>> from the heart of where innovation, money and power collide come in silicon valley and beyond, this is "bloomberg technology" with emily chang. emily:.

coming up in the next hour, what goes down comes back out. stocks stormed back from a 4% plunge closing higher on the day. bitcoin balance. the cryptocurrency climbed into positive territory for the first time in a week. could this signal the beginning of the end of the crib no crash -- crypto crash? davis cup -- david colombo joins us exclusively. let's get a look at the markets. ed ludlow. we have earnings and a big-name intech. >> 110-year-old company. stock up almost 6% in after hours. strong numbers in the fourth quarter. a lot of strength in the cloud. the best sales growth ibm has seen in a decade. one to look for in the next 24 hours. this adds to the excitement of

what was a wild day in the market. we see really heavy selling in the morning across equity markets. most of the technology shares. look at the nasdaq 100 closing up 0.5%. some of the mega caps -- and bitcoin is the most interesting of the case studies because when we saw the rebound across risk assets, bitcoin moved first. we are seeing it hover around $36,700. the crypto index is giving us a reading of -8%. the index does not trade over the weekend. could this be the end of the rout? a picture paints a thousand words. we go from a 4.5% drop to a half a percent gain. was this dip buyers?

if there was an area of the market that did not escape the pain, it was meme stocks. amc and gamestop both seeing heavy losses. the mima stock index, a custom basket bloomberg tracks is down. investors being a little cautious in this area. and finally, what were you doing in 1994? emily: i was a little older than you. ed: i was probably still in nursery. whatever. but it is interesting because the philadelphia 70 -- the philadelphia semiconductor. the first 24 days of the month of january going from december 31 to present day, the worst performance we have seen tins the index began. take the bigger picture. look at the performance of this index and the gains it has seen.

emily: i want to stick with today's tech market moves and bring in ben. how are you making sense of all of these big tech moves? >> overall, my sense, and i heard some chatter that this was a dip and people were optimistic about riding on the dip, i think the question is how low some of the stocks will go but overall we are seeing so much demand for a number of technology stocks. it seemed hard to read this as a giant market correction or that so many stocks were really overvalued. there are some stocks that were inflated during the pandemic that might see some correction but i think there are still a lot of good fundamentals at play. there is still a lot of demand for tech. emily: what about some of the

not so great stories? netflix, a huge plunge. could it be the end of the beginning? >> if you look at netflix and you could throw in peloton, you are hearing a lot of chatter about optimism that we are at the end of covid or the pandemic ib opening up new opportunities for people to go out and about again whether it is travel or whatnot. they are not going to have as much time to consume these goods and services so i think there is some concern. you're seeing that with disney, peloton. there is the matter of competition for a time and if we are not going to be at home as much, some stocks will suffer but i don't think that as a signal for the overall market. i think you will still see a lot of positive earnings from tech this week and next. emily: where are you looking to see positive stories? negative stories? >> the best way to look at the

market right now is in terms of infrastructure. we are still at a point where digital transformation has not really come to every industry. there is a lot of headroom for tech. cloud stocks, data center, infrastructure, semiconductors. we are still seeing so much demand for those stocks. if you're looking for safer bets, infrastructure stocks such as amazon, microsoft, google, qualcomm. i believe a number of those will play out well because they are feeding the infrastructure. what you said about netflix and some of the others come up your hardware stocks where prices might fluctuate, they could be more concerning. i am fond of the infrastructure side because there is so much tech filled up that will happen. emily: apple is coming this week. facebook and google next week. any specific storylines you

would pull out given that apple is a hardware company? >> apple -- the product story remain strong. i think there is still a lot of optimism for them. they are a hardware, software, and services company. facebook -- we are coming off watching them from a multiple of corridors and what is going on -- quarters and what is going on . i think there are still some questions for them and others as we go back into more normalcy with tech and people spending their time other places and not just sitting at home spending more time on their devices. there is a risk for those types of stocks. i think you will see apple do fine from an earnings standpoint. the easiest things to look at are the infrastructure stocks because they have the most

headroom to continue to supply the backbone of digital transformation. emily: what would your advice be for investors right now? check for years up to this has been a safe bet. >> i still think there is safety in a number of stocks because there is so much opportunity for tech to go into areas. i am still really bullish on semiconductors. they are going to move -- as a core part of digital transformation in retail, health care, automotive. these areas are still massively untapped in terms of semiconductors. look at what is going on with wireless and 5g. qualcomm is well positioned. nvidia is there as well as you talk about cloud and training.

really safe bets -- defensible if you look at where software is going. companies coming back to cloud. these are defensible budgets that will continue to grow. the consumer side is where there are more questions. coming out of the pandemic with inflation, where will people spend their time and money? i am still optimistic on a number of those stocks but we need more time before we buy in. emily: ben, always appreciate your insights. thank you for joining us. a group of attorneys general from texas, indiana and washington are suing google claiming the company uses deceptive tactics designed to trick consumers into disclosing data. even when consumers turn off location tracking on their phones, the lawsuit says google

continues to track their movements using a separate function. a similar case was filed by arizona against google in 2020 and the case is still ongoing. coming up, more on the crypto selloff and its early signs of a comeback. we will talk about that and more with spencer bogart. this is bloomberg. ♪

emily: bed coin hovering dangerously low snapping a 5k -- five day slide.

investors are retaining some degree of risk appetite. bitcoin backup to about $37,000 after hitting a low earlier. the lease since july. i will get into it all with spencer bogart. what is driving the declines and also this modest recovery today? spencer: fundamentally, i think this is a macro driven selloff. the recent pullback undervalues the progress, the attraction, and the opportunity happening in crypto. is that part of a late surge later in the trading session? maybe. it is a long-term sector. emily: let's talk about short term because that is what investors are concerned about especially if they are thinking about pulling out. do you see these losses, the crash extending for a

significant period of time or within a short term period, do you see more upside? spencer 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. the attraction is real. we are seeing progress on all of those fronts. the backdrop is the pace of innovation. when you're thinking about it from a forward-looking perspective, 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 er 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 fundamental backdrops, we have this open 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 any one asset 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? is it similar to 2018? is it dramatic, softer, different? spencer 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 had yet to be developed. many of those never launched. 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. the numbers are incredible. 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 paychecks in 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. and i 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 a fixed in ust term and then converted into crypto. that seems like a savvy play to me. emily: we will see if those "savvy moves" keep up through uncertainty. spencer bogart. always great to have you for stopping by. coming up, the ride for pella -- peloton 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? why would i travel for an inferior experience? 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 founder and ceo john foley, nearly a year ago he was responding to my -- responding to my question about life after the pandemic and whether 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 resign as director. what is your take? >> it is interesting because peloton has utterly mismanaged their own success. mismanaged expectations and 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 demand really looks like 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. that was misjudged. what we are seeing people wanting to do is 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 was mates and all of these companies would 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 emerges from this crisis? what happens? >> 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 rate is 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 see a

stronger push towards digital offering phones, tablets, dvds, smart home appliances. it is pushing through the web, pushing through computers. more subscription options 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, it has a smart camera and it really 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. we have seen the voting rights. 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. i'm sure he and the board believe he can do that again. 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 fremont, california produced an average of 8500 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 tesla's. coming, we speak 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 to bloomberg technology. earlier this month a 19-year-old cybersecurity specialist in germany stumbled upon a pretty big flaw involving tesla. david columbo discovered thanks to third-party software, he could not only access data on two dozen teslas, but take control over certain functions. open doors and windows, turn up the music, honk the horn. he posted about the discovery on twitter, which set off a

firestorm online, and even tried to contact some owners to making -- make them aware of the vulnerability. 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 an interesting story. i was just -- i was in the process of doing a security audit for a french company. i looked at the infrastructure. i didn't even start the audit, i wanted to take a look at the infrastructure to figure out what services they used and i thought 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

-- through a vulnerability to get access to the api key off the person using the third-party software. and the tesla api key is like a digital car key, basically, that also allows for remote control functionality. and you mentioned, opening windows and doors. unlocking the car, seeing where the car is. starting key less driving. someone with malicious intent could have taken the car for a road trip. turning off the security mode, unlocking the doors as you were driving and taking the tesla for a road trip. that was basically when i discovered this. on the 10th of january, a random software, if the default configuration of this third-party software was insecure, what if there were more people using it? i ran a search for those instances and i found numerous 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 comment tesla but haven't heard from the company publicly. we do know they have a bug 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 -- after my tweet, the security team reached out to me and i have been in contact with them. they were very helpful, they understood the issue. i sent them a write up privately so they can get an overview of the full situation, and they responded very quickly. they revoked access, revoked access 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. we do know that tesla has a policy when it comes to cybersecurity. let's bring that up and take a look at it. tesla basically saying they work with the cyber security community when a flaw is identified, went off law is brought to their attention. we are committed to 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 for bringing this to them? >> great question. 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 researcher 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 a vulnerability in third-party software and not directly in teslas code or the car software. in the process, i also found another minor flaw affecting tesla's api directly. i disclosed this to tesla and this vulnerability, the minor second one i found, is eligible for a bounty but i have not gotten a response from tesla yet how much the bounty will be. but i hope it pays for all of the coffee from last week. [laughter] >> two separate things there, a fault in the api you found, but the original hijack was a third-party issue or flaw with a

third party. can you explain that distinction to us? 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 the company is responsible and with the software, it is open source and it is on github, maintained. it is a difference if you find a vulnerability in a third-party software, open source third-party software, then to find a vulnerability in tesla's infrastructure directly. unfortunately, a few media articles claim that i hacked tesla directly and that is 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

the owners using third-party software and not by tesla as a company. tesla is a company could have done steps that would have prevented these from in the end being able to control certain features of the tesla, but i had to point out i didn't hack tesla's infrastructure itself. emily: david, here is the concern. if this flaw exists, could there be other flaws? are you concerned that tesla's -- 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 cars 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 those cards. 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 digitalized cars. so, we as a cybersecurity

community, the company distributing the cars and the owners of the cars, we have 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? i know initially you were talking about two dozen cars, but how big could some of these problems be? is this something that could 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 definitely affect the whole fleet. there has been a report i think five years ago or something, where a security researcher was able to take over a full fleet, but since then the security on teslas side has improved massively. but it is a concern that it could be affected by a vulnerability. it is important to make sure it is secure, or as secure as possible. >> really quick, run us through

the basics on the second api 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 the 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 find the email address of the tesla owner. and then i went on the search to figure it out because teslas 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 -- -- query the email address associated with the digital khaki, and i noticed i was able to query the email address of the tesla owner use and it -- using a token that was revoked by the security team. that is what i reported to them. they already wrote out to fix in production to fix this because you shouldn't be able to query sensitive information like an email address using a token that is expired or revoked. emily: we will be watching for more news from you. thank you for sharing your discoveries with us. david colombo, ceo of colombo technologies and the man behind the tesla hack. and ed ludlow. thank you both. 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. we will have more on that next. this is bloomberg.

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emily: at&t is rolling out the fastest consumer broadband offered by any internet -- of the major internet providers in a move aimed at cable providers after the new 5g service went live last week. at&t's ceo spoke earlier with matt miller. take a listen. >> it is a big day at at&t because we are making progress on our mission to become america's best connectivity provider. as you alluded to earlier, as one of the largest if not the largest fiber operator in america, we are pleased to announce the availability of multi-gig across 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 that is 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 last year, and the response was overwhelming. for over a year we have been building out this network and it is multi-gig cake -- capable. today we announced the availability with attractive pricing. >> i am a little confused about the 5g rollout, because i was getting 5g cellular service, roaming, weeks before the hubbub about what happened at the airports. 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 is a lot of fives and

everything we are talking about in the telecom industry. first of all, the speeds we are offering on the 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: the ceo of at&t communications there. meantime, meme stocks took a dive and now bouncing back slightly. overall losses still piling up for investors who rode the trend of stocks being pumped on social media platforms like twitter. let's break these market moves down with emily. what do you make of the meme stock crash? >> gamestop and amc, two of the original meme stocks, are down over 50% in the last two months. a basket of meme tracked by bloomberg is at its lowest since

last january when the initial meme stock trading frenzy began. i am not really surprised by this crash. meme plays are highly speculative, they are driven by liquidity and they are driven in a large part by retail investors. every piece of that is taking the opportunity to reduce liquidity, 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 source who told me a retail play on a meme stock is really going to be the first thing to go when we see speculation start to turn off a little bit. emily: what does this mean for the retail investor? are they going to ride the wave o'er 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. and you can cheer each other on, you can share your gains on social media. people probably have lost real

money right now. there is definitely pain within the retail community. i have spoken to a few retail investors who seem to say 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 -- combing 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 less activity on wall street bets. a lot of retail investors or -- are maybe not really going to that forum 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 see perhaps a lot of people pivoting strategies. maybe they are not going to look at wall street bets but they will be in an online discord group that talks about how to read an earnings report or that talks about the long-term plays where people can share that kind of information together. emily: thank you for the update. we will see how this wave is ridden this week. coming up, china's latest weapon in the tech war with the u.s., realigning the country's tech industry. what it means for silicon valley. 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 -- to a nearly two decade old supreme court precedent that allowed universities to use race to create a more diverse student body. the court is likely to take up the case this year. in china, behemoths like alibaba and tencent are out of favor but little giants, as they are called, 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 can compete with silicon valley. bloomberg's executive editor for asia technology peter elstrom joins us now for more on this week's big take. this is interesting, given the crackdown on some of these big china 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 one of 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, and what we discovered is that beijing has really accelerated its efforts to build up these little giants, giving money, tax breaks, other

incentives to these companies that are developing technologies that are strategically important. we have talked before about 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 left to their own tend to come up with the best innovations and build a robust technology industry. it is worth pointing out that china's tech industry largely works that way too. jack ma succeeded because he was given free reign to pursue alibaba as an amazon like company.

you also saw that with bytedance, which built tiktok. this is a different program where the government is helping pick winners in areas they think are important it is not clear that this is going to win so we want to watch this closely. we will track these little giants. they are beginning to go public and we will see if they can 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 is certainly a 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. bloomberg's 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 bloomberg technology. stay with us all week. we will continue to cover big tech, microsoft out tuesday, tesla wednesday, thursday apple and robin hood. you won't want to miss our coverage. i am emily chang, this is bloomberg. ♪

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yousef: this is bloomberg daybreak mentally stocks stage one of their biggest one-day turnarounds in history, swinging from 4% down, but futures are lower this morning. the pentagon puts thousands of troops on alert as russia masses forces on ukraine's border. manus: