Capital ideas, conversations with Mike Gitlin from Capital Group features our top investment professionals sharing what drives them in today's market. Get stories and actionable insights. Subscribe wherever you get your podcasts. Capital Client Group, Inc.
Donald Trump has already changed the way we think about the US economy. Now he's back in the White House, and Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Whatever the big question of the week is, we'll have something interesting to tell you about it in a lively conversation with the reporters and analysts closest to the action. Listen to new episodes every Wednesday and follow Trumponomics on Apple Podcasts, Spotify, or wherever you listen.
Microsoft is investigating whether a deep-seat-linked group obtained open AI data without authorization. Plus, collaborating in secret Bloomberg learns Apple and SpaceX are working to add the Starlink network to iPhones.
Let's start with the roundup of our top stories. The UK's Chancellor Rachel Reeves will pledge today to boost the economy by unblocking new infrastructure projects and deregulation. In his speech intended to reframe the narrative around her tenure so far, Reeves will say growth won't come without a fight. It's a message Keir Starmer has also sought to deliver in the last 24 hours.
The number one priority of this Labour government is gross, gross, gross, gross. And by that I mean wealth creation. We'd have to get our economy working. I think we're beginning to see how that's turning around and we'll build on that as we go forward.
as he joined the Chancellor in Bloomberg's London headquarters yesterday to pitch the government's plan to business. Rita speech is expected to include a green light for new homes and transport links between Oxford and Cambridge, as well as possible backing for a third runway at Heathrow. We'll have live coverage on Bloomberg radio of the speech for our UK audience, starting at 10 a.m. London time.
Microsoft and OpenAI are investigating whether data from OpenAI's technology was obtained in an unauthorized way by a group linked to China's DeepSeek. DeepSeek and the Hedge Fund High Flyer, where DeepSeek was started, did not immediately respond to requests for comment.
It comes as President Donald Trump's AISAR David Sachs told Fox News that there is substantial evidence that the Chinese ARA startup did distill knowledge from open AI models.
There's a technique in AI called distillation, which you're going to hear a lot about. And it's when a one model learns from another model. Effectively, what happens is that the student model asked the parent model a lot of questions, just like a human would learn. But AI's can do this asking millions of questions, and they can essentially mimic the reasoning process that they learned from the parent model, and they can kind of suck the knowledge.
out of the parent model. And there's substantial evidence that what Deepsea did here is they distilled the knowledge out of OpenAI's models. And I don't think OpenAI is very happy about this.
In a statement, open AI didn't directly address those comments by David Saggs, but did say that they know companies based in the People's Republic of China and others are, quote, constantly trying to distill the models of leading US AI companies. Markets are continuing to grapple with the impact of deep-seeks AI model known as R1, which was produced at a fraction of the cost of its US competitors, leading to a $1 trillion route in tech stocks.
Apple has been secretly working with SpaceX and T-Mobile US to include the Starlink network in its latest iPhone software. The smartphone's latest software update released this week supports the technology. The tie-up comes as a surprise. Apple already provides its own offering and neither company had signals the change was coming.
A judge has temporarily halted President Trump's surprise order to freeze federal grant funding. The order was issued after a lawsuit filed by a coalition of nonprofit organizations. New York Senator Chuck Schumer was highly critical of the measures. In an instant, with no precedent, no justification, no legal grounds, Donald Trump has shut off billions, perhaps trillions.
of dollars that help American families every single day.
New York Senator Chuck Schumer, speaking there, the original White House memo sparked widespread confusion and panic about its broad scope, which included anti-poverty initiatives and medical research, as well as other forms of aid. Some Republicans have supported the president's announcement on spending, whilst Democrats have described the plans as unconstitutional.
The M H is reported subdued demand as wealthy shoppers remain cautious. The luxury giant posted a 1% decline in sales of fashion and leather goods during the last three months of 2024, while revenue grew by just 1%.
Despite both figures being ahead of analyst estimates, revenue disappointed as the firm's recurring income fell by 14 per cent. Of your major CEO, Bernard Alno is optimistic about the prospects in the United States, telling reporters that Donald Trump has brought a wind of optimism. The billionaire also referred to his return to France after the US presidential inauguration as a cold shower.
Now, supersonic air travel might be returning to passenger flights. A new aircraft from Boom Technology broke the sound barrier for the first time in Tess yesterday. Bloomberg's James Wilcox has more. It's been 20 years since Concorde's final flights. Now, Boom Technology want to revive the dream of taking you from London to Miami in less than five hours. This is the sound of their first major step taking off.
Their XB1 craft is now the first civil supersonic jet made in America, but the company plans to go bigger. They intend to carry passengers on a supersonic commercial airliner three times larger by 2029. It's a tough challenge. Boom is one of the few players left in the space due to the financial and technical difficulties. In London, James Wilcock, Bloomberg Radio.
Those are your top stories on the markets. We saw a rebound in tech shares yesterday, the NASDAQ finishing up 1.6%. European stock futures pointing higher three quarters of 1% on the Eurostocks 50 today. We have the Federal Reserve decision later on. 10-year treasury yield ahead of that. Denabassus point to 4.52%. The Bloomberg Dollar Spot Index is a 10th weeker. We've got the Japanese yen, 3.10 stronger at 1.5514 against the dollar.
Now, in a moment, we'll bring you more on what to expect from the UK Chancellor's speech on growth later today and Apple's latest innovation with Starlink. But first, a word on another story that we've been reading this morning from our opinion columnist about food, the highs and lows. This is how I run who is a dedicated foodie. He's always got a great piece out.
Yeah, he does. He's a great Instagram account as well, if you want to follow his various culinary adventures. But he's been writing about the dominance of French cooking in contemporary cuisine, referring to the latest Bocuse d'Or competition, which is named after the legendary Leoné chef, Paul Bocuse.
He says that you know this is something that's kind of been true without history is that even now the hottest new restaurants or French restaurants It's sort of the a lot of people's entryway into the business It's seen as being sort of the you know the hegemony of of cooking if you want but and this is the part that I really love about this piece He also talks about that it's not about everything being fancy and wonderful and even the most incredible creations can fall flat whereas sometimes you really just want the slice of pizza from the place that you like in Greenwich or that you want to
to have your favourite noodle dish from your local Cantonese restaurant or, you know, they're talking about the love of the kind of simple, not low cuisine, he points out just good food. OK, yeah, I wonder whether any French person would agree with that. I don't know. Yeah, it's definitely favourite French food. You lived in France for years. I've lived in France for years. Favourite French food.
Oh, I mean, you can't be a good parmantee. Oh, right. Ratatouille. Fortbed it as a child. A lot of it as an adult. There you go. Great piece on the terminal to think about this morning. Let's bring you more now on the Chancellor, Rachel Reeves plans to go further and faster to boost the UK economy through new infrastructure projects. Our UK correspondent, Lizzie Pardon, is with us now for more. Lizzie, what are we expecting from the Chancellor today?
So we're expecting it to give the green light to a load of infrastructure projects, possibly signaling backing for a third runway at Heathrow. This is something we've been reporting on all week. We're also expecting announcements focused on building up this region around Oxford and Cambridge to make
what they're calling the potential to be Europe's Silicon Valley. So we'll get announcements on more funding to improve transport in the area, housing as well, and we're expecting the appointment of Science Minister Patrick Valens as the Oxford Cambridge Growth Corridor Champion. So putting flesh on the bones of that growth, growth, growth ambition that you heard from Keir Starmer a moment ago.
Yeah, I'm okay. Criticism, though, of course, that it centers a lot on the south and the southeast of England rather than the rest of the country already. Rachel Reeves and Kistama were here in Bloomberg's European headquarters in London yesterday to make this pitch to business leaders. If you've read any of this on the Bloomberg website, you'll see a nice picture of them also sitting there. What have they been hearing in terms of what the business leaders think about this pitch from government?
But it was interesting, Stephen and I spoke to Kathy Ward yesterday, the CEO and co-founder of ARK Invest, and she was quite clear that it's good. Rachel Reeves and Keir Starmer are going for it when it comes to this messaging on growth, and actually she's making lots of investments here in the UK. But then we spoke to the former Tesco CEO Dave Lewis, and he said, you can't just talk the UK to growth. You need joined up thinking across government, you need action.
And I mentioned the announcement that we're expecting on a third runway at Heathrow, despite the opposition on climate grounds within the Cabinet. And actually, we've also on Bloomberg TV been speaking to the Ryan Air CFO about this. And there's a different opposition here. He says, yes, we'd be keen to see more growth. Yes, we'd be keen to see more capacity. But in his words, if you really want the airlines to go in the UK, you need to bring down the taxes on passengers arriving and leaving the country.
So it's not just as easy as building a third runway. And of course, businesses got absolutely whacked with the tax hikes in the October budget. And that's contributed to this narrative that we've had around the Labour government in recent months, adding to a run of bad economic data as well. Is this going to be enough to turn around the sort of doom narrative that there is around the government? Well, if you look at all the data recently, it's
gloomy and that economic messaging has weighed on the economy. You've got private sector activities, stagnating, public sector borrowing, overshooting, forecasts, jobs cut at the fastest pace since the financial crisis, consumer confidence that it's lowest in more than a year, not to mention the two bouts of market turmoil and the fact that the change in the non-dom rules mean that there's been
a exodus of millionaires out of the UK. So ultimately, yes, growth is the holy grail, but it's going to take time to materialise in the data. Reeves knows this, and she's going to say today, growth will not come without a fight. There'll be a fight on the climate when it comes to Heathrow, but labour's on the ropes. Storm has got this big majority. Now it's time to take on his opponents.
Yeah, I mean, I think the Swift retort to that is why. Why does it take a fight on growth? I think business leaders might be kind of scratching their heads on that. Also, I thought it was fascinating, though, the chancellor talking, sorry, the prime minister talking about AI, artificial intelligence, you know, when he was speaking to business leaders, he said that the UK would strip away regulation, strip away the inhibition of planning and use AI to take us forward.
This had a very interesting sort of pivotal time in development of AI, Lizzie, and I wonder also how that is actually going to be delivered. Yeah, I think an interesting question is whether you can get the top AI talent to stay in the UK, stay around Oxford and Cambridge when you've got the tax system as it is in the UK compared to the US, when you have salaries as they are, and whether you can get these companies to list here. We already lost arm, for example.
And whether we have the energy policy to support it, that's Dave Lewis's new project. And yes, the Labour government has made lots of noises about green energy, the transition. But when you've got Donald Trump across the pond talking about drill baby drill and harnessing fossil fuels to boost growth using the AI boom, can the UK keep up?
Look, I think there's a really interesting question here, too, around how much deregulation can deliver and how the UK positions itself between the United States and that approach, as you mentioned, Lizzie, from Donald Trump, of wanting to drive towards deregulation. And then the signals that are also coming out of the European Union, you know,
European Commission President Ursula von der Waen's presenting her competitiveness compass today, which is supposed to also include talk of cutting red tape for businesses. When we spoke to Kathy Ward yesterday, she was quite favourable about the approach the UK is taking as being sort of the middle way between the more regulation in Europe and the less in the United States, and she wasn't
That concern, although she used two in favor of deregulation and has praised Donald Trump's efforts, she didn't seem that concerned that, you know, rules were going to be stifling the innovation opportunity in the UK. No, indeed. But as you say, Kathy Wood, very much somebody who is a risk taker, and she is behind Donald Trump's deregulation. There are others on the other side of the coin who will say, look, Rachel Reeves is
talking about deregulation. She's asked the competition markets authority chair delayed the introduction of stricter bank capital rules. But that will come at a cost and a cost to consumers. You've got regulation for a reason. And so they have to make this bold statement. And at the moment, it is growth.
pretty much any cost. Well, except that they have not included, of course, the two main drivers of economic growth as economists would see it, closer ties to the European Union and migration. On those points, the Labour government doesn't seem to be changing. And on workers' rights, again, more regulation coming in, there doesn't seem to be a change in tone on that front either. Yeah. Well,
That's exactly the point. John Mickle Sweet had his sit down with the business secretary and the chancellor at Davos, and they were saying that they would be growth over climate when it came to Heathrow, or hinting at that. So then the question becomes, why aren't you prioritising growth when it comes to EU relationship?
Look, there's likely to be a compromise here. Reeves has signaled in interviews over the weekend that the UK is open to membership of the Pan-Euro Mediterranean Convention, as that looks to ease trade frictions with the EU. And of course, there is the huge political headache of reversing Brexit. So you can see Labour trying to inch towards those closer trade ties with the EU.
Okay, more details to come from Rachel Reeves. Later on today, we will bring that speech to you live for our UK listeners here on Bloomberg Radio as well for now, Lizzie Burden, our UK correspondent. Thank you very much for joining us. Capital ideas, conversations with Mike Gitlin from Capital Group features our top investment professionals, sharing what drives them in today's market. Get stories and actionable insights. Subscribe wherever you get your podcasts. Capital Client Group Inc.
Donald Trump has already changed the way we think about the US economy. Now he's back in the White House, and Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Whatever the big question of the week is, we'll have something interesting to tell you about it in a lively conversation with the reporters and analysts closest to the action. Listen to new episodes every Wednesday and follow Trumponomics on Apple podcasts, Spotify, or wherever you listen.
Now, Bloomberg has learned that Apple has been secretly working with SpaceX and T-Mobile in the US to add support for the Starlink network to iPhones. Our chief technology correspondent Mark Gurman joins us now for more on his reporting. Mark, good morning. Thanks for being with us. So, firstly, what's the goal of this tie up? And what does it actually mean for an iPhone user? You're going to have to take me through this very slowly, Mark.
OK, so good morning. Thank you so much for having me. So really today, phones connect to the network in two ways. There is the home way, which is you go on your home Wi-Fi network. This is typically when you're at the office, when your house, you want to download movies, you want to download a TV show, you want to play games. But when you're out and about, you're connecting to the cellular data network, right? And so you're using your carrier plan in order to use the web browser.
to do text messaging, to do other things you would normally do in your phone that require an internet connection. But slowly emerging is a third way of downloading data to the phone, and that's satellite networks. And Elon Musk's SpaceX, other companies, including Apple itself with a partner known as GlobalStar, have been working on satellite networks for iPhones in order to do text messaging and emergency services in places like a long hike or a back road that may not have cellular connection.
The idea used satellites far away hundreds of miles away in the sky in order to always stay connected. And Apple has its own service that it rolled out a few years ago with GlobalStar for emergency services. Late last year, they enabled text messaging over that network. But there's alternatives in SpaceX through a new one called Starlink is its own new satellite network that Apple is now also going to support on the iPhone. In the US, this is starting with T-Mobile.
But SpaceX's Starlink, their negotiations with other carriers around the world to tie to their networks as well. So this could be offered outside the US eventually as well. So if Apple were developing their own system for this, why go to Starlink? Why do you deal with them?
So yes, indeed, Apple has its own service. This is through Global Star. It's called the emergency SOS over satellite, where I mess over over satellite. This is available in many countries around the world. But the carriers, they want to have their own satellite providers.
as well, right? The carriers don't want to get jettisoned by the service from Apple, the service from other companies. So they're partnering, right? And so T-Mobile's partner is SpaceX Starlink, Verizon and AT&T, the other major carriers in the US, other carriers around the world, they're negotiating their own partnerships. And in order to keep those carrier relationships healthy, Apple has to work with these third party solutions as well.
I've also believed they're doing this to avoid antitrust scrutiny. It would be a big antitrust violation if Apple were to promote its satellite service and then block these third party services as well that are, by the way, already tied to the networks that its iPhone customers are paying for. So what's the plan then to roll out these services going forwards?
So I can speak to Starlink and the T-Mobile service. As of now, it's in a very early beta. There's probably fewer than a thousand customers with access to this at this point. I would say maybe only a handful of people have actually been able to be in an
off the grid situation where they're actually using this technology at this point. But over time, I expect the satellite networks to get much better. Right now, you're able to do very low bandwidth text messages with friends, with emergency services. But over the arc of time, maybe five, 10 years, I expect these to evolve, to be able to send images, video, power applications, maybe one day, even make brief phone calls. But I still think we're ways away from that happening.
Mark, this is coming in a week where we're going to get earnings from Apple. The indications aren't great, worries about risks of tariffs, weakness in China. What will you be watching out for when we get that earnings report tomorrow?
Yeah, obviously, there's a lot of peripheral stuff around the edges facing Apple right now. Obviously, there's the presumptive tariff situation that's going to impact them given the second Trump administration. Obviously, there's concerns about iPhone sales in China, going to counterpoint research, Huawei in terms of flagship phone sales. It's now top to the iPhone there with the iPhone sales falling.
somewhere north of 18% in China. You have the situation with its artificial intelligence service being very basic at this point. But none of that really matters to investors if Apple crushes the Wall Street forecasts. And last I checked, the forecasts are between 3% and 6% growth year over year. And if they beat that, I think investors will be happy, all things considered.
It's very likely going to be a record quarter for Apple all time throughout the history of the company, the most revenue they ever generated in a quarter. There is a possibility. I would say it's a coin flip possibility that you're even going to see a record on both iPhone and services sales as well. So if they go three for three on that, right, all time revenue record,
all-time iPhone revenue record, all-time services record, despite all the very real noise of surrounding them, I think they'll have a positive story to tell.
Oh, Mark, I can sense you have your finger card out already for when you get that report. But I did want to ask you one more thing about this. It's been a week, of course, where the AI stories dominated markets. The whole question around deep-seek and what it might mean for AI and for big tech companies. Where is Apple in the AI journey? Where should we be thinking about it to cite it in that story where we could be looking at it, perhaps, a new revolution in the AI space?
Well, I would say of all the things that Apple is prioritizing and working right on right now, I would say their AI effort is probably the least impressive of the bunch. I mean,
up there with the Vision Pro. The Vision Pro certainly is even less impressive than the AI work. But at the same time, they're very much behind there. There are serious questions about their work. There are serious questions about why they're so behind OpenAI and other competitors. But this deep-seak situation, you notice Apple stock went up when all the other companies went down because of deep-seak. And I think
Deepseak what it did is it did affirm a couple of strategies that Apple's doing here with AI. One strategy is to be sort of the Switzerland of AI and be the platform of AI and have all these companies run on top of their operating system. So I think that Deepseak, if that continues to see momentum, there is some potential beneficiary to Apple here from subscriptions and the like. So we'll see what happens there. For one, I think it's going to get banned, but that's just my speculation.
The other thing is that DeepSeek is very light AI models, a lot of stuff running on-device, and Apple's really pushing the on-device idea for processing these generative AI models versus pushing everything to the cloud like OpenAI and Google.
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Donald Trump has already changed the way we think about the US economy. Now he's back in the White House, and Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Whatever the big question of the week is, we'll have something interesting to tell you about it in a lively conversation with the reporters and analysts closest to the action. Listen to new episodes every Wednesday and follow Trumponomics on Apple Podcasts, Spotify, or wherever you listen.