From the heart of where innovation, money, and power collide, in Silicon Valley and beyond, this is Bloomberg Technology, with Caroline Hyde and Ed Ludlow.
Live from New York, I'm Caroline Hyde.
And I'm Jackie Davalos in Washington.
The White House crypto summit as Trump signs the Bitcoin reserve executive order. White House AI crypto czar David Sacks joins us to discuss. AI spending going strong as Broadcom gave an upbeat forecast with AI being a key driver in the first quarter. HPE is out with earnings but shares are tumbling because of tariffs. Breaking news moments ago, Russia is willing to discuss a potential truce with Ukraine, but it is with conditions. They are willing to discuss a temporary truce if there is towards a final peace settlement. What's the nuance?
We just broke the story, but this is apparently something that Russia presented in Saudi Arabia in talks last month, a suggestion that they are willing to agree to a temporary truce provided there is an effort towards a peace deal that Russia likes. Specifically what they have asked for is clear guidance on the parameters of peace and what that would look like and specifically what a peacekeeping mission in Ukraine would constitute as Russia has rejected the presence of NATO troops on their soil. Complicating the idea that France and U.K. would provide the troops for the peacekeeping mission, the so-called coalition of the willing. Russia does not like that idea. They would however be open to a country like China providing a peacekeeping force. It's unclear whether or not that is something Ukraine would agree to. Keep in mind that the news is breaking as we are expecting next week senior U.S. officials, including Marco Rubio, Mike Waltz, and Steve Witkoff to be meeting with their Ukrainian counterparts in Saudi Arabia for additional talks towards peace as the U.S. is still continuing to push for a deal.
Kailey Leinz, thank you. The markets are bouncing off of their lows, nonetheless we are having a torrid time with correction territory down from the previous highs as we see three straight weeks of declines for the tech benchmark, the longest losing streak since August, off by 4% over the last five trading days as anxiety grows around Chinese AI models and what it means for compute demand and selling winners into an economy that could potentially be slowing on the back of tariffs. Moving on to the world of crypto, there is so much to delve into when it comes to the latest executive order. 88,000, but remember, we are well higher than the 67,000 dollars level we were at when the presidential election occurred. Many anticipate that such regulations will become more pro-crypto and we see the executive order that was signed last night with a reserve for Bitcoin. We are now pleased to be welcoming to our TV and radio audiences around the world someone who can dive into this exact executive order, we bring you the White House AI crypto czar, David Sacks. It's busy. More people are coming to the White House. Remind the American public and investors why you need a Bitcoin reserve at all.
Good to be here. The federal government already owns some. It obtained 400,000 Bitcoin over the past decade through criminal and civil forfeitures and seizures. So, the government has to have a strategy for how it deals with this. In the past the strategy was simply to sell it in an ad hoc way almost willy-nilly, costing American taxpayers something like $17 billion in lost value. So we want a long-term strategy for holding value. We have decided that Bitcoin is scarce and valuable and it's strategic to hold onto as a long-term asset. That's the plan with the 200,000 Bitcoin that we believe are in the possession of the federal government. We say we believe because no one knows for sure, we never had a proper audit. That's one thing this executive order provides, a full audit to find out what digital assets we have so that they can be safeguarded and moved into a strategy that maximizes long-term value.
Then there's the stockpile. Talk to us about it, the stockpile, why you need it, and how it's being treated differently.
Again, we are going to figure out what's on the federal balance sheet and we are going to move those coins, digital assets other than Bitcoin, into a stockpile for safekeeping. The difference is the Secretary of the Treasury will exercise responsible stewardship over those assets and he has the discretion to rebalance the portfolio or sell items in that portfolio. But that isn't true for Bitcoin. The Bitcoin we want to keep long-term. There is a difference in the objective there. With the reserve the goal is long-term preservation. With the stockpile the goal is responsible stewardship.
The executive order also tasks Secretary Lutnick with finding budget-neutral ways that won't cost the taxpayer to add to that reserve. What qualifies as a budget-neutral? Can you give us some examples of how that would actually work?
It just means it won't increase the deficit, won't cost the taxpayer, won't increase the debt. Those are basically the constraints on what they can do. If they can figure out creative ways to add to the stockpile of Bitcoin, they are allowed to accumulate more and again, it cannot impose a burden on the federal deficit, debt, or taxpayer. That's the rule. You can ask the question how will they do that and it's up to them. If they can figure out creative strategies in long-term interests of the country, they now have the authorization to develop those strategies.
Do you think using savings coming from DOGE qualifies as something budget-neutral?
That's a good question. I don't know the answer. I think that is something that would have to be assessed by the Office of Management and Budget. In that sense, DOGE is cutting the deficit and we would want to seek a way to present those appropriations. It probably wouldn't count, but you would have to ask the OMB.
When you talk about the stewardship, particularly the stockpile, what about staking, lending? Will there be ways to maximize the volume there?
It's a good question. The first idea of this executive order is to increase the mandate. First, we do the audit, we find out what they are. Then we move them into a separate account for safekeeping. Then the Secretary of the Treasury and his team will be able to exercise portfolio management with responsible stewardship and that could include staking, rebalancing, sales. These are all options they can pursue if the Secretary of the Treasury believes these are in the long-term interests of the American people.
Going into what's in the holding of the U.S. government, going back to what Trump mentioned over the weekend, talking of Ripple and other alternative points, people are wondering whether they will be included in this stockpile. Do they? Why mention them?
The President mentioned the top five cryptocurrencies by market cap. I think you are reading into it too much. He just mentioned the top five. In terms of what happened, we have to do the accounting. We are not sure, sitting here today, if the federal government owns these alternatives. The government owns Bitcoin, we believe. Ethereum, we think. This is why we have to do the accounting. No one has been able to give us a straight answer, to be honest. We have never really had a digital asset strategy before and it's why we missed out on accumulating value for the American people.
David, you mentioned earlier that you don't have any additional cryptocurrency assets anymore. You have divested from your interests there. However, Secretary Lutnick in July mentioned that he had a shedload of Bitcoin. Is it important for the stewards of the reserve and stockpile to divest from their cryptocurrency interests and do you know if they have done so already?
I can't speak to the situation. Every member of the administration has to go through the same conflict of interest process I've gone through, an ethics process. I will let him speak to his own situation. All I can say is that I sold all of mine prior to the start of the administration and there is no conflict in my case, I just want the right innovation policy for the U.S.
Do you think it is important, though, to just not have the appearance of a conflict of interest?
Look, we are all subject to 18 U.S.C. 208. Every member of the administration is subject to that, but I won't speak to anyone's interests. We are all governed by those rules and in my case I chose to divest everything to make it simple. You should ask every other member of the administration about their situation.
What about the President? Herein lies some of the issues for those on the outside looking in and suddenly feel that the U.S. President has exposure to meme coin. How do you give confidence to the U.S. investor base and U.S. population that this is legit?
I think you're making something up there. How do you know he has exposure to Solana? Is that something you just came up with?
When you think about meme coin exposure in particular, people try to understand why we have a Trump coin, a Melania coin. Is there a clearer way that the U.S. President can disassociate himself from any upside when it comes to cryptocurrencies?
He already spoke to the Trump coin. That is a collectible. The SEC said it is a collectible. Collectibles have no intrinsic value and are in a different category. As long as you issue a meme coin and disclaim there's no intrinsic value, it can just be a collectible. Different from what we are talking about here with cryptocurrencies.
What do you make of some of the market reaction? Clearly, Bitcoin was down earlier today on the back of just not really getting what they were hoping for. You know, if the government is not going to buy additional crypto, what's the benefit? Can you say for sure that the administration is not open to using taxpayer dollars in the future? Is that completely off the table?
According to the EO, it is. We said it won't cost taxpayers a dime and have been clear in this executive order that we won't use taxpayer funds to basically accumulate more crypto unless it can be done in a budget-neutral way. No increase in the deficit. No increase in the debt. No use of taxpayer funds. No burden on the taxpayer. We were clear in the executive order about that.
Let's move on to artificial intelligence, where you are already weighing in on policy. The Biden rules have been repealed. Who's involved?
The President in his first week on AI rescinded the Biden EO, which was a burdensome executive order, over 100 pages of regulations on AI companies. He rescinded that and tasked three people to basically evaluate and create a new AI action plan. Those people are the head of the Office of Science and Technology Policy, the National Security Advisor, and myself. We are currently working on that plan and will have more information for you when we are ready to present.
How confident are you around AI leadership in the U.S.? News coming out of China, for example, these incredibly powerful models that are ultimately more efficient, how are you exercising the view that AI can still be a leader for the United States, not losing leadership to China?
I'm confident in American leadership, but we can't be complacent. It's clear that China will be very competitive. Roughly half of the AI researchers in the world are from China and they are very good at math and science. With the launch of DeepSeek, you have seen they have good AI software companies. It's going to be a good competitive race, we have to win and we can't be complacent. It's going to be a tough competition here.
There is reporting from other news sources that DeepSeek would be banned in the U.S. Do you think that's appropriate?
It's premature for me to comment on something like that. If the administration announces a policy, I will comment on it then.
Let's talk about the other voices in the White House as of late that could potentially chime in on AI policy. Elon Musk, is he involved in any capacity?
Not in what we're doing. So, again, we have an office within the White House where we deal with crypto and AI policy. He's doing DOGE, a separate initiative.
Let's talk more about the contours of the AI policy and what it could look like. I know you can't share too much at the moment, but what would be your priority areas? Much of the talk has been around competitiveness and what we've seen from Trump's comments on the CHIPS Act and National Science Foundation layoffs, there's concern this could undermine competitiveness if there is not enough federal funding going to research. What are your thoughts on that?
I think there are some items that are policy items that are coming up quickly. For example, there was an 11th hour policy announced called the diffusion rule announced by the Biden administration that governs the sale of advanced AI chips or GPUs to countries across the world. It's basically an international version of the export controls. There is a 120-day clock on that for the Trump administration to weigh in and make whatever modifications we want to make. For example, I think that will be one of the first policies on our plate that we have to address, because there is a clock on it. Export controls are a big area. Diffusion is a big area. What and how we govern the licensing of the most sophisticated chips and semiconductor manufacturing equipment is at the heart of the policy discussion right now.
Would you ultimately be supporting an end to the CHIPS Act?
No one has said they want to end it, but the President has been critical and with good reason. We were trying to get semiconductor manufacturing into the United States because it's so strategic. The problem is the money went to companies who are losing in a competitive market and some of them have not even used the money they were granted because they weren't doing well. The CHIPS Act has had mixed results at a high cost and the question is if we can do something better. The President has said that he would like to use tariffs to try to get companies to onshore semiconductor manufacturing here. The advantage of that approach is that the best companies have to do it too. They cannot drag their feet or they will be hit with tariffs. The President has a very powerful weapon and incentive to get the best companies to locate advanced manufacturing for strategic reasons in the United States.
TSMC putting money where their mouth is when it comes to tariff concerns.
That's a very good point. We did a press conference with them earlier in the week where they announced a $100 billion investment in the U.S. and a big part of the reason why is the presidential tariff policies have given incentive to moving manufacturing here. They know that if they don't do that, they will be hit with a tariff.
We have 45 seconds, should Intel not be getting the money? Is that the company you're hinting at?
I'm not saying they shouldn't get it but everyone knows that they are a challenged company. It's unfortunate. We want Intel to do well. They are a legendary company and are one of the few companies in the U.S. capable of doing advanced chip manufacturing. We want them to do well and we will try to do whatever we can to help them.
You are going to be speaking with lots of leaders from other companies today at the White House. We thank you so much, David Sacks, and of that all-important White House crypto meeting. Coming up, Broadcom shares jumped following the earnings.
Let's take a look at Broadcom shares. This after the company gave an upbeat forecast driven by strong spending on AI computing. Shares down by 2% to 3%. Joanne Feeney joins us now for more. What a roller coaster it has been so far for chipmakers this week. Other infrastructure players as well. Is the market telling us something more about the fundamentals? Is it a short-term blip or are fundamentals OK at this point?
Hey, Jackie. The surge in Broadcom shares after they reported in December obviously boosted the stock. It has come down here today, but last night's report was very impressive. Not only did they beat the numbers, they came in with better guidance than expected and more importantly, not in their guidance are two new partners for the development of custom AI solutions, including chips and networking solutions. $60 billion to $90 billion outlook for '27 for AI business. By the way, only at a pace of $20 billion this year. It's a really startling opportunity that the company has ahead of it. Remember, they see the roadmaps of their partners and customers. They have an awful lot of visibility. I think it reassured investors somewhat, which is why the stock is up today.
Is it still enough to shake off the overall anxiety surrounding generative AI, the opportunity that these companies have, and how profitable it will be for them?
It's not clear what is causing the pullback. One of them is just the general level of policy uncertainty, tariffs, government shutdown, or geopolitical causing a bit of a risk-off trade across the board. The DeepSeek information announcement at the beginning of the year certainly caused some to question how much we needed most advanced chips. But what they said last night was really informative. They said that customers are demanding more and more powerful solutions. Clearly, they are not running away from having the best hardware to run their models, both pre-training, post, and inference. Again, he sees the roadmaps for years out. I think that investors are unfortunately taking the wrong idea from the DeepSeek situation and inferring that for some reason, hyperscalers and others that want to use AI models are going to somehow say we don't need all of that computing power. They clearly want that, according to Broadcom.
The 20% selloff in shares since the start of the year, ultimately what shakes it off? Is this the right time to buy Broadcom if it's ultimately going to be a winner?
