  Speaker 7: it really counts. The market trusts him, and the market
• 22:33
  Speaker 7: based on its observations draws these conclusions, rightly or wrongly.
• 22:38
  Speaker 2: Does he share any concerns he may have about just
• 22:41
  Speaker 2: getting somehow involved in some of the crossfire that happens
• 22:46
  Speaker 2: around President Trump and getting into President Trump's bad graces
• 22:49
  Speaker 2: or just kind of I mean, because it's such a
• 22:51
  Speaker 2: perilous those people that fight fly close to President Trump
• 22:54
  Speaker 2: historically have done at their own risk. Well, the former
• 22:57
  Speaker 2: vice president, so yeah, how does he shape Is he
• 23:01
  Speaker 2: even acknowledged that that's a risk.
• 23:03
  Speaker 7: What I divine from the conversations we had with the
• 23:07
  Speaker 7: Treasury Secretary is that it there is a formula for
• 23:13
  Speaker 7: success in the Trump administration, and it means making certain
• 23:21
  Speaker 7: compromises if you will with yourself. You can come in
• 23:23
  Speaker 7: with your own ideas, but it is not your job
• 23:25
  Speaker 7: to advance that agenda. So you have to make some compromises.
• 23:29
  Speaker 7: If you don't, and Steve Stephen Mnuch and the former
• 23:32
  Speaker 7: treasure secretary, points this out, if you cannot represent the
• 23:35
  Speaker 7: president well, in other words, if you can't get behind
• 23:38
  Speaker 7: what the president wants, the role has no power. What's
• 23:42
  Speaker 7: the point of being in DC. What's the point of
• 23:44
  Speaker 7: abandoning a forty year career in finance where you rose
• 23:48
  Speaker 7: to be one of the most successful hedge fund managers
• 23:51
  Speaker 7: and have you know, for it all to be worthless,
• 23:55
  Speaker 7: have to have no power. No, you want to be
• 23:56
  Speaker 7: able to wield influence and get things done. And that's
• 23:59
  Speaker 7: very much much in the back of Scott Beston's mind.
• 24:02
  Speaker 7: What's my legacy as Treasury Secretary going to be.
• 24:05
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