announcer: from the heart of where innovation, punny -- money and power combined, this is bloomberg technology with emily chang. ♪ emily: this is bloomberg technology. coming up, what goes down comes back up. storm back from a 4% plunge from a closing higher on the day. we will tell you how tech is making out. that coin balance.

the cryptocurrency climb into positive territory for the first time in a week. could this signal the beginning of the end? the 19-year-old who hacked two dozen teslas joins us next. we will get all of that, but first let's look at the markets. ed, we've got earnings and a big name in tech after the bell. ed: we do not often focus on them but strong numbers in the fourth quarter, sales up 6.5%. almost $70 million. lots of strengthen their cloud union. this is the fastest growth ibm has seen in a decade. one to look for over the next 24 hours. this is as the excitement of what was a mild -- while day in the market. heavy selling in the morning across equity markets. and then look at the nasdaq 100, closing off half a percent. down .9%, because some of the

mega caps, the likes of tesla, apple and netflix all closed lower. it coin is the most and gesturing because when we saw that it was bitcoin that moved first. we are seeing it hover around $36,000. the bloomberg crypto index is giving us a reading of -8% from friday's close. the index does not trade over the weekend. a picture tells a thousand words. let's bring out the next chart. we go from a 4.5% drop 2.5% gain. what is top of mind for investors? are they getting more sanguine about rising rates? it is impossible to know. if there was an area that did not escape committed was the meme stocks. amc and gamestop both seeing heavy losses. the meme stock index, which the

bloomberg tracks is down 60% over two months. investors are clearly being cautious in this area. finally, what were you doing in 1994? emily: i was just a little bit older than you. >> let's not go there. [laughter] it is interesting because the philadelphia semiconductor index also rebounded on monday. and good because it was having its worst start of the year since 1994. the worst 24 days of january going from december 31 until present day. it is the worst performance we have seen since this index began. take the bigger picture, the performance of this index and the gains it has seen in the context of the chip crunch is one to watch going forward emily: thank you. let's bring in analyst and ceo ben herron.

-- been better herron. >> overall, i heard some chatter that this was a dip and people were -- people were saying optimistic they would buy on the debt. the question was how low some of those stocks would go. overall we are continuing to see so much demand for a number of technology stocks that have seemed hard to read as a giant market correction or that so many stocks were really overvalued. you've got some stocks that were inflated via the pandemic that might see correction but there's a lot of good fundamentals at play and ibm and a range of others will prove that there is still demand for tech. emily: what about the knots are great stories? netflix? huge plunge. could it be the end of the beginning? >> if you look at netflix, you may be able to throw peloton into that. you are hearing a lot of chatter

about there being optimism that we are at the end of the pandemic. opening up new opportunities for people to go out again. whether it is travel or whatnot. they are not going to have as much time to consume these goods and services. there is concern with netflix and disney. peloton falling into that. there is the matter of competition for time and if we are not going to be home as much there are stocks that will suffer. but i do not think that is a signal of the overall market where you will steal that she will still see positive earnings from tech. emily: where are you looking to see negative stories? >> the positives, the best way to look at the market right now in terms of infrastructure, we are still at a point where digital transformation has not really come to eat every industry. there is a lot of headroom for tech. cloud, stocks, semiconductors i

think will continue to do really well. we are still seeing demand for those stocks. i would look for those things if you are looking for safer bets. amazon, microsoft, google, qualcomm, nvidia. a number of those will play out really well because they are -- so much of the infrastructure. what you said about netflix and others, may be some pure hardware stocks where we might see pricing more the concern but i am fond of the infrastructure side because i think there is still more tech that is going to happen as digital transformation expands. emily: apple coming up this week. they spoke in google next week. any specific storylines? given apple is a hardware company, yes but also a software company. >> the product story remain strong. there's a lot of optimism for them.

they are a hardware, software and services company. there's a lot of wheels feeding into their overall business. facebook, we are coming off watching them in multiple quarters and what is going on in advertising and now they are talking more about the metaverse and beyond. i think there are still questions for them and a few others as we move back into more normalcy with tech and people spending their time other places, not just sitting at home, spending more time on their devices. there is a risk for those types of stocks, but i think you are going to see apple do fine from an earnings standpoint. the easiest things to look at our those infrastructure stocks because those have the most room to continue to supply the backbone of digital transformation. emily: what would your advice to investors be given the jitters we have seen to the start of the year and the fact that tech for years leading up to this has

been a safe haven? >> there is still a lot of safety in a number of good stocks. just because there is so much opportunity for tech to go. i still, we talked about this last time, i am bullish on semi conductors. it is a core part of digital transformation. you've got health care and automotive. all of those areas are vastly untapped from a semi conductor standpoint. we are looking at roads going out with wireless and 5g qualcomm is taking advantage of retail ift automotive's. nvidia is there as well, talking about what is going on in cloud and ai and trading her back end sites. this is defensible by if you just look at where software is going. coming back to hybrid cloud hand cloud and the back end seems to be sensible budgets that

continue to grow. the consumer side is where there is more questions. coming out of the pandemic with inflation, i am optimistic on a number of those stocks but we need more time before we buy in and say these are going to continue to rise in an upward path. emily: always appreciate your insights. thank you for joining us. meantime, a group of attorneys general from texas, indiana and washington, d.c. are suing google claiming the company uses deceptive tactics to trick customers into revealing location data. even when consumers turn off location tracking on their phones, google continues to track their movements using a separate function. a similar case was filed by the state of arizona in 2020. that case is still ongoing. coming up, more on the big crypto selloff and its signs of

a comeback. we talk about that and more with spencer bogart next. this is bloomberg. ♪

emily: bitcoin dangerously low, snapping a five-day fry in the late rally. investors are retaining some degree of risk appetite. bitcoin back up to now about 37 thousand dollars after hitting a low of just below $33,000. i want to get into it with

spencer bogart at blockchain capital. what do you think is driving the declines and maybe this modest recovery today? >> fundamentally i think this is a macrerhe hood, this recent pullback undervalues the progress and opportunity for everything happening in crypt though. is that part of a late surge later in the trading session? maybe. it is really a long-term kind of sector, not short-term. emily: let's talk short-term because that is what investors are really concerned about, especially if they are thinking about pulling out now. do you see these losses extending for a significant period of time? or within a short-term period, do you see more upside? >> we think about upside in terms of basically five to 10 years. what is going to happen in the

next year or two remains to be seen. plain and simple, crypto is both disrupting and creating new opportunities in multiple trillion dollar markets. let's talk about just finance and gaming and social. that's just three. that stuff is not going to go away. we are seeing progress on all of those fronts. the backdrop is the pace of innovation. what is exciting about what is happening here? it is all about the pace of innovation. in the history of technology, we have never seen anything match this pace of what we are seeing in crypto today. emily: i asked michael seiler the same question about how long he plans to hold this. microstrategy's, the largest corporate holder of bitcoin in the world. signs of winter, take a quick listen. >> we are not sellers, right? we are only acquiring and

holding bitcoin, right? that is our strategy. we have been very clear. you can read it in our sec filings. emily: that is in response to a question that was basically like, would you ever sell? the answer was basically never. is that the right strategy? >> kudos to michael for his strategy. he is running a very different type of investment strategy as we are running as an investment firm. think about these fundamebackdrn infrastructure anyone can build on. we have open source technology so new founders don't have to re-create the wheel. anyone can take these protocol aspirations off-the-shelf intakes of -- make something new. we are running all of these in parallel and that gets us really excited. is there anyone we hold in our portfolio that i say we would never sell? that is not in our business

model. but for michael seiler and business strategy, he is running a different game and that is ok. emily: for those who are not venture capitalists like yourself but do not know what to do right now, how are you looking at this crash? it is it -- is it similar to 2018? is it dramatic, softer, different? >> i don't think it is anywhere near 2018. in 2018 we were coming off of the icl phenomenon that had a lot of projects selling tokens upfront for applications that were look yet to be developed. in contrast, we are seeing a live network to do live applications where you can review the data on a real-time basis to see how they are performing. you can see what kind of fees they are generating on a minute by minute basis. several of these applications are generating well north of hundreds of millions of dollars a year annually. they are delivering real utility

to their users and that is very different from 2018. the other thing i would add is that the backdrop is very different. in 2018, this was a secular bear market. in contrast, the secular story for crypto is all very bullish. we just have a negative macro backdrop. emily: after a big football weekend, got to ask you about the chatter, athletes excepting their paycheck and bitcoin. odell beckon junior. do you think this was the right play for them -- pun intended -- given that they are losing money? >> this kind of strategy is really only suitable for those who can afford to have long-term commitments. unfortunately these high-profile names, they are doing this in that category. they think that is ok but i do not think it is suitable for the vast majority of people who do

not have the extra income to take that risk. we should keep in mind that presumably all of those athletes, i am not sure what their contracts look like but it is usually a ust term that is -- in crypto. that seems like a savvy play to me. emily: we will see if those "savvy moves" keep up through uncertainty. always great to have you for stopping by. coming up, the ride for pella todd ceo john foley is getting bumpy as one investor -- at least one, wants him ousted with shares tumbling. more on that scathing letter next. this is bloomberg. ♪

>> i think the word is out that peloton has these experiences like you just heard. the word-of-mouth is helping us. people get addicted to them. they say why would i go back to the gym? covid or no covid, that is universal. we believe the growth we have seen is going to continue for years to come. emily: my conversation with peloton john foley, nearly a year ago he was responding to my question about life after the pandemic and whether they will -- there will always be demand for peloton. peloton demand is indeed falling. now, one investor is being called on to not only sell the company but remove foley. i want to read your quote from this letter saying we believe

that no board exercising reasonable judgment could leave mr. foley in charge of peloton. the company has gotten too big for mr. foley to lead and he should have enough self-awareness and self interest to resigned as director. what is your take? the >> it -- >> it is interesting because peloton has utterly mismanaged their own success. mismanage their entire supply chain. they invested millions of dollars at the completely wrong time a year ago, there was endless demand and little supply. now they have endless supply and very little demand. it is the complete opposite situation. they are in big trouble. they are going to be eating costs. there is reasons why we have these plans of production halts.

they can't keep producing bikes that they are not selling. that goes back to the supply chain model of apple and so many other consumer-electronics makers where they really were building with weeks of inventory. it is possible peloton has a year of inventory now with very little demand. what happens when they need to release updated versions of these bikes later? they are in a very bad position in terms of supply and demand balance. this is why you are seeing stock reaction in these letters. emily: give us a snapshot of what -- of where demand looks compared to where john foley thought it would be a year ago. >> foley seemed to think that no matter when the pandemic slows down, when people are able to go back, they are not going to want to go back to the gym. people are still going to want to work out at home because as foley said, working out from home is more convenient and less expensive.

it is an overall better experience. we are seeing people wanting to actually get out of the house and go to the gym because they have been locked up. a complete misjudgment there. there were people who thought the end of going out, the end of this and that and that uber and postmates at all of these companies take over. that doesn't seem to be the case. people want to go out and about and go back to pre-2020 days. emily: how do you think peloton emergence from this crisis? >> this is a bad situation but i think silver lining for peloton is that they are doing a very good job in terms of content and subscription offerings. their return raid was not as good as a year ago. but still, their content is well-received and their ability to do social marketing and getting people -- is well-received. i would imagine we cs -- we see

a push toward digital offering phones, tablets, dvds, smart home appliances. it is pushing through the web, pushing through computers. -- that do not require peloton bikes at home, which is $3000 in some cases. the peloton guide, that is a $500 device where you hook it up to your tv ended understands your body. i think we are going to see the future of peloton doing more things. cheaper hardware and a bigger push toward subscription services that do not require those trendy bikes. emily: do you think foley survives? >> i do. i think we have seen the control structure there, we have seen how the board is organized. i think it would be very hard to remove foley, who would have to step down on his own and i am not sure why he would. he is the guy who built the company. emily: ok.

lots to continue to follow. thank you for that update. a story we continue to watch, tesla runs the most productive auto factory in america. last year, the tesla plant in california produced 8000 cars a week, more than the toyota factory in kentucky as well as the bmw plant in --. elon musk says he wants to increase production at both his california and shanghai facilities by 50%. the 19-year-old hacker who broke into two dozen teslas, bespeak exclusively with david columbo who discovered a dangerous security flaw that allowed to turn cars on and off remotely. this is bloomberg. ♪

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emily: welcome back. -- a 19-year-old cybersecurity specialist in germany stumbled upon a pretty big flaw involving tesla. david columbo said thanks to third-party software he could not only access data on 2000 teslas, but take control over certain functions. open doors and windows, turn up the music, honk the horn. he posted his discovery on twitter which that off a firestorm and even tried to contact some owners to making

them aware. joining us is david columbo, ceo of columbo technologies and ed ludlow, who covers cars for us. david, you could also start the car without the keys. figure out the car's location and whether the driver was inside or not. tell us about how you stumbled upon this flaw. how did you realize you could hack a tesla? >> it is interesting. i was just -- i was in the process of doing a security audit for a french company. i didn't even start a security audit, they just wanted to take a quick look at the infrastructure and i thought maybe i would find something beforehand. that is when i discovered the third-party software in question and i discovered the third party software in the configuration is insecure and allows me the ability to get access to the api

key off the person using the third-party software. and the tesla api key is like a digital khaki basically that also allows for remote control functionality. and you mentioned, opening windows and doors. i am seeing where the car is. someone with malicious intent could have taken the car for a road trip. unlocking the doors as you were driving on taking the tesla for a road trip. that was basically when i discovered this it was the 10th of january, a random -- default configuration of this third-party software was insecure and one of their remotes was using it so i ran an internet search for those instances and i found numerous teslas, teslas in california and

germany, all around the world. 13 countries, actually. i really wanted to report this to the owners to get it fixed because in my opinion this is a huge issue if someone can take your car for a trip. emily: we had reached out for tests of her comment but haven't heard from them publicly. we do know they have a bounty program. what kind of conversations have you had with tesla? have you spoken to elon musk? >> i have not spoken to elon musk yet. i have spoken to the awesome tesla security team because the security team reached out for me -- reached out to me and got in contact with that meant they were very helpful. i sent them my write up so they could get an overview of the full situation and they responded very quickly. they -- the tokens that were exposed to the internet and they

also notified the affected tesla owners using email and push notifications. i am very glad tesla notified owners to get this resolved as quick as possible. >> then points out that tesla hadn't talked about your activities publicly. you are in touch with tesla. tesla has a policy when it comes to cybersecurity. let's take a look at it. tesla basically saying they work with the cyber security committee. when he flaw is brought to their attention, working with this community to verify, reproduce and respond to legitimate reports of vulnerabilities. tell us about the kind of communications you are having with tesla. what are you helping the with? are they giving you any kind of reward? >> the process was pretty much i sent them all the information and they started investigating this issue on their side. to figure out how it affect or how they can have the security

research here. and then they very quickly responded, they acknowledged the issue and then took action very quick. but i did not get a bounty from tesla for this whole thing because it is -- third-party software and not directly in tesla's code. in the process, i also found another minor flaw affecting tesla's api directly. i disclosed this to tesla and this one ability, the minor second one i found, is eligible for a bounty but i have not gotten a response from tesla yet but i hope it pays for all of the coffee last week. [laughter] >> two separate things there, a fault in the api you found, but the original hijacked jack, that was a third-party, right? an issue with a third party.

and you explain that distinction? you were really stressing this on twitter that this was something going through a third party, not tesla itself. >> exactly. there's a very important difference between those because one time tesla company is responsible with third-party software -- it is on get hub and maintained by cool peter. it is a difference if you find a vulnerability in a third-party software then to find a vulnerability in tesla's infrastructure directly. unfortunately, a few media articles claim that i hacked tesla and that it's just not true because the vulnerability that allows me to get this kind of access was in the third-party software. i stressed on twitter that it is indeed third-party software and not tesla as a company.

although tesla could -- that could have prevented me from being able to control -- but in general it is -- and i really have to point out that i did not hacked tesla's infrastructure itself. emily: david, here is the concern. if this flaw exists, could there be other flaws? are you concerned that teslas could be hacked in other ways? >> that is definitely a very important issue also going forward to the future when cars get connected to the internet more and take it connected to each other. cybersecurity is a very important topic and we have to take a look at that if we are going to digitalize and connect all of our cars. there have been ways to hack teslas in the past and i think there will be hacks in the future which affect tesla and other cars. so, we as a cybersecurity company and to owners, we all

had to work together to mitigate this and to make sure it is very secure and it is very important going forward. emily: what is the concern here? initially you were talking about two dozen cars, but how big could some of these problems be? the could this affect an entire fleet? >> that's the difference between third-party software and tesla. if there is a hack in tesla's infrastructure, that could affect the --. i think like five years ago or something, a security researcher -- but since then, security on teslas site has improved dramatically. there definitely is a concern that -- could be affected by a vulnerability. that it just -- that is why it is very important to make sure to secure -- as secure as possible. >> really quick, run us through

the basics on that second flaw you discovered with tesla. the specific one you hope pays for your coffee. you are a young man, 19, what happens next for you? >> i will answer the first one first. the second vulnerability was very interesting because when discovering the issue with teslas i could control certain features of, i had no way to notify the owners. and i really wanted a way to notify the owners. on twitter, someone pointed out that there is an api end point where i could -- that email address of the tesla owner. and then i went on the search to figure out what -- is because api is not documented so i had to search for things to figure out that end point.

once i was able to figure out the end point, i was able to -- the email address. something i did with the api key. and then i noticed that i was able to -- an email address using a token that was already remote. that is what i reported to them. they already wrote out a system to fix this because -- very sensitive information using an -- that is already expired. emily: we will be watching for more news from you. thank you for sharing your discoveries. david colombo, ceo of colombo technologies find the tesla hack. thank you. coming up, the fate of meme stocks. what comes next as speculative stocks are coming down hard even as tech stocks are going back in the green. this is bloomberg. ♪

emily: at&t is rolling out the fastest consumer broadband offered by any internet providers as a move after cable providers. 5g service went live last week. -- spoke earlier. >> it is a big day for us at at&t because we are making progress on our mission to become america's best connectivity provider. as you alluded to earlier, that's one of the largest if not the largest fiber operator in america. we are pleased to announce the availability of multi-gig

through our footprint in over 70 metro markets. speeds you can get all the way up to five gig speeds for fiber product, which is the fastest available. i tell you that, the purpose, why we are doing this is we actually listen to our customers. we tested this service in raleigh durham north carolina and the response was overwhelming. for over a year we have been building out this network and today we announced the availability with attractive pricing. >> i am a little confused about the 5g rolled out because i was getting 5g cellular service, roaming, weeks before the hubbub about the airports. and then we had that, there was a different 5g. what can you tell me about the safety of this network? conspiracy theorists have been up in arms for years and now airports are worried too. >> there's a lot of -- we are

talking about today in the industry. the speed we are offering on our fiber network, up to five gigabits, has no correlation whatsoever to the 5g wireless services that we offer here on the market. as you pointed out, we have had 5g services turned on for quite some time. emily: jack mcdowell fridge there, ceo of at&t. meme stocks now bouncing back slightly. overall losses still piling up for investors who rode the -- stocks being pumped on social media platforms like twitter. let's break these move down -- let's break these moves down with emily. >> gamestop and amc, two of the original meme stocks, are down 50% in the last two months. a basket of meme stocks tract by

bloomberg is at its lowest since last january when the initial trading frenzy began. i am not really surprised by this crash. these plays are highly speculative, they are driven by liquidity and they are driven in a large part by private investors. every piece of that is -- as we anticipate the fed is going to reduce liquidity. we are going to get an interest rate hike as early as march. i had one from -- he told me a retail play on a meme stock is going to be the first thing to go. we are seeing speculation start to turn up a little bit. >> what does this mean for the retail investor? are they going to ride the wave for get spooked? >> we will have to wait to see. it is definitely more fun to be a retail trader when you are making a lot of money. you can cheer each other on, you can share your gains on social media. people probably have lost real

money right now. there's definitely -- within the community. i've spoken with a few investors who seem to be saying they are starting to pivot their strategy a little bit now as speculation comes down. they are not doing as much daytrading anymore. they are pivoting toward looking more at fundamentals of companies and may be coming down on the in and out options trading and perhaps getting more into education and not just buying the first stock you see mentioned on social media. emily: i was checking on the reddit wall street bets thread. how would you rate this activity compared to what we saw last year this time? >> there is definitely a lot last activity on wall street bets. a lot of retail investors or maybe not going to that for them anymore for perhaps advice on what to buy. there are still a lot of discord groups and other online communities where we are seeing

these retail investors congregate and share strategies. i do not anticipate that all of the retail investors who came in during the pandemic and started making money and investing are just going to all of a sudden pullout. i think perhaps a lot of people pivoting strategies. maybe they are not looking at wall street bets but they will be in an online discord group that talks about how to read an earnings report were talks about the long-term place people can share that kind of information together. emily: thank you for the update. we will see how this wave is written this week. coming up, a tech war with the united states, realigning its companies -- it's countries tech industry. this is bloomberg. ♪

emily: in what could be a transformational showdown for higher education, the u.s. supreme court agreed to take up a case that could end the use of race when determining college admissions. the case involves both harvard and the university of north carolina and it is being led by an opponent of affirmative action in admissions. this is the latest threat to 82 decade old precedent that allowed universities to use race to create a more diverse student body. in china, behemoths like alibaba and tencent are not -- but little giants are on the rise. that is the designation for a new generation of startups that have been selected under an

ambitious program aimed at fostering a tech industry that compete -- that can compete with silicon valley. peter alstom joins us now for more on this week's big take. this is interesting, given the crackdown on some of these big tech behemoths. but now the government also wants to support up and comers? explain. >> that's right. we know that china's technology industry works very differently than silicon valley. what we wanted to do with this story is take a deep dive into these government programs and really look at how it works from the bottom up. this little giants program has been around for a while but it is taking on new significance over the past year as beijing has cracked down on the biggest companies, alibaba and dd. what we discovered is that beijing has accelerated is -- it's efforts to these giants,

giving money, tax breaks to these companies that are -- that are strategically important. how important the semi conductor industry has been for the u.s.-china relationship and the u.s. cutting off the best chips from chinese companies like huawei has stiffened beijing's resolve to build their own semiconductor industry. ai, robotics, technologies like that. emily: talk about what's next. how will this change the tech industry potentially in china? >> the big question of course is whether it is going to work. what we have seen in silicon valley is that entrepreneurs tend to come up with the best innovations and build a robust industry. it is worth pointing out that china's industry largely works that way too. jack -- succeeded because he was given free reign to pursue

alibaba as an amazon like company. you also saw that in tiktok. this is a different program the government is helping pick these winners in areas they think are important and it is not at all clear this is going to win. track these little giants. they are taking money from public investors and we will see whether they can about -- live up to the government's expectations for them. emily: should silicon valley be worried about the competition or a different kind of competition? >> it is a very different kind of competition. there certainly concern that china wants to build competitors in these key areas. if you are in semiconductors, ai and robotics, you know that not only are china's entrepreneurs coming after you and we have seen skilled entrepreneurs accomplish many important things in this second largest economy in the world, but now they've got this government support too.

there are certainly going to be serious contenders and we will see whether they are able to succeed. emily: all right. peter elstrom joining us from asia. thank you for that report. you can check out bloomberg's big take this week. that does it for technology. stay with us all week long we are going to continue to cover big tech results, microsoft, tesla wednesday. thursday, apple and robin hood. you won't want to miss our coverage. i am emily chang, this is bloomberg. ♪

>> good morning. you're coming down to asia's major market opens. shery: our top stories this ever appeared u.s. stocks stormed back from a deep selloff. dip players rescuing a section of explosive volumes and wild swings. president biden and european leaders work to strike a new five position on russia.