>> i'm in for emily chang. this is bloomberg technology. tumbled, is tech losing its shine? and the microsoft ceo joins the -- google thele's latest to reveal a security flaw. our exclusive interview, coming up.

volume.g drop in user we will look at what's ahead. top story, u.s. stocks have seen their longest losing streak of donald trump presidency. we saw the bank stocks hit the lowest level since they to live, falling as much as 4.1%. investors are searching for answers. here to explain is sarah. >> if you think about the, this season, heading in, tech as a sector is expected to have 90% earnings growth. that is still great, but the s&p as a whole is expected to see 40% as a whole. you can make the argument that maybe for once, tech does not have as much luster into earning season. caroline: does everyone could bring out 20% growth.

i'm looking also this is a question of whether the mighty fall. i'm looking at how much the beaten up stocks have been the most in favor. you can check it out on the bloomberg terminal. performance nowadays is no guarantee for future results. how much is the best performance becoming the worst performance? sarah: if you look ever momentum -- look at momentum, it has its worst day since yesterday. etf tracks the past winners over the past year. so you are seeing the big winners get sold and if you think about the bull market, four of the top five names or microsoft, apple, amazon, and alphabet. yesterday they were the four biggest lacquers as well. you see the direct opposite reaction. caroline: let's get a perspective from the investor base. our chief market strategist joins us.

michael, is it the time to start buying. have we see enough or erosion that the companies look at a better time to get in? michael: i think this is only the beginning of the selling of the technology sector. it seems to me the china hacking story that bloomberg businessweek broke last thursday is where the selloff in technology started. and it has gained momentum in the past, throughout this week. there was another report earlier this week that there was another instance of this espionage occurring in a technology supply chain. caroline: i was speaking to the ceo of softbank yesterday who was discussing how he feels playing the businessweek story is key. >> the next big security attacks will not become from your conventional email, it will come

from the hvac system. 90 billion microcontrollers are shipped in the world. the secure operating system will help us ensure everything going forward will help us be secured. caroline: apple has been tainted by the story and microsoft has not. they say they have seen no vulnerabilities. how much of these concerns going to double down on the trade tensions between the u.s. and china? michael: i think this is a major event. one month ago, there was a report that china might toyed with the technology supply chain as a negotiating technique in the trade war -- tactic in the trade war. you would risk alienating the u.s. multinationals dealing in china, but they are trying to

wage the trade war in an effective way. when you have the hacking story break and gain momentum, you have to think the whole entire technology supply chain has to be rethought. when you think about globalization and the china entering the wto in 2001, the u.s. economy traded gdp growth, wages, jobs in exchange for corporate profits and lower consumer prices as companies offshore to. that is a big shift -- offshored. that is a big shift. caroline: sarah, you are looking at many sectors. how much of these pre-announcements been a problem? sarah: we have one earlier this week saying china is cracking down on border policy checking people coming into the country. that said names like tiffany and louis vuitton were lower on the day.

it is kind of leading to higher input costs as well. companies cannot keep up with this. caroline: let's talk about earnings. michael, how do you set yourself up going into the earnings season and how is technology likely to outperform, underperform, or match? michael: i think this whole trade war story is much bigger. the first half of the year, earnings and tax cuts were a big part of it. the repatriation of the offshore tax on technology corporations has become old news. going forward, everyone will be focused on how the companies manage the tariffs, the supply chain issues, and we have an environment where we have got to one-time boost from the corporate tax-cut. what is the outlook going forward?

as sarah noted, we've seen weakness in other sectors which will be a source of concern for investors. caroline: on the day like today, technology outperforms. what do you think? michael: today is a perfect example. the technology companies have been down leaders in the past week and they were the first group to get sold at the heart of the issue. then, the past two days, materials had announcement. in the chemical sector, their clients are industrials. you saw a few days of strength in utilities because they do not sell or source into china. they were thought of as a safe haven. now you see people come back into the oversold groups and their selling other group still up whether it is financials or health care. you are seeing downward rotation in the stock market which shows investors are jittery. after a huge bull market, they're looking to take profits off of the table. caroline: great perspective from

the sarah and michael. thank you both for joining us. the group behind matchmaking app, bumble, is weighing an initial public offering and the u.s. as part of the plan to become the biggest dating business. this is according to the founder. they hope to take over tender as the world's most valuable dating app. my exclusive interview with a ceo is next. if you like bloomberg news, check us out on the radio. listen on the bloomberg app, bloomberg.com, and, in the u.s., sirius xm. this is bloomberg. ♪

caroline: microsoft ceo has 20 -- joined the call for a national privacy law days after google revealed a security flaw in its google plus shows a network. other firms would als rather have one specific law. i sat down for an exclusive interview and started with the pentagon cloud computing contract that's worth over $10 billion. >> microsoft, for all of our existence, we have had the department of defense as our customer and many other federal agencies. tomorrow we have our government summit where we talk about everything we do from the department of labor, to fema, and the veterans affairs and so on. we are probably investing in our competitive if radiation and edge technology, which is more relevant to more of our taxpayer dollars spent well, so we can get more efficiencies out of the

i.t. infrastructure that needs to power all of these institutions. we are very focused on making sure we bring the best technology and compete in any of these contracts get put out. caroline: with a focus on security, which must be front of mind when you serve anything federally or the government, how much do you think there is a focus on security? you as a company has managed to define midterm election potential attacks from russia. how are you looking at cybersecurity and ensuring you are at the cutting edge and his attack global at the moment? >> some of the best work that we are doing when it comes to the industry is help of the

cybersecurity posture. the most important thing we as a company can do and have as an asset is our operational security posture. with something like seconds of and a half -- six and a half trillion events we see and billions of loggins a month, maybe a couple of different malware we inspect so all that has to be converted into operational security health for our customers. a good example is what happened when we saw an attacker group was attacking some folks in the senate and affiliated groups of the republican party as phishing attacks. we realized we needed to get a hold of those domains. this is where it is not just about the technology but about the policy work we did working

with the legal infrastructure in transferring those domains. another single is traffic. -- sinkhole is traffic. they are targeting small businesses because consumers and small businesses suffer the most when it comes to cyberattacks. there was an attacker group attacking small businesses in tennessee. we were able to get rid of this on first sight which is one of the big challenges of ai. we're doing work there. the next big security attack will not come from your conventional enough being contra mise -- compromised, it will come -- from your conventional email being compromised, it will come from the hvac system. the system helps us ensure all microcontrollers going forward can be secured.

caroline: talking there about software and hardware issues and safety. we've seen a bloomberg businessweek piece looking at supply chain strength. is this something you think is fully secure when you look at microsoft and can be going forward? satya: when it comes to operational security including the soft train -- software supply-chain, it is about every day being at the gym and practicing. in our case, we are no exposure but we constantly have a lot of people dedicated to it, and a lot of rigor and process dedicated to imply our supply chains are secure. caroline: wrapping up with the cybersecurity conversation is

privacy. do you think the legislative agenda is where it should be, regulation is where it needs to be when it comes to privacy of individual's data and the security of company data? satya: that is a great set of questions but we are already living in a world where the secular movement around individual data is that you should think of privacy as a human right. gdpr in europe legislates that. we have done a lot of work implementing that in our products and we have taken off some of the rights from gdpr and made it available globally. i think that is something the united states will look at. california look at it. we hope there is more of a national privacy law because we do not want increased transaction cost arming the small businesses. if you really want a level playing field, having legislative framework that uses

transactional costs and allows new entrepreneurs to adopt it is a very important thing. the other thing is cloud act. i'm very pleased to see us because we had to go to the supreme court to fight our own government on this case many times but we did. we worked with legislative bodies to get a cloud act passed. that creates a new equilibrium on how you can balance your need for privacy on one end and national security on the other end. this is something i'm hoping will now be bilateral deals between the united states and other governments. caroline: you helmet a fascinating company because it is more than 40 years old. it has been through its education process, it has looked at regulators over the years, it's making sure that it is now one of the most value companies in the world -- valuable companies in the world. how do you look at other technology giants and seeing them have to evolve or catch up

to some of the ways, charges, and regulations you have had to deal with in the past. what advice can you give to them as they deal with it? satya: i can only speak to our experience and what we try to do. i don't say this as a term of competition between us. when i look back in our own history between 1975 to now, technology is important in our society and economy. the tech industry itself -- but yet it is influenced on the rest of the 95% -- its influence on the rest of the 95% is greater than it used to be. we should become trouble knowing

we would be held to a different standard -- the comfortable knowing we would be held to a different standard. microsoft is everything from what is our operational security posture to what is our ethics. how will we go and ask for regulation where it will create more of a rule of law and framework for us to make progress. i think these are all places where the needs to be maturity beyond day-to-day competition. caroline: that was the microsoft ceo there. next, he weighs in on the tray concerns gripping world economies. more on my exclusive chat with the microsoft ceo is just ahead. "bloomberg technology" is livestreaming on twitter. check us out @technology, and be sure to follow our global news network, @tictoc, on twitter. this is bloomberg. ♪

caroline: as the trade conflict

between the u.s. and china deepens, the microsoft ceo weighed in on how the tariffs might impact his business. here's more from my conversation. satya: being an american company, i always say we are a multinational company that is american so we are fundamentally dependent on an proud of the american values and the trust in american institutions and values that the world has. clearly, that has served us well, and even today, it serves as well because our formal government and democracy, with all of the debate we have, our ability to be able to set an example for what is a place

where a lot of people of diverse backgrounds come together, can have a debate, and make progress, i think that's what's makes america great and gives us credibility. we cannot take any of this for granted as a nation or company. trust is this formula about having values consistently applied everyday overtime. that is what engenders trust. caroline: the tray tenders -- trade tensions concerning? satya: let's call this the phase of globalization not creating equitable growth in all parts of the world or in any country to all parts of society. every country is looking at what are their relations around trade that help them thrive because that is key. every country will put their country's interests first and look at what makes more sense. what is our responsibility is a multinational country -- how do we make things more

competitive. if we do that, we are good. if we don't, we have a challenge. long-term stability comes from our ability to create more surplus outside of what we do. caroline: talking about trust and about the way in which you help serve businesses, you have made a big push into artificial intelligence. ethics is wrapped up in that and in the way decisions are made. satya: that is a very important topic. it comes in three parts. just like any other technology, we need to have a set of design principles used and practiced every day by our product makers and designers as we create new products that are ai driven. we have six privates best principles about fairness, security, inclusiveness, and

transparency to be practiced on these abstract things. in practicing them, we also have to make the software engineering more sophisticated. for example, when you have a language model that's trying to make decisions, the model learns from human language out in the wild. human language in the wild has biases. we need technology that can help artificial intelligence marbles to be deal biased. data is important. the age of data needs to be thought through. does a lot of work in building the tools of the practice of all by -- ai to be robust.

we are making sure the technology and uses are being ethically governed by our values. caroline: have you had to turn down company contracts because it has not set well with your ethics groups internally? satya: absolutely. even prior to ai, we always had these principles. we have now gone a couple of steps further in having a process around it where we are clear if there is a project that does not sit well with our values, we do not do them. that is as simple as that. caroline: my exclusive conversation with the microsoft ceo there. coming up, trouble for tencent continues. asia's biggest stock has lost 20% in a ten-day losing streak. we'll discuss that next. later in the program, global hit crypto's. this is bloomberg.

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caroline: this is "bloomberg technology." i'm caroline hyde in new york, in for emily chang. back to our top story. the nasdaq was up modestly a day after it had its biggest drop since june 2016. global tech felt the blow. tencent's downward spiral is accelerating at a dizzying pace. it saw its second worst day in seven years on thursday. the chinese internet giant has lost most 20% in an unprecedented 10-day losing streak. joining us is the managing director of msa capital. put this into perspective for us. tencent has been a rocket ship since its ipo seven years ago.

how much does this significant selloff over the last 10 days, over the last month or so worry you? >> it's really worrisome. tencent certainly has a hand in just about everything going on in china from chat to e-commerce, mobility, you name it, ai. for us, looking at where they are investing, the types of industries that are tied to the we chat platform -- wechat platform and are starting to see declining user numbers, i think it's an overall worrisome trend, at least in the short term here in china. caroline: this is a company that is trying to reorganize. it has been focusing a little bit more in different areas of the business, trying to diversify, particularly as they see regulatory hurdles being thrown at them by china,

particularly when it targets gaming, which is a cash cow for the company. are they making the right maneuvers to support profitability going forward? >> i think they are. a couple of the key restructuring items -- the first was this new platform and content group. we termed that them trying to unify their chat, short form video media, news, things like that that are being eaten away by this new entrant into the market. the cloud computing division or the cloud services division is a clear attempt to really try to counterbalance the impressive moves that alibaba has made in that space.

that seems to be going in the right direction. this new push into industrial enterprise, smart industries is really the largest and newest push and this is the kind of unified traditional industries with a lot of the ai, bid data, core components that tencent has always offered but now bringing them to traditional. it's a critical component of this restructure. caroline: do you think this will work? is it more of a buying opportunity? >> i'm bullish on tencent, especially at this pricing. they have been trying to do share buybacks. they have their lowest p/e multiple, 25x. it is really low today as an overall share price, but they have a lot of gems in their basket. they have a lot of great investments. in ridesharing, entertainment, even in financial services spaces. they are just started to grow into other capacities.

their battle with tencent raises on in the fintech continues on. i think that today's price is not representative of where this company can go. caroline: looking at today's prices, it is trading at 27 times future earnings, 27 times current earnings. that is still more expensive than facebook, more expensive on a multiple basis then alibaba -- than alibaba. why wouldn't you just go into alibaba if it is a cheaper stock? >> alibaba is far less of a diversified platform. payments, logistics, other services. tencent has a hugely diversified portfolio that spans gaming,

entertainment, transportation, the omnichannel and omnipresent wechat. as a diversified platform, today, it is still difficult to compare it on a strictly p/e ratio against a facebook or an alibaba, particularly facebook. which is really dependent today still on advertisement. and has actually shown a lot less innovation than tencent. tencent is not afraid of cannibalizing its own business and investing in sectors where it doesn't have existing synergy today, but where the platform can grow and expand and potentially rescue the business should certain elements of it start to reduce in terms of their overall contributions to revenue. caroline: ben, a lot of this erosion in value has been

spurred on by concerns about the regulatory implications of china. how much is that tainting technology as a sector in the country? ben: we have had a difficult period over the last month. certainly, there is a high incidence of internet addiction. the china government reports about 23 million internet addicts. we also have had instances of predatory peer-to-peer lending platforms. there's a lot of work that the chinese government needs to do today to continue to regulate these rapidly advancing and rapidly changing industries that would be difficult for any government to keep up with. i think we will continue to see a lot of involvement from the government in a lot of these new and emerging industries. they have benefited historically from being under regulated. i think it will be a trend that

will continue. caroline: ben harburg, thank you very much for joining us. now, tesla and sec have put aside an insulting tweet by elon musk. they ask a federal judge to accept a settlement against the electric carmaker in its controversial ceo. musk later insulted the agency on twitter. tesla and musk have agreed to pay $40 million to settle claims that he misled the public by tweeting about a plan to take the company private. musk also stepped down as chairman. coming up next, crypto's rough year, taking its toll on one of the world's largest digital currency exchanges. we discuss. facebook purging. the social network is trying to weed out political bad actors on the platform. this is bloomberg. ♪

caroline: facebook says it is removing nearly 800 pages and accounts that have consistently broken rules against spam and coordinated inauthentic behavior. this comes right before the u.s. midterm elections, of course. for more on the story, let's bring in sarah frier, who covers the social network. what were these pages trying to do? sarah: this is different than the kind of interference in our politics we have heard russia and iran coordinating. this is actually people in the u.s., these domestic accounts that have been trying to use incendiary shocking political news to get people to click on their sites and into the ads they are trying to run. it's more of a financial operation to try to make sure they can hook people, the same way they do with health news that is a little scary or celebrity news that is a little

shocking. now politics is in the same category of things people click on. it has become a target for spammers. caroline: do we have any idea as to whether these tactics are very different than those employed by russia or iran? do they also do it for financial gain in some way? sarah: they are trying to run a misinformation campaign. they were coordinating real-world events that people showed up to to protest. they wanted to cause some chaos in the united states. this is different in that they are trying to cause popular websites -- this kind of political news, the click bait, the stuff that people want to read whether or not it's true, it can be quite lucrative to run on your website. i should note that fake news is not against facebook's rules. you can spread misinformation on facebook and it is totally fine.

they are trying to tamp down on it a little bit, but it is not against their policy. what is against their policy is running accounts with inauthentic names, multiple people having the same account in the name, that sort of fakeness. that is what is at the heart of what facebook wants to delete. that is a similarity across what russia and iran did and what these domestic actors are doing. they are creating accounts to drum up buzz about political news, even though those people don't exist. caroline: 251 accounts is a lot. do they do it all in one go? sarah: they probably knew for a while what was going on before they decided to take action on it. i think there is a little more pressure on them right now to try to do all they can ahead of the midterm election.

we are close to the elections now so this kind of content, even if it doesn't have an exact political agenda, except to shock and surprise people and get them to click, that could still be very damaging to the collective knowledge of the electorate ahead of an important election. they are trying to really be sensitive to that now, even if in the past it might have seemed sort of harmless. caroline: midterms are a key thing for them, i'm sure. sarah frier, thank you for that story. square slid as much as 16% after words that their ceo is leaving to become ceo of nextdoor. our analysts said fryer's leadership was more instrumental than that of jack dorsey.

let's shift gears to cryptocurrencies. wehaven bitcoin continued its , rough year, falling as much as seven percent on thursday. other rivals dropped as much as 11% to 13%. all of this on the same day as nouriel roubini told the senate banking committee this -- >> crypto is the mother and father of all scams and bubbles. blockchain is the most overhyped technology ever. it is not better than a glorified database. caroline: the bad news for the digital world -- digital currency world continues. coinbase took a bit hit with an $.80 drop in its buy/sell user volume. coinbase's u.s. dollar volumes have fallen $.80. dire, indeed.

that's over a period of fourth quarter last year to third quarter of this year. i will ask you first, with the senate hearing, flamboyant stuff from nouriel roubini, as ever. what does it mean, wife the senate hearing from him and people on the other side of the trade? >> the hearing reminded me of that hearing with mark zuckerberg, when the cambridge analytica stuff was happening. i say that because what i learned from it was a lot of the senators that were asking questions -- they still had very basic questions around cryptocurrencies. we've seen it before in past hearings. it's becoming more clear that our government doesn't fully understand cryptocurrencies and blockchain technology. there was one point in the hearing where -- it was nouriel roubini versus a gentleman from the crypto lobbying firm.

he started to be a little bit technical. one of the senators kind of redirected the question, sort of pushing him to give a more simple answer. it was clear that he didn't quite understand it. caroline: what do you make of nouriel roubini grandstanding here? joe: i've been really entertained by nouriel roubini's tirades in the hearing and on twitter the last few days. he is going to town. the funny thing is, he sounds like a really hard-core bitcoin maximalist. he uses a pejorative that we can't say on-air. he slams ethereum. he slammed blockchain technology. it's almost like he says all the things that the really hard-core bitcoin tribe likes to say,

except he doesn't say anything good about bitcoin. i've been amused at how much overlap there is between him and the most hard-core faction of the crypto world. caroline: interestingly, it's not correlated. joe: cryptocurrencies are getting clobbered again today. it's hard -- crypto falls 10% frequently. who knows? the way i think about correlation is, in a panic, what do you do? you worry about your bills coming up at the into of the month. you raise money in the currency that your bills are denominated in. i need some dollars. no one has bills denominated in cryptocurrency that i have ever heard of. caroline: i just got pitched by a company saying it has loads of future rentals. joe: by and large, crypto is a very good thing to sell if you need dollars.

when you get volatility, you sell everything besides the currency that you need. caroline: talking about buying and selling, it seems as though coinbase, one of the biggest, if not the biggest exchange, has seen a real plunging users. >> they have seen an 80% plunge in active users. prices in cryptocurrencies have dropped. if you are trying to run a business, it is not great. one thing they have to do is figure out how to diversify their business. they also have been trying to do that. they have introduced all these new products over the last year. they have been doing this big institutional push. there was a story out today that they are shutting down their index fund product because they were not getting enough institutional interest. we also learned this week that adam white, who is a key executive, their fifth executive, fifth employee of the company, very important in their institutional push, he is leaving. caroline: what do you think that says?

we have spoken to some big players. are institutions getting into it at the pace we expected? joe: it's hard to say. there have been a number of announcements this year that i think if we had got these in 2017, people would have been like, this is incredible. the yale endowment allocated a little bit of money to a crypto hedge fund. it's a tiny amount. it's not the type that moves the needle, but these stories would have gotten people so excited last year. on the other hand, so much of the hype last year was about front running what we have seen this year. maybe it is all priced in or old news. this is what was expected. the fact that some of this is actually happening is not new. there needs to be some new catalyst. caroline: do we know who is really hurting right now?

those who have really hurt in ethereum and ether, they have been sitting on this money. they didn't turn it back into fiat money. >> the people who have been holding the cryptocurrency -- caroline: who are they? >> there are different types of people. one is the crypto hedge funds. there have been hundreds of these crypto hedge funds that have emerged over the last year. they went into this new asset class for force and they are seeing returns plummet. caroline: we will have to keep track of their viewpoint. joe weisenthal, i will be hanging out with you in a little bit. and lily katz. when we come back, a rocket launch failure forces the u.s.-russian space station crew to have an emergency landing. what does it mean for the future of the international space station? we will talk to former nasa administrator charles bolden. this is bloomberg. ♪

caroline: this is bloomberg technology. i'm caroline hyde in new york. a soyuz spacecraft launched, carrying an astronaut and cosmonaut. during the launch, there was an anomaly with the booster and the launch was aborted. what happened next was an emergency landing of the spacecraft. joining us to discuss is retired astronaut charles bolden to talk us through just how rare this is an occurrence. charles: this is a very rare occurrence. we have only had, to my knowledge, one other abort of a soyuz spacecraft, and that was quite a while ago, when one of the cosmonauts with whom i trained was actually ejected

from the launchpad after a fire on the launchpad. the soyuz and its launch vehicles have been very reliable spacecraft up until now. caroline: how will this affect the space station, do you think? charles: that's the question. where do we go next? it is a setback, because today, because of restrictions on nasa's ability to work with the chinese, nasa is relegated to one capability to get their astronauts to the international space station, and that's on the soyuz, the russian spacecraft. a year from now, if all goes well, we will be back to normal and we will be able to utilize either the boeing starliner or the spacex dragon to launch crews from cape canaveral.

that's like an eternity away right now because of the failure today. >> its all tied up with the recent resurgence and focus of the u.s. government into the space race. how do you think this has been taken by people such as yourself, who have dedicated their lives towards studying space? charles: let me correct one thing. i will take issue with you on one thing. there is no resurgence in the interest in space, particularly human spaceflight. what we are doing now is a continuation of what has been going on for a number of administrations. the decision to move away from shuttle and to rely on soyuz as an interim measure until the united states had its own capability again was one that i agreed with and was very important, but the problem arose when we found out how difficult it is to get things and people ready to go to space. we're in a position that we were hoping we would not be in, but

we will get out of this, because we have thought about it very long and hard. caroline: how much do you think government funding and focus is necessary at the moment, when we seem to have so many private sector billionaires, for want of a better expression, focusing on this area as well, even though they might be interested more in space travel rather than investigation? charles: given the dreams of what i call commercial ideologues, there is one customer today for human spaceflight and that's the u.s. government, nasa, and our international partners. there will hopefully be a viable commercial capability for putting humans into space, but realistically speaking that day is not now. caroline: we thank you for your expertise and your experience. nasa administrator and astronaut charles bolden. that does it for this edition of

"bloomberg technology." i'm caroline hyde. this is bloomberg. ♪

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