it is 8:00 a.m. in menlo park, california, 11:00 a.m. on wall street "squawk alley" is live ♪ good thursday morning. i am carly fiorina with morgan brennan and jon fortt. also joining us, business insider foundation capital general partner paul who wiholl. nasdaq is coming off the first three day loss of the year on pace to snap what was a ten week win streak.

faang is still well off highs, despite a modest rally to start the year obviously, guys, this is an interesting dynamic. i mean, the bounces need to be digested at some point is that what this is about >> we shall see. the argument continues, is this a bear market rally or couple months of panic and now off to the races and bull market continues. my view is probably a bear market >> a bear market >> yes i think all things have come together, ten years valuations are extreme across everything, not so much in tech but across the market in general, you have the interest rate issue, the tax cut crack hit wearing off. i think a lot of things coming together, people revaluing. >> paul, what do you think is going on with smaller tech stocks, like stitch fix, took a big hit after the last earnings report, it is up 26% in the past month. yext had an amazing week and

month. some stocks that investors seem to have gotten really depressed about have had an enormous bounce >> i think there are a number of things going on, not to take issue with my friend henry who i haven't talked to in a long time but i think we're seeing a different thing happen on the west coast i think our view is that we're seeing a lot of fundamental changes in the way people are buying products, the direct to consumer brands like stitch fix are starting to get a foot hold in the marketplace, starting to take real share. i think we're starting to see things like artificial intelligence work into some technology solutions, companies like respond software, applying ai to security these companies are taking off and i think they're going to put a push into some public competitors, get them to have to move it too. >> who is going to be under pressure, paul >> i think anyone who's

basically stuck in an old paradigm with the old orthodox ees. if you're trying to practice what you were 20 years ago, you're going to be in a tough position what's the stat that, you know, the fortune 500, if it was 50 years ago, the average ten year was 75 years now the average 10 year is 15 years. i think the up starts are getting bigger, faster, stronger we had a talk yesterday where the ceo of a company called flex sport got a million dollar check for financing because he is overturning the shipping industry i think we're seeing a bunch of movement happen here when they move out of silicon valley, they push everybody else forward and things have to change >> i was going to say, henry, on the flip side of that, one of the other things we heard from entrepreneurs in recent years is how hard it's been to get the scale and to become a formidable competitor to some big already established tech companies

what we have seen happen is a lot of big tech companies buy up all of the smarter startups. is there reason to think that dynamic is changing? >> the areas paul is talking about are far enough afield from google, apple, facebook and so on that they actually do have room to run, they're going after big consumer companies same with ai those companies are doing a lot. ai is such a broad category, can be applied to any business there's definitely room. there are still a lot of exciting startups. one thing i point out in the public market, when you have a crop of disruptive, aggressive new companies, it is often not great for big incumbents being shot at, eaten away at. >> one that's still doing shooting is facebook mark zuckerberg saying the company is planning new emphasis on private chats for that, julia boorstin out west. >> carl, mark zuckerberg declaring the privacy focused vision for social networking a key part of this is zuckerberg

announcing they'll integrate secure messaging across platforms, you can message across what's app, messenger, instagram, writing i believe the future of communication will increasingly shift to private encrypted services where people can be confident what they stay to each other stays secure and messages and content won't stick around forever this is a dramatic shift from the company's long time focus on public sharing, connecting the world, after a number of missteps around privacy protections and potential to manipulate users through spread of fake news facebook shares are down this morning, down nearly 2%. looming questions about whether facebook will be able to make money from private communications where it hasn't yet established a real business model as it has from ads in the news feed and now stories format noting we believe facebook sits in the precarious position of trying to protect the golden goose of engagement and data

driven advertising revenue while pivoting to a new privacy centered business model to create the perception of addressing flaws from the past yesterday, edison published a report saying facebook users declined by 15 million from 2017, the biggest drop in 12 to 34-year-olds facebook responds by pointing to last quarter's increasing users in north america, but they don't publish information about the demographics carl, back to you. >> thanks for the setup. we draw your attention to a tweet. i think last night, quoting zuckerberg and asking how long has he personally believed this, an hour, a day what do you make of the scynics >> facebook is getting shelled on privacy people are skeptical i don't think it is as big a deal as some are saying. messaging has always been very different than public news feed, all advertising is in the public news feed. very valid question whether facebook can build a business

out of messaging to me, do what we chat has done, folding in payments and other things, and frankly it is remarkable facebook hasn't already built a payment platform and some other ancillary businesses but not likely to be advertising. >> that's my take, too i wonder what you think. facebook said they already don't really target ads based on content of messages but seems like under this model, it is not like the news feed is going away facebook will still know who is having the conversation, how often, where they are, and potentially what they're buying. seems like maybe they have to do this to keep people coming back to them so at least when they're entering the private space, maybe they get a retargeted ad. >> i think you're onto the right things henry made the point why isn't facebook more like we chat, for those of us that travel the world, see different models at play, it certainly makes more sense let's not get into the fact that the chinese aren't as concerned about privacy as we tend to be

about these things but i think there's a more fundamental thing happening. i have three teenage daughters, 17, 18, now a 20-year-old. two of them here on stanford campus go stanford. and they don't -- facebook is a nothing, a nonthing for them it is a middle age photo sharing website for a lot of people. if i want to find out what they're doing, i have to go on snapchat, i have to watch their stories and go to instagram. from my perspective in terms of the notion we're looking for the next wave of activity and market, if facebook didn't have instagram, i'm not sure what would be going on now. that's the platform that's capturing the attention of the middle school kids, high school kids and college kids, and that's where you have to be if you want to have a future. >> paul, you mentioned snap. that stock is down 3% as well. what does this do in terms of pressure on that company >> i think all these guys, henry kind of made the comment before,

if somebody is innovating, everybody else has to begin to innovate in my mind, i'm surprised how little innovation there has been around the social platforms from the perspective of integrating all of the different services as henry said, with billing, shopping, all of the other pieces i have to believe that's the next wave of activity that will kick in and have an impact i do know, i have friends at facebook that are working in things like infrastructure and scale and so forth and they're working on some things that are just absolutely out there, space age kind of scale because they have to. they have to get to a place, think about where facebook was five years ago, it was static images look at much of what's happening on facebook now, it is video, it is animated, it is all of the other different bits of information. and that pushes them in a whole different direction around frak and scale. if i'm betting on facebook, i'm betting on their brains and

ability to make moves around that so far not jumping up and down about the feature functions and stuff. >> meantime, guys, amazon, jpmorgan, berkshire unveil a name about a joint health care venture, calling it haven. it is a busy week for amazon grocery news earlier this week, closing 87 popups around the country by april on a day kroger posts a huge earnings miss you know amazon well, henry. can you explain what you think they're up to on physical retail now? >> well, i think they're experimenting. closing 87 pop up stores originally designed to showcase alexa and smart speakers, now that they own whole foods and can have them in there and other retail concepts, i think they decided that's not working, shut it down, we'll do something else one ironic note from the 1990s, they bet on amazon books, the bookstore. huge conflict about digital and bricks and mortar in the 1990s,

started with books, they're back at their roots basically on the other side. >> paul, why is it so essential, you look at amazon or other chinese e-commerce companies, for example, that are now expanding so aggressively into brick and mortar, why is that such an essential filler for growth moving forward, and if it has been, then why would a company like tesla be rolling back out of it >> wow a lot of good stuff in there to unpack so i think henry is touching the right thing in terms of thinking about amazon the way i think about this with a large company like amazon, when they roll out something like the 87, i have been in meetings in the large companies, they're like what's the impact here, come on. we're at this many billions of revenue and profit, let's push that away, let's try something else that can do something at large scale. meanwhile, i think there's a ton of innovation happening, a small company about two kilometers north and east of you called

bulletin, two incredibly dynamic women working on ways to disrupt wholesale and retail in ways that could be dramatic i think we're seeing startups going that direction i think there's quite a bit of movement that's going to happen. in the case of amazon, they're at such scale now that i think they're going to have to be in places where what are we going to do to move the meter tens of billions and put us in a different position from a profit perspective. >> henry on the haven health care thing, the more i hear about it, the less i get it. it seems to get squishier and squishier. i am looking at the website, havenhealth care.com, it is full of vague platitudes about making health care more accessible. couldn't they have started some doctor's offices, launched their own model? what are they doing? >> everybody is trying to figure out health care. nobody is happy with the current system there's three big good companies

that have a lot of potential customers and employees, hopefully they can figure something out, we'll see there's a lot of innovation around health care, you mention the retail doctors are starting to proliferate there are many experiments going on let's hope this is one that works. >> this is the least exciting of them so far. >> it is vapor so far. >> experimentation the name of the game thanks for the discussion. see you soon >> thank you >> thank you. still to come, huawei looks to take the u.s. to court saying it hopes for a constructive dialogue with the trump administration full story next. and softbank startup in south. marcelo claure next. and the ceo behind the car vending machines, carvana joins

us busy hour when "squawk alley" cos ghba when you look at the critical issues facing our world, what do you see? we see a billion more people breathing free. we see access to fresh food being the global norm, not the exception. we see homes staying cooler, without the planet getting warmer. at emerson, when issues become inspiration, focusing core strengths to create a better world isn't just a result, it's a responsibility. emerson. consider it solved.

all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. welcome back chinese tech giant huawei is suing the u.s. government. the company says a law limiting

u.s. business is unconstitutional cnbc's ar general car pal is in china with the latest. >> reporter: they're claiming the u.s. government claiming the law that bans it selling to federal agencies is unconstitutional they have a particular issue with a law known as national defense authorization act, and particular section of that law in which it is specifically named. company lawyers say this section amounts to what's known as bill of retainer or organization or individual is guilty of some offense and punished without due process. the company argues due process, a legal trial, hasn't been possible, and huawei hasn't had the right process to clear its name it argues that congress has powers of the judiciary by the law and therefore the separation of powers between the president, congress and judiciary are not sufficient all of this they say amounts to breaching the u.s. constitution. it hopes if the lawsuit is successful, it can clear the air, restart negotiations the

u.s. government. it is on the front foot here, taking litigation to the u.s. and taking the fight to the u.s. what's at stake of course is a chance for huawei to clear its name, could mean other countries around the world soften the stance towards huawei. but of course if it is condemned in the u.s. courts, other countries could become tougher towards the chinese telecom firms. what's at stake is a bigger race between the u.s. and china over who dominates what's seen as crucial technology known as 5g >> thanks. softbank announcing the launch of a $5 billion fund to invest in tech startups in latin america. marcelo claure, former ceo of sprint, and softbank operating officer. >> it is a $5 billion fund, our

goal to deploy in the next four to five years and we already are speaking to a lot of different companies, so we already have a lot of companies in the pipeline you should see us start to make investments in the next couple of months. i think we have an amazing advantage when you have a name of softbank, a large tech investor throughout the world, we have knowledge in the market, so again, so many companies are ready for large checks in order to continue to grow. >> i imagine people wake up who run some of the companies happy at hearing the pool of capital i imagine those of those doing venture investing in latin america are waking up going what do i do now. >> we come in at a later stage once companies have proven they have a proven business model that can expand to other areas of latin america

everybody is happy we're coming in and can supplement investments that they made and provide necessary capital for companies to grow. >> are you the final decision maker on the investments made by the latin american fund or does masa get involved? >> we all get involved, we have a traditional committee that masa is part of, we all debate and make sure we invest the money correctly. >> let's move on to something we used to spend a lot of time talking about and still are, sprint what happens to sprint if you're unable to do this deal >> 5g is great, at the same time puts a burden on sprint. to deploy their own network which wouldn't be nationwide, it would be in select areas, would have to spend 20 to $25 billion which means we have to go to the debt market and more likely you have a sprint that will no longer be the price leader. >> you made something of the idea of competing against the cable companies, including my

owner, comcast, delivering broadband via 5g there are questions whether that will be competitively possible why are you confident you can deliver that kind of service and conceivably compete in an entirely different area in terms of video in the home without need of a wire >> you cannot run away from what is going on around the world and the concept of people never buying cable or concept of cord cutters, it is happening around the world and accelerating basin the u.s. there's no reason when you can bring that speed with that low latency why anybody would hire the traditional broadband. >> stuff i hear about trees getting in the way, leaves, line of sight, all the cell sites that are needed, you feel confident you can deliver. >> we have a differentiating advantage no other company has we have over 150 megahertz of spectrum, and that's the best

spectrum for 5g. when you combine that to t mobile spectrum, we offer cable replacement to most of america at a better price with better customer service we feel extremely comfortable that not only are we going to compete with at&t and verizon, our goal is to compete against customers that pay a hefty bill to comcast and charter. >> how many years before there's a market that will allow people to cut the cord, truly cut it in terms of just a broadband alternative. >> next two to three years in major metropolitan areas, to basically have a product that's going to be superior to cable in terms of speed and latency andthe consumer will be able t save significant money in terms of combining their monthly cell phone bill and eliminating what today they pay to broadband suppliers. >> it will be a major moment, without a doubt.

>> two things that could be major disruptive forces, 5g for fixed broadband, if that pans out as claure was saying next two to three years could be explosive in places like new york >> $25 billion, is that the number he put out there for investment to implement 5g in major metropolitan areas, that's a mind blowing number. also that's interesting. in this interview he talked about investment fund, 13 unicorns in latin america, 200 venture backed companies that they could potentially invest in we focus so much on brazil which has been a tough market for tech companies, especially tech companies outside brazil to crack. a lot of other marketplaces and other startups to keep an eye on >> jim's point is that ex-venezuela, latin america has been hot as for 5g, people are asking which technologies will be victim to the onset.

>> i think 5g, unlike 4g and 3 g before it won't be one roll out over two to five-year period there are so many different stages this needs to go through, so many complexities around the number of cell sites you need and different locations than the previous technology. i want to say about the latin america fund, potential tech connick shift depending how it works. that's an enormous amount of money for a region largely neglected by venture investors if they can get an engine going there that's self sustaining, enormous force for innovation. >> by u.s. investors china has been playing there a long time. wherever softbank goes, everybody watches. >> not a lot of money sloshing around a lot of brilliant entrepreneurs could use that >> tectonic. i see what you did there major averages near session lows the dow down 264 points now.

the s&p 500 and nasdaq are dropping below the 200 day moving averages. we'll take a closer look next. look at shares of alibaba. on pace for the worst day since early february, down 3% now. this is the china trade index lls arfane 1%. "squawk alley" is back after this om! no more lugging your clubs through the airport or risk