Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and Eva Low in Sent Francisco.
Speaker 2: This is Bloomberg Tech coming up. Intel returns to profitability.
Speaker 2: It gives an upbeat revenue forecasts. Are the chip makers
Speaker 2: comeback efforts working.
Speaker 3: Plus banks for preparing to launch a thirty eight billion
Speaker 3: dollar debt offering to help fund data centers tied to Oracle.
Speaker 3: It's a record for AI.
Speaker 2: Infrastructure, and Mistraus's CEO, Arthur Mench joins us on the
Speaker 2: company's release of a new platform to help enterprise clients
Speaker 2: make customizable AI tools.
Speaker 3: An important private market conversation. We get back to the
Speaker 3: public markets to end this week. We are at a
Speaker 3: new record high when you're looking at the SMP, when
Speaker 3: you're looking at the NASDAC, we're up two percent of
Speaker 3: the course of the last five days. But a real
Speaker 3: tick hire on the day ed the macro picture, the
Speaker 3: inflation cooler than many had worried about, and indeed that
Speaker 3: gives a bedroom to run when it comes to maybe
Speaker 3: some more cuts that the market has already been pricing in.
Speaker 3: We've got China us. We've got plenty to be digesting,
Speaker 3: and you're looking at earnings.
Speaker 2: Yeah, in the earnings context, Intel's post earnings rally has
Speaker 2: basically completely faded. A gain of more than seven percent
Speaker 2: is now less than one percent, but profitable for the
Speaker 2: first time in a long time on a net income basis.
Speaker 2: The PC market was better than they expected. They're making
Speaker 2: some progress in server, even a little bit in foundry.
Speaker 2: The issue is that the quarter was all about getting
Speaker 2: money from anyone they could, clearing some of the debt,
Speaker 2: and there's still a lot of unknowns about how far
Speaker 2: there's left to go on this turnaround plan.
Speaker 3: Correct, Yeah, let's get about where some of the holes
Speaker 3: are still left on Intel Counjin surmanis with US beming
Speaker 3: intelligence senior analysts covering semiconductors, and we are still left
Speaker 3: with a lot to chew on. Because clearly PC doing
Speaker 3: a bit better, maybe even CPUs getting into those data centers.
Speaker 3: But what about the next iteration of fabrication of chips.
Speaker 4: This result shows the first sign in the right direction,
Speaker 4: sort of a turnaround, a beginning of a turnaround. You know,
Speaker 4: the gross margin headwinds. Like you said, the challenges are
Speaker 4: not gone away. But what they showed yesterday where they
Speaker 4: are running their demand is running ahead of the supply,
Speaker 4: which it will be for the first chapter twenty six.
Speaker 4: There were structural gross margin improvements, though we will not
Speaker 4: see a gross margin expansion next year, primarily due to
Speaker 4: the new eighteen A coming on their exit from the
Speaker 4: ALTA business, which was their highest gross margin business.
Speaker 5: But structurally under.
Speaker 4: When you peel the onion, we like what they're doing.
Speaker 4: Most of the eighteen A will be moving from Oregon
Speaker 4: to Arizona, which is a better cost structure fab to
Speaker 4: begin with, a lot more volume will be coming back
Speaker 4: to Intel's foundries, which is better for them as they
Speaker 4: go through the initial transition cost and the revenue scale,
Speaker 4: which it is showing from the higher demand and PCA
Speaker 4: Data center improves slowly structurally the overall gross margins to
Speaker 4: start to keep well.
Speaker 2: I don't know what happened, Conjum, but in the time
Speaker 2: you've been speaking, Intel's now flat and eliminated all of
Speaker 2: its gain of the day. And I'm not saying that's
Speaker 2: your fault. I'm just making the observation. Look, when I
Speaker 2: spoke to the CFO Dave's Instagram the phone, he was
Speaker 2: a bit surprised by some of the end markets that
Speaker 2: they're relying on. On the product side, servers in particular.
Speaker 2: The basic argument they're making is the hyperscalers has suddenly
Speaker 2: realized that you have to at some point update your CPUs,
Speaker 2: you have to invest in them, and so now they're
Speaker 2: saying that actually on a year on year basis, they'll
Speaker 2: see unit growth.
Speaker 6: What did you make of that?
Speaker 4: You know, that is a very credible story to believe in.
Speaker 4: We have seen signs of this in other markets. For example,
Speaker 4: the storage server market has been seeing a big demand
Speaker 4: when it comes to HDD. So when you think about
Speaker 4: every time when we're pinging something like a co pilot,
Speaker 4: it's going and clearing or analyzing data which was sitting
Speaker 4: dormant for the past six months, so the storage servers
Speaker 4: were not really.
Speaker 5: Using them cuddly.
Speaker 4: Now we're pinging them four to five times, So that
Speaker 4: does you know, it is a credible story to believe
Speaker 4: that the need for CPO, even outside AI servers, is
Speaker 4: going to increase now as we involve more and more AI.
Speaker 5: In our world.
Speaker 2: Day Conjensavania Bloomberg Intelligence. Later in the show, we'll get
Speaker 2: more on Intel from the cell side. Meanwhile, banks are
Speaker 2: reportedly preparing a thirty eight billion dollar debt offering for
Speaker 2: data centers tied to Oracle. Sources say the deal could
Speaker 2: launch as soon as Monday, with JP Morgan a MUFG
Speaker 2: among the lead banks. Here to discuss, Bloomberg Intelligence Senior
Speaker 2: tech analyst Anna rag Rana, there's a key point of
Speaker 2: clarification here that Caroline made to the team earlier in
Speaker 2: the chat, and it's not Oracle taking on this debt.
Speaker 2: Its advantage the developer who will do the project. Even so,
Speaker 2: when you see a news piece like that about that
Speaker 2: level of debt supporting the build out in infrastructure, what
Speaker 2: is your reaction to it.
Speaker 7: No, that's a very good point, and in fact, you know,
Speaker 7: I had a very good conversation with our credit analyst,
Speaker 7: Rob Schiffman, and we discussed this quite a bit. We
Speaker 7: have seen something like this coming from other places as well,
Speaker 7: which is when you have a contract from a particular vendor,
Speaker 7: you know you can create, you could an asset back
Speaker 7: securitization product where the contract itself says there is revenue
Speaker 7: that's going to come in the future. So the question
Speaker 7: is whether they're going to be appetite for such large
Speaker 7: dead deals going forward as well, because I think that's
Speaker 7: critical for recognizing a lot of that RPO that's coming
Speaker 7: in into revenue. Otherwise, you know it's going to be
Speaker 7: very difficult to convert that into sales.
Speaker 3: This is about yield, and for the facilities related to advantage,
Speaker 3: they're expected to come to you in about four years
Speaker 3: is about two one year extension options. You're getting two
Speaker 3: and a half percentage points over benchmark those. So people
Speaker 3: who are clamoring to get exposure to the AI narrative
Speaker 3: now just have to do it through equity. They can
Speaker 3: do it through debt, and they can do it in
Speaker 3: a nice yield. More broadly, are we going to see
Speaker 3: these sorts of packages come in this sort of sheer
Speaker 3: scale because of the need that we've got out there
Speaker 3: at the moment.
Speaker 7: So you have to because I think about it, if
Speaker 7: Open Eye has signed a deal worth three hundred billion
Speaker 7: dollars with Oracle, you know, how are you going to
Speaker 7: finance that? How are you going to convert that contract
Speaker 7: into sales? And you need data centers to come there,
Speaker 7: you need equipment, and finally that needs to be realized.
Speaker 7: So we are expecting a lot more in the market.
Speaker 7: The question is whether the private debt market has the
Speaker 7: ability to, you know, basically absorb this level of.
Speaker 5: Debt or not.
Speaker 3: Arak Rana, I'm pretty big intelligence. We'll see how this
Speaker 3: does get absorbed. It's coming to the market as soon
Speaker 3: as Monday. But let's just talk more broadly about what's
Speaker 3: happening in the debt markets, when it comes to tech,
Speaker 3: when it's happening in the equity markets, which are actually
Speaker 3: tech help performing in that particular area. Today, you've got earnings,
Speaker 3: you've got hopes on the China US trade talks, you've
Speaker 3: got stock ticketing on record. After that CPI number came
Speaker 3: in with well a relief that the Fed will potentially
Speaker 3: keep on cutting at the rate in the market things.
Speaker 3: Martin Norton's with US Chief Investment Strategies at EMPOWER. I
Speaker 3: want to go back to what we're just talking about
Speaker 3: and the debt that's coming to the market and the
Speaker 3: absorption that's going to be happening. I'm looking at a
Speaker 3: story right now saying that the Bank of England is
Speaker 3: actually probing data center lending because they're weren't about AI
Speaker 3: bubbles brewing. Is this something you're starting to hear about
Speaker 3: in the market.
Speaker 8: Martyr.
Speaker 9: Well, it's so interesting because a lot of the rationale
Speaker 9: for the I guess complacency around the AI trade has
Speaker 9: been that this is largely being funded by very well capitalized,
Speaker 9: very strong hyperscalers, and the companies are not taking on debt.
Speaker 9: They're using what they have to extend into this space.
Speaker 9: But now in the most recent month, we are beginning
Speaker 9: to see more debt issuance, and I think when you
Speaker 9: think about the scale of investment and the ratio of
Speaker 9: capex to revenue that we're seeing, even the hyperscalers, it
Speaker 9: does argue that we're going to have to use a
Speaker 9: broader range of financing to meet some of the targets
Speaker 9: that we have, And of course that's the signal that
Speaker 9: folks are looking for that there is an AI bubble now,
Speaker 9: you know. I think there's a real difference between extreme valuations,
Speaker 9: which is where I think we are in an AI bubble.
Speaker 9: I think the sentiment has to get more aggressive. I
Speaker 9: think we would have to see far more debt issue.
Speaker 9: I think we've our I guess kind of wildness around it.
Speaker 3: We're getting a few hits to the line. Mart we
Speaker 3: need more compute I'm interested in. Look, five trillion is
Speaker 3: what the spending is likely to be up to twenty
Speaker 3: thirty if we're going to get the data center and
Speaker 3: compute necessary to fuel the AI viewpoint. To that end,
Speaker 3: when you're thinking about clients coming to you saying I
Speaker 3: want exposure, I want it to be cross asset. Are
Speaker 3: you saying don't how you talking about the diversification between
Speaker 3: equity exposure and debt exposure foot bonds and the like.
Speaker 9: Well, at this point, I mean the primary to AI
Speaker 9: still within the equity market. I think this is something
Speaker 9: that especially for the active credit managers, it is an
Speaker 9: opportunity to vet.
Speaker 8: You know, you can get that added yield.
Speaker 9: As suggested, but I do think people want to be
Speaker 9: really cautious in terms of adding that debt. One thing
Speaker 9: that we're talking about a lot in the credit market
Speaker 9: is just how tight spreads are, and so that is
Speaker 9: we want to watch to make sure that isn't you know,
Speaker 9: evaluation risk within the within the credit market.
Speaker 2: Martya earnings was a factor in this market.
Speaker 6: This morning.
Speaker 2: When I came to my desk, we showed Intel actually
Speaker 2: is now basically flat. Even so, in the course of
Speaker 2: a conversation we had with Intel CFO Dave's insner. He
Speaker 2: made for an interesting case study, which is that he
Speaker 2: said they had been very cautious about tariffs, but the
Speaker 2: impact wasn't there in the end, and actually in the
Speaker 2: PC segment on which they depend, shipments were very strong,
Speaker 2: stronger than they had anticipated. Just as a case study,
Speaker 2: you know, that's really interesting data to me.
Speaker 6: What do you make of it?
Speaker 9: I mean, it's totally interesting, and it really echoes what
Speaker 9: we've seen over the course of twenty twenty five, which
Speaker 9: is this sea change in trade policy and yet really
Speaker 9: no discernible effect from either an earnings perspective or from
Speaker 9: an inflation perspective. Our emphasis over this period has been
Speaker 9: expecting to see some hit to earnings, less concern on
Speaker 9: the inflation front, and I think one thing that we're
Speaker 9: really learning over this process is that you can see
Speaker 9: a sea change in policy and yet not necessarily see
Speaker 9: the impact immediately. I think the concern I would raise
Speaker 9: to investors is just because you don't see an immediate
Speaker 9: impact doesn't mean there isn't an impact. When we look
Speaker 9: at that long term implications of globalization on earnings, it
Speaker 9: has been a real positive for the US and globally,
Speaker 9: and so as we roll that back, it stands to
Speaker 9: reason that it is a headwind. Maybe a headwind that
Speaker 9: we can overcome, but a headwind nevertheless.
Speaker 2: Marta, please respond to what is one of the top
Speaker 2: news stories of the day. President Trump says he's halted
Speaker 2: trade talks with Canada because of an advertisement that they ran,
Speaker 2: citing a Reagan era comment, you're aware of it. In response,
Speaker 2: Mark Carney says that trade talks were making progress before
Speaker 2: the president's post on true Social again as a case
Speaker 2: study of trade and policy in this market.
Speaker 6: Your reaction to it.
Speaker 9: Well, I guess I would say that that trade talks
Speaker 9: are the toddler that just won't go to bed.
Speaker 8: I don't think this story is really over yet.
Speaker 9: I mean, we have a lot of certainty, I guess
Speaker 9: in terms of the overall effective terrif rate, but the
Speaker 9: fine details of what those trade talks look like, yes,
Speaker 9: with Canada, but also of course there's still a lot.
Speaker 8: Of negotiation with China.
Speaker 9: So I think this is something that will be this
Speaker 9: kind of lingering volatility within the market.
Speaker 3: Marta, you have a sea of parents of young children
Speaker 3: who are just feeling that pain analogy really beautifully. Thank
Speaker 3: your just I want to go back to the very
Speaker 3: star of our conversation and they say that valuations you
Speaker 3: think are extended where exactly and what will earnings have
Speaker 3: to vindicate which types of companies.
Speaker 9: Well, when we're looking at the US market broadly, really
Speaker 9: every sector from our vantage point, with one exception, is
Speaker 9: quite expensive. And when we talk about expensiveness, we're looking
Speaker 9: at sectors and de siles of valuation relative to their
Speaker 9: own history, and what we're seeing is valuations that are
Speaker 9: really in those ninth and tenth deciles. And that's when
Speaker 9: that starts to matter to perspective three year returns. When
Speaker 9: we look under the hood and technology, we really see
Speaker 9: it across industries. Now, that doesn't mean that these stocks
Speaker 9: can't grind higher, and if we do see upside surprise
Speaker 9: within earnings, potentially that could push the stock market even further.
Speaker 9: I think the idea here is that there's just low immunity.
Speaker 9: So if we were to get an earning season that
Speaker 9: people expect, I think that's a lot harder to move
Speaker 9: the stock market.
Speaker 8: I will do a shout out to healthcare.
Speaker 9: This is something we've been surfacing since the summer This
Speaker 9: is one of those areas that is more attractively priced.
Speaker 9: It has a lot of problems that it faces, but
Speaker 9: it also has, you know, the potential to benefit from
Speaker 9: something like AI. So that's one of those areas that
Speaker 9: we're looking to in this environment.
Speaker 2: Martin Orton, chief investment Strategist to empower, thank you very much.
Speaker 2: A Clara Resources and Exploration and Mining Services provide a
Speaker 2: plans to build a two hundred and twenty seventy seven
Speaker 2: million dollar rare Earth's plant in Louisiana, the first of
Speaker 2: its type in the US. This comes as Western nations
Speaker 2: attempt to reduce reliance on China, currently the dominant supplier.
Speaker 2: The facility will process material from m clara's clay deposits
Speaker 2: in Brazil and Chile for magnets used in evs and
Speaker 2: wind turbines, and construction is expected to be completed by
Speaker 2: the end of twenty twenty seven.
Speaker 3: And coming up so much for pet rocks, hey. JP
Speaker 3: Morgan takes another big step into the crypto world. More
Speaker 3: on that next. This is Bloomberg Tech.
Speaker 2: JP Morgan is set to allow clients to use bitcoin
Speaker 2: in Ether as collateral for loans. That's according to sources
Speaker 2: the move marks a deeper step into crypto for Wall Street.
Speaker 2: Bloomberg's digital finance reporter Emily Nicole broke the story, joins us, now,
Speaker 2: I think it's really important to go through the mechanics
Speaker 2: of what we think this will work as right, institutional clients,
Speaker 2: what they can do is collateral and then what the
Speaker 2: bank will do in return take it away.
Speaker 10: Yes, so what we've been hearing is that JP Morgan
Speaker 10: will be allowing this by the end of this year.
Speaker 10: What the process would look like is where institutional clients
Speaker 10: come to JP Morgan with holdings of bitcoin and ether
Speaker 10: that they already own that would then be transferred to
Speaker 10: a third party custodian that JP Morgan well the point,
Speaker 10: who will look after the cryptos so the bank doesn't
Speaker 10: have to touch themselves, and that can be used as
Speaker 10: collateral for financing that the bank can lend against.
Speaker 3: What's really interesting is the context of JP Morgan and
Speaker 3: shall I say Jamie Diamond's relationship with crypto, because it
Speaker 3: was a few years ago he was calling them pet rocks,
Speaker 3: hyped up fraud and now most recently in your story,
Speaker 3: which is a beautiful quote talking about I don't think
Speaker 3: we should smoke, but I defend your right to smoke.
Speaker 3: Is that why they're not going to be custodian while
Speaker 3: they're letting others like State Street Bank of New York,
Speaker 3: Mellon Fidelity still play that game rather than JP Morgan itself.
Speaker 10: There's definitely a bit of a divide in terms of
Speaker 10: how banks want to touch crypto. Some like JP Morgan
Speaker 10: are happy for clients to touch it, but they don't
Speaker 10: necessarily want to be involved in touching it themselves. So
Speaker 10: earlier this summer, for example, this started out with JP
Speaker 10: Morgan allowing clients to use crypto ETFs as clateral, so
Speaker 10: traditional finance rappers that they're used to touching, but it
Speaker 10: tracks the price of a cryptocurrency. This is a step
Speaker 10: further than that, but they're still not getting to the
Speaker 10: point of why they'd want to touch the crypto directly.
Speaker 10: It should be no though, it's pretty difficult for banks
Speaker 10: to touch cryptodirectly sometimes because there are rules like the
Speaker 10: buzz or rules on banking that prevent them from touching
Speaker 10: crypto without having to hold an equivalent amount of capital
Speaker 10: and reserve at the same time. It can get pretty
Speaker 10: expensive unless you've got the right structures in place.
Speaker 3: There's a lot of institutions and a lot of private
Speaker 3: individuals have a lot of crypto gains they want to
Speaker 3: be able to use as collateral. Emily Nicole, it's a
Speaker 3: great story. Thank you coming up. Google says it's reached
Speaker 3: another new milestone in quantum technology. It's a step that
Speaker 3: could bring the long promise power of quantum computing closer
Speaker 3: to reality. One of the next this has been their tech.
Speaker 2: Google says it achieved a major milestone in quantum computing,
Speaker 2: bringing the technology's immense processing power a step closer to
Speaker 2: real world use. The company says it ran an algorithm
Speaker 2: on its Willow quantum chip that is verifiable and thirteen
Speaker 2: thousand times faster than today's best supercomputers. Let's discuss with
Speaker 2: Koreana Chow, chief operating officer at Google Quantum AI. I
Speaker 2: think actually the best place to start is the basics
Speaker 2: of quantum computing versus accelerated or supercomputing, because if you
Speaker 2: explain why that thirteen thousand x performance is notable in
Speaker 2: simple terms, it gives some measure of why it's a
Speaker 2: piece of news this week.
Speaker 11: Absolutely, today's computers classical computers, they use bits right zeros
Speaker 11: and once they use that to calculate, it's useful.
Speaker 6: For a number of different problems across the world.
Speaker 11: However, quantum computing is different uses a combination of zeros
Speaker 11: and ones at the same time that enables access to
Speaker 11: different types of problems, like the quantum echoes algorithm we
Speaker 11: announced this week.
Speaker 2: You have brought Willow with you, You've put it in
Speaker 2: an impenetrable safe housing and casing. There it is on
Speaker 2: the desk in front of me. I read a lot
Speaker 2: of academic papers this week, and many point out that
Speaker 2: you didn't use a scalable or fault tolerant chip for
Speaker 2: this demo, and so the argument follows that it would
Speaker 2: be a big challenge for you to commercialize or scale
Speaker 2: out that technology. Is that a fair concern from the
Speaker 2: academic community.
Speaker 11: That is the goal of quantum computing, to get to
Speaker 11: fault tolerant quantum computing. Nobody is there yet. It is
Speaker 11: a long journey, but it is very exciting. We've been
Speaker 11: excited last December to announce for the first time that
Speaker 11: error correction can work. We demonstrated that with our Willow chip,
Speaker 11: and we continue on this journey pushing the number of
Speaker 11: cubits and also bringing the errors way down.
Speaker 3: And it's the timing now, Karina, what is it five
Speaker 3: years do we get something that actually will show quantum
Speaker 3: computing being really applicable and useful in the areas of science,
Speaker 3: in the area of medicine. Why that timeline in particular.
Speaker 11: Yeah, we are optimistic that we'll see real world applications
Speaker 11: that are only possible on quantum computers in the next
Speaker 11: five five years. You know, this breakthrough that we announced
Speaker 11: this week is a great milestone towards that path. We
Speaker 11: showed that quantum echoes, this algorithm is not only thirteen
Speaker 11: thousand times faster on a quantum chip, but that it
Speaker 11: can be used to simulate and calculate the exact structure
Speaker 11: of a molecule. So we think this is an important
Speaker 11: step on the past.
Speaker 3: Someone on your team, we're on the twenty twenty five
Speaker 3: Nobel Prize in physics was among the winners. You have
Speaker 3: hert and leading the charge. We have real stellar well talent,
Speaker 3: but also a lot of investment. What did you make
Speaker 3: of the news the flow that maybe the US government
Speaker 3: is there to support other smaller quantum players here in
Speaker 3: the United States? Is that important? Yeah?
Speaker 11: We are really excited and pleased to see all of
Speaker 11: the investment, the support, the excitement about quantum computing across
Speaker 11: the board. US government has been a strong supporter and
Speaker 11: partner in this for the last many years, and we're
Speaker 11: very excited about those investments and continue partnership across the ecosystem.
Speaker 2: Crini, the COO of the Quantum Group, right, And we
Speaker 2: reflected earlier in the week on the show when the
Speaker 2: headline hit the Bloomberg about this breakthrough. Actually markets reacted,
Speaker 2: alphabet shares moved markedly. Would you reflect a little bit
Speaker 2: on what the days that followed that were, like, did
Speaker 2: the phone ring off the hook from various parties that
Speaker 2: are interested now to know more about how they might
Speaker 2: be able to use the tech.
Speaker 6: Yeah.
Speaker 11: For us at Google, we are really excited about all
Speaker 11: the interests that we're seeing across the board. Our mission
Speaker 11: at Google Quantum AI is to build quantum computing for
Speaker 11: otherwise unsolvable problems. I think that's why there's increasing interest
Speaker 11: with every breakthrough. People in other fields are getting excited
Speaker 11: about what can be possible, and we look forward to continue.
Speaker 2: So the bar has been set now for you, what
Speaker 2: is the next milestone that we should judge you by
Speaker 2: in progress.
Speaker 11: Yeah, there's going to be continued work across the board.
Speaker 11: One really important marker of progress is continuing to push
Speaker 11: the hardware. So you can see on this Willow chip
Speaker 11: here it says one hundred and five Q. That's one
Speaker 11: hundred and five cubits on our willow too fast.
Speaker 6: Give the camera man a chance to catch up, but
Speaker 6: he will get it.
Speaker 11: Yeah, yes, one hundred and five cubits.
Speaker 6: So that is great.
Speaker 11: This has been honestly cutting edge ship. But to get
Speaker 11: to where we want to go to solve these important
Speaker 11: problems in chemistry, in physics, in material science, batteries, energy,
Speaker 11: and more, we want to get to a million cubits.
Speaker 11: So we're going to keep pushing the performance of our system.
Speaker 11: We're also going to keep pushing the algorithm in software
Speaker 11: developments so that we can solve these problems.
Speaker 3: What does that take, Karina? What does that take in
Speaker 3: terms of supply chain? What does that take in terms
Speaker 3: of talent? What does that take in terms of focus?
Speaker 11: Yeah, these are all really important questions. I'll start with talent.
Speaker 11: You mentioned a Nobel Prize winner on our team.
Speaker 3: We are super proud of.
Speaker 11: Michelle Deveray and the entire group of teammates and body
Speaker 11: of work that's happened over the last many decades.
Speaker 3: We're super proud of our team.
Speaker 11: We've got a super talented team of engineers, technicians, research scientists,
Speaker 11: program managers and others who are pushing the boundaries of
Speaker 11: this technology. We've got to keep bringing the best and
Speaker 11: the brightest to our team to push the performance of
Speaker 11: what is possible.
Speaker 3: Kaarina Chow, it's been great speaking with you, chief operating
Speaker 3: officer at Google Quantum AI, on the back of what
Speaker 3: has been quite a week for your team. Congratulations. Now
Speaker 3: coming up, we get back to Intel's earnings and the
Speaker 3: chip makers efforts and come back from New York from
Speaker 3: San Francisco. This is Bloomberg Tech.
Speaker 2: Welcome back to Bloomberg Tech if you're just joining us.
Speaker 2: Intel and its earnings were our top story, and the
Speaker 2: stock actually has eliminated most of the gain that it had.
Speaker 2: It opened up almost eight percent, is now up just
Speaker 2: half of the percentage point, but trading at its highest
Speaker 2: level since April of twenty twenty four. It has returned
Speaker 2: to profitability. It saw surprising demand across PC and server,
Speaker 2: and it had some fighting talk about its place in
Speaker 2: the AI infrastructure industry, which largely was around wayfer and packaging.
Speaker 2: Not as exciting as GPU. But it's worth digging into numbers.
Speaker 3: Character and is we can do that with a perfect person.
Speaker 3: Pierre Farrago is with US New Street Research, head of
Speaker 3: Global Tech Infrastructure joining us and look, we have seen
Speaker 3: the games fade. What did you make of the numbers?
Speaker 3: Was there enough there to keep the share price rallying
Speaker 3: as it has been.
Speaker 12: Yeah, so the numbers for Intel on the day like
Speaker 12: yesterday are but relatively short tone on trend. And so
Speaker 12: the PC market has been very weak for some time.
Speaker 12: Meeting actually expectations that we are very high because everybody
Speaker 12: was very excited about the AIPC and things like that,
Speaker 12: which didn't really move the needle for the math. And
Speaker 12: so now what we see is the more traditional driver
Speaker 12: like the Windows refresh cycle helping enterprise demand and that's
Speaker 12: great of course. And then servers, we've seen the server
Speaker 12: market been weak for quarters and quarters, if not years,
Speaker 12: because you had so much focus on deploying like AI
Speaker 12: servers that a lot of very large players were kind
Speaker 12: of you know, deprioritizing the deployment of traditional services and
Speaker 12: now we are entering a phase of catch ups. So
Speaker 12: the new term for Intel looks good and it reminds
Speaker 12: you that it's a good business, that there is operating leverage.
Speaker 12: But even if they've lost a lot of market shirts
Speaker 12: with MD, there are still like a market leader. So
Speaker 12: that's great, but a very surprisingly positive but relatively short ter.
Speaker 12: I mean, that's the way I interpret the stock movement.
Speaker 12: You know, yeah, big grip on the news floor, and
Speaker 12: then you look back and you're like, well, but at
Speaker 12: the end of the day, word does really matter for Intel?
Speaker 12: Is that really like PC demand over the next couple
Speaker 12: of years or is that more so?
Speaker 3: What matters. What matters is fourteen A. What matters is
Speaker 3: are they going to be the cutting edge of the
Speaker 3: next iteration of chips? Are they going to really rival
Speaker 3: ty SMC and get others than Intel's own fabrication? Going,
Speaker 3: what did you hear from Bhutan the team about that?
Speaker 12: So I heard two things. The first one is mixed signal,
Speaker 12: which is at eighteen A, the manufacturing is ramping, is
Speaker 12: going to get into volumes immediately, you know, like for
Speaker 12: the beginning of next year. But comments but the yield,
Speaker 12: so you know, the quality of the process are still
Speaker 12: very very mixed. Let's face it, the yields are not
Speaker 12: good today, so early yields not being good is almost
Speaker 12: business as usual. But I think eighteen a's performance in
Speaker 12: terms of manufacturing performance is disappointing. And then the second
Speaker 12: piece of news that that rematters the most for the
Speaker 12: long term of Intel is like more positive comments. But
Speaker 12: fourteen A. Remember three months ago, the CEO had very
Speaker 12: cautious comments, even mentioned in writing in the ten case
Speaker 12: as a possibility of not developing fortein a if Intel
Speaker 12: didn't find enough customers, you got to do it. And
Speaker 12: now they're talking positively about Fatina. On the technical front,
Speaker 12: like the road map is progressing well. And also I
Speaker 12: don't even want to call that the commercial front, but
Speaker 12: more like the coalition front. Decided that if you really
Speaker 12: want Intel to be successful in manufacturing, you need more
Speaker 12: than clients. You need industrial policy, you need a coalition.
Speaker 12: You need partners that deeply engage with Intel, invest in Intel,
Speaker 12: commit to Intel, to work with Intel. That's the only
Speaker 12: way the foundry is really going to do well. And honestly,
Speaker 12: on that front, it's very very early signals, but I
Speaker 12: think they are positive.
Speaker 2: I tried to get a sense from Intel CFO Daves
Speaker 2: and when I spoke to him on the phone about
Speaker 2: that long term you were talking about and in an
Speaker 2: AI world AI, his answer was quite simple. They do
Speaker 2: see opportunity and accelerators, but the foundry bit is what
Speaker 2: I was like most surprise. That is saying that the
Speaker 2: foundry opportunity for them in AI is in wafers and packaging.
Speaker 2: That doesn't sound hugely exciting.
Speaker 12: Pierre, Well, maybe it doesn't sound hugely exciting, but it
Speaker 12: sounds very realistic and really playing to Intel strength. The
Speaker 12: way it's Intel today is they have two major product franchises.
Speaker 12: One is in the Piece of Business x eighty six
Speaker 12: CPUs for pieces and one was in seven. So I'm
Speaker 12: pretty sure the management wants to maximize the value of
Speaker 12: these two franchises and concentrate on them.
Speaker 6: And it's good.
Speaker 12: You can't invent yourself, you know, like an AI accelerator designer,
Speaker 12: like fifteen years down the lines or ten years down
Speaker 12: the line, and that's very reasonable. And then yes, Intel
Speaker 12: has an edge packaging. Intel is a strategic asset for
Speaker 12: this industry and this is probably what management wants to
Speaker 12: build on and I see that as maybe not as
Speaker 12: exciting as willing to compete against the VIDR, but very
Speaker 12: realistic and the right industrial approach probably.
Speaker 6: You know, and for our audience pre appreciate that answer.
Speaker 2: Because you also cover in video right, you're able to
Speaker 2: make the comparison on xAd six. I think the argument
Speaker 2: Intel were making to us was the hyperscalers have woken
Speaker 2: up a bit to the value of having the latest
Speaker 2: CPU in infrastructure. They're willing to invest and refresh on CPU.
Speaker 2: So again for them Intel, they would argue that it's
Speaker 2: a great opportunity for them.
Speaker 6: Do you see that opportunity.
Speaker 12: Yes, absolutely, no doubt, and it's very very strong. You
Speaker 12: have like clients asking for it. The specifics of the
Speaker 12: XAT six architecture and the way Intel implements it is
Speaker 12: very differentiated. I've always been a great believer in the
Speaker 12: quality of the products of Intel on that from like
Speaker 12: the ability of an intell extaden ship to deal with
Speaker 12: very unforeseen city cuation in very complex work cloud is excellent,
Speaker 12: and you've had so much demand for it that it
Speaker 12: actually triggers NVIDA has moved first to open up envilling
Speaker 12: like the high bandwidth connectivity with their GPS so that
Speaker 12: Excaity six chip can be integrated into na systems, and
Speaker 12: a five billion dollar investment in Intel and a partnership
Speaker 12: with Intel to co develop chip that will be optimized
Speaker 12: to get integrated into Nvidia systems. And my read, having
Speaker 12: followed that for a few years, is that it's not
Speaker 12: just like a nice gesture from Nvidia under political pressure
Speaker 12: or anything like that. It is a genuine, thorough and
Speaker 12: deep interest for Intel products in the industry for that role. Now,
Speaker 12: keep things to the scale they are out on NVL
Speaker 12: seventy to server powered by x eighty six Champs chips.
Speaker 12: The chip is going to be single digit percentage of
Speaker 12: the co cost of the overall server and the other
Speaker 12: ninety plus percent would be in video.
Speaker 3: So Pierre within video support, we know the money is
Speaker 3: yet to come through in that settle in the next quarter.
Speaker 3: Will that be enough to see Ohio breakground? Will we
Speaker 3: see an actual commitment not just to co develop, but
Speaker 3: actually to eventually fabricate on site in the United States,
Speaker 3: not just relying on TSMC.
Speaker 12: It's a great question. You need more than that to
Speaker 12: have like a final commitment or to claim victory basically
Speaker 12: in order for Intel to successfully manufacture chips in the
Speaker 12: US package chips in the US for US clients. You
Speaker 12: need the money and major pogrests made on that front
Speaker 12: with money from the government, from NVDR, from South Bank,
Speaker 12: and I'm sure.
Speaker 5: More will furrow.
Speaker 12: You need also like the multi year commitment of a coalition,
Speaker 12: so you're not going to get like the right hip
Speaker 12: in the first go with. It's a dialogue that needs
Speaker 12: to last very multiple years before you get to success.
Speaker 12: And last but not least, you need execution. You needed
Speaker 12: to come up with a fought in a that's going
Speaker 12: to show up like policively, be unveiled and better convinced
Speaker 12: and make potential adopters more confident. It's going to be
Speaker 12: the right not to do something with it.
Speaker 6: Pierre Faragu of New Street Research. Great to have you
Speaker 6: back on Bloomberg Tech. Thank you very much.
Speaker 2: Now coming up MISTRAUS CEO Arthur Mentch joins us to
Speaker 2: discuss the startups new platform designed to help companies get
Speaker 2: the most out of AI. It's a big interview. We've
Speaker 2: been looking forward to this one for some time. Stay
Speaker 2: with us. This is Bloomberg Tech.
Speaker 6: Today. European AI startup Mistra.
Speaker 2: Announced the release of a new platform to help its
Speaker 2: enterprise clients make customizable AI tools that are easy to
Speaker 2: operate throughout the businesses. Delighted to welcome mist our CEO
Speaker 2: after Mensch to the program. This is a path to
Speaker 2: production right and the enterprise category between you anthropic open AI,
Speaker 2: it's a fierce battle. I think let's just start by
Speaker 2: you explaining why you feel this is such a significant
Speaker 2: milestone for Mistra.
Speaker 13: So hello and happy to be here for us to
Speaker 13: We're a global company really focused on creating value for
Speaker 13: the enterprises, and we have had three years of experience
Speaker 13: in doing that, and so AI Studio is basically the
Speaker 13: one stop shop platform where you can build your AA
Speaker 13: application as a business, and so it brings everything that
Speaker 13: we need to create value in the enterprise, to create
Speaker 13: applications that belongs to the enterprises, that contains their IP,
Speaker 13: that is connected to their data, and that improves over time,
Speaker 13: averaging the knowledge that is contained within enterphrises, that is
Speaker 13: contained within employee's mind.
Speaker 3: You are a global company, you're producing foundational models. Author
Speaker 3: I wonder though, how you compete against those that are
Speaker 3: already serving the enterprise. How is your solution different from
Speaker 3: that of anthropics, that of open AI, is that of
Speaker 3: X's and many others.
Speaker 13: Well, I think our solution is much more integrated. Is
Speaker 13: that we have thought about all of the bricks that
Speaker 13: needed to be there to go from a model, which
Speaker 13: is how we started to an application with the right
Speaker 13: font end, with the right back ends, and with the
Speaker 13: right learning mechanisms. So that integration is really the reason
Speaker 13: why we've been succeeding in delivering value with enterprises. So
Speaker 13: that's one very strong area of differentiation. The other thing
Speaker 13: is that, in contrast with some of our competitors, we
Speaker 13: really believe that enterprises should build their own AI, that
Speaker 13: they should own the system, that the IP should remain
Speaker 13: their own, that the data should remain where it is
Speaker 13: and should not necessarily flow back to us. And so
Speaker 13: that approach of building a portable platform that can be
Speaker 13: the deployed on prend that can be deployed on private cloud,
Speaker 13: combined with the vertically integrated approach of having just one
Speaker 13: platform allowing you to go from prototype production, I think
Speaker 13: is very very different from the approach for competitors, and
Speaker 13: that has an oders to make a lot of progress
Speaker 13: in particular under.
Speaker 2: Us Arthur, can you talk about how quickly you're able
Speaker 2: to onboard scaled enterprise customers to this and in turn
Speaker 2: therefore what the capacity and compute constraints are for you
Speaker 2: in launching a new product and then trying to run
Speaker 2: workloads with clients.
Speaker 13: Well, a good example that I can give you is
Speaker 13: what we've been doing with one of our big customers,
Speaker 13: which is a logistic company call same Messagem and one
Speaker 13: of the biggest shipping company in the world, and so
Speaker 13: as many other companies, they were a bit struggling with
Speaker 13: the adoption of air. If you look at the MIT reports,
Speaker 13: they state that ninety five percent of use cases just
Speaker 13: don't go intoduction. And the way we have done the
Speaker 13: work with them is we use AI studio and we
Speaker 13: deployed our AI applied engineers or.
Speaker 5: AED applied scientists.
Speaker 13: We made them work with the business unit owners and
Speaker 13: they realized what kind of processes could be automated and
Speaker 13: to end and from ideating what we could automate to
Speaker 13: going into production. So from March to July in formats
Speaker 13: we were able to understand a full function to be automated,
Speaker 13: so cargo release and dispatching of release of containers to
Speaker 13: multiple customers. We're able to go from that to production
Speaker 13: that is now going at the global scale. So the
Speaker 13: way we think about it that it takes a quarter
Speaker 13: to go from a prototype to production, and for him
Speaker 13: to happen, you need to have the right tools. You
Speaker 13: need to have the right tools. You need to have
Speaker 13: the right experts. You need to deeply understand what AI
Speaker 13: agents can do and cannot do. You need to connect
Speaker 13: the agents to the data sources. You need to connect
Speaker 13: them to software which is sometimes legacy, so you need
Speaker 13: to have the right interfaces, the right plumbing.
Speaker 5: That's what AIP studio can bring.
Speaker 13: You also need to have the experts, so that's why
Speaker 13: we deploy people in the companies that we work with.
Speaker 2: After there is intense interest in Mistrau as the European
Speaker 2: champion among AI labs frontier labs. The thing we're most
Speaker 2: interesting to learn about is the progress of the follow
Speaker 2: on fundraising round that's reported. You're undertaking how much money
Speaker 2: you seek in the raise, But beyond the money, why
Speaker 2: do you need to do a quick follow on? What
Speaker 2: is the most pressing need for capital at the moment.
Speaker 13: So I'm not sure we'll talk to you about the
Speaker 13: follow on but we are not raising money at the moment.
Speaker 5: We are.
Speaker 13: We've just actually announced the fundraise with SML, which is
Speaker 13: the biggest European company and with whom we work with
Speaker 13: whom we have a commercial agreement where we help them
Speaker 13: make better products, automate the processes, we help connect their
Speaker 13: vertical expertise to horizontal expertise, We make them create their
Speaker 13: own AI and deploy this AI into the their systems.
Speaker 13: So that was a one point seven billion euro race,
Speaker 13: which which makes us We've raised around three billion euro
Speaker 13: in total, and that in turn has enabled us to
Speaker 13: grow very fast and to create unique technology and to
Speaker 13: release it in particular on the.
Speaker 5: Open source WED.
Speaker 3: That was really interesting, this strategic investment coming from SML.
Speaker 3: You just referenced CMA, CGM, another French based giant. It's
Speaker 3: a global company, but it's French based. You've got work
Speaker 3: with stillants, You've got work with BNP, Parabar. What about
Speaker 3: US companies? How are you managing to penetrate here?
Speaker 5: So we are working with CHIPELU US companies.
Speaker 13: We're working with Cisco for instance, which has chosen us
Speaker 13: because we allowed them to deploy on private cloud and
Speaker 13: we deploy people to work with them in particular on
Speaker 13: the customer experience side, so that's one important customer of hours.
Speaker 13: We also work with Snowflake deployer technology in particular on
Speaker 13: document processing and all of our technology to structure and
Speaker 13: structure knowledge into to take instruct your knowledge and turn
Speaker 13: it into things that can then be crawled by a systems.
Speaker 13: We also work, as you know, with Microsoft, which is
Speaker 13: which is a very important bartner of owers and exposes
Speaker 13: on the on voundry on models, being very competitive in
Speaker 13: particular on their cost of performance ratio. We walk with
Speaker 13: A Doubles and GCP and we work with multiple digital
Speaker 13: natives Companion as well.
Speaker 2: Arthur your peers, Dario ama Day from Anthropic, Sam Altman
Speaker 2: OpenAI are looking increasingly to the Middle East, both for
Speaker 2: capital but compute capacity. Right this week we broke the
Speaker 2: news of Anthropic securing one million TPUs with Google and GCP.
Speaker 2: That's the scale that people are talking about. Are you
Speaker 2: making those future plans for scale? Are you looking at
Speaker 2: debt markets to ensure the future of mistrau and what
Speaker 2: you want to do?
Speaker 13: So the future of if you should diligence is very
Speaker 13: linked to infrastructure, as you know, and as a consequence
Speaker 13: of that, we have created a new business unit called
Speaker 13: Mistile Compute, which is creating digital infrastructure GPUs, in particular
Speaker 13: in Europe, which is lacking infrastructure today, and so we've
Speaker 13: been growing that very fast and we are acquiring multiple
Speaker 13: hundreds of Mega what capacity in the coming year to
Speaker 13: actually be able to serve our customers, to serve AI startups,
Speaker 13: to serve all of our existing customers and customers that
Speaker 13: come to us because they are looking for sovereign capacity.
Speaker 13: We also use that capacity to train our own models
Speaker 13: and to maintain our leadership on the open source font.
Speaker 3: With that comes the need to continue to invest. You
Speaker 3: raised money, and is that what's being used to finance
Speaker 3: the exploration and data center build out. Because I'm looking
Speaker 3: at a headline at the moment that the Bank of
Speaker 3: England itself is really worried about a circled AI bubble
Speaker 3: and some of the debt and the financing that's going
Speaker 3: on data centers at the moment. Is that something that
Speaker 3: gives you pause?
Speaker 13: Author, Well, we've raised equity and we are deploying that
Speaker 13: equity to actually train models.
Speaker 5: So RANT is financed by our equity.
Speaker 13: We also have long term contacts for our compute facilities,
Speaker 13: and with those long term contacts, we are able to
Speaker 13: actually finance them through that that's not this is bank
Speaker 13: debt and gives us confidence that we are not overly
Speaker 13: exposed to that there is a lot of investment happening
Speaker 13: on the infrastructure side today. We're really focused on creating
Speaker 13: the long term value that will justify with investments. Because
Speaker 13: we operate with enterprises, because we go all the way
Speaker 13: to delivering value for.
Speaker 5: Them, to identifying their use cases, to.
Speaker 13: Making things that transforming what looks like magic to something
Speaker 13: that looks like money, we are not exposed to whatever
Speaker 13: may happen on overly investing on the infrastructure site.
Speaker 5: We invest on the infastructure site in a wise way
Speaker 5: to help.
Speaker 3: Build mister Lai studio. Mench. Great to have you on
Speaker 3: that news today. Thank you so much, the CEO of
Speaker 3: Mistrell and co founder. Now coming up, we'll come back
Speaker 3: on the AWS shortage and outage. But it is one
Speaker 3: of the biggest in history. Remember and what would that
Speaker 3: mean for cloud Giant's future in the age of AI.
Speaker 3: This has really big ten.
Speaker 2: Amazon basically invented the cloud business, but now it's struggling
Speaker 2: as Monday's outage shows one of the worst outages in
Speaker 2: the cloud unit's history. Bloomberg's Amazon reporter Matt Day joins
Speaker 2: us to discuss his latest deep dive and why AWS
Speaker 2: is now perceived as trailing its rivals and AI. This
Speaker 2: week's been rough outage, losing some Groundman to GPUs TPUs
Speaker 2: for Google.
Speaker 6: Just give me the headline of your story.
Speaker 14: So the headline of the story is that Amazon is
Speaker 14: essentially no longer the only game in town in cloud computing.
Speaker 14: They've got real credible rivals, you know, down to Oracle
Speaker 14: and Google. Now, five years or so ago was on
Speaker 14: Microsoft that was knocking on the door. And now you
Speaker 14: add on all this AI workloads and that's not a
Speaker 14: business at AIS or that Amazon rather seem to be
Speaker 14: leading in.
Speaker 3: Just for context, though, how successful does it remain, how
Speaker 3: much market shared does it still own? And what are
Speaker 3: we starting to see in terms of inroads and so.
Speaker 14: On on traditional cloud It's something like thirty eight percent,
Speaker 14: reckons Gartner. It's down from about half of the market,
Speaker 14: you know, five or six years ago.
Speaker 6: Folks who have made inroads.
Speaker 14: You know, there's there's Microsoft, there's GCP, there's Oracle and
Speaker 14: a lot of a lot of the threat there is
Speaker 14: just some of the services at Amazon pioneered like those
Speaker 14: are leaning toward commodities. Other companies can offer you a
Speaker 14: similar package of goods.
Speaker 2: Right, Matt, When we break the story about Anthropic using TPUs,
Speaker 2: Google stock up, Amazon stock down, how have you reflected
Speaker 2: on that in the story.
Speaker 14: Also, it's you really can't overstate the importance of Anthropic
Speaker 14: to AWS. You know, they're their marquee artificial intelligence customer.
Speaker 14: They're helping kind of code develop Amazon's artificial intelligence ship
Speaker 14: called Tranium with them. So the fact that they now have,
Speaker 14: you know, what really looks like edge or an option
Speaker 14: to go more toward Google. Should they choose, should they
Speaker 14: like the tech results better? That is a real risk
Speaker 14: or a potential risk rather for Amazon's business.
Speaker 3: I have a feeling it's a story you're going to
Speaker 3: continue to dig into. It's so well read today. Thank
Speaker 3: you so much. Bloomberg's Mack Day reflecting on the week
Speaker 3: that was for Amazon, and we reflect on the show
Speaker 3: that was because it does it for this edition of
Speaker 3: Bloomberg Tech Ed. It was another huge busy one and
Speaker 3: boy next week to lon end.
Speaker 2: Yeah, like we didn't even get to mention really in
Speaker 2: the course of today, but like next week is the
Speaker 2: tech super Bowl, right, Like in an earnings context, it's
Speaker 2: the biggest one.
Speaker 6: It's going to matter.
Speaker 3: Well, is a video there? I guess not. We've got
Speaker 3: everyone else, Meta, Microsoft, Amazon, you name it, the Vindication,
Speaker 3: the Fundamentals. They've got a lot to check out on
Speaker 3: the podcast.
Speaker 2: I am heading to DC for GtC within video so
Speaker 2: that there might be some news there. Check out the pod.
Speaker 2: You know where to find it. This is Bloomberg Tech