Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Eva low In sent frances.
Speaker 2: Go, this is Bloomberg Tech coming up.
Speaker 3: Microsoft and open Ai finalize a new agreement, with Microsoft
Speaker 3: now getting a twenty seven percent ownership stake in the
Speaker 3: AI startup worth about one hundred and thirty five billion plus.
Speaker 3: Today is in Video's DC super Bowl. We'll discuss what
Speaker 3: investors are looking for in CEO Jensen One's keynote address
Speaker 3: at the GtC conference, and we sit down with Tesla
Speaker 3: board chair Robin Denholm to discuss the push to convince
Speaker 3: shareholders to approve Elon Musk's one trillion dollar pay package.
Speaker 3: At the index level, there is not a lot going
Speaker 3: on in the world of technology, but there are two
Speaker 3: big stories. In video is off itsself highs upper percentage
Speaker 3: point and trading at a record high. We await Jensen
Speaker 3: Jang later today and a big GtC keynote. Then there
Speaker 3: is the big breaking news story of the morning. Microsoft
Speaker 3: will get a twenty seven percent stake in open Ai
Speaker 3: at a value of one hundred and thirty five billion dollars.
Speaker 2: There or thereabouts.
Speaker 3: It is some certainty for investors for both companies who
Speaker 3: have been waiting to understand the evolution of this relationship,
Speaker 3: and we got some details well into the future. Let's
Speaker 3: get to our senior tech editor Mike Shepherd, who's.
Speaker 2: Here in DC.
Speaker 3: There's the ownership in the financials, let's go through those, please.
Speaker 3: But also we now know that open ai will license
Speaker 3: its technology to Microsoft for a very long time.
Speaker 4: Yes, until twenty thirty two ed.
Speaker 5: And this is really, in a way a bigger move
Speaker 5: for open ai because it removes some of the uncertainty
Speaker 5: that has been surrounding its evolution into a for profit venture.
Speaker 4: We know the numbers there.
Speaker 5: We are Microsoft getting a twenty seven percent stake worth
Speaker 5: about one hundred and thirty five billion.
Speaker 4: But another key.
Speaker 5: Element that we also heard was that it will have
Speaker 5: a hold on open ai technology until twenty thirty two,
Speaker 5: and that also includes when open ai achieves AGI artificial
Speaker 5: This is the state of generalized intelligence when AI can
Speaker 5: think like a human in essence, So that's a key development.
Speaker 5: And there is also some money going into the nonprofit
Speaker 5: open Ai Foundation. That also resolves another loose end. And
Speaker 5: for investors, this removes one of the hurdles that have
Speaker 5: been standing in the way of this all happening, and
Speaker 5: it have been standing in the way. Microsoft was one
Speaker 5: of the last holdouts among the backers of open ai
Speaker 5: for this evolution to a for profit.
Speaker 3: Okay, so the pathway is open for open ai to
Speaker 3: become a for profit business and get the resources it needs.
Speaker 3: It was a hell of a day to pick to
Speaker 3: put news out between nine and nine thirty four East
Speaker 3: in this morning, four red headlines on the Bloomberg terminal,
Speaker 3: which is a lot for our technology news we all
Speaker 3: here for in video GtC and as we've written on
Speaker 3: the Bloomberg terminal, this is the AI super Bowl. The
Speaker 3: expectation is very high that Gensen Wang will say something
Speaker 3: that moves the needle, and he'll say something political.
Speaker 5: Well, they're sure is that we've been looking at this
Speaker 5: from two lenses.
Speaker 4: One, what are they going to be introducing?
Speaker 5: The way of products features partnerships to accelerate this push
Speaker 5: that Jensen Wong and Nvidia have been making to try
Speaker 5: to spread and disseminate artificial intelligence through the economy and
Speaker 5: a lot of different sectors ranging from healthcare to transportation.
Speaker 5: We'll hear him talk about things like robotics and other
Speaker 5: areas where they want to see what he calls the
Speaker 5: AI factory take hold. This is where AI is used
Speaker 5: to develop ideas. But one of the things that has
Speaker 5: been holding back the Nvidia push, of course, has been
Speaker 5: US export controls that has kept Nvidia out of the
Speaker 5: world's largest market for semiconductors, and that is China, and
Speaker 5: he would surely like to see that change. And not coincidentally,
Speaker 5: President Donald Trump is in Asia as we speak. He
Speaker 5: is about to meet with Chinese President Shi Jimping on
Speaker 5: Thursday and perhaps hashed through some of those issues. For now,
Speaker 5: this preliminary core between the US and China does not include.
Speaker 4: Any change to those export controls.
Speaker 5: But perhaps Jensen today will be sending a signal to
Speaker 5: his new friend, Donald Trump, and Jensen will be traveling
Speaker 5: to South Korea and he will see Trump there as
Speaker 5: soon as the Super Bowl.
Speaker 4: Wraps up later today.
Speaker 3: The President told us he expects to see Jensen Wong tomorrow,
Speaker 3: so he's going to have to hot foot it away
Speaker 3: from Washington, DC this afternoon. Bloobog's Mike Shephard, thank you
Speaker 3: very much. Now coming up, Robin Denholt, Chair and Tesla's board,
Speaker 3: joins us to discuss the push to convince shareholders to
Speaker 3: approve Elon Musk's one trillion dollar pay package.
Speaker 2: That conversation is next. This is Bloomberg Tech.
Speaker 6: He's to welcome our TV and radio audiences worldwide as
Speaker 6: we're joined here in New York by Robin dan Holm,
Speaker 6: chair of Tesla's Board of directors in New York, meeting
Speaker 6: with shareholders.
Speaker 7: Key institutional shareholders of Tesla.
Speaker 6: Chris, there's a pay package that many have been analyzing
Speaker 6: that will keep from your perspective, Elon Musk in the
Speaker 6: driving seat and CEO of Tesla. Who are you meeting
Speaker 6: with and what thus far has been the response been
Speaker 6: to this pay package that could see Elon paid as
Speaker 6: much as a trillion dollars.
Speaker 8: Well, thank you for having me today. Yes, as part
Speaker 8: of our annual shareholder meeting, I meet with the top
Speaker 8: investors in Tesla on the institutional side, and obviously also
Speaker 8: talk to retail investors through forums like this this morning
Speaker 8: to encourage everybody to vote, but also to answer any
Speaker 8: questions that they have. From a board perspective, we really
Speaker 8: like to engage with our shareholders. Understand their questions that cancers,
Speaker 8: their optimism for the future, and so it's a really
Speaker 8: important part of the process we go through on a
Speaker 8: quarterly basis, but also with the proxy on an annual
Speaker 8: basis as well.
Speaker 6: So the initial feedback is it one of optimism around
Speaker 6: the pay package. We've heard from Glass Lewis from ISS
Speaker 6: which have said they're not in agreement with the way
Speaker 6: in which the pay package is thus formed.
Speaker 7: The key concern seems to be.
Speaker 6: The sheer amount of money going to Elon Musk if
Speaker 6: indeed he achieves all of those key milestones. But for you,
Speaker 6: it's about and for Elon influence, it seems like, so
Speaker 6: how are you managing to discuss that with the investors
Speaker 6: institutional a retail.
Speaker 8: Yeah, So, firstly, it is a performance package, so he
Speaker 8: gets nothing if he doesn't perform against the pretty audacious
Speaker 8: milestones that are part of the performance criteria that's been
Speaker 8: outlined by the board in the performance package. So I
Speaker 8: think rather than compensation, it's actually about the performance and
Speaker 8: the goals that we have for the company as we
Speaker 8: move forward. And so for me, it really is about
Speaker 8: making sure that investors understand that that they actually get
Speaker 8: paid if he hits the master and before he will.
Speaker 8: But to your point, it is about voting influence. Elon's
Speaker 8: been very public, including on last week's earnings call, about
Speaker 8: the fact that it's around the voting influence that he
Speaker 8: could have in future shareholder meetings as opposed to the
Speaker 8: economic interests of the shares that he would get as
Speaker 8: part of the performance plan.
Speaker 2: Robin, good morning from Washington, DC.
Speaker 3: You've acknowledged that there is a very real risk that
Speaker 3: Elon leaves if the vote is a no. This question
Speaker 3: we get most often from shareholders to you is what's
Speaker 3: the plan be? Is there a plan B as a
Speaker 3: different person stepping up, or have you discussed with Elon
Speaker 3: the idea that it will result in a no vote
Speaker 3: and that you can use some kind of bridging mechanism
Speaker 3: another interim pay award for example.
Speaker 8: Well, he's been quite public in terms of the implications
Speaker 8: of a no vote being on his leadership as well
Speaker 8: as on the obviously on the performance plan itself, and
Speaker 8: so from our perspective as a board, we we obviously
Speaker 8: take our fiduciary responsibilities really seriously to all shareholders and
Speaker 8: having you know, a succession plan, you know those types
Speaker 8: of things things we've discussed on an ongoing basis, particularly
Speaker 8: you know, if something unto world were to happen. So,
Speaker 8: from our perspective, succession planning is an important part, and
Speaker 8: so much so that we've actually baked in an orderly
Speaker 8: succession plan and a plan for a plant, if you like,
Speaker 8: as part of this performance plan. So the last two
Speaker 8: tranches of the of the performance plan are unlocked by
Speaker 8: having a robust performance plan that sorry succession plan that
Speaker 8: Elon would be part of.
Speaker 3: If Elon Musk walks away from Tesla on November sixth
Speaker 3: or seventh because of a no vote, is there a
Speaker 3: contingency where there is an individual already within Tesla or
Speaker 3: an individual outside of Tesla that is lined up as
Speaker 3: a near term option.
Speaker 8: Yeah, So from our perspective, the most important thing at
Speaker 8: this point in time is making sure that we're explaining
Speaker 8: all of the items on the shareholder agenda for the
Speaker 8: annual sharing holder Meeting, making sure that institutional investors retail
Speaker 8: investors have their questions answered. That's our most important thing
Speaker 8: right at this point, and we.
Speaker 3: Are only robin That is their question, Who's the backup plan?
Speaker 2: Is the question that they're asking you.
Speaker 8: Well, there is no other person that is Elon. We
Speaker 8: think that he is the right leader for the company
Speaker 8: over this next decade and delivering the plan and the
Speaker 8: opportunities ahead of us. So it's about how do we
Speaker 8: create the most value for the company and for our
Speaker 8: shareholders over this next period of time. And he is
Speaker 8: the right leader for us over this next decade.
Speaker 6: Can you give me a sense of probability if the
Speaker 6: vote is no, what probability Elon walks?
Speaker 2: So right?
Speaker 8: At this point in time, it's too early to actually
Speaker 8: make a call on the outcome. Most investors wait to
Speaker 8: the last minute to vote, so we're still early in
Speaker 8: that cycle, which is one of the reasons why I'm
Speaker 8: in New York to meet with our institutional investors. And
Speaker 8: we will get a better sense as the votes come in.
Speaker 8: And some institutions are more public than others in terms
Speaker 8: of how they're going to vote. So yesterday there was
Speaker 8: public announcement by the pension fund in Florida, and so
Speaker 8: other investors will start to make their votes public as well.
Speaker 7: But if it's no, the probability that Elon.
Speaker 9: Goes well, time will tell.
Speaker 8: But he's been very very public in terms of you know,
Speaker 8: it would be more of a say on his leadership
Speaker 8: over this period of time, not just about the performance
Speaker 8: plan itself in terms of a no vote.
Speaker 3: Yeah, Robin, you've been generous with your time. You know,
Speaker 3: we've already spoken with you in September at length about
Speaker 3: the goals that you've set for Elon Musk. But one
Speaker 3: of the things that came out of that from again
Speaker 3: the shareholder base is why are the energy products not
Speaker 3: as strictly mandated to Elon when you consider the earnings
Speaker 3: that just posted. That was a growth driver, right, It's
Speaker 3: such a key part of Elon Musk's master Plan Part
Speaker 3: four and this abundance that he is going after. So
Speaker 3: why didn't you include energy products as a stated goal?
Speaker 8: Yeah, So there are many different goals that we looked at.
Speaker 8: Energy is an important part of the Tesla product line
Speaker 8: up today and in the future, and you can see
Speaker 8: the impact that energy is having not only on the results,
Speaker 8: but also on the transition to sustainable energy longer term.
Speaker 8: So it is embedded in the plan. The ebitter goals
Speaker 8: that we have as a company. You can't get there
Speaker 8: without a robust energy outcome. And so again, if you
Speaker 8: look at the results of last week, energy contributed very significantly,
Speaker 8: and to get to four hundred billion dollars of adjusted
Speaker 8: ebitter as a monumental task for anybody. No one out there,
Speaker 8: at least to my knowledge, is at that sort of level.
Speaker 8: And so even the first ebitter goals at billion dollars
Speaker 8: is nearly three times our highest bitter goals that we've had,
Speaker 8: So from our perspective, it is absolutely.
Speaker 7: Embedded in the goals.
Speaker 8: To your point, it's not a specific line item in
Speaker 8: terms of the revenue or the units or the killer
Speaker 8: watts of energy or megawatts of energy that are out there,
Speaker 8: but it is implicit in the plans, and the master
Speaker 8: Plan for you know, talks about that as well in
Speaker 8: terms of getting to sustainable abundance.
Speaker 3: Robin has the special committee and the advisors that you
Speaker 3: took on discuss the use of interim awards in the
Speaker 3: event of the no votes and how you might replicate
Speaker 3: what you did already.
Speaker 8: Well, there's an important other measure on the board as well,
Speaker 8: proposal in terms of increasing the share pool that we have.
Speaker 8: Firstly for our employees. As you know, we're in a
Speaker 8: talent wall at the moment, particularly around aar talent and
Speaker 8: adding to the Employee Reserve as part a of that
Speaker 8: to actually increase the amount of equity that we have
Speaker 8: for our employee program. But secondarily, we've also asked shareholders
Speaker 8: to add to the pool in the event that we
Speaker 8: need to award an amount to elin to compensate for
Speaker 8: the twenty eighteen plan, because as you know, we put
Speaker 8: an intram award for roughly one third of what he
Speaker 8: earned under the twenty eighteen plan. Given the appeal that
Speaker 8: is ongoing in Delaware at the moment, so we have
Speaker 8: not ruled that out. The special Committee was charged with
Speaker 8: looking at all matters compensation wise. As you're aware, in August,
Speaker 8: we did actually award an interim award which does have
Speaker 8: a two year vesting period and is four aforded if
Speaker 8: we win the appeal in Delaware for the twenty eighteen
Speaker 8: compensation program.
Speaker 6: It does seem then to be about money, and I'm
Speaker 6: interested as to how you continue to You've made very
Speaker 6: clear it's about influence as well. Some of the feedback
Speaker 6: has been just a gargantuan amount that could go to
Speaker 6: Elon in terms of monetary value, but then others.
Speaker 7: Are worried about the dilution to other shareholders.
Speaker 6: How was it in just no way possible to give
Speaker 6: him more voting rights without the one trillion dollar mega
Speaker 6: money bonus.
Speaker 8: It feels like yeah, I mean, we looked at many
Speaker 8: different instruments to be able to award equity that had
Speaker 8: voting rights versus the economic value, and it's just not
Speaker 8: possible once a public company has gone public to introduce
Speaker 8: a special class of voting shares.
Speaker 7: Other companies have that.
Speaker 8: If you look at some of the tech companies, they
Speaker 8: have two classes and founder shares if you like, or
Speaker 8: special voting rights exist. But Kesler, that wasn't implemented at
Speaker 8: the time that we actually went public, and therefore we
Speaker 8: weren't able to use that type of instrument. But what
Speaker 8: we were able to do was to bifurcate the voting
Speaker 8: rights versus the economic rights. And so under the plan.
Speaker 7: The first.
Speaker 8: All the awards have voting rights that are earned first,
Speaker 8: and then the economic rights happen, you know, seven and
Speaker 8: a half years later in the first instance.
Speaker 7: Or ten years later.
Speaker 8: So it really isn't about the economic or monetary value.
Speaker 7: It's more about the voting rights.
Speaker 8: And if there was a different mechanism that was available
Speaker 8: to us, we may have used that, but we had
Speaker 8: many experts look at it over an extensive period of time,
Speaker 8: and we were not able to come up with something
Speaker 8: that would enable us to do that.
Speaker 6: We asked you who had Robin Dunholm, Chaphas and Tasla
Speaker 6: board of directors of course, and Robin what's so interesting
Speaker 6: is made very clear why he wants influence, and in
Speaker 6: the Earning school, who is saying he's worried about this
Speaker 6: army of robots that he is creating and they're not
Speaker 6: having the influence if something went untoward. His concerns about
Speaker 6: AI have been well documented, But why is he the
Speaker 6: right person to have influence, to have more than twenty
Speaker 6: twenty five percent.
Speaker 7: Vote in control?
Speaker 8: I think there's not another person on the planet that
Speaker 8: has the skill set that Elon has, both in terms
Speaker 8: of the manufacturing prowess that we've developed and he has
Speaker 8: developed over many years, but also around AI, that confluence
Speaker 8: of those technology skills, I think there are very few
Speaker 8: people that have that, and therefore, obviously, looking at the
Speaker 8: risks associated with new technologies andology and risks that haven't
Speaker 8: even yet emerged around those technologies, I think he is
Speaker 8: the right person not only to take advantage of the
Speaker 8: opportunities for the company ahead of us, but also to
Speaker 8: make sure that there are not the pitfalls of new
Speaker 8: technologies that could happen. Obviously the board plays a role
Speaker 8: in that as well, and as from a governance perspective,
Speaker 8: looking at the types of evil that could be done
Speaker 8: with different types of technology is part of our purview
Speaker 8: as well, and it is why we have such a
Speaker 8: phenomenal board with the skill sets that we have, both
Speaker 8: from a technology perspective but also from a governance perspective,
Speaker 8: and so we play a role. But obviously the CEO
Speaker 8: the management team play an even bigger role on safeguarding
Speaker 8: companies and safety is a huge priority of ours as
Speaker 8: a company, and so when you're developing new technologies and
Speaker 8: technologies that other people have not yet developed globally, it
Speaker 8: is important to make sure that you have the right
Speaker 8: framework in place.
Speaker 3: Robin final question from the shareholder base is did the
Speaker 3: situation around the twenty eighteen package Chancery Delaware situation mean
Speaker 3: that the board had to hold off on authorizing any
Speaker 3: other investments or big strategic shifts.
Speaker 8: No, I don't think so. I mean, obviously we take
Speaker 8: into account a whole bunch of factors as we're working
Speaker 8: through strategy and different alternatives the company.
Speaker 7: Has ahead of us, but.
Speaker 8: Clearly the Delaware situation was disruptive, but not disruptive from
Speaker 8: a strategic point of view. Making sure that we have
Speaker 8: an eye on the future and the evolution of the
Speaker 8: company over the long term, I think is something that
Speaker 8: the board is focused on, but also something the management
Speaker 8: team is focused on.
Speaker 3: Robin Dunholm, Chair of Tessa's board. Thank you very much,
Speaker 3: Thank you. Adobe is hosting its annual user conference this week,
Speaker 3: where the company will announce it's continued in integrations of
Speaker 3: generative AI into flagship creativity and productivity tools. The announcements
Speaker 3: include an updated version of their fly Fi image model
Speaker 3: and an AI assistant in Adobe Express, and access to
Speaker 3: models from Google and open Ai. We sat down with
Speaker 3: Adobe CEO Shantanu Orion for an exclusive conversation about its
Speaker 3: AI ambitions.
Speaker 10: I think everybody is so focused right now on training
Speaker 10: and the creation of these models, and that's where the
Speaker 10: investment is until that moves to inference and you're starting
Speaker 10: to see, you know, the usage of that. All of
Speaker 10: this investment is not going to be monetized, and you're
Speaker 10: not going to get a return. So you know, I'm
Speaker 10: very confident that Adobe is already at the path where
Speaker 10: it's the inference, it's the usage, it's the workflows, it's
Speaker 10: the actual value that we provide to customers. That's going
Speaker 10: to be the long lasting value.
Speaker 3: You present to picture a human generated picture of a
Speaker 3: business in rude health to the market.
Speaker 2: Give you enough credit for that?
Speaker 10: Well, I think it's fair to say that you know
Speaker 10: the stock price right now I don't think represents because
Speaker 10: there's a question about software at large that I think
Speaker 10: is misunderstood when you look at how profitable we are,
Speaker 10: the growth prospects that we have models are going to
Speaker 10: be an on wrap, and what we have to do
Speaker 10: at Adobe is just to continue to focus on driving
Speaker 10: the innovation, on demonstrating the metrics that are power powering
Speaker 10: this underlying business, the early metrics and adoption of all
Speaker 10: of this technology. And that gives me great confidence that
Speaker 10: the innovation that we're doing, innovation is alive as well
Speaker 10: at Adobe as well as it's being recognized by our customers.
Speaker 10: So you know, we recognize that inference is where the
Speaker 10: action is. We're skating to where the puck is and
Speaker 10: you know, I think the stock will take care of itself,
Speaker 10: but it's certainly undervalued right now, which is why we're
Speaker 10: buying back a lot of our stock.
Speaker 2: Let me address this head on.
Speaker 3: Wool Street does not see Adobe as a place where
Speaker 3: AI innovation is happening. And you just said, you know,
Speaker 3: when inference comes, you will be there. What's the counter
Speaker 3: argument to the statement that I just made.
Speaker 10: I actually think Wall Street has recognized that AI and
Speaker 10: Adobe and the way we've innovated has actually been stellar.
Speaker 10: I think they're wondering where the monetization of training and inference.
Speaker 10: I think this incredible focus on chips and the infrastructure
Speaker 10: for training is where the action is right now, and
Speaker 10: you know, my belief is that it will switch to inference.
Speaker 10: So I would actually dispute the fact that they are
Speaker 10: not recognizing the innovation that we're providing. But I think
Speaker 10: they're waiting to, you know, see how that accelerates on
Speaker 10: the inference site.
Speaker 3: There was Adobe CEO Shantanuan Orion. Okay, some more news,
Speaker 3: It's time for talking tech.
Speaker 2: First.
Speaker 3: Our PayPal shares surging today after the company raised its
Speaker 3: full year earnings guidance and announce a new partnership with
Speaker 3: open Ai. The deal integrate PayPal's digital wallet into chat
Speaker 3: GPT products, enabling users to seamlessly turn searches into purchases. Plus,
Speaker 3: Meta is moving its top Metaverse executive to a new role.
Speaker 2: Vishal shar is set.
Speaker 3: To oversee AI products and will be responsible for adding
Speaker 3: the company's AI Tech two metas, app and wearable devices.
Speaker 3: This comes just a week after the company cuts six
Speaker 3: hundred jobs from its AI unit and Paramounts Guidance is
Speaker 3: preparing for a major round of layoffs, cutting about one
Speaker 3: thousand jobs starting Wednesday.
Speaker 2: That's according to sources.
Speaker 3: The move follows the company's merger in August, as management
Speaker 3: looks to streamline operations and reduce costs. The second wave
Speaker 3: of job cuts is expected at a later date.
Speaker 7: Welcome back to blue Mentech.
Speaker 6: Let's get a quick check on these markets because for
Speaker 6: a record hires folk then as that one hundred tracking
Speaker 6: up just about three tens percent. We're coming off of
Speaker 6: the previous highs of the day, but nevertheless we march
Speaker 6: ever higher as the moon music is positive. One around earnings.
Speaker 6: One about some of the seismic announcements we're going to
Speaker 6: get from Nvidia, it's trading higher ahead of the big
Speaker 6: announcementsro GDC. Microsoft trades higher with clarity on that twenty
Speaker 6: seven percent state they have in the public benefit cooperation
Speaker 6: of opening I going forward better stig beneath also what's
Speaker 6: rallying and Amazon is now we understand with clarity now
Speaker 6: that fourteen thousand jobs in the corporate part of the
Speaker 6: business are to go. We're up about a quarter of
Speaker 6: a percent. But we want to dig into this particular
Speaker 6: story and what it means going forward with Matt Day,
Speaker 6: you cover Amazon Matt and in many ways this has
Speaker 6: been signaled by Andy Jasse. Generator AI is going to
Speaker 6: allow them to do more with less from a corporate
Speaker 6: personnel perspective.
Speaker 11: That's right.
Speaker 12: Andy Jasse, the Amazon boss, came up with a memo
Speaker 12: earlier this spring, I guess, saying that over time they
Speaker 12: expected AI to reduce the headcount in corporate roles. Now
Speaker 12: PR is telling us that's not the driving force today,
Speaker 12: but it's hard to escape as a background they did
Speaker 12: just in the layoff memo from the hrchief this morning
Speaker 12: announcing those fourteen thousand cuts. You know, they mentioned AIS
Speaker 12: transformative and Amazon's got a reshape to be ready for it.
Speaker 3: We actually did find out a little bit more granularity
Speaker 3: from sources right now on which roles, which departments. And
Speaker 3: I think it's worth pointing out fourteen thousand is less
Speaker 3: than half the number that Reuters put out yesterday afternoon.
Speaker 12: That's right, And I think one of the indications in
Speaker 12: Amazon's communication to employees is that these might not be
Speaker 12: over They said, you know, looking to twenty twenty six,
Speaker 12: the company would continue to hire in some areas, but
Speaker 12: also look for efficiencies and look for ways to cut
Speaker 12: the fat. So employees are definitely taking that as a
Speaker 12: sign that more are coming, which would be within the
Speaker 12: patterns Amazon is established from its prior big layoff.
Speaker 5: Right.
Speaker 12: We saw this movie a few years back when they
Speaker 12: rolled out layoffs in October, November, January, and March.
Speaker 3: Bloomberg's Matt Day, thank you very much. Let's get to earning.
Speaker 3: Shares of so far down roughly this morning, this despite
Speaker 3: the company reporting pretty strong earnings, raising its full year
Speaker 3: profit outlook, and increasing membership in the latest quarter. Let's
Speaker 3: talk through those numbers with CEO anton Ote. I'm reading
Speaker 3: actually the Bloomberg Intelligence reaction to the numbers. Right, You've
Speaker 3: been through the numbers on the call. But the story
Speaker 3: is that this one stop shop platform is getting traction
Speaker 3: with affluent, younger people. Is that the story that you'd
Speaker 3: want to.
Speaker 11: Tell, Absolutely, and the results speak to that.
Speaker 13: We've driven seventeen consecutive quarters where our revenue growth and
Speaker 13: our margins when added together, exceeds the very attractive rule
Speaker 13: of forty that technology investors like to see.
Speaker 11: In software companies.
Speaker 13: We've actually averaged fifty eight in this quarter, we're sixty
Speaker 13: seven percent. We drove thirty percent revenue growth and have
Speaker 13: twenty nine percent with down margins, which is an exceptional performance,
Speaker 13: and it's really the direct result of the foundation that
Speaker 13: we've built over the last eight years to have this
Speaker 13: diverse setup product that are all now firing together to
Speaker 13: deliver durable growth and really strong profitability. Our business continues
Speaker 13: to diversify into products outside of lending. Fifty six percent
Speaker 13: of our revenue was from the line lending segments, and
Speaker 13: that was up quite meaningfully fifty seven percent. So the
Speaker 13: strategies working with thirty five percent product member growth, thirty
Speaker 13: six percent product growth, and then about forty percent other
Speaker 13: products in the quarter were bought by existing members.
Speaker 3: And to bear with me one moment please, there's just
Speaker 3: some breaking news. Nvidia is making a one billion dollar
Speaker 3: equity investment in Nokia, the European telecom telecommunication networking name.
Speaker 3: Nvidia will subscribe Nokia shares at a price of six
Speaker 3: dollars one cent per share and hold three percent of
Speaker 3: the company almost three percent, two point nine percent. Nokia
Speaker 3: is going to use that money to accelerate its strategic
Speaker 3: plans around AI, and the shares will be delivered in
Speaker 3: the form of ADRs. It's an interesting piece of breaking news.
Speaker 2: We're here in.
Speaker 3: DC for Nvidia GtC. I'm sure later in the day
Speaker 3: we'll get back to it. Antie, thank you for bearing
Speaker 3: with me. The other person I want to ask about
Speaker 3: is what's happening in the market right now. If you
Speaker 3: are a fintech company and you put out a press
Speaker 3: release or you say the words open AI in the
Speaker 3: public forum, your stock goes ballistic. Paypalers example of that.
Speaker 3: Does so FI feel the need to integrate itself as
Speaker 3: an API through chat GPT?
Speaker 13: What I'd say is this, we're benefiting from two technology supercycles,
Speaker 13: blockchain and artificial intelligence. We'll talk about products and impact
Speaker 13: as they're released. I think it's critically important to stay
Speaker 13: grounded in reality of the business as well as the
Speaker 13: impact of these new initiatives and the business. We've recently
Speaker 13: launched something called Sofi Pay, which is the ability to
Speaker 13: pay in the United States. There are app in dollars
Speaker 13: of money that's remitted internationally to Mexico as a start
Speaker 13: rides down a layer two blockchain and it arrives in
Speaker 13: the destination country and local feat We've rolled out Mexico
Speaker 13: and we'll soon be adding the rest of lat am
Speaker 13: as well as Europe, and we think it's a very
Speaker 13: unique product. We also will be launching before the end
Speaker 13: of the year the ability to buy, sell, and hold
Speaker 13: cryptocurrencies at SOFI. Will be the first national bank in
Speaker 13: the US to offer buy, sell and hold cryptocurrencies, and
Speaker 13: you'll be able to do it through your Sofi Money account.
Speaker 13: Our Sofi Money accounts a our checking the seams accounts
Speaker 13: they have up to two million dollars with FDIC insurance.
Speaker 13: People could open up a crypto account and fund that
Speaker 13: purchase directly.
Speaker 11: From their Sofi Money account seamlessly.
Speaker 14: So not only building unique products, but we're stitching them
Speaker 14: together so that you have a seamless ability to use
Speaker 14: all of our products, and it's better to use them together.
Speaker 14: We'll also launch next year a stable coin, which we
Speaker 14: think will impact a number.
Speaker 11: Of our different businesses.
Speaker 13: It will be part of Sofi pay, be part of
Speaker 13: held Biols and sell Crypto, and will also be offered
Speaker 13: to our technology platform partners.
Speaker 7: The product innovation is rapid, Anthony.
Speaker 6: What's interesting though, is trying to understand the asset quality
Speaker 6: going forward. And as Ed started this conversation, there's perhaps
Speaker 6: the sort of higher level, higher type of person that
Speaker 6: you've been marketing to. But PayPal has just been saying,
Speaker 6: I'm ind their earnings said worried about the US.
Speaker 7: Consumer right now? Are you?
Speaker 11: No, we're not. Our consumer is very strong.
Speaker 13: We're going after prime and super prime customers with their
Speaker 13: lending products. Our credits performed incredibly well. We actually saw
Speaker 13: an improvement sequentially again in net charge offs by about
Speaker 13: twenty basis points across both products.
Speaker 11: Our average FYCOS score for our personal loans is.
Speaker 13: In the seven to forty range and the average FYCO
Speaker 13: score for our student owner financing is in the seven
Speaker 13: to fifty range. So we're seeing really strong performance of
Speaker 13: credit and great demand from our capital markets partners in
Speaker 13: our loan platform business, which is now in this quarter
Speaker 13: over three billion dollars, up nine hundred million dollars sequentially.
Speaker 13: And so not only is our credit performing well, the
Speaker 13: returns investors are getting and buying our loans or licensing
Speaker 13: with us on our loan platform is also performing well.
Speaker 13: And we see a flight to quality and we're benefiting
Speaker 13: from that.
Speaker 6: Anthony, you have been talking about the innovations when it
Speaker 6: comes to investing in AI investing in crypto, maybe there's
Speaker 6: a bit of an in organic as well as organic.
Speaker 7: But I'm interested about what it means for your workforce.
Speaker 6: Are you still going to be expanding Briefly, might you
Speaker 6: see some trimming in terms of corporate jobs.
Speaker 13: We are accelerating our rate of investment, and we've announced
Speaker 13: a number of new initiatives, including the smart card for
Speaker 13: next year as part of Sofi Plus. We'll continue to
Speaker 13: expand the selection that we have in the invest product
Speaker 13: that I mentioned the crypto investments.
Speaker 11: We're also doing things in artificial intelligence.
Speaker 13: We've recently launched cash Coach, which is a way to
Speaker 13: evaluate the cash that you have in your Sofi accounts
Speaker 13: and all of your external accounts and show you how
Speaker 13: you're not using your cash optimally. Will also launch something
Speaker 13: more broadly called Coach, which will answer your questions but
Speaker 13: most importantly help you understand how to spend less than
Speaker 13: you make so you can invest the rest. We're moving
Speaker 13: forward with hired and we've hired more engineers this year
Speaker 13: than we've had in the past, and we don't see
Speaker 13: that signed.
Speaker 6: Down, Anthony Noto, so Fi CEO. Great to catch up
Speaker 6: with you today. On the back of your earnings.
Speaker 3: Secretive Americans startup Substrate has come out of stealth with
Speaker 3: a one billion dollar valuation and a bold claim on
Speaker 3: chip making technology. It's built a new lithography tool that
Speaker 3: it says uses particle acceleration and X ray wavelengths to
Speaker 3: etch intricate wafer patterns as sharp as all sharper than
Speaker 3: ASML's EUV machines. ASML shares fell after Bloomberg published its story.
Speaker 2: The company also has.
Speaker 3: Long shot plans to build an American foundry, taking aim
Speaker 3: at TSMC's dominance. Substrate founder and CEO James Proud joins
Speaker 3: us now from San Francisco. James, I've had the benefit
Speaker 3: of spending some time with you in recent weeks looking
Speaker 3: at the company seeing the technology. The technical breakthrough is
Speaker 3: the use of a particle accelerator. But you're very keen
Speaker 3: to point out that you didn't take any ip from
Speaker 3: anyone else or work with another technology company. The response
Speaker 3: when we published the story was, how is this different
Speaker 3: from a company called x light? So take that and
Speaker 3: run with it, please.
Speaker 15: I think that what we've shown today is a working
Speaker 15: tool that is producing beautiful images. To our knowledge, there's
Speaker 15: only two companies that are actually printing images at these resolutions,
Speaker 15: in one in the United States.
Speaker 3: Let's bring up those images. You're basically sharing these images
Speaker 3: as evidence that the machine itself works. What is it
Speaker 3: that we're looking at here? And you know, beyond that,
Speaker 3: I think some of the technical questions that the analyst
Speaker 3: community came to us with is what is the throughput
Speaker 3: of this machine, you know, beyond this being a lab
Speaker 3: based experiment.
Speaker 4: Yeah, so that's a great question.
Speaker 15: So it's important to know that the images that we've
Speaker 15: printed printed, we've done them under production like conditions, So
Speaker 15: this isn't something that is a very long exposure, a sort.
Speaker 4: Of one off.
Speaker 15: We've been very very focused on if we're going to
Speaker 15: use this kind of light source. It has to be
Speaker 15: capable of high volume production. And then on the other
Speaker 15: side the actual tool itself. We have what is a
Speaker 15: production quality three hundred millimeter away for tool with the
Speaker 15: mechatronics in that tool moving a production throughput. Of course,
Speaker 15: we're not in a fab. We've not built a fab yet,
Speaker 15: and so the proof is really going to be there.
Speaker 15: But we feel very very confident that on the key
Speaker 15: metrics that go into throughput, we've been demonstrating those.
Speaker 6: Okay, so you haven't built a fab, but you are
Speaker 6: planning an American foundry.
Speaker 15: Why, James, Well, if you look at the history of
Speaker 15: all of this techn from the transistor to photo lithography itself,
Speaker 15: the United States invented all of this. It was predominantly
Speaker 15: actually two companies, Intel and IBM. And so I see
Speaker 15: that we have a long history in this country of
Speaker 15: doing crazy, bold things, and it feels like a more
Speaker 15: brief aberration that the United States is not in the
Speaker 15: leadership position here. We've gone and done something very very
Speaker 15: different on the sort of key process in the manufacturing process.
Speaker 15: Our ideas aren't limited just to the lithography. We have
Speaker 15: lots of ideas about what would it look like if
Speaker 15: you were starting a foundry from scratch, and so we're
Speaker 15: very excited to go and keep building on top of that.
Speaker 6: And I'm sure IML looks on with wonder as at
Speaker 6: the moment they are at the heart of lithography, and
Speaker 6: maybe Japanese player too, but really they have the choke point.
Speaker 6: I'm interested as and when your facility might be up
Speaker 6: and running for such lithography, for such semiconductor equipment making
Speaker 6: machines to be up and running, and you see, commercially, James, our.
Speaker 15: Goal is to be up and running in twenty twenty eight.
Speaker 15: It's a very very fast timeline, but we've moved at
Speaker 15: incredible speed. The company's really only three years old at
Speaker 15: this point, and so if we can continue at that pace,
Speaker 15: we think that we can get that done.
Speaker 2: James.
Speaker 3: For you, this is about American sovereignty over a national
Speaker 3: security critical technology. Would you just explain your pitch in
Speaker 3: those terms. I know that you are driven by a
Speaker 3: very specific ideology on how and why America should lead
Speaker 3: in this field.
Speaker 15: Yeah, to be very clear, like you said, like this
Speaker 15: company and starting this, this is a very ideologically driven mission.
Speaker 15: Doing this and starting this is not easy. It's been incredibly,
Speaker 15: incredibly hard to get to this point, but I feel
Speaker 15: like the national security and economic security imperative, we need
Speaker 15: to be doing absolutely everything that we possibly can to
Speaker 15: get it States back into a leadership position. We need
Speaker 15: to be building as many fabs from domestic and foreign
Speaker 15: players as we possibly can. My number one goal is
Speaker 15: wafers built in the United States.
Speaker 9: We think that we can.
Speaker 15: Do a different version of that and bring that online
Speaker 15: very rapidly, but the end goal is semiconductors built in
Speaker 15: the United States as quickly as possible.
Speaker 3: In the story, we outline both that you were once
Speaker 3: a UK citizen who renounced UK citizenship and became an
Speaker 3: American citizen, and that you have no intention to sell
Speaker 3: these machines. So I want to get to some subject
Speaker 3: the matter that we didn't cover. You know that you
Speaker 3: need to raise tens of billions of dollars probably to
Speaker 3: achieve this vision. The capital right now is coming from
Speaker 3: the golf in the Middle East. How would you manage
Speaker 3: that situation?
Speaker 15: So I think it's actually really important to note that
Speaker 15: traditionally with a large semiconductor fab, you need a very,
Speaker 15: very large anchor customer to be able to fund the
Speaker 15: sort of tens of billions required to get a a
Speaker 15: fab up and running. But with what we're doing, we
Speaker 15: can actually reduce those costs so that to bring up
Speaker 15: a low volume facility you'd only really be in the
Speaker 15: single low single digit billions of dollars. And so because
Speaker 15: of that, we think that we have a lot more
Speaker 15: flexibility in raising capital and actually getting this build as
Speaker 15: quickly as we can.
Speaker 6: So maybe keep on depending on US capital to build
Speaker 6: and fabricate in the United States. And for that, how
Speaker 6: much have you had to liaise with the Trump administration,
Speaker 6: how much we had to be in sync with their
Speaker 6: own focus on fabrication in the United States.
Speaker 15: Well, I think the Trump administration and the President have
Speaker 15: made it very clear they see that this is a
Speaker 15: golden age for the United States and that we are
Speaker 15: in a technological battle. There's an AI race and the
Speaker 15: United States needs to win. And so from literally day
Speaker 15: one of that administration, they've been incredibly supportive, engaged, and
Speaker 15: the door has always been open. And so we're incredibles
Speaker 15: of the administration and appreciative of the time that they've
Speaker 15: given us.
Speaker 6: James Crowd, CEO, substrate we thank you for joining us today. Meanwhile,
Speaker 6: coming up, we're going to be speaking with Anka Crawford,
Speaker 6: algia EVP and portfolio manager.
Speaker 2: I want to.
Speaker 6: Expect outam In Video's GtC keynote adds some news on
Speaker 6: him Video.
Speaker 2: Yeah, and it was breaking out of Europe.
Speaker 3: In Video is making a one billion dollar equity investment
Speaker 3: in Nokia, where in Video will end up holding almost
Speaker 3: three percent of that company. And it's about Nokia having
Speaker 3: both the capital and the technology relationship to advance its
Speaker 3: strategic priorities in AI.
Speaker 2: I am here in DC for GtC.
Speaker 3: One would assume therefore that later today we'll hear more
Speaker 3: about it. But Caro, look at Nokia shares right now
Speaker 3: and that reaction that's called the Nvidia effect, the golden
Speaker 3: ticket in AI.
Speaker 2: This is Bloomberg Tech.
Speaker 7: We've got to get back to our top story of
Speaker 7: the day.
Speaker 6: Microsoft has finalized a pact with Open AI, giving the
Speaker 6: t tech giant Microsoft that is a twenty seven percent
Speaker 6: stake in the chatchipte maker. It's public benefit corporation part
Speaker 6: of it worth about one hundred and thirty five billion dollars.
Speaker 6: Unco Crawlford is with US EVP portfolio manager at Algae.
Speaker 6: And you've been putting a lot of thought into underlying
Speaker 6: valuations into the overall AI spectrum right now. Is this
Speaker 6: clarity a good one for you when it comes to
Speaker 6: the Microsoft thesis?
Speaker 8: Oh?
Speaker 16: Sure, I mean, you know, partnering with open Ai. Open
Speaker 16: ai is probably one of the most significant companies of
Speaker 16: our decade. Of this decade, and to be able to
Speaker 16: partner with open ai and increase the time horizon over
Speaker 16: which the partnership will will exist was important for Microsoft
Speaker 16: because the underlying technology is being developed at open Ai. So,
Speaker 16: you know, welcome, We're very happy to see it. The
Speaker 16: extension of the Data Center Pact also an important step
Speaker 16: in the right direction.
Speaker 7: Two hundred and fifty billion dollars worth.
Speaker 16: Yeah, that's right, and so moving forward, I mean, there
Speaker 16: was a lot of kerfuffling that we'd heard between open
Speaker 16: ai and Microsoft. I'm glad that they're over it. I
Speaker 16: think they'll make great partners once again. This is about
Speaker 16: deal making once again. This is about open ai just
Speaker 16: trying to ensure that it's got the bandwidth of compute
Speaker 16: that it needs. With Microsoft being able to say real
Speaker 16: revenue from general to AI in the here and now
Speaker 16: and still have access to the IP When we keep
Speaker 16: thinking about these deals, some of them being talked of
Speaker 16: as circular. Has it given you any pools, any calls
Speaker 16: for concern? Actually quite the opposite in that maybe we
Speaker 16: should be asking what is it that open ai actually
Speaker 16: thinks their revenues can be that they need so much capacity,
Speaker 16: and back into perhaps you know, how big is this
Speaker 16: market and how are they framing it?
Speaker 9: How is anthropic framing their market?
Speaker 16: You know, last week there was a really interesting article
Speaker 16: about how open ai was hiring investment bankers, where they're
Speaker 16: coding a junior investment bank analyst.
Speaker 9: What is that worth?
Speaker 3: Right?
Speaker 16: What is that worth to a bank that may hire
Speaker 16: an open ai digital banker?
Speaker 9: Right? And if you do this across.
Speaker 16: The economy, I think it becomes a clearer that you know,
Speaker 16: the opportunity set here is very significant. It's not tens
Speaker 16: of billions, it's hundreds of billions, if not greater.
Speaker 7: We are at a new record high in the day.
Speaker 6: We are seeing Nvidia push hire ahead of more announcements
Speaker 6: coming out of GtC. We are seeing earnings anticipation all
Speaker 6: of some of the major players of Magnificent seven this week, the.
Speaker 7: Key five coming forward.
Speaker 6: But when you're looking at your investment playbook. Are you
Speaker 6: going to keep putting money into a Microsoft, into an Video,
Speaker 6: into an Amazon and an alphabet or is it a
Speaker 6: broader remit Now?
Speaker 16: I think it has been a much broader subsection that
Speaker 16: we have been investing in, mostly playing on the infrastructure side.
Speaker 9: At some point you're.
Speaker 16: Going to have to pivot from not only in structure,
Speaker 16: but into those companies that are actually deploying and getting
Speaker 16: the benefits of AI that is still on the come
Speaker 16: because we are still in this ramp of building infrastructure.
Speaker 16: I mean, we can't actually deploy artificial intelligence to companies
Speaker 16: and get that benefit until the infrastructure is in place.
Speaker 16: So I think there's another you know, two to three
Speaker 16: year build out on the infrastructure. I think as we
Speaker 16: go through this earning season, we will see everyone is
Speaker 16: going to be raising their CAFEX estimates. Next year the
Speaker 16: numbers probably go up again.
Speaker 6: Can you celebrate that rather than seeing the revenue going
Speaker 6: up into the right?
Speaker 9: You celebrate both.
Speaker 16: Right, you need to see the infrastructure people spending CAPEX,
Speaker 16: which will eventually come as revenue to them over the
Speaker 16: next few years. But you do have to invest first
Speaker 16: in order to see the game.
Speaker 6: OK, it's always great to get your perspective. We so
Speaker 6: appreciate it on co cooford of Alga there with us
Speaker 6: portfolio manager. Meanwhile, let's just take a quick look as
Speaker 6: we wrap up this edition of Bluembag TI of the
Speaker 6: movers of the day nokire European what was the telecom
Speaker 6: equipment pivoting into AI equipment and then some in video
Speaker 6: vindicates that pivot by investing some one billion in terms
Speaker 6: of equity. That's a billion dollar equity investment in nock here.
Speaker 6: This is all about the future of AI RAN. That's
Speaker 6: radio access network market that's rapidly growing. It's about five
Speaker 6: it's about sixty for ups seventeen percent. Look out of
Speaker 6: course for the GtC announcements to come. But that does
Speaker 6: it for this edition of Bloomberg Tech. One key focus
Speaker 6: is also to get your podcasts satiation. Do it with us,
Speaker 6: go to the terminal to online on Apple, Spotify and iHeart.
Speaker 6: Lookout for ED a little bit later at the GtC
Speaker 6: coverage as well.
Speaker 7: This is Bloomberg Tech