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 San Francisco.
Speaker 2: This is Bloomberg Tech coming up. Planerzon agrees to buy
Speaker 2: satellite operate a Global Star in an eleven point six
Speaker 2: billion dollar deal all about Spectrum Plus. We speak exclusively.
Speaker 3: To Lucid's new incoming CEO, Sylvio Napoli, as the company
Speaker 3: announces a fresh injection of capital and deeper Robotaxi push, and.
Speaker 2: The US Treasury Department looks to use anthropics mythos Ai
Speaker 2: model to find vulnerabilities in its own systems.
Speaker 3: First we check out the markets which have actually been
Speaker 3: on a tear ten straight days of gains, and then
Speaker 3: as that one hundred, we haven't seen this sort of
Speaker 3: eleven percent charge. We haven't seen this longer stretch of gains.
Speaker 3: So this is all the way back to twenty twenty one. Today.
Speaker 3: The hope is there that we'll have a second round
Speaker 3: of talks between the US between Iran, maybe it happens
Speaker 3: in Pakistan, and whether we are not managed to put
Speaker 3: an end to this conflict, the market is getting ahead
Speaker 3: of those hopes, and we're currently seeing we'll gain up
Speaker 3: three trillion dollars in terms of market cap over the
Speaker 3: course of those ten days.
Speaker 2: In Okay, we have some M and A and it's
Speaker 2: confirmation of a deal we've been tracking on the show
Speaker 2: for a little while. Amazon to buy Global Star eleven
Speaker 2: point six billion dollar deal. The offer is basically the
Speaker 2: equivalent of ninety dollars per share for Global Star and
Speaker 2: cash whrip just around eighty dollars right now, So there's
Speaker 2: a premium on where the start's currently trading, even with
Speaker 2: that big jump on confirmation of the deal. What's it about.
Speaker 2: It's about director sell from satellite. There's some spectrum in there,
Speaker 2: there's some strategy in there. It's time to get the
Speaker 2: details character it.
Speaker 3: Certainly as we get more of them from Blomberg Senior
Speaker 3: does report to Michelle Davis and just the timeline here,
Speaker 3: because we knew this asset, this Global Star business was
Speaker 3: in play. When did Amazon start getting interested?
Speaker 4: So we've heard that Amazon started getting interested last year
Speaker 4: and Global Star is an asset that's kind of been
Speaker 4: out there for years. People have always talked about it
Speaker 4: as the key kind of the jigsaw piece and the
Speaker 4: puzzle that you know, if you bought it because of
Speaker 4: all of its spectrum, it would help you get up
Speaker 4: to speed and kind of dominate the satellite market. So
Speaker 4: that's what it really is about. It's the spectrum. We
Speaker 4: heard that SpaceX had also looked at this asset last year.
Speaker 4: Of course, Amazon prevailed, and you know, both of these
Speaker 4: players had been racing to dominate the space based connectivity
Speaker 4: market and Starlink is clearly ahead. But what this does
Speaker 4: is it really accelerates for Amazon their plans to be
Speaker 4: a formidable competitor to starlink.
Speaker 2: Michelle a really interesting one for the deal's team. Right, Like, Amazon,
Speaker 2: the tech giant that it is, has never gone that
Speaker 2: big on M and A. But I think I'm right
Speaker 2: in saying that Global Star pending clothes, et cetera would
Speaker 2: be its second biggest ever deal. You know, what do
Speaker 2: we make of an what was the reporting around the offer,
Speaker 2: how competitive was and how Amazon really wanted to go
Speaker 2: for this.
Speaker 4: You're right, I mean, this is Amazon's biggest deal since
Speaker 4: twenty seventeen when it bought Whole Foods. Amazon's been known
Speaker 4: to kind of go after different parts of the market,
Speaker 4: you know, everything from healthcare to movie studios to now
Speaker 4: of course this big spectrum satellite play. And what we
Speaker 4: were hearing is that Global Star was really looking for
Speaker 4: a value above ten billion dollars and the deal that
Speaker 4: was announced today is that a huge premium to you know,
Speaker 4: more than one hundred percent premium to where the stock
Speaker 4: was trading when the leak first hit, you know, last October.
Speaker 4: And so I mean, it clearly shows there aren't that
Speaker 4: many players out there that can afford to spend this
Speaker 4: much money on something like this. But if you want
Speaker 4: to win in this market, that's what it takes, clearly.
Speaker 3: And the advice they've been getting from banks is the
Speaker 3: way in which they structure this not just in terms
Speaker 3: of premium, but in terms of what's on the offer.
Speaker 3: It's either shares or indeed it's straight out cash exactly.
Speaker 4: Yeah, so it's a mix of stock and cash. There's
Speaker 4: a forty percent cap on the amount of cash that
Speaker 4: shareholders can get, and that means we'll get up to
Speaker 4: a cap of ninety dollars per share up to forty percent.
Speaker 4: The way that works is basically, a few days before
Speaker 4: the deal is going to close, shareholders will get to
Speaker 4: elect what they want do they want. You could say
Speaker 4: I want all stock or I want all cash, because
Speaker 4: of course Amazon stock is valuable. But at the end
Speaker 4: of the day, assuming everyone elected all cash, the most
Speaker 4: you could get is forty percent forty percent in cash,
Speaker 4: So it'll be pro rated depending on what folks elect.
Speaker 2: Really appreciate you breaking down the deal structure. You know,
Speaker 2: this has been out there for a couple of weeks
Speaker 2: now it's confirmed. In that period, what was industry saying
Speaker 2: about this, right, Like, the big picture is, oh, Amazon's
Speaker 2: going to go off to Starling, but they're actually if
Speaker 2: you look at the specific details, you know, in terms
Speaker 2: of Loo, they have a lot of existing assets Amazon does.
Speaker 2: What was our read on the strategic play from Amazon.
Speaker 4: So Amazon really needed the Spectrum to really accelerate its
Speaker 4: desire to get into that director device market, which it's
Speaker 4: said today it's going to do in twenty twenty eight.
Speaker 4: And what that'll do is it means, you know, consumers
Speaker 4: will be able to get text, video data, you know,
Speaker 4: voice using satellite service rather than than cell towers kind
Speaker 4: of like a cell tower in space. But it really
Speaker 4: what it does is helps Amazon catch up. They haven't
Speaker 4: been able to launch as many satellites as SpaceX has.
Speaker 4: That's the biggest, one of the biggest reasons why they've
Speaker 4: been behind. But this, this piece is really complimentary to
Speaker 4: everything that they do already have.
Speaker 2: Bloomberg's Michelle Davis with the reporting, Thank you very much.
Speaker 2: So what does Amazon get out of the deal. Let's
Speaker 2: get the reaction. According to Bloomberg Intelligence, the company's eleven
Speaker 2: point six billion dollar agreement gives it a foothold in
Speaker 2: the direct to sell satellite market, along with access to
Speaker 2: valuable spectrum, narrowing the gap with Starlink, an sat space mobile.
Speaker 2: Bloomberg Senior telecom analyst John Butler joins us with his research.
Speaker 2: That's start with the Russian. Now, why do you think
Speaker 2: Amazon's doing this?
Speaker 5: It's all about the spectrum that you know. There's a
Speaker 5: lot of spectrum out there, mostly in use by terrestrial
Speaker 5: wireless carriers. And I stress the word terrestrial because the
Speaker 5: FCC will only allow most of the spectrum now that's
Speaker 5: accorded to wireless services to be used on a terrestrial basis.
Speaker 5: But there is a band called Mobile Satellite Service or
Speaker 5: the MSS bands that allow for direct communication from satellite
Speaker 5: to cell phone and Global Star owns some of that
Speaker 5: valuable L and S band spectrum as it's called. So
Speaker 5: in my mind, this deal is all about the spectrum.
Speaker 5: It's not about the satellites that.
Speaker 2: Are up there.
Speaker 5: GST actually has a pretty thin constellation as satellite networks go.
Speaker 3: So coup for LEO, Amazon's LEO potentially is Apple as well. John,
Speaker 3: So how much does this make this a cementing of that?
Speaker 3: How do we see Amazon really going neck connect now
Speaker 3: with the likes of SpaceX.
Speaker 5: Well, SpaceX has a big lead here at Caroline. I
Speaker 5: mean they you know, they have both broadband and directs
Speaker 5: to sell satellites. Their fleet numbers ten thousand satellites, six
Speaker 5: hundred and fifty of which are direct to sell. So
Speaker 5: Amazon has a lot of catching up to do, both
Speaker 5: on the broadband front and the direct to sell front.
Speaker 5: My suspicion is what they'll do is throw more funds
Speaker 5: into gst's next generation satellite development program. They're developing these
Speaker 5: next generation SATs called I believe C three's. They will
Speaker 5: be higher capacity, they'll be able to offer full wireless
Speaker 5: services for the most part, voice, video, and browsing. And
Speaker 5: so that's the key here is the Amazon has Jopper pockets.
Speaker 2: Let me jump in hre that that is key because
Speaker 2: there is a really big present day distinction between broadband
Speaker 2: and the capabilities that starlink offers you and what you
Speaker 2: can do with direct to sell. Direct to sell is
Speaker 2: text messages right now, right, and not a lot more.
Speaker 2: Could you just go through the basics of that distinction.
Speaker 5: Yes, So broadband satellites offer high capacity links. So if
Speaker 5: you look at starlink, they have one hundred two hundred,
Speaker 5: four hundred megabit plans. The users are static, they're not moving,
Speaker 5: and so those satellites are really designed specifically for that.
Speaker 5: Direct to sell is a different animal. You need to
Speaker 5: go from the satellite directly to a cell phone, and
Speaker 5: cell phones have very very low their signals are very
Speaker 5: low power. So you need specialized satellites with big antennas
Speaker 5: to do that link. And Amazon have the funds to
Speaker 5: develop those next generation satellites. Again, Amazon has a little
Speaker 5: catching up here to do. Ast is also a big
Speaker 5: player in this market. They have very sophisticated satellites. So
Speaker 5: I guess I guess I would say this ed the
Speaker 5: race is only interesting.
Speaker 3: Em and A is certainly helping JOMP start at John
Speaker 3: Butler of Broomberg Intelligence. It's been great to have your
Speaker 3: expertise or analysis today. Let's get a broader take on
Speaker 3: the markets. There certainly a bit of a tech M
Speaker 3: and A field to it till today laid shows with
Speaker 3: us alliance Bensteam please to be welcoming your portfolio manager,
Speaker 3: and we don't want to do individual names. What's notable
Speaker 3: is that there is some desire to be been making purchases
Speaker 3: at this moment despite the volatility in the market. What
Speaker 3: do you make of M and A coming to the foe.
Speaker 6: Well, as there's definitely the race is on, I think
Speaker 6: that's a good description of the current state of the market.
Speaker 6: There are a lot of disruptive changes happening across different
Speaker 6: themes AI is one of them, but there are the
Speaker 6: things as well, and because of that, I feel that
Speaker 6: incumbent in particular, with such strong balance sheet historically, they
Speaker 6: are looking to bolster their war chest because when disrupt
Speaker 6: changes happen at this pace, everybody is spending, and you
Speaker 6: can think of spending as in capex, but M and
Speaker 6: A is another factor that it plays in and then
Speaker 6: sometimes can help you get a lead. But I would
Speaker 6: say the bottom line is the race is on. Everybody's
Speaker 6: playing both offensive and defensive, and that's what makes an
Speaker 6: interesting and exciting market to invest.
Speaker 3: How have you seen the disruption and the race in
Speaker 3: space in defense tech, because that been something you've been
Speaker 3: leaning into with the funds.
Speaker 6: Yes, and for our portfolio, we have been looking at
Speaker 6: disruptive changes across and space, and defense tech is certainly
Speaker 6: one area that we're seeing tremendous amount of capital flowing
Speaker 6: into it. And so while the market has been spending
Speaker 6: a lot of time and AI is certainly part of
Speaker 6: it where a lot of capital has float into its
Speaker 6: space defense tech, it is an area particularly in developed markets,
Speaker 6: we have actually underinvested and perhaps underestimated. So when we
Speaker 6: look for secular changes longer term, these are two buckets
Speaker 6: how we see sustainable growth trends.
Speaker 2: Lebe bear with us. One second, we have some breaking
Speaker 2: news on the Bloomberg terminal. Disney is announcing it's cutting
Speaker 2: one thousand jobs the first wave of layoffs under new
Speaker 2: CEO Josh Tomorrow. The layoffs are company wide, but they
Speaker 2: will fall particularly hard in marketing and the marketing department,
Speaker 2: which has been consolidated under new leadership. An interesting one.
Speaker 2: Disney shares up around a percentage point right now in
Speaker 2: response to this, But one thousand jobs in the context
Speaker 2: of this company Caroline is a relatively big move, but
Speaker 2: it's a company of two hundred and thirty thousand people.
Speaker 2: So we're going to continue tracking that and bring you
Speaker 2: a fuller picture later in the program. What you were
Speaker 2: just saying, Ley is so interesting. When you've come on
Speaker 2: this program, we've been taught looking in the context of
Speaker 2: the AI race on terrestrial based assets. For many people,
Speaker 2: the next wave, particularly you know, running inference at the
Speaker 2: edge is going to be above our heads. And so
Speaker 2: in the context of what we went through Amazon Global
Speaker 2: Star Satellite Communications generally, what is the Alliance Burned Steene
Speaker 2: thesis on that.
Speaker 6: I think from our perspective when we think about it,
Speaker 6: a lot of attention has been clearly focused on the
Speaker 6: GPUs at the core and then on the training side.
Speaker 6: And this year with the rapid adoption of AI as
Speaker 6: what we have seen the token adoption, we see increasing
Speaker 6: evidence the edge is taking off and the data center
Speaker 6: infrastructure as we see it is rapidly evolving. So if
Speaker 6: you look at from an investment perspective, from our fund
Speaker 6: is we're seeing a broadening out. We're seeing the players,
Speaker 6: the incumbent, annual entrants, thinking about what the future of
Speaker 6: infrastructure would look like. We talked about the shortages at
Speaker 6: various levels. We talked about the training, the power, but
Speaker 6: increasingly we're also seeing, just even at the commodity level,
Speaker 6: across the board, we're seeing the adoption and that gives
Speaker 6: us confidence that you know, there is increasing confidence in
Speaker 6: the cap expend the sustainable trend of that, and then
Speaker 6: beyond that in terms of different buckets that will benefit
Speaker 6: from it, which really seem the broadening out of different
Speaker 6: ways that we're trying. Because at the end of the day,
Speaker 6: as incredibly capital intensive, data intensive, bandwidth intensive, so everything
Speaker 6: has to catch up. There are just a lot of
Speaker 6: investment opportunities across the board.
Speaker 2: Have you done an assessment on the viability of the
Speaker 2: economics of orbital data center.
Speaker 6: I think it's probably too early to say that, you know,
Speaker 6: to say definitively viable and not viable. But that said,
Speaker 6: we're just using today's revenue numbers. But this is really
Speaker 6: about the rebuild of the future of infrastructure as we
Speaker 6: see it in the digital world. So I would venture
Speaker 6: to say some of the changes that we have seen
Speaker 6: thus far in terms of how rapidly we have hidden
Speaker 6: an inflection point in the AI adoption. Just look at
Speaker 6: the arrs of some of the new entrants is staggering.
Speaker 6: How fast it's actually ramping. So if we take that
Speaker 6: as a starting point and then we look out, I
Speaker 6: would say, you know, if historically in technology and when
Speaker 6: there is disruptive trends, what we have seen is on
Speaker 6: the short term basis, it looks like everything could be overbuilt.
Speaker 6: But if you actually look out on the long term basis,
Speaker 6: as consumption is taking off, we actually don't have enough
Speaker 6: capacity to address all the needs of the future. And
Speaker 6: in this particular case, it's really about looking out long
Speaker 6: term and having a secular view and then say what
Speaker 6: do we see as the future and then invest accordingly.
Speaker 6: They're not all going to be winners. There will be
Speaker 6: some losers, and so we actually have to be very
Speaker 6: selective as well nimble.
Speaker 3: And therefore how much you divert towards the energy focus
Speaker 3: towards the actual infrastructure rather than just the deployment and
Speaker 3: the applications.
Speaker 6: Yes, we actually just look across the board at all times, right,
Speaker 6: all investments. When we look at it we think about
Speaker 6: you know, I always say we don't look at valuation
Speaker 6: as the first starting point, but ultimately we do look
Speaker 6: at the long term potential and look at how much
Speaker 6: the stocks have been buid up, and then how sustainable
Speaker 6: it is the growth and the margin profit pools that
Speaker 6: we're looking at, and whether that justify the valuation, so
Speaker 6: that all times it does require you to be more
Speaker 6: nimble as an active investor in this kind of environment.
Speaker 2: Wow, we love having you on ed Yeah, Lachue of
Speaker 2: the lines. Bernstein back on Bloomberg Tech. Let's turn to
Speaker 2: some whiplash in the markets and the story we brought
Speaker 2: you yesterday. Nvidia has denied that it's trying to buy
Speaker 2: a large PC company. The report from the website semi
Speaker 2: at sent shares of the two of the world's top
Speaker 2: PC vendors hire yesterday. Dell climbed over six and a
Speaker 2: half percent. Hp was up over five and a half percent.
Speaker 2: That was Monday, after we brought you that original report. Today,
Speaker 2: after that denial, we're back down on both of those
Speaker 2: names a little softer, three percent on Dell, almost two
Speaker 2: percent on HPN. It got people talking. Carro we brought
Speaker 2: you the original report yesterday. We've had the denial. I
Speaker 2: think we just wanted to close the loop on that one.
Speaker 3: Yeah, some MNA on, some MNA off, keeping us up
Speaker 3: to speed. Meanwhile, coming up, we're going to hear from
Speaker 3: Lucid's incoming CEO, Silvio and Nepolie on the ev maker's
Speaker 3: latest injection and capital. That's a lot as through med tech.
Speaker 4: Okay.
Speaker 2: Shares of Lucid are all over the place. Frankly, with
Speaker 2: down almost six percent in the pre market when news
Speaker 2: broke up twelve percent. We opened higher in the main
Speaker 2: Tuesday session. The company has named former Shindler Holding chief
Speaker 2: Sylvia Napoli as its new CEO. The ev maker also
Speaker 2: announced one hundred and fifty million dollars in fresh investment
Speaker 2: from its two largest backers, Uber and Saudi Arabia's public
Speaker 2: Investments Fund. I spoke with Naplie about the new capital
Speaker 2: and the company's path forward. Listen to this.
Speaker 7: Discussing with PIF discussing with a chairman was an absolutely
Speaker 7: vital element of my decision making.
Speaker 2: They were involved in your talks to become CEO of Lucid.
Speaker 7: We have a chairman of the board with RPF of
Speaker 7: course they were, and again equally I was keen to
Speaker 7: understand their engagement. Today's announcement is a confirmation or their
Speaker 7: continued support or they believe in Lucid as a company
Speaker 7: and in his future. And therefore, absolutely the role is
Speaker 7: the absolutely heat and they are a very sub investor
Speaker 7: and it is for Lucid a competitive advantage to be
Speaker 7: able to rely on that type of support in a
Speaker 7: very competitive market.
Speaker 2: What did the PIF, the chairman, but the PIF's representatives
Speaker 2: convey to you on what their priorities are, how they
Speaker 2: see the to do list for you at Lucid.
Speaker 7: Yeah, these type of discussions, of course, where there was
Speaker 7: an element of strategic discussion to be now taken further.
Speaker 7: But the most important element of that was their belief,
Speaker 7: their willingness to bring on board someone like me with
Speaker 7: industrial global experience in turning around in growth in businesses
Speaker 7: around the world, combining industrial manufacturing and service and building
Speaker 7: a brand. And we saw it the same way.
Speaker 2: I've been reading about you as discreetly as possible, been
Speaker 2: asking people about you. You are about discipline, reality in
Speaker 2: your approach cost discipline as well. You look at all
Speaker 2: these projects that Lucid has some of them may or
Speaker 2: may not carry forward right at the investor day, a
Speaker 2: prototype of a specific ROBOTAXI design. How much is that
Speaker 2: on your list to look at the existing plans, existing
Speaker 2: products and say let's just focus on the main thing.
Speaker 7: It's very high on the priority. As a matter of fact,
Speaker 7: I believe deciding what we don't do is going to
Speaker 7: be as important, is no more than deciding on what
Speaker 7: we do. I'm an engineer myself. I can see the
Speaker 7: excitement engineers experience when given a new challenge, and so
Speaker 7: our goal will be to channel that excitement in the
Speaker 7: projects that are the highest return for our shouolders and
Speaker 7: then taking them one other time.
Speaker 3: A lot to talk about with the incoming Lucid CEO
Speaker 3: Sylvie and Apolie Great interview ed mean while coming up
Speaker 3: Oracle It's agreed to purchase fuel cell power from Blue
Speaker 3: Energy as it scales up the AI boom More on
Speaker 3: that next. As a boombag tech and the race to
Speaker 3: build out AI infrastructure, Oracle is moving to solve that
Speaker 3: power pinch by striking another big deal with Blue Energy
Speaker 3: for its fuel cell power remotes. Brodi Ford has more
Speaker 3: the share prices have reacted, Brodie, And what is it
Speaker 3: the blue energy brings that others.
Speaker 8: Don't they bring power?
Speaker 9: Right?
Speaker 8: I mean, that's the big bottleneck right now. You can
Speaker 8: really get the chips, you can get the customers, certainly,
Speaker 8: but in a lot of cases you just can't get
Speaker 8: the power to get these big data centers running. And
Speaker 8: so what Bloom Energy offers is fuel cells. That's going
Speaker 8: to be a lot quicker than if you're going to
Speaker 8: go out and try to buy some gas turbines yourself.
Speaker 8: And you know, Oracle has clearly said that they are
Speaker 8: willing to pay what is likely a pretty hefty premium
Speaker 8: here to get power online quickly. And again they have
Speaker 8: the giant contract with open Ai. They're on the hook
Speaker 8: for a number of gigawatts and within a year or two,
Speaker 8: and so Oracle is ready to give out the cash
Speaker 8: to Bloom to make sure that this plan goes accordingly.
Speaker 2: That scale is interesting because we talk about the hyper
Speaker 2: scalers and then Oracle from a capacity standpoint, we're covering
Speaker 2: great detail the hyper scalers securing long term energy supply.
Speaker 2: Talk a bit more about oracles broader strategy and making
Speaker 2: sure it can power all of that capacity.
Speaker 8: Effectively, Oracle promised something pretty large to open AI. They
Speaker 8: promised four and a half gigawatts and a pretty unprecedented timeline.
Speaker 8: And so yes, they are not a traditional hyperscaler, but
Speaker 8: right now they are building at hyper scale. They have
Speaker 8: a similar deal with a company called Voltagrid, which offers
Speaker 8: kind of gas turbines as a service, and they're paying
Speaker 8: them a lot of money, right, I mean, out of
Speaker 8: their Shackelford campus in Texas, that's one data center. They're
Speaker 8: paying over a billion dollars per year to power it.
Speaker 8: And so we have to imagine this is a similar
Speaker 8: scale deal and that's why the bloom shares are so
Speaker 8: happy this morning.
Speaker 2: Bloomberg's Brodie Ford, thank you very much. All Right, So
Speaker 2: the state of play is that the NAZDAK one hundred,
Speaker 2: it's a very tech heavy index, is up for a
Speaker 2: tenth straight day, best run of gain since twenty twenty one.
Speaker 2: Despite everything that's happening around the world, technology is plowing on.
Speaker 2: Coming up, we're going to speak to Denny Fish, portfolio
Speaker 2: manager on the Global Technology and Innovation Team. Janis Henderson Investors,
Speaker 2: somebody that has funds in the billions and billions of
Speaker 2: dollars is zeroed in on the biggest names of technology,
Speaker 2: and I hope can tell us why tech powers forward
Speaker 2: amid all these geopolitical crises. It is hard time and
Speaker 2: this is Bloomberg Tech.
Speaker 3: Welcome back to Bloomberg Tech and check on these markets
Speaker 3: that are continuing to ramp hire. We've had ten straight
Speaker 3: days of gains and then as like one hundred. We'll
Speaker 3: dig into that at moment, but today what fuels us
Speaker 3: higher optimism that we'll have a second round of peace
Speaker 3: talks between the United States and Iran. And we're up
Speaker 3: more than a percentage point on the nast That one
Speaker 3: hundred Amazon m and A spending eleven point six billion
Speaker 3: dollars to buy a satellite company, and global start jumps
Speaker 3: almost ten percent, and that's from the back of a
Speaker 3: nice little premium being paid by Amazon. Move on and
Speaker 3: have a little look at what has been an extraordinary
Speaker 3: stretch for technology amid all the volatility geopolitical acts. We
Speaker 3: saw the S and P five hundred shake off those
Speaker 3: losses of the conflict yesterday and now we have a
Speaker 3: tenth day of gains. Three trillion dollars added to the
Speaker 3: NASTAK one hundred ed, the question is can we continue.
Speaker 2: Let's get more on the perspective and the markets with
Speaker 2: Denny Fish, portfolio manager on the Global Technology and Innovation
Speaker 2: Team Janis Henderson Investors. Something we looked at yesterday is
Speaker 2: one case study was an Intel right and gaining more
Speaker 2: than fifty percent over nine sessions. But then as that
Speaker 2: one hundred is on track for ten straight days of
Speaker 2: gains while we have a war in Iran, while energy
Speaker 2: prices are spiking. Given the technology sect has momentum, what
Speaker 2: is it that investors are basing that on, Denny? What
Speaker 2: are the facts as they're assessing in their optimism.
Speaker 9: Yeah, I think the primary factors are that regardless of
Speaker 9: what the geopolitical environment looks like. And you know, obviously
Speaker 9: I have to couch out a little bit because if
Speaker 9: it got extreme, this won't hold. But the trends that
Speaker 9: have persisted for the last three years because of the
Speaker 9: advances and expected advances in artificial intelligence just won't slow.
Speaker 9: And so unless you have a belief that we are
Speaker 9: starting to plateau in some form as it relates to
Speaker 9: the models, or that there's some other major constraint that's
Speaker 9: going to constrain our ability to actually advance these technologies,
Speaker 9: you kind of have to participate in the investment cycle
Speaker 9: because this could go on for several years. And you know,
Speaker 9: having covered technology or worked in the technology industry for
Speaker 9: over thirty years, you know these trends persist much longer
Speaker 9: than investors could ever imagine. And this is the most
Speaker 9: profound technology shift in our lifetimes. And I think that's
Speaker 9: why the market has quickly come back to the stocks
Speaker 9: that were working before the conflict actually started.
Speaker 3: Denny, Before the conflict started, software wasn't working, and actually
Speaker 3: today it is. But that hasn't been consistent in the
Speaker 3: last few days, particularly when you think about mythols, the
Speaker 3: latest models coming out of Anthropic and what that means
Speaker 3: for software written large. What's your take on how beaten
Speaker 3: up the sector's got.
Speaker 9: Yeah, it's really hard because the fundamental thing that's going
Speaker 9: on right now in software is that the market broadly speaking,
Speaker 9: is questioning the terminal values of the companies. And once
Speaker 9: you start questioning the terminal values of the companies, it's
Speaker 9: really really hard to disprove a bare case. And the
Speaker 9: reason that this just continues to get questioned and we've
Speaker 9: seen it really it started in mid December, when you know,
Speaker 9: with the launches of CLAW four dot five and Codex
Speaker 9: from open AIY, those were step function changes, and I
Speaker 9: think in an environment where investors were expecting maybe more
Speaker 9: moderate increases in capabilities, we saw saw a step function change.
Speaker 9: And then with four dot six from Claude, we just
Speaker 9: saw another step function change. And what's important is, you know,
Speaker 9: these context windows are getting much longer, the agentic capabilities
Speaker 9: are becoming amazing. You combine those two things, these these products, now,
Speaker 9: these models can do things that humans, the best humans
Speaker 9: can barely do when it comes to software development. So
Speaker 9: really what it comes down to then is what is
Speaker 9: going to be the barrier to injury for software and
Speaker 9: how sustainable are the competitive advantages of the existing incumbents.
Speaker 9: And I think one of the challenges is that not
Speaker 9: only do you have threats from the models at the moment,
Speaker 9: but all these capital market cycles generally kind of look
Speaker 9: and feel the same, and as we get into twenty
Speaker 9: twenty seven twenty twenty eight, we're likely to see an
Speaker 9: environment where you see a whole slew of agentic first
Speaker 9: software companies that have been funded in the venture community
Speaker 9: over the last three or four years that are then
Speaker 9: going to becoming a scaled enterprises growing really fast, and
Speaker 9: typically that's a more attractive environment.
Speaker 3: And so Joe vin to software at these levels. Denny like,
Speaker 3: how do you make that decision? Or is it safe
Speaker 3: to be with the picks and the shovels, with the
Speaker 3: energy of the infrastructure of the chips.
Speaker 9: I think it's still safer to be with the picks
Speaker 9: and shovels and the infrastructure that's building out, you know,
Speaker 9: for these models. And I mean if we just look,
Speaker 9: I think a great data point that we just recently
Speaker 9: got if you read Anti Jassey's shareholder letter from Amazon,
Speaker 9: and he just clearly lays out what's going on within
Speaker 9: their infrastructure. And once you really understand kind of the
Speaker 9: constraints that we're still facing and the returns that these
Speaker 9: companies expect to get over time, you can start to
Speaker 9: get more comfortable with that. But you know, as far
Speaker 9: as the I can see, I was just in Asia.
Speaker 9: I mean, we are supply constrained in AI infrastructure, likely
Speaker 9: you know, well through twenty twenty seven, maybe into twenty
Speaker 9: twenty eight, depending on you know what components or you
Speaker 9: know that you're looking at. But nonetheless, this building this
Speaker 9: buildout is going to continue, and I think we're going
Speaker 9: to continue to see the same thing that we've seen
Speaker 9: the last three years, where we get closer to the
Speaker 9: end of the year and then the expectations around CAPEX,
Speaker 9: whether it's the hyperscalers, enterprises or governments, just continues to
Speaker 9: exceed expectations.
Speaker 2: So to illustrate that point, the top two holdings in
Speaker 2: the two biggest funds that you're across any are in
Speaker 2: Nvidia and then TSMC. And the state of play so
Speaker 2: far in twenty twenty six is that then, as that
Speaker 2: one hundred is up modestly and the socks excuse me
Speaker 2: is massively outperformed. I think, going back to Caroline's last question,
Speaker 2: when does that change? When do you which point in
Speaker 2: times you adjust stieholdings to reflect more dominance of the
Speaker 2: software names benefiting from the investment.
Speaker 9: Yeah, I think a couple of things would need to happen.
Speaker 9: I mean, the reason that AI infrastructure continues to work
Speaker 9: is number one, the fundamentals remain quite strong and continue
Speaker 9: to exceed expectations. And that's not just TSMC and Nvidia.
Speaker 9: That's the memory complex, that's optics, that's energy. I mean,
Speaker 9: we can you know, data center infrastructure. You can go,
Speaker 9: you know, down the whole list and they all continue
Speaker 9: to participate. But you would either need those fundamentals really
Speaker 9: to start to slow, you know, lower than what investor
Speaker 9: expectations are, or the valuations to blow out to levels
Speaker 9: where then you just get really uncomfortable at what your
Speaker 9: return could be despite really strong fundamentals. And so far,
Speaker 9: fundamentals continue to be strong and valuations are reasonable across
Speaker 9: a lot of the ecosystem, and you can trast that
Speaker 9: to software, for example, where maybe fundamentals are stable, maybe
Speaker 9: they're not declining yet, but as I mentioned, you have
Speaker 9: terminal value risk. And then you actually, if you're looking
Speaker 9: at these things and comparing them on say like a
Speaker 9: gap basis or adjusted for stock based compensation or the
Speaker 9: things that a lot of generalist investors would do, the
Speaker 9: valuations actually might not look that attractive in many cases.
Speaker 9: And that's why I think you have to be careful.
Speaker 9: We're still investing in software, to be clear, but we're
Speaker 9: taking what I call a rifle shot approach versus a
Speaker 9: shotgun approach when we think about the names that we'll
Speaker 9: invest in, and more likely than not, the better place
Speaker 9: to be invested. Is in infrastructure software that's based on
Speaker 9: consumption that's really going to benefit from this build out
Speaker 9: as well versus the application space.
Speaker 3: Danny Fisher, Jenis Henderson. We so appreciate it. It's even
Speaker 3: on the road a lot. Thanks for checking in. And look,
Speaker 3: let's check out another era that in Vidia is injecting
Speaker 3: some life into quantum. Now we understand in Video is
Speaker 3: launching its world's first family of open source quantum AI
Speaker 3: models called Nvidia Icing. That's named after a mathematical model.
Speaker 3: And really this is a design how researches enterprises that
Speaker 3: build quantum processes actually capable of running useful applications. Look
Speaker 3: at the stock market reaction, D Wave, IONQ inflection, which
Speaker 3: is part of this partnership in particular, all up into
Speaker 3: the right end.
Speaker 2: Okay, coming up the Treasury Department's tech team. Once access
Speaker 2: to Anthropics Mythos, we'll discuss the air model's cybersecurity impact. Next,
Speaker 2: this is Bloomberg Tech.
Speaker 3: The US Treasury Department is seeking access to Anthropics mythus
Speaker 3: model so it can begin hunting for vulnerabilities. Now that's
Speaker 3: according to a source, Anthropic has worn the powerful model,
Speaker 3: maybe capable of powering cyber attacks and has released it
Speaker 3: only to a limited group of institutions. Thus far s
Speaker 3: get the latest Bloomberg cyber editor justone. Is it as
Speaker 3: powerful as all? This is a good reason why part
Speaker 3: of the government, I might say, while the Pentagon is
Speaker 3: currently in a legal fight with anthrops be getting access
Speaker 3: to the.
Speaker 10: Model, Anthropic hasn't released this model publicly, which is really
Speaker 10: important for everyone, especially in the general public cybersecurity research.
Speaker 10: Cybersecurity researchers don't have access to this tool, so we
Speaker 10: can't independently verify that. Initial feedback has been that this
Speaker 10: tool is quite powerful. This is the kind of thing
Speaker 10: that it's essentially what Anthropic describes as the ultimate kind
Speaker 10: of red team tool that if you unleash it within
Speaker 10: your systems, you're going to use it to find as
Speaker 10: many bugs and vulnerabilities and potential points of exploit before.
Speaker 2: The bad guys can so. According to our source, right
Speaker 2: the Treasury Department want access to it to identify vulnerability.
Speaker 2: Is there any more flesh to that that you can
Speaker 2: take us through, Jeff, what the Treasury Department would do
Speaker 2: with it. There's also the background that Treasury Secretary Besson
Speaker 2: was part of the official group that warned Wall Street
Speaker 2: about taking this seriously, right.
Speaker 9: That's right.
Speaker 10: The best meeting that he had with fed Share Powell
Speaker 10: is a really important piece of context to this when
Speaker 10: they summon these Wall Street leaders to a meeting with
Speaker 10: them in Washington to urge them to say, hey, you
Speaker 10: should unleash this tool. You should try to find your
Speaker 10: own kind of flaws and vulnerabilities before outside attackers. Do
Speaker 10: you know at that time, we know that Treasury and
Speaker 10: some government agencies were in discussions with Anthropic about using
Speaker 10: this tool. They want it for the same reasons that
Speaker 10: they're encouraging so many of their partners to use it.
Speaker 2: Bloomberg Jeffstone with the reporting, Thank you very much. Let's
Speaker 2: get more on the capabilities an impact of Anthropics Mythos
Speaker 2: that speak with Jaya Blue. She's the chief operating Officer
Speaker 2: and chief Information security Officer at the AI cybersecurity firm Aisle.
Speaker 2: A week ago, I spoke to Mike Krieger, who leads
Speaker 2: Anthropics Labs team, and in the context of Mythos, who
Speaker 2: was saying, when you have a model this powerful, you
Speaker 2: can't actually isolate one capability. But what's so confusing about
Speaker 2: that is we are only talking about Mythos's ability to
Speaker 2: identify vulnerabilities quicker at great expense. But that's the very
Speaker 2: narrow use case. What have you made of that?
Speaker 11: Well, So, actually it was never in doubt that we
Speaker 11: can use AI to discover vulnerabilities, and at Aisle we've
Speaker 11: been doing that since August twenty twenty five. We found
Speaker 11: all of the vulnerabilities, and something that's been a very
Speaker 11: hard code base, like open SSL, we've been finding those vulnerabilities.
Speaker 11: So using AI to find vulnerabilities is not a unique capability.
Speaker 11: What I think is interesting about Mythos is it's supposed
Speaker 11: to be the most powerful model yet, and I have
Speaker 11: to say, like there is a contention here. I disagree
Speaker 11: with that because I think one of the things you
Speaker 11: see is that you know, the vulnerabilities that they've actually
Speaker 11: surfaced and disclosed are not impossible to find, not with
Speaker 11: a closed source model like Mythos, but also with small, tiny,
Speaker 11: open source models. And that's incredibly significant. Because Mythos has
Speaker 11: now been restricted use to only like forty companies, they
Speaker 11: are incredibly deterministic about who gets access to it. And
Speaker 11: I think that what we should expect is that if
Speaker 11: we really want to maintain a state of security, specifically
Speaker 11: with open source security vendors, then we need to make
Speaker 11: sure that they also have the capability to do this.
Speaker 11: So one of the things that we're really intent on
Speaker 11: is releasing something open source that is comparable the finding
Speaker 11: those same kind of vulnerabilities, and we've proven that we
Speaker 11: can actually do it.
Speaker 3: How can you do that safely? And do you think
Speaker 3: therefore that this is being done safely from a mytho's
Speaker 3: general purpose model perspective, or is it more hype that's
Speaker 3: happening around it.
Speaker 11: Well, I think there's always you know, I think with
Speaker 11: all of this stuff, there is always a degree of
Speaker 11: hype and the real effect you can only actually validate
Speaker 11: it when you have access to the model and you
Speaker 11: compare it to other models. But if you just take
Speaker 11: a look at the vulnerabilities that they disclosed, we can
Speaker 11: confirm that we can find those vulnerabilities not with a
Speaker 11: closed source model from nthropic, but an open source model
Speaker 11: like GPT five point four, And that is the tiniest
Speaker 11: model that we can test with, and we can confirm
Speaker 11: that we can find those same vulnerabilities. And the reason
Speaker 11: to make this more widely available, this open source tiny
Speaker 11: LM model is this is something that I believe that
Speaker 11: we should always do because defenders now globally, are you
Speaker 11: worried about who else can build this? If we've already
Speaker 11: proven previously you can do this with open source, it's
Speaker 11: just a matter of time before someone else figures out
Speaker 11: how to do it. So without making it open source,
Speaker 11: we're actually giving defenders a disadvantage. And I think the
Speaker 11: real issue is how can you get defenders up to
Speaker 11: scale globally and not just forty companies in Selicon Valley,
Speaker 11: but everybody on a level playing field in order to
Speaker 11: defend their stuff. So open source maintainers need to be
Speaker 11: able to find their own villabilities in order to fix them.
Speaker 3: Our attack is already looking at these smaller open source models.
Speaker 3: What have you seen, particularly as we are in the
Speaker 3: midst of a global conflict where Iran has very sophisticated
Speaker 3: cyber attackers.
Speaker 11: At least I think the best example that we saw
Speaker 11: is the recent example that was hit by the towards
Speaker 11: the Mexican government, where you saw a bunch of compromise
Speaker 11: happening because of AI, because of an attacker using AI
Speaker 11: to hack the government in Mexico, so I think we
Speaker 11: are definitely going to see more of this. I worry
Speaker 11: about again the ability for people who are trying to
Speaker 11: build like foundational Internet capabilities to have access to things,
Speaker 11: to find issues in their own code base and then
Speaker 11: defend them proactively, versus having sort of small community only
Speaker 11: have access. I think we need to democratize this because
Speaker 11: the building blocks of the Internet are democratized. They are
Speaker 11: in the hands of everyone.
Speaker 12: JII.
Speaker 2: This is the view of Bloomberg Intelligence are in house
Speaker 2: and this right, and that is that mythos on paper,
Speaker 2: because you quite rightly point out the limited scope of
Speaker 2: access lacks the capability to replace leading cybersecurity providers like yourself.
Speaker 2: Beyond vulnerability assessment, right, it's good at identifying memory corruption,
Speaker 2: logic vulnerabilities. Do you accept that that that's where it's
Speaker 2: limits end. Because the conversations I've had every day for
Speaker 2: seven days is that this is a model more capable
Speaker 2: than any we've seen before.
Speaker 11: And you know what I think Mythos is actually doing.
Speaker 11: Let me just maybe cavy up this by saying, I
Speaker 11: think they're doing a really good job. I think it's
Speaker 11: hard for us to actually validate some of that that
Speaker 11: it's the greatest model ever unless you can actually do it,
Speaker 11: because we can reproduce this with three and I want
Speaker 11: to emphasize the word free here. Free open source models.
Speaker 11: The smallest models are capable of finding the same thing.
Speaker 11: So it's not about the model, although anthropic makes it
Speaker 11: about the model, It's really about the system and the
Speaker 11: scaffold and everything you build around it. Because what we
Speaker 11: see is that this is this capability is quite jagged,
Speaker 11: so it's not good at everything. Equally as well, it's
Speaker 11: good at some things, like you pointed out that it's
Speaker 11: not good at everything, and this is something that we
Speaker 11: also see in the open source model. But given enough
Speaker 11: open source model, you can highly paralyze all of this stuff.
Speaker 11: So instead of relying on one exceptionally intelligent model, you
Speaker 11: can take this kind of raw intelligence capability, farm it
Speaker 11: across many models and then actually find more. This is
Speaker 11: something that we've proven we can actually find bugs that
Speaker 11: Mythos has missed, and we're doing this together with the
Speaker 11: open source community, for example hugging face models and you
Speaker 11: know a GPT five point four and again like doing
Speaker 11: this for free means that there's a certain degree of
Speaker 11: asymmetry right now that's being held by anthropic that asymmetry
Speaker 11: will decline, and to your point, we will have other
Speaker 11: actors also capable of doing this. So it's about giving
Speaker 11: defenders the leverage here to figure out their on issues.
Speaker 11: And six.
Speaker 3: Then it's great catching out with you, Javalu A Vile.
Speaker 3: We really appreciate your time. Now coming up US residential
Speaker 3: electricity prices. They have spiked in the last five years,
Speaker 3: and how much blame is AI getting for that jump?
Speaker 3: What's it going to mean for the midterms? More on
Speaker 3: that next.
Speaker 1: This is a boombog peg.
Speaker 3: The rapid build out of AI infrastructure has seen the
Speaker 3: spike in energy prices wholesale electricity in areas with significant
Speaker 3: data center activity, so there isn't as much as two
Speaker 3: hundred and sixty seven percent in five years. That's making
Speaker 3: the cost of electricity for the twenty twenty six midterms
Speaker 3: well what the price of eggs was in the twenty
Speaker 3: twenty four election. That's the focus of the latest Bloomberg
Speaker 3: Big Take, and one of our reporters on it, Energy
Speaker 3: reporter Josh Saul, is here with us now and I
Speaker 3: want to clear something up first and foremost, because is
Speaker 3: the wrap the bad rap coming to data centers the
Speaker 3: right target right now in amidst oil price issues, amid
Speaker 3: just supply demand constraints, the up grade of the utilities.
Speaker 12: More broadly, people are really angry about their utility bills.
Speaker 12: Data centers are part of the reason that those bills
Speaker 12: are getting higher, but they're not the whole reason. There's
Speaker 12: other things like investments needed for an aging grid, overall inflation.
Speaker 12: But when you ask people, when I was in the
Speaker 12: Lehigh Valley in Pennsylvania, when I would ask them about
Speaker 12: their utility bills, they would say, I'm so mad about
Speaker 12: the data centers. They would go right to.
Speaker 2: That, right, Josh, you know there is when it comes
Speaker 2: to data center impact on any given zip code. There
Speaker 2: is not in my backyard, right, Nimbi. That's one movement,
Speaker 2: But specifically with energy prices and how it relates to
Speaker 2: the mid terms, How do we measure the movement of
Speaker 2: the electorate in how they feel about this issue, in
Speaker 2: how it might sway votes in key races.
Speaker 12: The NIMBI issue is more about green space. It's more
Speaker 12: about what's right next to you. People worry about power prices,
Speaker 12: but the way that the power prices travel across the grid.
Speaker 12: Whether you can see a data center or whether it's
Speaker 12: ten or even one hundred miles away, it's still going
Speaker 12: to be affecting your power bills.
Speaker 3: And look, it's affecting Japanese power bills. It's affecting UK pawables,
Speaker 3: and some of them are data center related to some
Speaker 3: of them are also energy and import related. But take
Speaker 3: us to Pennsylvania and take us to whether or not
Speaker 3: this is being deemed more one side, more Democrat issue,
Speaker 3: more Republican issue, because of course it is the administration,
Speaker 3: the current administration that is all in on data center expansion.
Speaker 12: It's shaping up as an anti incumbent issue. So there's
Speaker 12: a Republican incumbent in the Lehigh Valley and people are
Speaker 12: angry about their power bills, and often that anger is
Speaker 12: taken out on an incumbent, whether it's a local representative
Speaker 12: in the Lehigh Valley or whether it's President Trump.
Speaker 2: I want to thank Bloomberg Joshaul, who has the big
Speaker 2: take and it's a must read. Let's get back to Disney,
Speaker 2: the story that we broke at the top of the hour.
Speaker 2: Disney is cutting around one thousand jobs. That's according to
Speaker 2: Bloomberg's sources, Bloomberg reporting that the cuts will be company why,
Speaker 2: but impact marketing most This would be the first layoffs
Speaker 2: under new CEO Josh Tomorrow, who took over from Bob
Speaker 2: Iger in March. Separately, Bloomberg is reporting and has seen
Speaker 2: a memo from Josh Tomorrow to Disney's staff that says
Speaker 2: that they will start eliminating roles in some parts of
Speaker 2: the company, and they've begun notifying those impacted employees. The
Speaker 2: stock didn't really move when the story broake carry you know,
Speaker 2: there's been reports on this in prior weeks, but yeah,
Speaker 2: a big piece of news.
Speaker 3: Yeah, more agile, technologically enabled workforce, that's what they want. Well,
Speaker 3: we talk about that technology and the enablement and it
Speaker 3: does it for this edition of Bloombog Tech.
Speaker 2: Yeah, recap on the pod. You know where to find it.
Speaker 2: A lot of important markets, news, technology conversations. That's where
Speaker 2: you find it. From New York and San Francisco. This
Speaker 2: is Bloomberg Tech