♪ taylor: i am taylor riggs in san francisco in for emily chang, and this is "bloomberg technology." jp morgan's record year. we break down how tech helped push the bank to its most profitable year ever. plus, crystal ball. we will look at one of the internet pioneers and what he sees for tech in the years to come. hacking ukraine. in the midst of an impeachment investigation into president trump, russian hackers went after the company at the heart of it all.

our top story, jp morgan setting records. tuesday, reporting the best year for any bank in u.s. history. shares jumped in the fourth quarter, ruled by a rebound in trading. joining us to discuss, bloomberg's sonali bostic. it seems like humans at least stand another chance against the robots that had been threatening so much of the trading business. sonali: even though there are humans involved, remember that jp morgan among other banks are working very hard to make these businesses much more electronic. almost every part of these banks are being transformed by technology, except the m&a rainmakers we really need the relationships to make a difference.

if you talk to anyone at jp morgan, the ceo definitely says that they are just at the early innings in terms of what technology can do for them. that is with the nearly annual $12 billion spend on technology. taylor: we are only in early innings of that transformation from technology. what do we do from that retail visible presence? sonali: if you go to a branch network and need a certain type of loan, they still believe those are necessary. that does not mean that you can't supplement the digital with the branch network. citigroup, this morning, they were explaining that digital deposits have risen to $6 billion just last year. that is sixfold. they are making progress on all fronts here. taylor: any thoughts on how they are looking to repurpose that space? much of the banking is done

online but millennials want to make sure they can at least see a branch if things go wrong? sonali: first of all, they have to make these places more welcoming and do a lot with less space. we had citigroup this morning talking about their relationship with google, and to expect more product alongside google in the first and second quarter of this year. goldman sachs, the ceo has already started talking about the market that has rolled out much more quietly than their relationship with apple. now, you can do many more banking services on a mobile app. the big banks have been pretty hesitant to do what we saw with visa, for example, to go out and acquire a big company.

we have seen goldman make acquisitions at the margins but generally, we have seen them investing to make their own products and do partnerships on the side. taylor: you mentioned a lot of their tech spend. what do we know about how they are spending to invest in electronic trading and some of the other robotics and ai perhaps? sonali: when you look at the trading businesses, in the equity trading business, there has been a a lot of progress across wall street. fixed income, we are at the early innings. if you look at market access, one firm focuses on this world, they have really flown out of the water. they are really benefiting from

the investments they are making there. taylor: don't go anywhere because we are moving on to our next story and i want to include you in this conversation as well. the big deal around fintech. visa has agreed to buy plaid a company that connects customers. let's bring in bloomberg intelligence senior analyst for fintech, julie. what does plaid do for visa? plaid has 2800 fintech customers. it has the big ones. venmo, coinbase. plaid has really been a u.s.-based company so visa is in a great position to add fintech companies internationally with the plaid services.

payment capability into fintech. that would mean, more payment transactions coming across the visa payment network. taylor: earlier, we had nea general partner and a plaid investor, rick yang. take a listen. >> you have a lot of traditional and financial institutions talk about our software strategy, how do we stay relevant? then we have a lot of software companies recognizing the benefits of fintech to the consumer. with infrastructure like plaid, it becomes much easier to bundle that into software. visa, the rationale for acquiring plaid, it was really about growth and expanding.

taylor: what do you make of those comments? sonali: it is pretty amazing because when you look at some of the big stories of last year. wework, peloton, trying to command multiples, they had a hard time. a lot of the software companies won out. it seems like we have a pretty perfect marriage here where the software people family financial industry and the financial industry had a real need for the software people. otherwise, they would need to be paying up so much to be hiring. i don't know how many exits we can see that are this big. but remember, there are a lot of interesting fintech companies that have ballooning valuations, including stripe, the most valuable startup in america right now. taylor: an analyst at jefferies

came out with a note saying that visa had traditionally lagged mastercard when it comes to showing its value to fintech customers. how does this change the game for visa? julie: i think this allows visa to catch up and levels the playing field. the companies with deep pockets are able to throw money at the issue. when they need a capability, when they feel the time is right, they are able to go and pick up these companies. essentially, the revenue of a company like plaid is practically a rounding error for the revenue of visa. as these companies need the technology and feel that the time is right, they are able to throw their big dollars at them. taylor: this also addresses the theme of digital wallets. what other transactions have we seen from visa? julie: when the digital wallet first came out, everyone was

writing the obituary of visa and mastercard. the card brands were smart direct is that people did not necessarily want to get rid of their credit or debit cards. now they could use them on mobile. visa allowed its credentials to be added to a wallet so people can keep using the accounts that they always wanted to use. at the same time, it needed easier for the merchants to accept digital wallets because they were already connected, most of them, and they could continue to process payments. the threat turned into an opportunity and right now, visa partners with all the major wallets in the u.s., europe, india, and china.

taylor: thank you. rachel holt, one of the first employees at uber, who rose to become one of the most powerful employees in the company, is leaving to start a venture capital firm. she is creating a new firm, construct capital. holt led the development of new mobility project's at uber such as electric bicycles and scooter rentals. coming, aol cofounder and current chairman and ceo of revolution, steve case. if you like bloomberg news, check us out on the radio, the bloomberg app, bloomberg.com, and in the u.s., on sirius xm. this is bloomberg. ♪

taylor: british prime minister boris johnson is hinting that he will not and while way from the country's 5g networks. the u.s. has been pressuring the u.k. to ban the company from the country for national security reasons. johnson said that if they ban one supplier, they have to come up with an alternative. there is no shortage of tech related news. data privacy, antitrust, as well as trade. i am joined by steve case, aol cofounder and chairman and ceo of revolution. the first story, apple and fbi. a complicated story. a december 6 terrorist attack in a florida navy base. apple is a little bit hesitant to turn over the data. generally speaking, where you see tech as protecting people's data?

steve: i think you framed it perfectly as a balance between individuals. five years ago with apple, there was a case in san bernardino and they wanted them to open up the phone. it went back and forth. we will see more of these cases in the years to come as technology and the internet becomes more embedded in everyday life that it will deal with a lot of issues in terms of what it enables on the positive side and how you make sure society is protected from bad things happening. taylor: one of the arguments, if we create backdoors or loopholes, it allows bad actors to come in. steve: it is a fair argument.

i do not know all the details with this recent case in florida. apple obviously would have a lot more insight than any of us. these are not simple issues. it really requires engagement. that is one of the things i hope will happen more in the next 10 years. engagement with silicon valley, the policymakers. we are going into an era where it is so fundamental. of course, privacy is important. it makes sense for apple to protect the privacy of its consumers. it is also of course reasonable that law enforcement has the tools to protect us as a society. it is tricky and you have to get into the details. taylor: we are waiting, phase one perhaps of the signing of the u.s.-china trade fight, hoping to get a little bit of a resolution.

as you look at phase one and going out further, and especially as a tech entrepreneur, do you think we got enough concessions from china with ip theft and some of those forced tech transfers? steve: the tech transfer issue is probably the most fundamental and the trickiest. china agreed years ago to not require technology companies to transfer technologies to compete in china. i think having some kind of truce, some kind of settlement so people can move forward with there is clarity, everyone knows the rules of the road i think that is a step in the right direction. it really comes down to the nitty-gritty, the execution. i think broader, from a global standpoint, for decades we have

been focused on internet as a global phenomenon, but we are seeing, particularly in china and more broadly in asia, a splintering of the internet. the internet will not necessarily be as global. how that is connected into everyday life, dealing with policymakers to getting these issues right. taylor: how do you operate a company in china and how do you operate an internet service given that effectively your reporting to beijing? steve: it is tricky. google, as an example, did not do that. they decided a few years ago that they made those compromises.

not to continue to compete with some things like instant messaging because we were concerned about some things around censorship. trying to build revenue, serve more customers, create shareholder value, but also figure out your broader responsibilities in society. every company has to make its own decision. it is getting more difficult than it was years ago. taylor: steve case, revolution chairman and ceo, will be staying with us. up next, how he thinks technology will shape the next decade. "bloomberg technology" is livestreaming on twitter. check us out @technology and quicktake on twitter. this is bloomberg. ♪

taylor: revolution chairman and ceo, as well as aol cofounder, steve case, is still with us from washington. you have been traveling the u.s. looking at startups and innovation hubs outside of silicon valley.

you announced five new destinations. wichita, oklahoma city, tulsa, northwest arkansas, and st. louis. why those cities? steve: this is our ninth road trip. we have been visiting cities to shining spotlight. they are building really interesting companies. obviously, silicon valley is going to continue to be a great center of innovation. venture capital went to just three states. whether it be kansas, ohio, michigan, other states, get less than 1%. we want to level the playing field and allow entrepreneurs to people feel like they can be part of the future as opposed to just a few entrepreneurs.

there have been a number of breakout successes. we have now backed over 100 companies in 70 cities, over 30 states. it is excited to see what is happening not just on the coast. taylor: it would not be a good interview with an entrepreneur if we did not get some of your top 10 predictions of the next decade. reading through your blog, one thing that stuck out to me was the rise of health and wellness. i wonder, how much of this appears to be overvalued even that there appears to be so much attention on health, on wearables. steve: a lot of the focus has been on the wellness side of things. the consumer decision. over the next 10 years, the core of the health care system. a lot of companies doing really interesting things. a chicago company using an ai to

diagnose cancer more precisely so people know what they are dealing with and there can be a more personalized approach. you would see a lot more of that. better outcomes and at a lower cost. taylor: another one of your big predictions, more tech backlash. do you think the problem here is that there is not enough trust between the consumers and the owners of that data as well? how do you get more trust so there is not that big backlash we have started to see? steve: two areas, one is the consumer side of things.

they are starting to get a little more concerned. they are concerned about the election's given some of the things happening. not surprisingly, the policymakers, they are saying, this technology is allowing things to happen, but how do we strike the right balance in terms of managing this. the backlash, regulatory backlash, probably a look on the antitrust side, facebook, google, others getting broken up. these companies will be a little bit more careful about making new acquisitions and that will have an interesting impact in the startup sector, maybe open up opportunities in sectors that right now look locked down by the incumbents. taylor: you are looking at a rise in e-commerce. does someone come in and disrupt amazon?

steve: amazon looks to be in good position. walmart and amazon are duking it out. they had different strategies, they are starting to converge with a bricks and clicks type of strategy. most of the attention is on what is happening on the direct to consumer side of things. many copies that have formed, warby parker, frame bridge capitalizing on the e-commerce boom. on the backend, companies like big commerce focusing on reverse logistics. what happens when products get returned. freightway, figuring out where trucks should go to deliver the products. all the infrastructure happening around that will continue to accelerate in the next decade. taylor: we have less than a

minute. i wanted to get your thoughts given that we just passed the 20 year anniversary of the aol-time warner merger. would you do it again? steve: i would do it a little bit differently. trying to drive the conversions of what we have seen, things like netflix, the ipod. aol and time warner together had the potential to do that but they never worked well together. there was a culture clash, a bunch of other challenges. it is great to see companies like disney bring the whole company together in an integrated way to launch disney plus. i wish we had seen that 20 years ago. thomas edison said, "vision without execution is hallucination." that is what i think about that merger. great promise but it was obviously a big disappointment. taylor: always great to have your thoughts. thank you to steve case, revolution chairman and ceo, and cofounder of aol.

coming up, how chinese companies are pursuing access to global technologies. this is bloomberg. ♪

♪ taylor: this is "bloomberg technology." we joined bloomberg daybreak australia to bring you the latest news. haidi stroud-watts is in sydney. let's take a look at the top tech stories of the day. haidi: royale has vowed confidentially to raise $1 billion, according to sources. it's now tapping u.s. markets after liquidity downturns. royale is known for manufacturing the world's first commercial disposable phone. credit suisse has stopped working on the upcoming u.s. -- according to sources.

it joins other investment firms including citigroup and bank of america. it follows going concerns about a potential sector downturn. amazon has offered alone after u.k. probe into the startups funding round brought on a cash crunch, according to sources. it could be running low on capital at the london-based food delivery service is said to have sufficient funds to continue operating. a spokesman declined to comment. those are the top tech stories we are watching. shery: an achievement in the tech sector for huawei in china. it broke into the top 10 recipients of u.s. patents last year.

it's the latest sign that chinese companies are aggressive in pursuing the u.s. lead in global technology. and trying to overtake germany for the first time as the fourth biggest recipient of u.s. patents. i'm joined by anand, great to have you with us. it seems a lot of those patents were related to 5g and we have this trade dispute still ongoing in the tech sector with the blacklisting of huawei. how has that affected this rollout? >> is no surprise that china wants to dramatically expand its tech prowess from semiconductors to advanced internet services.

it is no surprise that huawei and other chinese technology companies across the landscape are filing for more patents, to the degree this is home-court, and it is also a large market. they want to secure home-court advantage, so to that extent they are pushing for patent exposure or patent protection in the chinese market before they expand into other areas. that is the first part of it. with respect to the global trade drama, this is going to be a continuing saga, number one. number two, we're going to see these patents be enforceable in multiple jurisdictions all the way from d.c. to europe to china to the u.s., and multiple jurisdictions even in the u.s., so it is not surprising that this is a natural evolution, both by chinese technology companies as well as from a location perspective, they are trying to secure this advantage.

taylor: are you surprised that the u.s.-china trade fight hasn't stunted both the long and short-term goals of some of these global tech companies? anand: i am surprised by the fact that it hasn't dramatically impacted, you are right. huawei is a very large player in the technology landscape, particularly from domestic chinese consumption. its consumption of chips wasn't that substantially affected. the revenues were not substantially impeded as a result -- as a result of the trade drama. it also goes to show that the technology foodchain and its impact is perhaps far more wide and deep reaching then we originally thought. shery: we continue to see that trade tensions easing, but what happens with the bifurcation of

tech with different regulations in asia, the u.s., europe. what happens to the future of global tech? anand: it's not good. the escalation has continued to a point where you have parallel tracks. you go back to vhs and betamax all over again. this time it is regionally split, not company differentiated. run the risk of companies developing multiple chips or multiple standards for one jurisdiction versus another. it's not that long ago that we had mobile phones we had to carry that would not work in one region or another. now the consortium has immigrated to where you have a single device that works globally. he ran the risk of potentially bifurcating that again. i think that risk is now sorted, potentially as the parties come to the table and sign this trade deal hopefully in stage 1, 2, 3.

taylor: do any of your outlooks change, even the potential signings that we could see? anand: i think the expectation that the trade deal would be signed was very high. semiconductor stocks have rallied for 2019. companies -- some companies have doubled that. the expectations going into 4q was that we would get a deal signed and it would not be the worst case scenario. so that was taken care of. now from a demand perspective, we still think that 2020 is going to be a pretty good year, or the second half relative to the first have. taylor: thank you for joining us. much more ahead, so stick with us. this is bloomberg.

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taylor: time for a look at the top tech calls. apple got a rare downgrade on tuesday. analyst said the upside potential for the 5g cycle is now full. gamestop reported lower guidance for the year. benchmark analyst said management ceased zero terminal value. there is a three dollar price target on the stock. tesla shares rose for a second day after an analyst bump the price target to $600 a share was saying it would be wrong to -- analysts increased the price target to $455, a share saying the company's firing on all cylinders.

speaking of tesla, larry ellison seeing his friend rewarded. he bought a billion-dollar state in 2018. that stake is now worth more than $600 million more. tesla shares have risen 25% in the first two weeks of 2019. fourth quarter vehicle delivery beat estimates. i want to bring in an energy technology analyst. there is a lot to digest there. what struck me today, you have a $6,000 price target on the company and a $70 price target. where is the fair valuation for this company amid all the bulls and bears?

>> my fair valuation is below where the stock is now, to be honest. i had downgraded the stock on concerns about demand earlier, and frankly, i wish i hadn't done it. the company's competitive position continues to improve, but i'm not sure i want to buy at the current valuation. taylor: the last time we had you on, we were talking about this. frankly the bull season on this company is that they're able to get it done in china and china makes up about half of the total ev sales. his china deal breaker when it comes to the bears? >> i think it is more than that, to be honest. i was just at the consumer electronic show and one of the things that struck me on tesla and some of the other ev startups, it is still weak.

it's shocking here in 2020 that the major companies don't have a product to compete with tesla. china is not the whole story. taylor: you said you would probably not be buying tesla at these valuations. is it the rate of change and the right of moving up that makes you nervous? >> is an analyst, when you end up in a situation where you've missed a big move in the stock, there was always a temptation to just give in. if you are wrong, you try to step back and think about the next thing to do. tesla's competitive position is awesome. that does not mean i would be buying the stock right now. taylor: we are going into earnings in a few weeks. let's get back to the fundamentals. what do you want to see in terms of numbers? anand: they do a very good job of communicating about their business so we already know the units they did for the fourth quarter. i don't think financially we

will see any big surprises. the big question is the outlook for 2020, because it is a new year, and the margin they will be able to operate in. that's what i will be focused on. taylor: the profitability at one point was elusive and they've been able to show it the past quarter. >> i would like to see a gross margin in the high teens and i would like to see them be able to generate more than a billion dollars in free cash flow. i think that is what matters. taylor: do they have to go back to the debt market anytime soon? how is the health of their balance sheet, given the big run-up in the stock? >> they have debt they will have to refinance. i cannot recall if any of that is coming due in 2020, but they have plenty of bankers willing to do it for them on favorable terms. it will not be difficult for them to access. taylor: analysts are looking at the model y production that will be kicking off soon.

can they avoid production hell of starting off with the model y? >> it's a slightly modified version of the model three. it was designed specifically with an intent to make it easy to manufacture. i don't think it will be as bumpy. taylor: one more chart inside my terminal here on tv . you said you had just downgraded the company in recent months. what would it take for you to do it? ? trade war downgrade what do you need to see from the company to change your opinion? >> i have set i believe gross margin will come under pressure in the first quarter as the company brings its china facility online. there's also some seasonal weakness that the business should see.

i think i'll get a chance to buy the stock at a lower price. that's what i'm hoping for. taylor: just came out with another recent report, probably 200 pages long so i admit i haven't read through the whole thing. it is talking about your efficiency model. when we mentioned technology, we think ev's and solar panels. you say in your report there is much more going on. >> it means many things. it means not generating ways, it means transporting food more efficiently. it means thinking about vehicle electrification other than cars, for example trucks and buses. i'm trying to help people think more broadly about efficiency. taylor: thank you to joe osha, i always appreciate your time. still ahead, russian hackers show us their favorite playbook and the latest cyberattack. we will have more on that, next. this is bloomberg. ♪

taylor: an update to a story earlier this hour regarding apple and the ability to unlock phones. the fbi asked apple to help unlock this year's iphone. apple said it was helping but there was criticism. now it seems the fbi can unlock the terrorists iphones without apple. security analysts say they can crack iphone five and seven passcodes. russian hackers have been found to attack a ukrainian gas firm as early as november, according to research by security firm area one. it is linked to -- saying hunter biden was on the board until last year.

i'm joined by my guest. a hugely complicated story. what do we know about the hack on the ukrainian gas company? >> we know that it was ongoing as the president's impeachment inquiry was really getting moving in early november. as the house intel committee was considering articles of impeachment, the gru and russian hackers were trying to gain access to burisma holdings, which as we know played a crucial role in the whole inquiry getting started. exactly what they found when the guardian is a question, but we do know that they gained access to employee emails that presumably, if they were able to read through them, could have provided derogatory information about vice presidential candidate joe biden. taylor: saying they're using

similar methods that we saw in 2016. always surprise they are still using the same method? >> it is a little surprising in that most people thought there would be an evolution in tactics between 2015 and 2020 in order to undermine the credibility of the election. what we are finding is that the russian hackers have been using these tactics throughout the world since 2016 and they are still working. the tactic primarily being fishing campaigns to get unsuspecting employees to provide their credentials and allow hackers to gain access to emails. it's pretty simple, and it's working, so they are still doing it. taylor: what do we need to do to beef up our cybersecurity? we have been talking a lot about it in the last few weeks. >> its fundamental, when it comes to phishing, knowing how to identify those emails.

don't click on this link and put in all your personal information. things to us might be obvious when you are sorting through emails and you don't want to get caught off guard, but there are companies like everyone that are providing services to filter through those emails and identify which ones may be phishing campaigns to save you from having to do it yourself. the notion that the same campaigns are being used offers some intel into what to expect in 2020. were not getting into the hypotheticals of hacking into control systems, but thinking about the ways the u.s. was attacked in 2016, we can expect more phishing campaigns to be used against voter registration databases and state election officials in 2020 as we gear up for the election.

couple that with disinformation which we've seen since, that is a formula that could be ripe for attacking the credibility of results, if not actually changing results. taylor: thank you for joining us. we are getting some headlines here from nancy pelosi, she's going to announce impeachment managers wednesday at 10:00 a.m., this of course as we continue to follow the impeachment process. we will keep you posted as we get more details. bloomberg has also learned that google is planning to end use of cookies, as a tracking tool on the web. over the next two years, google fans to phase out cookies in their chrome browser.

they are currently used to follow people around the web and are part of the online advertising landscape. apple and mozilla already block such cookies. mark, it increases users privacy. is that the goal? mark: that is the stated goal. we saw mozilla, the pressure was on google, make a similar decision. google was suggesting that would not go this direction. the bulk of their revenues dependent on this ecosystem. they are taking a line in the sand here. i'm sure the effects will continue over the next couple of years. taylor: how is advertising responding to this?

mark: thus far the market response and from people in the industry, they are a little bit surprised. they see the writing on the wall from the privacy laws in europe and then in california. there are people who will privately say this is a chance for google to either intentionally or not, just continue to dominate the market. they are pushing some of their rivals out. google has the resources where a lot of people are using google services, and therefore google's marking camp is probably not going to be as effective as others. taylor: i'm curious, the timing of this. safari and firefox have gotten away from not using those cookies, so why does google do this now when competitors are ahead of them? mark: i think part of it will be the california privacy rules. they have a lot of partners in the publishing industry on the marketing side and in the ad tech world.

a lot of stakeholders at play, so that could be part of it. they're doing their best to keep all these stakeholders happy, and the publishers, at this point google is so well entrenched into every single marketing spin, but that's probably the reason why they took so long to make this decision. taylor: as we talk about google in advertising, i would be remiss if i don't comment on this chart inside my terminal, which is google approaching the $1 trillion value mark. what are you hearing about the continued optimism around this company and their advertising business in getting them to $1 trillion?

mark: one thing the analysts in the street are looking for in 2020, e-commerce and shopping are something google has struggled with next to amazon. there is hope here that commerce will click in for 2020 and can unlock a lot of potential. the second area is dual cloud is this. the company has to demonstrate that it is catching up to amazon and microsoft and showing some big wins. there are a lot of expectations that for the first time it may disclose revenue and break down the financials. depending on the results, that would have a big impact. taylor: thank you to mark bergen. that does it for this edition of "bloomberg technology." check us out at technology and be sure to follow are global, breaking news network at quick take on twitter. this is bloomberg. ♪ good morning!

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