>> from the heart of for innovation, money and power collide, from silicon valley and beyond, this is "bloomberg technology" with caroline hyde and ed ludlow. ed: i am ed ludlow in san francisco. caroline hyde is off this week. this is "bloomberg technology." apple stock pops on an analyst upgrade despite news of a looming antitrust suit from the

justice department. the smartphone giant facing a legal setback in the dispute with masimo. more on the story and interview with the masimo ceo later this hour. samsung unveils a new slate of products to compete with the iphone maker, including an up tracking -- an upcoming health tracking gadget, the samsung ring. apple will dominate the program today. in the equity space apple is the biggest mover to the upside on the nasdaq 100 and the s&p 500. the main catalyst is the upgrade from bank of america from neutral to buy. there is a lot of upside coming with the vision pro. you would have seen loads of images on social media. they have confidence in the upgrade cycle on the iphone side going through 2024. and then there are the more

negative headlines. bloomberg reporting, according to sources, that a suit from the justice department in the antitrust context could come as soon as march. four into that that apple will have to sell its series 9 and ultra 2 watch with the oxygen reading disabled via software because of the masimo patent dispute ongoing. right now the focus is on the pending doj suit out of d.c.. let's bring in a bloomberg reporter. we are hearing from sources that the suit could come in march but what is it about? >> we have heard the suit could come as soon as march and might end up being delayed a little bit. the justice department has been investigating apple since 2019. it also opened its probe to google.

it is finally getting back to apple. it has focused on a bunch of different things. there have been already allegations into its app store that it makes its policies unfair to developers. the justice department has honed in on different things apple has done to his software and hardware on the iphone and ipads that make it harder for rivals to compete. for example, the apple iphone only works with apple pay. it limits what is known as the nfc chip so it only works with apple pay's financial services product. it could work with lots of other things. that is one thing the justice department has taken a look at. a couple weeks ago we heard about beeper. pple has now disabled i message from working with this app that combines messages from lots of different communication apps and devices.

these are the things the justice department has honed in on with apple. ed: the justice department and particularly apple -- specifically apple -- did not comment on the story or declined to comment. my understanding was the justice department was looking at apple going back to 2019. these things are always "read between the lines." tell us where the investigation stands and the thinking of senior officials at the doj as you have it from sources. leah: there is an election in november and the justice department is reluctant to file cases too close to the election because the dude i want to have it seem politicized. they want to wrap up the investigations the by demonstration has been doing, particularly in the monopolization area. they have been investigating apple for a long time. it is time for them to make a

decision and move on if they are or are not going to bring this suit. the european commission has brought two cases against apple, one related to the app store and one the apple pay issue. the justice department has been holding back. epic games run a case against apple in 2020. the justice department was interested in that. they brought prosecutors to sit in on that trial and monitor. when the supreme court decided earlier this week that it was not going to extend that case any further it declined both apple's appeal and epic's appeal. that cases wrapped up and there is nothing more that can happen. that was one of the last things the justice department is was waiting to resolve before it makes final decisions. ed: mark your calendars for march because bloomberg reporting the doj suit could be coming.

digital markets in europe and apple needing to make changes to comply with that. leah nylen out on the east coast. let's bring in da davidson, senior software analyst. you heard the reporting from leah. when we think about the antitrust threat to apple, is that price in? >> i do not believe so. great reporting from leah and the rest of the bloomberg team that broke this story. i believe implication could be far-reaching. apple will have to do something. either allow these other third-party equipment providers access to some of their closed system, which would degrade the consumer experience or they would have to fight this and deal with whatever the regulators decide on their own. one way or the other, this will hurt.

the reason all these apple products work so well is because it is a closed system. that is why it is so seamless and fast and intuitive. they are the only ones that can use their tools. they do not allow tools to plug-in unless it is through the app store in a way they agree to. any changes that have to happen to them -- the doj did not spend four years working on this case not to make changes -- will integrate the consumer experience or hurt apple some other way. ed: apple seems a bit proceeds right now. you have the supreme court decision on the epic dispute and the idea that apple has to give developers the option to divert consumers away from ios and the app store. then there is a digital markets act. on the show last week, the commissioner talked to me about her meeting with tim kirk and the idea she is there to say you

have to comply by march 7 and this is how you can do it. how serious is all of that in aggregate for apple? gil: let's step back. nobody is picking on apple specifically. regulators in the u.s. and e.u. are concerned about the power that they technology companies have. they are concerned about the power amazon, apple, microsoft, meta, google have. they have cases outstanding against all of them. they are blocking acquisitions by all of them. apple just happens to be in the headlines this week. it is something very deliberate on both sides of the atlantic to prevent these companies from abusing their power. apple will argue the reason we do not let other application providers access to all of our systems is to make a better consumer experience but the line between that and being anti-competitive is a very thin line. that is what will be litigated.

just like it will be litigated for google, meta, amazon and for microsoft in other regards. we will have to see how that plays out. it is not personal against apple. it really is against big technology companies as a category. ed: i would not for one minute suggest any regulator in any jurisdiction is taking a personal action or direct action just against apple. 166 price target. the main catalyst for the share is in today's session, up 3%, this bank of america upgrade to buy from neutral. they are looking specifically at the vision pro and they see upside both on hardware sales and services. i was there the day was unveiled. the conversation is this is a more niche product directed at developers.

i found the bank of america call interesting. but it is moving the market. what is your view? gil: we are coming off other analysts downgrading the stock. the sentiment was pretty low. that is what you are seeing today. vision pro is a niche product. very few people will spend $3500 on a product that weighs one pound, it is uncomfortable and does the cool stuff but is $3500. there are products on the market the do most of what the vision pro does, look like sunglasses and cost a penny on the price. this is not a mass-market product. when apple gets to the vision, which will be less than $1000, maybe there will be broader adoption but for now this is a very niche product. for those who have experienced the augmented reality devices from meta, you know it is not a product you will use all day, spend a lot of money and time on.

we will get there but based on the current price point and the current capabilities, we are probably years away from this being a mass-market product. ed: gil, the patent dispute with masimo, how are you modeling the various outcomes and scenarios in that situation? gil: it should not have a material effect on results. there are a few days -- it was still on sale other places. they have had to take the feature out using software for the foreseeable future. very few people are going out and buying an apple watch to measure their blood oxygen level. it is a unique feature that has a lot of health benefits and is part of the big picture of the apple watch being a health care device but it is not necessarily driving people into the store to buy a watch.

it is not necessarily that there will be a material impact. they will have to settle with masimo. this technology is far more valuable in apple's hands than masimo's hands. the fact that we can provide a health care to consumers broadly has a ton of value. it should be apple that is doing it. they just have to pay masimo. masimo has the intellectual property. ed: a lot going on with apple with shares of 3%. thank you. coming up, we will take a look at the macro picture for technology stocks. maybe we'll talk about bitcoin. jay jacobs from blackrock is coming up next. we are watching shares of tsmc. it -- expects a return to solid growth.

it raise capital spending in 2024, suggesting it anticipates a recovery in and markets like smartphone and computing. the main chipmaker for apple and nvidia is budgeting capx at $28 billion and a jump from last year. much more to come on that story. this is "bloomberg technology." ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy. ed: let's get a quick check in on financial markets. in the equities market, mega cap tech having a good day. apple is the main focus of the program. biggest points mover on the upside on both the nasdaq 100

and the s&p 500. the philadelphia semiconductor index outperforming, 2.5%. tsmc this story overnight, a lot of buoyancy and confidence that some of the end markets -- smartphone, personal computer -- maybe things will start to get better in 2024 based on tsmc's outlook. we are a little. . higher, if you basis points so much fed speak. higher rates discount the present value of future cash flows. for the tech sector, that is important. let's get the read on tech markets with jay jacobs over at blackrock. you just heard my preamble. mi kind of on the money of what the market is thinking right now? jay: i think that is right. in the short-term the fed is dictating a lot of the moves in the market. the fed is indicating rate cuts

might happen sooner or quicker and that tends to be a positive. right now maybe we could have higher rates for longer. ed: there is something really interesting, how you view bitcoin. and then the bitcoin etf situation. do you see any evidence that investors with a particular risk appetite divergent money from particular etf products that track or follow broadly the technology sector to bitcoin etfs four in addition to -- is it one or the other or can you play both? jay: it is difficult to say. we are still in the early days of our bitcoin etf, just launching on thursday. we have seen tremendous interest, bringing in over $1 billion on the product but it is coming from a lot of different investor types. some people had previous bitcoin exposure. you could have seen people owning bitcoin miners. equities that are mining bitcoin.

we see people who might have wanted bitcoin exposure but could not get it and now they can because of the etf. frankly there are investors who have not considered bitcoin and they are starting their educational journey that is etfs available. because of the wide availability of etfs in general it is appealing to a lot of investors. ed: the u.s. head of somatic, i wonder if we can call ai or a the the theme of investing right now? jay: absolutely. it was the theme of last year but we have it as a theme of 2024 as well. we are seeing a shift from a proof of concept year with a lot of new products toin 2024 being a commercialization year, more adoption of ai in areas like travel websites, where you can have a more conversational itinerary being built.

or you can look at it in terms of home appliances or cards. you could have a conversation with your vehicle rather than trying to find a specific button to do something. it is applying ai to more everyday interactions. it will lead to commercialization some platforms. ed: as the chart we displayed indicated, it is about margin and cost-saving more than it is about a new revenue stream. a fascinating chart. if i had a venture capitalist on the show, they would say ai is the blanket or umbrella. i am micro focused on biotech because i see that space as the biggest beneficiary ofs what is happening with aiub. jay: it is a great way to look at it. we are calling aia mega force. it is massive and impact so many sectors of the economy. i think we have to look at areas

like semi conductors where ai can drive a lot more demand. we have to look at digital infrastructure. we expect digital infrastructure in the u.s. to basically double over the next eight years. you have to look at areas like health care were ai can be applied to things like developing pharmaceutical drugs in a faster manner. there are a lot of different use cases for ai and segments of the market that will likely benefit from more ai adoption. ed: jay jacobs from blackrock, great to have you on the program. coming up on "bloomberg technology," we will turn our attention back to apple as the company faces a legal setback in its patent dispute with masimo. much more ahead. this is "bloomberg technology." ♪

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ed: apple is facing another legal setback in its patent dispute with masimo after the u.s. court of appeals for the federal circuit declined to grant apple a longer pause on an important band of the devices and the ban originally imposed. joining us now is nicholas matich. there is a lot of legalese here. i want to start with rationale. back in october, or prior to that when masimo went to the icc, there were five patents in dispute in the case and the icc found that apple had infringed two of them. within those two infringements, they granted masimo five claims. if you are any layperson or consumer, you look at that and say masimo is throwing so many claims at apple to see what sticks.

is that a fair assessment? nick: i don't think so. that is fairly standard in patent litigation. defendants do the same thing. they throw a lot of arguments about why those claims are valid and patent owners have a lot to overcome. when you come up with the new technology, there are a lot of ways to describe it. that is why patent owners and up getting multiple claims. otherwise one claim might be too broad and invalid and another might not cover other products in the market that are rightly part of your invention. ed: how usual or unusual is it for the itc to have these kind of proceedings against a very, very large company like apple? nick: it is very common for the itc to have these proceedings. there is a lot going on against large technology companies.

what is unusual is it made it all the way to a final decision that apple lost, the exclusion order against it and still has not settled with masimo. that is the thing that is pretty unusual. ed: the augment is simple, masimo feels apple infringed on patents and they therefore want to stop that from manifesting itself in apple products. one thing apple argue to the contrary is the issue of prosecution latches. explain that to our audience. nick: prosecution latches is a legal doctrine when you apply for a patent, you need to move the application along. you cannot just wait and watch the market will you are prosecuting your patent. it is not terribly well developed. it actually only got approved by the court of appeals recently.

it is not clear how it will shape out. ed: in going to the itc, masimo would have to demonstrate domestic industry, something apple might push back on. explain domestic and industry. nick: it is a unique requirement of the itc. it is basically you cannot go to the itc to get relief there unless you show you have significant investment in the u.s. you could be a foreign company like samsung and bring itc actions but you have to show you have a lot of investment in the united states. ed: nicholas matich, is a hard story to track and understand. we appreciate you explaining it to our audience. thank you. we will have more on this story with the ceo of masimo, joe kiani. we will have more.

a lot of questions posed by the legal proceedings. while this appeals process from apple might take a year, there are other things that could be happening in the meantime. from san francisco and the west coast, this is "bloomberg technology." ♪

ed: welcome back to "bloomberg technology." ed ludlow here in san francisco. a quick checking on the markets. the nasdaq one hundred is almost up a full percentage point. it is a shortened week because of the u.s. holiday. right now it is the mega cap s in tech driving is higher. also fed speak. be on the watch this week for fed speak because it has been moving markets. bitcoin is also interesting.

since we came on air at 12:00 eastern there has been volatility with bitcoin filing below $42,000 per token. we continue to look at the impact of trading from spot bitcoin etf after approvals in the last week or so. the main story is apple. apple is moving to the upside because of an analyst upgrade at bank of america to buy from neutral. the thesis the outline is positivity around vision pro. apple will have to sell it series 9 and ultra 2 watch with the blood oxygen monitoring technology disabled. it is disabled via software. why? because of an itc decision on an import ban in october. apple wanted a longer pause, which was denied. the overall appeals process to the itc situation first coming about in october is probably

going to take a year. we have the perfect guests to spoke to. joining us now is joseph kiani, the ceo of masimo. joe, i have tried my best to outline where we stand in the legal proceedings but it will be a year of appeal. let's start here. how recently have you spoken to apple in the context of mediation and what have those talks in the mediation context centered around? joe: i have not spoken to anyone, personally, regarding mediation. there are court-ordered mediations that happen regularly during these litigations. not the itc but the other two cases we have in california and delaware. but those are just meetings. nobody from apple has reached out. i am not here pleading for that but i offered in all of branch -- i offered an olive branch.

if not i would rather compete with my technology not in apple's products. ed: in the context of masimo the company, i am sure you have strong internal legal counsel and outside counsel, there are no conversations taking place at all between your company representatives and apple company representatives? joe: no executives are talking to apple, none of the apple executives are talking to us. there are court-ordered mediations that i cannot get into that have been held before and there will be additional meetings probably in the future. but those are not meetings i consider steps towards settling litigation. as you know, masimo, being the inventor of the pulse extremity, successfully sued and wo -- won

two other big cases that took six years. once we got an injunction, the ceo of a health care the time apologized and asked what i need to settle. we met and within 30 days we settled. those types of calls have not happened. ed: we will get to the technology discussion in a moment. you are the ceo of masimo. last year you had around $2 billion of sales. that is 5% of the segment apple reports that includes wearables. it has been hypothesized that a licensing agreement or royalties is one possible outcome. that must be something you are pushing for hard because it would have a material needle moving impact on your sales. joe: it takes two to tango. whether we wanted or not it has to be both parties that want it.

there are positive reasons or both of us to have it. probably the biggest positive is the consumers getting a reliable , accurate pulse oximeter, no matter whose watch they are wearing. i would be happy to have a settlement that is a win-win, i did not file this litigation because of that. i did it because, first of all, principally it is wrong what apple does, taking smaller company's technologies. they stole our people, our patents and our property. i had no choice to go after them. i am the ceo of masimo. i have to defend masimo's intellectual property. we make properties. we have $2 billion in revenue. the wearable market is a $50 billion revenue. we make the most reliable and accurate pulse xm enter. even when apple was making their

watch they thought the most important feature was pulse xm entry -- pulse proximity. i have the fda cleared product and it really works. i intend to get into the marketplace and hopefully gain our rightful share of the market. ed: we showed apple's statement on the screen a moment ago. in summary apple fundamentally believes the patents are invalid in the first place in the context of this itc battle and the associated court battles and apple fundamentally believes they do not infringe them, that their products as they are today do not reflect what is reflected in the patents. you make two competing arguments here. how will you prove the opposite of the statement i summarize from apple is true? joe: we are no longer alleging apple infringed our patent, apple has been proven to infringe our patents. not only the itc, the judges are

patent lawyers, reviewed, looked at the evidence and found our patents to be infringed, but even -- generally kill 80% to 90% of patents brought in front of them found these patents to be valid. when the judge ruled in our favor, apple told the commission, which is the commission's appeal group, do not pay attention to what the judge did. the real expert is ptab, they did not invalidate our patents. then we said you showing look at that if they found the patents to be invalid. we are the inventors of this technology. my coinventor went to apple and took this technology to them. the only two companies that had this -- you can get accurate

readings, masimo and apple. i wonder why. ed: i am focusing on the itc decision to ban from october because that is the latest. the action apple has to take today selling the series 9 and ultra 2 with the functionality disabled is related to the process. in the original itc decision from october, you submitted five patents in the context of that case. the itc found that two apple had infringed and within those two, you were allowed to proceed with five claims. in all, you made more than 100 claims in the itc allows you to move forward with five. to play devils advocate, how is this not to be interpreted at just throwing everything you can and apple to see what sticks? joe: first of all, in the entire

history of masimo, we have had two major litigation. none of our patents have ever been invalidated. in 2012, under the american invest act, ptab was created to look at people filing processes to kill people's patents. unfortunately they created what is not clear and convincing evidence to kill a patent but preponderance of evidence. that is why 80% to 90% of people's patents are getting killed and apple happens to be the number one customer of ptab. focusing on the itc case, this particular litigation, none of our claims were invalidated. itc found our patents to be valid. some of them they thought apple

did not infringe, some of them they thought they did. some other they thought we did not have domestic industry on. we have not thrown our patents against the wall to see what sticks. we have been in business for 35 years. i am one of the coinventors of this technologies that has revolutionized pulse oximetry. over 200 million people per year are monitored with our technologies. when apple wanted to make their pulse oximeter, they wanted to hire my team to develop it for them. i think this narrative is false and it was given to find that apple was found to infringe by the commission, several agencies from president biden reviewed this to see if they should intervene and they did not. the court of appeals just joined

them during the appeals process, to have someone say to me apple thinks your patents are invalid, they have their own -- what do they call it? a fake reality? they can live in that reality if they want, but to the rest of us? ed: joe kiani, we are grateful for your time. what is clear that you and apple agree on is pulse oximetry can be a real benefit from a health perspective to the consumer. one of the arguments that the consumer might make and was flagged to me on social media when i said you were coming on the show, there are people who want to buy the series 9, apple has a great installed base of devices around the world and there are consumers who may or may not put off buying that product because apple is not able to allow the functionality in the context of blood oxygen.

explain your thinking on that to me about access to the technology and where current proceedings inhibit that for the consumer. joe: thank you for asking me that question. i am glad one of your audience did ask that. this is actually really important to me. i have dedicated my life to helping improve people's health care. i have done a tour of innovation, philanthropy, advocacy. when someone says you took this away for me, i cannot bite anymore. the people who already have it -- i cannot buy it anymore. this is one of those alternative universes apple has created. in their own internal documents, apple knew their product was not good enough to be relied on medically. it was not good enough for them to seek fda clearance. literally they said -- this was in 2020 -- in the chaos of

covid, this is quotation in their document, if we latch pulse oximetry with our watch, we will gain market share from fitbit. that is where they launched it. their own testing showed it measured twice a day at best on 37% of the population. pulse oximetry is not useful unless it is a continuous monitor. that happens during sleep. during sleep, you could have a desaturation that might be to apnea. you can have a dangerous desaturation to opioid pain relief you might have taken. that is where the value comes. our product, which is fda cleared, can actually do 70,000-plus data points per day. it is a continuous, accurate pulse oximeter. unfortunately, apple is masquerading what they are offering to consumers as a reliable, medical pulse oximeter even though it is not. i really feel wholeheartedly

that consumers are better off without it. if they really need pulse oximetry on their wrist, they should buy ours or find another solution that is accurate and reliable, not something that gives you two measurements per day at best. ed: joe kiani, masimo ceo, we are grateful for your time on the program and helping explain a complicated process. thank you so much. coming up on "bloomberg technology," we will take the pulse of the venture industry with katelin holloway, founding partner at seven seven six. this is "bloomberg technology." ♪

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ed: let's get right to the venture industry with katelin holloway. she is a founding partner at seven seven six. a venture capital firm founded by the reddit co-founder which currently has $970 million in assets. welcome to the program. katelin: thank you so much. i'm happy to be here. ed: i think we agreed 2023 was a more difficult environment for your industry and the startups you invest in. how has 2024 started? katelin: [laughter] we are only a few weeks in and there are some big headlines, especially around reductions of forts and layoffs around big tech. there will be a trickle-down effect to the startup industry. ed: negatively or positively? one idea outlined -- we said

there is a sense of deja vu because we started 2023 with big tech layoffs. what idea was if you are a start up is a lot of talent on the market that might otherwise not be available. katelin: there are so many incredible opportunities. full disclosure, i am an optimist. there is a huge opportunity ahead of us in 2024 to not repeat the same mistakes of 2023. we are going into an incredible new chapter. we have the accessibility of ai. ai is so prolific within the tech industry and so accessible to not only founders but consumers. we are in a post--- more companies are being pushed into being more thoughtful about how they are building. we have had a depletion of funding. that is from the lp standpoint trickling down.

they were over indexed. from the venture space, managers not giving out as much capital. the impact going into this chapter i think is a real opportunity both for founders and for vc's to step up and play their part. ed: it is an interesting time behind the scenes of your industry. you just had your firm off-site, your partner shared a little snippet into on social media. what were the discussions you had based on what you explained to me and what did you agree to do in response to that? katelin: i love this question. having been a former head of hr -- i was in hr executive for well over a decade -- i will date myself -- a lot of the practices from building

companies translated over to building our venture capital firm. starting with not only having deep expertise, folks who were founders themselves, people who built that zero to one several times and ultimately taking companies through exit is a real advantage for us in this chapter. the headlines of doom and gloom that everyone will lose their job, whether it is ai kicking in or no capital being available, the real opportunity is -- how can we as the investors, the partners who are portfolio companies, really step in and get this an opportunity for more companies to succeed? i think there are several companies who will not survive this year because of capital constraints, not necessarily because they did not deserve the chance to thrive, i really think something that set seven seven six apart from the rest of the industry is our deep people expertise. converting hr folk into

investors. one side of the boardroom table to the other. you can say i have done that and i have been there with you. whether it is helping with the reduction -- sometimes that includes a layoff. oftentimes it does not do it -- often times does not need to. all of the promises we make, we have to make good on them. ed: there are a lot of themes in your investment focus. seven seven six founding partner katelin holloway, great to have you on the program. this is "bloomberg technology." ♪

ed: samsung unveiled the s24 product family days after the company was dethroned as the world's top phone maker by apple. let's break it all down. the competition is heating up. what caught your eye from samsung? mark: thank you for having me. samsung and some of these other companies typically come out with a new camera feature, big hardware changes, new speakers, some overhauled software interface. this year you are not seeing new looking software. you are not seeing new looking hardware. you are seeing ai. ai everywhere. what samsung is doing to get people to buy their latest

phones is integrating artificial intelligence. the coolest example and something i wish i had in college is a voice memos app. you can record a lecture and at the end of the lecture you can get a readout, a summary of what was discussed with ai. you can use ai to do more advanced searches. you can circle something and get inside through google search. this is all powered by the google gemini models, their probe model. they are talking about integrating their ultra model. it is ai everywhere rather than major hardware or software upgrades. that is where the industry is going. you will see apple to the sand this fall. the iphone 16 will not be a massive overhaul. the camera changes are more significant with appleton samsung. in terms of major fundamental shifts, it is all about ai from samsung to apple.

the other thing samsung did -- this is a competitor to aura. the company says it will be on sale before the end of the year. ed: thank you. this is bloomberg. ♪

>> welcome to work markets. let's get started with a quick check on the markets, now in the green. snapping two days of the clients on the s&p 500, up .2%. the nasdaq 100, up about .8%. that is all as yields stay roughly stable. the two year and 10 year are parting ways. the two-year is relatively flat. we will keep an eye on that all week.