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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive

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Speaker 1: from coast to coast with Caroline Hide in New York

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Speaker 1: and ever though in San Francisco.

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Speaker 2: This is Bloomberg Tech coming up. Intel plunges after the

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Speaker 2: chip maker warned its struggling with manufacturing problems.

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Speaker 3: Fas China's largest tech firms get an initial green light

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Speaker 3: from Beijing to start preparing orders for videos two hundred.

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Speaker 2: AI chips, and after years of drama comes to an

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Speaker 2: end as TikTok and its Chinese parent Byte Dance close

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Speaker 2: a deal to operate in the US.

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Speaker 3: Let's look right now though at US markets as we

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Speaker 3: close up this week, a volatile training week to say

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Speaker 3: the very least consumed by geopolitics to start, and we

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Speaker 3: end with a little bit of green on our screens.

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Speaker 3: For the nasat one hundred, we're up five ten percent,

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Speaker 3: six tenths. You can see the clallback that happened post

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Speaker 3: Davos speech and post President Trump really taking his line

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Speaker 3: of sight away from Greenland by force at least. But ed,

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Speaker 3: it's all about the chip stocks today and you're digging

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Speaker 3: into them.

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Speaker 2: So Intel is down a lot, and it's because of

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Speaker 2: a sales outlook for the current period that at the

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Speaker 2: midpoint was below investor expectations, on track for its biggest

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Speaker 2: drop since August of twenty twenty two. But remember this

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Speaker 2: was a stock that just in the few weeks we've

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Speaker 2: had of twenty twenty six, was up forty seven percent

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Speaker 2: as of yesterday's close. The problems are in supply, but

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Speaker 2: specifically in execution. Let's get to Bloomberg's chips reporter Ian

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Speaker 2: King and Ian You and I spoke with Intel's CEO

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Speaker 2: Lit Bhutan on the telephone. He was very clear that actually,

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Speaker 2: when they say there are supply issues, a lot of

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Speaker 2: this was how Intel tried to manage it. They have

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Speaker 2: yield and they have production problems. Explain that to us.

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Speaker 4: Yeah, So those are a couple of things here. The

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Speaker 4: first was that they basically did believe that the demand

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Speaker 4: for some of their best products, which would be the

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Speaker 4: server chips.

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Speaker 2: Was there.

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Speaker 4: Didn't build inventory, didn't assign supply to that, so that

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Speaker 4: didn't help. But then the production, which could help you

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Speaker 4: out where you get more chips for a production room,

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Speaker 4: what's called yield. If that had been better, they would

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Speaker 4: have had more chips and been able to meet more supply.

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Speaker 4: So they've really left quite a lot of orders on

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Speaker 4: the table here and obviously that is not good.

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Speaker 3: What does it say about the future of its fab

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Speaker 3: business in if you're a solo.

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Speaker 4: Well, I mean, I can refer you to what the

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Speaker 4: analysts has said, which is, look, if you're out there

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Speaker 4: looking for external customers for your factories, your factories have

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Speaker 4: to be showing their best side. They have to be

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Speaker 4: operating at full of you know, best they can. They

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Speaker 4: have to be working, you know, a maximum efficiency. If

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Speaker 4: that's not the case, then that obviously hurts your you know,

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Speaker 4: your sales pitch to outside customers.

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Speaker 5: Intil Intel.

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Speaker 2: We also discussed in the context of Intel his efforts

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Speaker 2: with the coming fourteen A process right, and I found

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Speaker 2: lit Bhutan's candor quite interesting. We tried to push them

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Speaker 2: and say where are the customers and his answer was

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Speaker 2: until I have a volume commitment on that, I'm not

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Speaker 2: going to tell you anything. Just give us a bit

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Speaker 2: more of how he tried to explain that foundry business

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Speaker 2: in its progress.

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Speaker 4: Yeah, I mean, this is him sticking to a line

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Speaker 4: of kind of reasoning which I think resonated initially with

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Speaker 4: shareholders and then caused a little bit of concern. Basically,

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Speaker 4: he's saying, look, this is really expensive building these factories

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Speaker 4: and equipping them past the fortune I am not going

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Speaker 4: to do that until my customers say, here's an order

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Speaker 4: that I can then turn into cash that pays for

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Speaker 4: these factories. So that's a very logical, sort of down

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Speaker 4: to earth, pragmatic sort of viewpoint, saying that he'll know

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Speaker 4: for sure whether he's going to get concrete orders or

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Speaker 4: not in the second half of this year and into

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Speaker 4: the first half of net. So from the Wall Street perspective,

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Speaker 4: that's like we're still in the kind of wait and

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Speaker 4: see period in terms of whether Intel can become this

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Speaker 4: kind of boundary this rival to TSMC.

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Speaker 3: Wonder how the administration is viewing it as a key

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Speaker 3: stakeholder in Intel in king great roundup, Thank you, Let's

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Speaker 3: turn attuch to a Bloomberg exclusive. Now, Ali Baba ten

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Speaker 3: Fighte Dance were then now allowed to prepare orders for

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Speaker 3: Invideo's h two hundred AI chips, suggesting that Beijing is

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Speaker 3: prioritizing the needs of the major Chinese hyperscalers again close

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Speaker 3: to formally approving imports of essential AI components. Let's get

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Speaker 3: to bloomog Tech executive editor Peter Elstrom, it's another stepping

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Speaker 3: stone that hints Beijing I'll.

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Speaker 6: Let them in.

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Speaker 5: Yeah, this is a very closely watched drama.

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Speaker 7: Of course, Nvidia used to sell lots of AI chips

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Speaker 7: into the China market, but Washington and Beijing have been

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Speaker 7: battled over exactly what kind of chips are going to

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Speaker 7: be sold and what kind of volume. Washington has stopped

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Speaker 7: the most advanced chips from go into the market, but

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Speaker 7: the Trump administration did approve these age two hundred chips

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Speaker 7: to be sold into the market. It wasn't clear whether

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Speaker 7: Beijing was going to let its tech companies buy these chips.

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Speaker 7: Now now what we're hearing from sources is that they

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Speaker 7: have given the go ahead for the key companies you mentioned, Alibaba,

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Speaker 7: ten Sent and byte Dance to prepare their orders, to

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Speaker 7: tell them how much they want to buy from Nvidia,

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Speaker 7: and then they're going to make decisions about when exactly

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Speaker 7: this is going to happen. It's going to come with

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Speaker 7: some caveats. They do still want to build up the

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Speaker 7: domestic industry. They want these companies to also purchase from

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Speaker 7: some of the domestic players, which include Wallwe technologies and

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Speaker 7: camera con as we've talked about in the show a

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Speaker 7: few times before. But it looks like they're going to

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Speaker 7: be able to go ahead with those Age two hundreds.

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Speaker 2: Yeah, those caveats also include restrictions, right that on both

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Speaker 2: sides of this negotiation, there is agreement that the Chinese

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Speaker 2: officials that we're hearing from talking about there will not

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Speaker 2: be access when it comes to sensitive industries things like that.

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Speaker 5: Just break that down, Peter. Yeah, they're concerned.

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Speaker 7: They've said this before with the chips and now the

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Speaker 7: two hundred chips.

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Speaker 5: They're concerned.

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Speaker 7: They don't want invidious chips going into sensitive areas like

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Speaker 7: the military, like state on enterprises or government agencies for

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Speaker 7: that case. So the market's going to be narrower than

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Speaker 7: what it would be otherwise. But in Vidia used to again,

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Speaker 7: used to sell a lot of chips into this market,

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Speaker 7: used to be very very important. Jensen Wong has talked

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Speaker 7: about how important it is, and they know that there's

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Speaker 7: demand there for these chips, so he'd like to get

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Speaker 7: back in. And I think this is not the Age

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Speaker 7: two hundreds are not the end of the game here.

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Speaker 7: We know that some people in the Trump administration included

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Speaker 7: David Sachs have advocated for selling even more in video

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Speaker 7: chips into China, and so we think that if this

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Speaker 7: is going to move ahead, it's more symbolic of what

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Speaker 7: the broader potential is in China for in video if

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Speaker 7: they can make this happen.

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Speaker 2: Bobergs, Peter Elstrom, thank you very much. Let's get more

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Speaker 2: on that story. Joanne Feenie, partner and portfolio manager and

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Speaker 2: Advisors Capital Management, long time.

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Speaker 5: Coverage of the chip industry.

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Speaker 2: Now on the buy side of the table, Joe, and

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Speaker 2: you yourself owned some Nvidia. I feel like we've discussed

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Speaker 2: different shades of this story many times over on this

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Speaker 2: program with you. But at this point, at this juncture,

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Speaker 2: and based on the reporting that Peter just gave us,

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Speaker 2: do you start to model in some upside for Nvidia

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Speaker 2: in the China market and thus think about your positioning

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Speaker 2: on that stock.

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Speaker 8: Yeah, clearly it's a good sign, right, and it's been

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Speaker 8: long and coming, but you know, the size of the

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Speaker 8: market opportunity is still hard to define. You know, clearly

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Speaker 8: China wants to encourage its own semiconductor industry to catch

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Speaker 8: up to some degree to in Vidia.

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Speaker 9: But you know, it's a good sign. It's incrementally positive.

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Speaker 8: We're not really going to model it in at this

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Speaker 8: point because it's hard to know how large it could be. Nevertheless,

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Speaker 8: a positive sign opening up that market, and also just

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Speaker 8: to you know, continue to make sure, as Jensen Wang

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Speaker 8: has put it, that AI applications are built on the

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Speaker 8: US technology stat primarily, and because we have the leading

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Speaker 8: ships that's appropriate.

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Speaker 2: As Jensen one has put it, it's a fifty billion

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Speaker 2: dollars per year market opportunity if they can go back

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Speaker 2: to China, which is currently a net zero assumption. That

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Speaker 2: last bit you said, I really want the joe An

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Speaker 2: Foinie take on this. In the White House, the consideration

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Speaker 2: was if we don't sell any technology deprecated or otherwise

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Speaker 2: into China, then there will be a vacuum which the

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Speaker 2: Chinese domestic players will occupy. But there is still this

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Speaker 2: national security and competition standpoint. Where do you stand on that?

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Speaker 8: Yeah, I'm not a military expert, ed, so I'm going

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Speaker 8: to refrain from from talking really about how this could

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Speaker 8: change the military, you.

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Speaker 9: Know, competitive situation.

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Speaker 8: You know, if we don't sell these chips, if Nvidia

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Speaker 8: doesn't get to tell these sell these ships, China will

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Speaker 8: develop them and they've worked around the you know, less

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Speaker 8: capability of their own chips by redesigning you know, inside

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Speaker 8: the rats to try to save energy, to try to.

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Speaker 9: Boost through put it. And they'll continue to do that,

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Speaker 9: and they'll do that in AI applications.

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Speaker 8: They are going to do that in military applications, whether

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Speaker 8: or not they can use those Nvidia chips there. So,

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Speaker 8: you know, I think that the opportunity for US to

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Speaker 8: have more sort of input and potential control over the

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Speaker 8: future of this AI technology is really a worthwhile goal.

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Speaker 3: The administration looking at h two hundreds, the administration probably

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Speaker 3: looking at the share fall of Intel today, Joanne, take

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Speaker 3: us to your thoughts on the manufacturing well, lackluster performance

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Speaker 3: thus far from the company, it seems.

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Speaker 9: Yeah, I mean until Caroline has certainly had its problems.

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Speaker 8: I mean they went down what is retrospect, the wrong

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Speaker 8: path in terms of the process technology. And now they've

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Speaker 8: been trying to fix that since Pat Gelsinger was put

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Speaker 8: in charge and now with Liptu Bhutan, and clearly we're

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Speaker 8: seeing that it's more challenging than perhaps investors recognize.

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Speaker 9: And I think investors really got ahead of the story.

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Speaker 8: You know, they saw the US government come in and

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Speaker 8: take a stake and they felt like, you know, that

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Speaker 8: put a floor on the stock price to so degree.

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Speaker 8: But you know, Intel is in a situation with you know,

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Speaker 8: two things coming out on that report. One, they're gross margins.

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Speaker 8: You know, you know they beat a little bit, but

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Speaker 8: they beat. It's thirty seven point nine percent. I mean, Intel,

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Speaker 8: right should have gross margins above sixty percent, given that

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Speaker 8: they're one of two suppliers in the PC business.

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Speaker 5: Well, Joe, let me.

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Speaker 2: Just say whether they should or not, Whether they should

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Speaker 2: or not. Historically they had margins of sixty percent, just

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Speaker 2: to jump in on that point.

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Speaker 8: That's a very good clarification, at very good point. Should

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Speaker 8: in terms of market structure. But now you know they're

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Speaker 8: trying to play in the AI market and they're well

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Speaker 8: behind and now in videos the leaders, So you know,

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Speaker 8: look at invideos margins clearly right for competition to.

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Speaker 9: Come in there.

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Speaker 8: But you know, with their outlook showing that they've sold

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Speaker 8: out of their server CPUs, they're going to have a

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Speaker 8: weak quarter this quarter. The yields are lower than they

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Speaker 8: would like, and it just you know, people look at

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Speaker 8: that gross margin and they see it as a really

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Speaker 8: important signal of how much progress they're making in a

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Speaker 8: complex manufacturing process. And clearly they're not making as much

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Speaker 8: progress as investors will like and as the company would like.

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Speaker 8: And so I think it's a particularly risky bed. We

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Speaker 8: have not owned Intel for clients. We think that the

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Speaker 8: opportunity cost is just too high. You can own a Broadcom,

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Speaker 8: which we've owned for you know, eleven years for clients.

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Speaker 8: You can own Nvidia, which we've owned for clients since

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Speaker 8: twenty twenty two. These are clearly market leaders, and they've

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Speaker 8: ironed out the design challenges and through their partners to

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Speaker 8: like TSMC, the manufacturing challenges, and so they're delivering. And

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Speaker 8: Intel faces now are chicken and an egg problem on

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Speaker 8: the fourteen A process.

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Speaker 3: Go there on the foundry side there for Joanne, because

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Speaker 3: the signals that maybe well, that side of the equation

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Speaker 3: still needs more than just the government buying in to

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Speaker 3: think that they're going to solidify any partners here and

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Speaker 3: building and manufacturing for them.

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Speaker 10: Yeah.

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Speaker 9: Intel's tried to enter the foundery world.

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Speaker 8: We've talked in the past about you know how challenging

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Speaker 8: that is to move from producing your own ships to

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Speaker 8: move to producing others. The design libraries and all that,

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Speaker 8: but they fundamentally need the manufacturing process. And the problem

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Speaker 8: that they face right now is that, on the one hand,

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Speaker 8: they're saying, hey, we don't want to invest the cap

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Speaker 8: x to build up this capacity until we have customers

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Speaker 8: locked in. But customers aren't going to lock in unless

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Speaker 8: they know they have a manufacturing process that works and

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Speaker 8: that can deliver. Because you know, you're designing a product,

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Speaker 8: you're designing it years out, and you have to know

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Speaker 8: the supply will be there if you commit to a

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Speaker 8: certain manufacturing partner.

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Speaker 9: So it's a real chick out an egg problem.

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Speaker 8: They might have to bet on, you know, on making

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Speaker 8: it happen and being able to deliver the customers by

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Speaker 8: getting that process up and running and showing that they

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Speaker 8: can get yield up in volume even in advance of

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Speaker 8: locking down some customers.

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Speaker 9: So you know, it's almost a bet the company kind

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Speaker 9: of problem.

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Speaker 8: And that's why again, as an investor, we're not enthusiastic

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Speaker 8: about Intel.

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Speaker 9: The risk is simply too high.

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Speaker 8: We don't find the current valuation compelling given that risk.

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Speaker 8: We think there are better places to be and so

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Speaker 8: we're gonna We're.

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Speaker 9: Gonna stick with with where we are. For example, and

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Speaker 9: am D.

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Speaker 8: By the way, that recent result pretty clearly indicated that

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Speaker 8: am D is continuing to gain share against Intel, likely

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Speaker 8: both in server CPU and in PCCPU.

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Speaker 3: Joanne Feeni with all the context Advisors Capital Management, thank

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Speaker 3: you so much.

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Speaker 6: Happy weekend. Now coming up, Tesla's.

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Speaker 3: Robotaxi gets closer to fully autonomous reality is some vehicles

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Speaker 3: in Austin feature no human safety monitors in the car.

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Speaker 3: While on that next as a Roomberg technology roombog tech,

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Speaker 3: so Tesla has begun offering robotaxi rides in a limited

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Speaker 3: number of vehicles in Austin with no human safety driver

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Speaker 3: behind the wheel.

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Speaker 6: In a post on x CEO in a Musk when even.

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Speaker 3: Further suggesting that cracking real world self driving technology could

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Speaker 3: ultimately lead to artificial general intelligence, Thomas really unpack what

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Speaker 3: this moment means for the future of autonomous technology. We're

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Speaker 3: joined by Regina Klulo, Managing director of Populace.

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Speaker 6: Regina brings more.

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Speaker 3: Than a decade of hands on experience and transportation and mobility.

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Speaker 3: Look your hold on PhD in transportation and energy systems.

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Speaker 6: My team, we should listen to you. Is this a

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Speaker 6: big feat?

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Speaker 10: This is definitely a significant development it's another major player

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Speaker 10: in the autonomous vehicle space, and it shows more confidence

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Speaker 10: in the technology, but it's still pretty limited and it's

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Speaker 10: definitely an experiment.

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Speaker 5: It's an experiment, Regina. I'm just going to jump in.

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Speaker 2: People on the Tesla side of the camp say, this

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Speaker 2: is a notable moment because it's a first for a

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Speaker 2: vision only based platform to be on public roads, not

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Speaker 2: just with no one in the driver's seat, but no

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Speaker 2: supervising attendant in the passenger seat either. People would also

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Speaker 2: note that there were other restrictions on social media. For example,

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Speaker 2: there were support vehicles from Tesla. It is alleged and

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Speaker 2: claimed that said the vision only part, the distinction that

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Speaker 2: Tesla's system relies only on cameras, whireas Weimo has a

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Speaker 2: multi sensor suite. Interpretation of why that's significant, well, I.

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Speaker 10: Think there are a couple of companies, including Zookes and Tesla,

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Speaker 10: that are really designing vehicles that are intended to be

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Speaker 10: purpose built for autonomous driving and for autonomous right hailing.

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Speaker 10: So it is the significant development, and I think at

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Speaker 10: the end of the day, what's great is that there

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Speaker 10: are multiple players that are entering the market, which ultimately

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Speaker 10: for cities is a good thing because it makes the

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Speaker 10: regulatory landscape easier for them to manage.

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Speaker 3: Regulatory landscape has not held back other competitors to this point.

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Speaker 3: And when you think about a few a handful of

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Speaker 3: Tesla's on the road and you compare that to a

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Speaker 3: million rides or having per month already using weimo, and

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Speaker 3: they're aiming it for a million per week, how much

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Speaker 3: are we able to really say that Tessa's winning here

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Speaker 3: or not.

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Speaker 10: I think it's still very early days, but the landscape

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Speaker 10: is moving much more quickly, especially over the last three years.

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Speaker 10: You see these new players entering the market with commercial

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Speaker 10: right hailing services, But I don't think that you know,

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Speaker 10: it's clear that there's any one winner at this point

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Speaker 10: in time. Although weimo is significantly ahead at the moment

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Speaker 10: in terms of commercial right hailing, as you mentioned, they're

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Speaker 10: estimating to reach a million rights per week by the

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Speaker 10: end of the year, but it's still anyone's market to win,

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Speaker 10: and it's exciting to see more players enter it.

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Speaker 5: Yeah.

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Speaker 2: In simple terms, people define Weimo being ahead by the

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Speaker 2: number of cities it's deployed in without any human supervision

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Speaker 2: in the car and charging affair to passengers. I'd love

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Speaker 2: to talk about the human side of this though, right

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Speaker 2: in your research at a number of academic institutions over

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Speaker 2: the years, do we have the evidence yet that the

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Speaker 2: general population feels ready to jump in a robo taxis

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Speaker 2: their sort of chosen method of transfer.

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Speaker 5: I think that.

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Speaker 10: In San Francisco there's a lot of data to suggest

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Speaker 10: that consumers do really feel comfortable utilizing Weimo and sort

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Speaker 10: of segments of customers preferring Weimo and even being willing

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Speaker 10: to pay more for that vehicle over let's say an

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Speaker 10: Uber or Lyft. So I think that people are becoming

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Speaker 10: very comfortable, very quickly with these vehicles, and we'll just

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Speaker 10: continue to see that happen Regina.

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Speaker 6: What's interesting is the global context.

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Speaker 3: Because we saw actually shares of Uber and Lyft get

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Speaker 3: hit by this announcement of Elo Musk, and in many

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Speaker 3: ways they're already out there, not only partnering in Austin

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Speaker 3: with Weimo like Uber, but they're also in China and

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Speaker 3: we're seeing Beijing people hopping in those cars pretty actively.

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Speaker 3: We're also seeing it in the Middle East as well,

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Speaker 3: with we Ride and Uber out there trying things. How

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Speaker 3: are you seeing globally the readiness of the consumer.

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Speaker 10: I think that a lot of the global readiness is

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Speaker 10: pretty accepting. We have a lot of other countries out

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Speaker 10: there that we'll be willing to allow more vehicles and

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Speaker 10: more operators to experiment, and then putting those vehicles out

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Speaker 10: there for consumers to begin adopting allows them to move

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Speaker 10: forward more quickly. So I think that, you know, at

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Speaker 10: a global level, we're going to continue to see an

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Speaker 10: acceleration of the adoption of those vehicles.

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Speaker 2: Regina Klulo of Populous, Great to have you on the show,

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Speaker 2: Thank you very much. Okay, So Apple's basically flat in

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Speaker 2: the session, but actually it had a pretty rough start

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Speaker 2: to the week. And believe it or not, this is

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Speaker 2: a stock that's on track for its eighth straight weekly decline,

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Speaker 2: the worst run of weekly declines going back to May

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Speaker 2: of twenty twenty two.

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Speaker 5: There is a lot in the news.

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Speaker 2: Cycle with Apple, and a lot of it comes from Bloomberg.

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Speaker 2: The company's hardware chief, John Turnas, has added one of

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Speaker 2: the iPhone maker's most critical functions and prestigious responsibilities to

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Speaker 2: his role overseeing the design teams. It's a new sign

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Speaker 2: that Turnus is a leading contender to take over for

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Speaker 2: CEO Tim Cook one day all according to our sources

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Speaker 2: and the guy that broke the story, plumost Mark German

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Speaker 2: is here introduce us to mister Turners. What does your

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Speaker 2: reporting tell us about his new workload? And also that

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Speaker 2: signal that he's climbing the ranks here.

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Speaker 11: John Turnis has been Apple's Senior VP of Hardware Engineering

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Speaker 11: since twenty twenty one. That means he runs all hardware

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Speaker 11: development for essentially every Apple products. He's in charge of

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Speaker 11: the iPhone, charge of the iPad, and charge of the Mac,

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Speaker 11: now in charge of the Apple Watch, and he's been

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Speaker 11: elevated to expand his role this year a couple times,

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Speaker 11: taking like I said, full oversight of the Apple Watch,

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Speaker 11: but also taking charge of Apple's AI robotics teams. Now

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Speaker 11: very recently, Tim Cook put them in charge of overseeing

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Speaker 11: Apple's design teams for both hardware and software. And no

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Speaker 11: design is the look and feel of the products, what

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Speaker 11: the interface looks like, what the icons look like, how

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Speaker 11: the software works. Industrial design are things like the shapes

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Speaker 11: of the devices, the colors, the weight in the field

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Speaker 11: goes well beyond the engineering of making everything work. And

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Speaker 11: like you said, design is one of the most critical

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Speaker 11: and prestigious functions at Apple. It's really only been run

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Speaker 11: by the most senior executives in the company's history, people

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Speaker 11: like Johnny Ive, Steve Jobs himself, Tim Cook himself, and

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Speaker 11: the COO Jeff Williams, who retired a few months ago.

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Speaker 11: Now John Turnis adds to that list, and it's yet

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Speaker 11: another strong indicator that he's being groomed for a larger

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Speaker 11: role and is at the very top of the short

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Speaker 11: list of front runners the potential Tim Cook's successors at

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Speaker 11: one point when Cook ultimately does decide to retire.

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Speaker 3: Mark What's interesting is how subtly this was done. And

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Speaker 3: I'm sure that's because they don't want to aggravate too

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Speaker 3: much the investor base, but also those also in the

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Speaker 3: running talk about who else we could see being lined

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Speaker 3: up in some way.

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Speaker 11: This is a very strange setup Organizationally, the design teams

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Speaker 11: are overseen by Turnis, but on paper they report to

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Speaker 11: CEO Tim Cook. Various reasons why you want to do that.

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Speaker 11: Apple previously announced that Cook would be running the design team,

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Speaker 11: so you don't want to take that away from him

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Speaker 11: publicly and undermine the CEO. You don't want to get

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Speaker 11: into a debate about who's better suited to run design,

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Speaker 11: whether that's an engineer or an operations person like Cook.

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Speaker 11: In terms of other CEO candidates, or really only one

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Speaker 11: other at this point, that's Sabby Khan, the chief operating officer.

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Speaker 11: Other publications have thrown out names like Eddie Q, Greg Joswiak,

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Speaker 11: Greg Federigi, Girdre Brian. Nothing I've heard points to any

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Speaker 11: of them being CEO other than maybe in an emergency

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Speaker 11: like scenario, it's really Turnus or the new COO, Sabby

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Speaker 11: con Mark.

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Speaker 2: We have ten seconds. What's the one product that Turnus

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Speaker 2: is going to be zeroed in on this year?

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Speaker 11: This year, it's got to be the foldable iPhone. This

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Speaker 11: is going to be a potential growth driver for company

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Speaker 11: revenue and we'll see him front and center for that

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Speaker 11: in September.

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Speaker 6: Max mon Gumman with all escapes. You so appreciate it.

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Speaker 6: Welcome back to Blue meg Tech.

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Speaker 3: Let's check in on these markets because we end the

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Speaker 3: week on a high, but it's been a turbulant four

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Speaker 3: days of trading, shortened week given the holiday on Monday,

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Speaker 3: We're up five ten percent on the day on the Nasdaq.

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Speaker 3: One hundred is you'll see more focus maybe post Davos

441
00:22:19,440 --> 00:22:21,919
Speaker 3: on the future of AI and of technology. Bitcoin is

442
00:22:22,040 --> 00:22:23,960
Speaker 3: up three tens percent, but look, it's still been hammered

443
00:22:23,960 --> 00:22:27,320
Speaker 3: a little bit. We're sub ninety thousand dollars overall. I'm

444
00:22:27,320 --> 00:22:29,480
Speaker 3: looking at some individual names and looking only one. Really

445
00:22:29,520 --> 00:22:32,040
Speaker 3: do you want to be taking real attention to in

446
00:22:32,119 --> 00:22:35,000
Speaker 3: terms of points and in terms of the absolute.

447
00:22:34,520 --> 00:22:37,399
Speaker 6: Move, it's Intel. We're off by fifteen percent.

448
00:22:37,840 --> 00:22:41,520
Speaker 3: Look, the context is it's up prior to today fifty

449
00:22:41,520 --> 00:22:44,280
Speaker 3: percent on the month, on the year, and it had

450
00:22:44,280 --> 00:22:47,680
Speaker 3: a rapid run up. But the manufacturing issues, the issues

451
00:22:47,680 --> 00:22:50,280
Speaker 3: with basically yield on some of their chips and not

452
00:22:50,359 --> 00:22:52,679
Speaker 3: managing to make the most of demand for aipcs, and

453
00:22:52,760 --> 00:22:54,760
Speaker 3: indeed in CPUs.

454
00:22:54,640 --> 00:22:57,760
Speaker 6: That's a letdown trying to investibate that investor base.

455
00:22:59,680 --> 00:23:01,119
Speaker 5: Okay, some deal news.

456
00:23:01,160 --> 00:23:04,760
Speaker 2: Capital One has agreed to purchase fintech startup Brex for

457
00:23:04,880 --> 00:23:07,200
Speaker 2: five point one five billion dollars in a fifty to

458
00:23:07,240 --> 00:23:10,560
Speaker 2: fifty cash and stock deal. It's the largest acquisition for

459
00:23:10,600 --> 00:23:13,800
Speaker 2: the bank since its purchase of Discover, which closed in

460
00:23:13,840 --> 00:23:16,960
Speaker 2: May of last year. Here to discuss is Pedro Francesci

461
00:23:17,400 --> 00:23:18,240
Speaker 2: Rex CEO.

462
00:23:18,520 --> 00:23:19,720
Speaker 5: Pedro Let's get into it.

463
00:23:19,760 --> 00:23:23,840
Speaker 2: I mean, the obvious question to many last night was

464
00:23:24,119 --> 00:23:27,760
Speaker 2: the timing. But five point one five billion dollars is

465
00:23:27,800 --> 00:23:31,200
Speaker 2: a pretty steep discount to the valuation you raise money

466
00:23:31,240 --> 00:23:33,720
Speaker 2: at in twenty twenty two, which was twelve billion dollars.

467
00:23:34,119 --> 00:23:37,080
Speaker 2: What do you think that signals the timing and also

468
00:23:37,160 --> 00:23:39,080
Speaker 2: the value you agreed?

469
00:23:40,320 --> 00:23:43,440
Speaker 12: Yeah, thanks for having you. We're really excited about this news.

470
00:23:43,520 --> 00:23:47,119
Speaker 12: And you know, this is a really special combination. First,

471
00:23:47,560 --> 00:23:51,760
Speaker 12: it's as you mentioned, it's the largest bank fintech deal

472
00:23:51,840 --> 00:23:55,720
Speaker 12: in history. And really the way we thought about this

473
00:23:56,040 --> 00:23:59,360
Speaker 12: is really this unique one plus one equals three scenario.

474
00:23:59,840 --> 00:24:04,119
Speaker 12: So of course at brex we build you know, corporate cards,

475
00:24:04,200 --> 00:24:07,720
Speaker 12: expense management, banking products, bringing financial services and software together.

476
00:24:08,240 --> 00:24:12,240
Speaker 12: And then Capital One is really the original fintech. They

477
00:24:12,359 --> 00:24:16,280
Speaker 12: brought technology and data together for the first time and

478
00:24:16,400 --> 00:24:17,720
Speaker 12: have been a huge source.

479
00:24:17,480 --> 00:24:18,560
Speaker 5: Of inspiration for us.

480
00:24:18,640 --> 00:24:21,159
Speaker 12: And as we saw as we started to think more

481
00:24:21,200 --> 00:24:24,800
Speaker 12: about this together, we really saw this very unique combination

482
00:24:24,880 --> 00:24:28,760
Speaker 12: of bringing rexist technology, product and platform with Capital One

483
00:24:28,880 --> 00:24:34,120
Speaker 12: scale brand distribution and balance sheet and materially accelerate our

484
00:24:34,200 --> 00:24:36,879
Speaker 12: go to market and our product development to a level

485
00:24:37,040 --> 00:24:40,439
Speaker 12: that would be you know, amashed to a standalone private

486
00:24:40,440 --> 00:24:43,159
Speaker 12: company or even a public company for that matter. So

487
00:24:43,200 --> 00:24:45,520
Speaker 12: we saw this a massive opportunity to build it together,

488
00:24:46,600 --> 00:24:47,639
Speaker 12: opportunity to build.

489
00:24:47,840 --> 00:24:51,840
Speaker 2: But why was Capital One able to pay a more

490
00:24:51,440 --> 00:24:54,920
Speaker 2: than fifty percent discount on your last private valuation.

491
00:24:56,000 --> 00:24:58,480
Speaker 12: Yeah, So when we look into all the public market

492
00:24:58,480 --> 00:25:02,200
Speaker 12: comps that that in the fintech space, they're mostly trading

493
00:25:02,280 --> 00:25:06,600
Speaker 12: between eight, nine, ten, maybe eleven times, this acquisition is

494
00:25:06,600 --> 00:25:09,439
Speaker 12: at a thirteen times multiple. So it's a huge premium

495
00:25:09,520 --> 00:25:12,240
Speaker 12: to where all public market comps are today. And the reason,

496
00:25:12,280 --> 00:25:15,280
Speaker 12: of course Capital One believes in this is because there

497
00:25:15,400 --> 00:25:19,600
Speaker 12: is a massive growth opportunity. We really believe that we're

498
00:25:19,640 --> 00:25:23,000
Speaker 12: here to build really the most important financial platform for

499
00:25:23,040 --> 00:25:26,120
Speaker 12: businesses in the US. And you know, it's a very

500
00:25:26,160 --> 00:25:29,080
Speaker 12: you know, two founder led companies coming in together. And

501
00:25:29,560 --> 00:25:31,680
Speaker 12: the reason they're so excited and we're so excited about

502
00:25:31,680 --> 00:25:34,800
Speaker 12: this is because of the obvious webside path that we

503
00:25:34,880 --> 00:25:35,520
Speaker 12: have from here.

504
00:25:35,760 --> 00:25:40,879
Speaker 3: But Pedro, it's not an upside to that previous valuation.

505
00:25:41,000 --> 00:25:43,800
Speaker 3: And I hear you on the premium compared to where

506
00:25:43,840 --> 00:25:46,320
Speaker 3: others trade on the day, But why not just stay

507
00:25:46,320 --> 00:25:48,760
Speaker 3: private for longer? Why not build? Why not return to

508
00:25:48,760 --> 00:25:50,959
Speaker 3: a twelve billion dollar valuation in the private markets.

509
00:25:51,800 --> 00:25:52,040
Speaker 5: Yeah.

510
00:25:52,080 --> 00:25:53,960
Speaker 12: So the thing that we learned is we had we

511
00:25:54,000 --> 00:25:57,320
Speaker 12: did a lot of you know, twenty twenty one valuations.

512
00:25:56,680 --> 00:26:00,240
Speaker 12: We're a very specific point in time and market. And

513
00:26:00,240 --> 00:26:02,399
Speaker 12: one of the things that we believe for PREX is

514
00:26:02,400 --> 00:26:05,040
Speaker 12: that the teams to see reality the best wins. And

515
00:26:05,200 --> 00:26:08,560
Speaker 12: we like to run the company in a way that

516
00:26:08,680 --> 00:26:12,280
Speaker 12: mirrors where everything eventually converts to you, which is public markets.

517
00:26:12,720 --> 00:26:15,359
Speaker 12: And when we look from a public market lens into

518
00:26:15,440 --> 00:26:18,120
Speaker 12: everything that we've done, we made a lot of decisions

519
00:26:18,160 --> 00:26:20,200
Speaker 12: around the way we accelerate to growth over the past

520
00:26:20,280 --> 00:26:24,440
Speaker 12: few years, went after the enterprise became a casual positive company,

521
00:26:24,720 --> 00:26:28,560
Speaker 12: and this combination of factors, may this be a really

522
00:26:28,680 --> 00:26:32,880
Speaker 12: special outcome. And we think that private companies that mirror

523
00:26:32,960 --> 00:26:36,800
Speaker 12: themselves in a point in time valuation eventually forget that

524
00:26:36,880 --> 00:26:40,160
Speaker 12: everything converges to public markets eventually. And when we compare

525
00:26:40,200 --> 00:26:43,800
Speaker 12: the where brexast today with where a lot of peers

526
00:26:43,800 --> 00:26:47,720
Speaker 12: have ipoed and where other companies on a private basis

527
00:26:47,920 --> 00:26:50,760
Speaker 12: have been, we think this is a really exciting and

528
00:26:50,800 --> 00:26:53,639
Speaker 12: different outcome. But the real reason behind it and the

529
00:26:53,680 --> 00:26:56,280
Speaker 12: real reason I'm so excited for this next phase of

530
00:26:56,280 --> 00:26:59,960
Speaker 12: REX is because this is the beginning of us building

531
00:27:00,080 --> 00:27:03,040
Speaker 12: the most, the largest, and I think the most important

532
00:27:03,080 --> 00:27:06,000
Speaker 12: platform for businesses. When you combine the scale, the balance sheet,

533
00:27:06,000 --> 00:27:09,560
Speaker 12: the distribution, and the tech mindset that Capital one has

534
00:27:09,840 --> 00:27:12,160
Speaker 12: with the product and the technology that we have at BREX.

535
00:27:12,520 --> 00:27:14,359
Speaker 12: So really, at the end of the day, it's about

536
00:27:14,440 --> 00:27:17,000
Speaker 12: building something bigger than what we could ever build as

537
00:27:17,040 --> 00:27:18,040
Speaker 12: a standbone company.

538
00:27:18,520 --> 00:27:21,120
Speaker 6: How will it change your trajectory? What will you build?

539
00:27:21,280 --> 00:27:24,159
Speaker 6: Is it AI that gets infused? What more does this

540
00:27:24,240 --> 00:27:25,120
Speaker 6: give you power to do?

541
00:27:26,040 --> 00:27:28,800
Speaker 12: So just giving you two examples, so Capital one has

542
00:27:28,800 --> 00:27:33,000
Speaker 12: a six billion dollar marketing budget. Brex has a fraction

543
00:27:33,040 --> 00:27:37,119
Speaker 12: of data less than one percent of that today. Just

544
00:27:37,200 --> 00:27:40,959
Speaker 12: imagine the distribution and the capability to go in and

545
00:27:41,119 --> 00:27:44,000
Speaker 12: serve the millions of businesses in the US. Capital one

546
00:27:44,040 --> 00:27:46,760
Speaker 12: also serves already millions of businesses today and all these

547
00:27:46,800 --> 00:27:49,800
Speaker 12: businesses will benefit from the BREX product and technology that

548
00:27:49,960 --> 00:27:52,080
Speaker 12: really helps the run their business in a much better way.

549
00:27:52,520 --> 00:27:53,720
Speaker 12: And then when you're looking at the R and D

550
00:27:53,840 --> 00:27:56,280
Speaker 12: side and AI to your point, Capital one has a

551
00:27:56,320 --> 00:27:59,119
Speaker 12: six billion dollar again R and D budget as well,

552
00:27:59,480 --> 00:28:02,240
Speaker 12: and when you combine this with the product roadmap, and

553
00:28:02,280 --> 00:28:05,080
Speaker 12: the vision that we have at brex. We think we're

554
00:28:05,080 --> 00:28:08,240
Speaker 12: going to accelerate this momentum tremendously and continue to build

555
00:28:08,600 --> 00:28:11,040
Speaker 12: in a much seper trajectory than what we're able to

556
00:28:11,040 --> 00:28:13,320
Speaker 12: do now, and the benefit of the end for customers

557
00:28:13,359 --> 00:28:17,400
Speaker 12: will be, you know, a much better product, a much

558
00:28:17,400 --> 00:28:20,720
Speaker 12: more robust, fraildnap and just accelerating air path compared to

559
00:28:20,720 --> 00:28:22,680
Speaker 12: what we could ever do independently.

560
00:28:23,240 --> 00:28:26,199
Speaker 3: Come back as you scale, Pedro Francisci is great to

561
00:28:26,200 --> 00:28:29,280
Speaker 3: have you the brexits, I mean no, let's stick with

562
00:28:29,359 --> 00:28:32,800
Speaker 3: other deal news because nearly a year after an initial

563
00:28:32,840 --> 00:28:36,120
Speaker 3: deadline to sell TikTok Us has been bought by consortium.

564
00:28:36,400 --> 00:28:39,360
Speaker 6: You know, it's led by Oracle On the social.

565
00:28:39,000 --> 00:28:42,800
Speaker 3: Media President Trump thank the Chinese leaders using pin for quote.

566
00:28:42,680 --> 00:28:43,520
Speaker 6: Working with us.

567
00:28:43,840 --> 00:28:46,640
Speaker 3: Let's discuss the details been both Social media reporter Alexandra

568
00:28:46,760 --> 00:28:49,640
Speaker 3: Levigne has been following what has been quite the journey.

569
00:28:50,160 --> 00:28:53,200
Speaker 3: So the players involved talk us through who's going to

570
00:28:53,240 --> 00:28:55,520
Speaker 3: have the ownership and how that ownership changes what us

571
00:28:55,600 --> 00:28:56,360
Speaker 3: TikTok looks like.

572
00:28:57,080 --> 00:29:00,320
Speaker 13: So we know that the folks that are all only

573
00:29:00,320 --> 00:29:02,360
Speaker 13: going to be involved are going to be the three

574
00:29:02,360 --> 00:29:06,440
Speaker 13: managing investors silver Lake, MGX, and Oracle, which already has

575
00:29:06,480 --> 00:29:09,320
Speaker 13: this long standing relationship with TikTok. And then there are

576
00:29:09,480 --> 00:29:12,440
Speaker 13: a combination of other investors that are already that have

577
00:29:12,520 --> 00:29:16,400
Speaker 13: long been long time by Dan's affiliates. I think that

578
00:29:16,600 --> 00:29:19,640
Speaker 13: the most remarkable piece of this is just the fact

579
00:29:19,680 --> 00:29:23,040
Speaker 13: that it's spanned three presidencies more than half a decade.

580
00:29:23,080 --> 00:29:26,560
Speaker 13: It's been almost seven years since olives started and two

581
00:29:26,600 --> 00:29:28,520
Speaker 13: hundred million people, which is more than half a country,

582
00:29:28,560 --> 00:29:30,840
Speaker 13: are now on the platform, and it has grown so

583
00:29:31,000 --> 00:29:33,400
Speaker 13: considerably since all of this has been happening.

584
00:29:34,880 --> 00:29:37,120
Speaker 2: I think it's also important to kind of get to

585
00:29:37,160 --> 00:29:39,480
Speaker 2: know some of the people behind this new entity. They

586
00:29:39,520 --> 00:29:44,960
Speaker 2: have a leader who was a relatively high level executive

587
00:29:45,040 --> 00:29:47,760
Speaker 2: at the larger n seat to tell us about him.

588
00:29:48,200 --> 00:29:51,840
Speaker 13: Yeah, So the new CEO of this new TikTok venture

589
00:29:52,040 --> 00:29:56,880
Speaker 13: is Adam Presser. Adam Presser has been viewed as a

590
00:29:56,920 --> 00:29:59,720
Speaker 13: contender for the top job. He's been viewed as a

591
00:29:59,840 --> 00:30:03,480
Speaker 13: very influential insider for many years. He has an entertainment background,

592
00:30:03,600 --> 00:30:08,160
Speaker 13: not a political background. But he came from WarnerMedia and

593
00:30:08,360 --> 00:30:12,120
Speaker 13: he joined TikTok in twenty twenty two and was since

594
00:30:12,160 --> 00:30:15,240
Speaker 13: then really really close to Show to you reporting directly

595
00:30:15,360 --> 00:30:18,120
Speaker 13: into to Show who has been the CEO. He's taken

596
00:30:18,240 --> 00:30:21,120
Speaker 13: increasing responsibility over the last few years and he's really

597
00:30:21,160 --> 00:30:24,840
Speaker 13: like just below the top of by Dance Global, and

598
00:30:24,920 --> 00:30:26,800
Speaker 13: so this was a very obvious choice. And he has

599
00:30:26,880 --> 00:30:30,240
Speaker 13: also been leading TikTok Us Data Security it's out of

600
00:30:30,280 --> 00:30:33,280
Speaker 13: protection arm that is now basically being adapted into this

601
00:30:33,360 --> 00:30:36,520
Speaker 13: new joint venture, you know, over the last year.

602
00:30:36,480 --> 00:30:39,840
Speaker 2: Or so Bloomberg z Alex slaviine with the reporting, Thank

603
00:30:39,880 --> 00:30:43,440
Speaker 2: you very much. Coming up, the age of unicorns is

604
00:30:43,520 --> 00:30:47,760
Speaker 2: behind us. Is the number of Decca horns and hecticorns grows.

605
00:30:48,360 --> 00:30:50,840
Speaker 2: Peter Singlehurst, so Baby Gifford joins us to talk about

606
00:30:50,880 --> 00:30:53,200
Speaker 2: skyrocketing private valuations.

607
00:30:53,240 --> 00:30:55,400
Speaker 5: That's next. This is Bloomberg tech.

608
00:31:03,120 --> 00:31:06,959
Speaker 3: Companies. They're staying private for longer. Valuations are hitting new highs.

609
00:31:07,120 --> 00:31:10,400
Speaker 3: The appetite to invest in private growth equity is expanding.

610
00:31:10,640 --> 00:31:13,480
Speaker 3: Just think about some of these names, SpaceX, Data, Bricks

611
00:31:13,520 --> 00:31:17,120
Speaker 3: and Real. Peter Singlehurst's head of private companies are Bailey GIFD,

612
00:31:17,280 --> 00:31:20,400
Speaker 3: which is an investor in all three of those really

613
00:31:20,400 --> 00:31:23,080
Speaker 3: hot come you even call them startups anymore? He joins

614
00:31:23,160 --> 00:31:25,680
Speaker 3: us now Peter Bailey GIFFD has been at this a

615
00:31:25,680 --> 00:31:28,440
Speaker 3: long time, since twenty twelve, allocating billions.

616
00:31:29,640 --> 00:31:31,680
Speaker 6: Is this sustainable, this extent.

617
00:31:31,400 --> 00:31:33,960
Speaker 3: That companies are staying private for longer, and will the

618
00:31:34,040 --> 00:31:35,200
Speaker 3: wall of money still come in?

619
00:31:37,000 --> 00:31:39,600
Speaker 14: I think what we've seen is a structural change in

620
00:31:39,880 --> 00:31:45,120
Speaker 14: how companies capitalize themselves. This is driven by some very

621
00:31:45,480 --> 00:31:49,479
Speaker 14: enduring factors such as regulation. Sarbaine's oxously made it more

622
00:31:49,480 --> 00:31:52,640
Speaker 14: difficult to be public, and aspects of the Jobs Acts

623
00:31:52,720 --> 00:31:55,560
Speaker 14: made it easier to stay private. But I think there's

624
00:31:55,560 --> 00:31:59,800
Speaker 14: also been a cultural change amongst companies. I think founders

625
00:31:59,800 --> 00:32:01,960
Speaker 14: today they realize that you can build a better, more

626
00:32:02,080 --> 00:32:05,800
Speaker 14: enduring business by staying private for longer, because you can

627
00:32:05,840 --> 00:32:09,200
Speaker 14: be more focused on the fundamentals of business building. And

628
00:32:09,280 --> 00:32:13,920
Speaker 14: I think that has led to an irreversal change in

629
00:32:14,160 --> 00:32:17,640
Speaker 14: companies staying private for longer, and as a result, we're

630
00:32:17,640 --> 00:32:21,120
Speaker 14: seeing exceptional, world class businesses of real scale in the

631
00:32:21,120 --> 00:32:22,040
Speaker 14: private markets.

632
00:32:22,280 --> 00:32:24,880
Speaker 3: And now twenty twenty six can be quite the unlock.

633
00:32:25,280 --> 00:32:27,200
Speaker 3: We can have a one and a half trillion dollar

634
00:32:27,320 --> 00:32:30,720
Speaker 3: IPO of SpaceX if they live up to their own hype,

635
00:32:31,080 --> 00:32:33,920
Speaker 3: which you're in, we could have Anthropics been talked of

636
00:32:33,960 --> 00:32:35,880
Speaker 3: for twenty twenty six. Even open AI's been talked off

637
00:32:35,880 --> 00:32:38,520
Speaker 3: for twenty twenty six. Vita is twenty twenty six going.

638
00:32:38,520 --> 00:32:39,080
Speaker 6: To be the year?

639
00:32:39,160 --> 00:32:41,720
Speaker 3: And how do you think about some of your holdings

640
00:32:41,760 --> 00:32:43,320
Speaker 3: ahead of that as to whether you want to be

641
00:32:43,360 --> 00:32:45,240
Speaker 3: holding onto them in significant size.

642
00:32:46,840 --> 00:32:50,240
Speaker 14: It is unquestionable that many of these companies are of

643
00:32:50,360 --> 00:32:55,440
Speaker 14: the scale and maturity, solidity, operational robustness to be public businesses,

644
00:32:55,960 --> 00:32:57,520
Speaker 14: and I think the real question is when do they

645
00:32:57,640 --> 00:33:01,000
Speaker 14: choose to enter the public market. I think it's also

646
00:33:01,000 --> 00:33:02,960
Speaker 14: pretty clear that public market investors are going to have

647
00:33:03,000 --> 00:33:04,360
Speaker 14: real appetite for these businesses.

648
00:33:04,960 --> 00:33:07,080
Speaker 15: I think there are really two questions, though, at what price?

649
00:33:07,240 --> 00:33:10,840
Speaker 14: Are what valuations will public market investors be willing to

650
00:33:10,840 --> 00:33:14,800
Speaker 14: commit significant amounts of cattle to these businesses? And how

651
00:33:14,800 --> 00:33:18,200
Speaker 14: do the public markets digest IPOs of this scale? The

652
00:33:18,320 --> 00:33:21,520
Speaker 14: largest tech IPO in history was Ali Barbera in twenty fourteen.

653
00:33:21,560 --> 00:33:24,320
Speaker 15: That was a mere twenty five billion dollar IPO.

654
00:33:25,040 --> 00:33:28,240
Speaker 14: If SpaceX witt lists ten percent of itself, even at

655
00:33:28,240 --> 00:33:30,400
Speaker 14: its current valuation, you'd be looking at an eighty billion

656
00:33:30,400 --> 00:33:33,240
Speaker 14: dollar valuation. So I think we're in slightly uncharted waters

657
00:33:33,280 --> 00:33:36,880
Speaker 14: with regards to the scale of these IPOs Here at

658
00:33:36,880 --> 00:33:40,200
Speaker 14: Bailey Gifford, we keep our public and private growth equity

659
00:33:40,240 --> 00:33:45,320
Speaker 14: franchises tightly integrated. And when we own a company that

660
00:33:45,360 --> 00:33:48,800
Speaker 14: comes to the public markets, if our public teams decide

661
00:33:48,800 --> 00:33:50,760
Speaker 14: to buy that company, that's based on their own decision.

662
00:33:50,760 --> 00:33:53,400
Speaker 14: They have to make the right decisions for their public

663
00:33:53,440 --> 00:33:56,800
Speaker 14: market clients. We can potentially become much much owners of

664
00:33:56,840 --> 00:33:59,520
Speaker 14: these businesses and own them for a really long time

665
00:33:59,520 --> 00:34:00,640
Speaker 14: into the pub markets.

666
00:34:00,680 --> 00:34:03,040
Speaker 15: Long term ism is in our DNA as an organization.

667
00:34:03,440 --> 00:34:05,800
Speaker 14: We've been doing growth equity investing for one hundred and

668
00:34:05,880 --> 00:34:09,880
Speaker 14: eighteen years, right, We've been doing it in private markets

669
00:34:10,000 --> 00:34:14,560
Speaker 14: for about fourteen years, and we have really been in

670
00:34:14,560 --> 00:34:18,240
Speaker 14: this part of the private markets, these large growth stage

671
00:34:18,440 --> 00:34:21,400
Speaker 14: private businesses for as long as this asset class has existed.

672
00:34:22,360 --> 00:34:26,400
Speaker 2: That those names have not been one hundred percent liquid.

673
00:34:26,440 --> 00:34:30,480
Speaker 2: The secondary market has been fascinating for transparency in context.

674
00:34:30,480 --> 00:34:34,320
Speaker 2: You know, Belly Gifford came in for criticism by Cyber

675
00:34:34,400 --> 00:34:38,040
Speaker 2: Capital Management, right a hedge fund park that context. But

676
00:34:38,200 --> 00:34:40,360
Speaker 2: is the manager on the private side, how do you

677
00:34:40,440 --> 00:34:44,920
Speaker 2: balance that the timing of maybe trimming or taking advantage

678
00:34:44,920 --> 00:34:49,040
Speaker 2: of liquidity moment tender or otherwise or not holding on

679
00:34:49,120 --> 00:34:49,880
Speaker 2: to it and growing.

680
00:34:51,280 --> 00:34:53,759
Speaker 14: I think that's a really interesting observation edin that that

681
00:34:54,000 --> 00:34:56,839
Speaker 14: first wave of company staying private for longer I would

682
00:34:56,840 --> 00:34:59,480
Speaker 14: say up to the twenty fifteen stage was driven by

683
00:34:59,480 --> 00:35:03,000
Speaker 14: the privileged and of primary capital to fund companies growth

684
00:35:03,320 --> 00:35:07,080
Speaker 14: in the private markets. What's led to these megacap private

685
00:35:07,120 --> 00:35:10,720
Speaker 14: companies is that we're seeing more secondary market transactions happening,

686
00:35:10,920 --> 00:35:14,360
Speaker 14: meaning that secondary market requirements can be solved whilst companies

687
00:35:14,680 --> 00:35:17,600
Speaker 14: remain private. We've seen that in the likes of SpaceX,

688
00:35:17,600 --> 00:35:19,440
Speaker 14: We've seen that in the likes of Data Bricks in

689
00:35:19,560 --> 00:35:23,160
Speaker 14: by Dance in Stripe, and that is really enabling companies to.

690
00:35:23,120 --> 00:35:25,400
Speaker 15: Put off these IPOs for a really, really long time.

691
00:35:26,760 --> 00:35:29,520
Speaker 14: Our job is to manage portfolios and selectively, we will

692
00:35:29,560 --> 00:35:35,920
Speaker 14: occasionally look to trim our positions in private markets if

693
00:35:35,920 --> 00:35:37,920
Speaker 14: we're wanting to realize some of those gains, either to

694
00:35:37,960 --> 00:35:41,640
Speaker 14: recycle into new new holdings or distribute returns to our

695
00:35:41,640 --> 00:35:42,400
Speaker 14: limited partners.

696
00:35:43,320 --> 00:35:47,880
Speaker 2: I'm really interested in how strong and influential feel Bailey

697
00:35:47,920 --> 00:35:49,800
Speaker 2: gift it is, you know, with respect, Peter, I've broken

698
00:35:49,840 --> 00:35:52,120
Speaker 2: a lot of news right over the years on SpaceX

699
00:35:52,120 --> 00:35:54,880
Speaker 2: and or whatever. But the composition of the cap table

700
00:35:54,960 --> 00:35:58,960
Speaker 2: like SpaceX, you've basically got founder's fund fidelity in Google,

701
00:35:59,080 --> 00:36:02,600
Speaker 2: not necessarily in that order. And like all late stage

702
00:36:02,640 --> 00:36:05,799
Speaker 2: growth rounds pre IPO, the crossover investors want to come in,

703
00:36:06,000 --> 00:36:09,319
Speaker 2: they want to anchor a future IPO. Do you have

704
00:36:09,440 --> 00:36:12,080
Speaker 2: influence on the management at SpaceX? Do you try and

705
00:36:12,080 --> 00:36:15,720
Speaker 2: be constructive operationally in working with them in the direction

706
00:36:15,800 --> 00:36:18,240
Speaker 2: they want to take the company.

707
00:36:18,560 --> 00:36:22,600
Speaker 14: So we try to focus our value add capabilities on

708
00:36:22,640 --> 00:36:25,920
Speaker 14: the things which are particularly pertinent to growth stage companies.

709
00:36:26,440 --> 00:36:27,759
Speaker 15: We're not trying to do venture capital.

710
00:36:27,840 --> 00:36:31,040
Speaker 14: We're trying to do growth equity investing, and that means

711
00:36:31,320 --> 00:36:34,520
Speaker 14: the ways in which we have to influence companies need

712
00:36:34,600 --> 00:36:38,320
Speaker 14: to be designed to the growth stage. So, for instance,

713
00:36:38,440 --> 00:36:41,040
Speaker 14: we will often play a role in helping our companies

714
00:36:41,480 --> 00:36:46,440
Speaker 14: shape governance frameworks transitioning to independent led boards as they

715
00:36:46,480 --> 00:36:50,040
Speaker 14: think about becoming public the public.

716
00:36:49,719 --> 00:36:50,319
Speaker 15: Markets as well.

717
00:36:50,360 --> 00:36:52,319
Speaker 14: We've been for one hundred years and we bring that

718
00:36:52,440 --> 00:36:56,360
Speaker 14: expertise in helping our portfolio companies get ready for being

719
00:36:56,800 --> 00:36:58,759
Speaker 14: a public business. But that's not something that we try

720
00:36:58,800 --> 00:37:00,880
Speaker 14: to do six months before come and it becomes public.

721
00:37:01,120 --> 00:37:03,000
Speaker 14: We try to do that in the years leading up

722
00:37:03,120 --> 00:37:04,560
Speaker 14: to being a public business.

723
00:37:05,040 --> 00:37:07,839
Speaker 3: So when you're looking at an Anthropic, for example, and

724
00:37:07,920 --> 00:37:11,399
Speaker 3: there are now there are actually more companies analysts at

725
00:37:11,560 --> 00:37:14,840
Speaker 3: banks now analyzing private companies because they're so huge. And

726
00:37:14,880 --> 00:37:17,280
Speaker 3: one of the analysis really coming from JB. Morgan, for example,

727
00:37:17,360 --> 00:37:19,759
Speaker 3: is that the premium pricing that Anthropic has might start

728
00:37:19,800 --> 00:37:21,880
Speaker 3: to be hit by the level of competition in the enterprise.

729
00:37:22,080 --> 00:37:23,879
Speaker 3: Is that something you steer a company on or something

730
00:37:23,920 --> 00:37:24,600
Speaker 3: that you agree with.

731
00:37:26,040 --> 00:37:29,120
Speaker 14: Look, I think that when we're investing in a company

732
00:37:29,280 --> 00:37:32,640
Speaker 14: like Anthropic, fundamentally, what we're trying to do is determined

733
00:37:32,680 --> 00:37:35,680
Speaker 14: not just how large the revenue base can be. We're

734
00:37:35,719 --> 00:37:38,120
Speaker 14: trying to determine how much of that can flow down

735
00:37:38,320 --> 00:37:40,560
Speaker 14: profit and how large that profit can be relative to

736
00:37:40,560 --> 00:37:43,640
Speaker 14: return on equacy. So of course we're trying to understand pricing,

737
00:37:43,680 --> 00:37:46,440
Speaker 14: power dynamics, we're trying to understand margin structures, and we're

738
00:37:46,440 --> 00:37:50,040
Speaker 14: trying to understand capital intensity and the returns that can

739
00:37:50,080 --> 00:37:54,120
Speaker 14: be earned on capital. Clearly, the AI markets are pretty

740
00:37:54,120 --> 00:37:56,919
Speaker 14: hot at the moment. We think whenever you have a market,

741
00:37:56,960 --> 00:37:59,360
Speaker 14: there will be a tiny number of exceptional companies. And

742
00:37:59,400 --> 00:38:02,879
Speaker 14: so we own Anthropic, we own data bricks, but we're

743
00:38:02,880 --> 00:38:04,719
Speaker 14: not an AI find We're trying to find the best

744
00:38:04,760 --> 00:38:06,960
Speaker 14: growth companies wherever we can find them, and often you

745
00:38:07,000 --> 00:38:08,799
Speaker 14: find them in areas where people aren't looking.

746
00:38:10,040 --> 00:38:11,840
Speaker 2: Peter, I wish we could do thirty minutes with you.

747
00:38:11,920 --> 00:38:16,160
Speaker 2: We can't. Very simply, things have changed. You have retail

748
00:38:16,239 --> 00:38:19,840
Speaker 2: investors coming in via these big SPVs, pension funds I

749
00:38:19,840 --> 00:38:23,520
Speaker 2: talked about with SpaceX and then basically golf sovereign money.

750
00:38:24,040 --> 00:38:26,719
Speaker 2: How is that changing the market for you? And again

751
00:38:26,800 --> 00:38:28,920
Speaker 2: let's go back to valuations in that context.

752
00:38:30,960 --> 00:38:33,800
Speaker 14: I think the truth is private markets are not democratic markets,

753
00:38:33,840 --> 00:38:37,320
Speaker 14: so companies still get to choose their investors, and companies

754
00:38:37,320 --> 00:38:42,160
Speaker 14: will still anchor towards we'll steer towards value added partners

755
00:38:42,160 --> 00:38:44,120
Speaker 14: and partners who they believe will be with them for

756
00:38:44,160 --> 00:38:46,279
Speaker 14: the long term and can support them. But I think

757
00:38:46,320 --> 00:38:48,920
Speaker 14: it's really important to point out that the demand and

758
00:38:48,960 --> 00:38:52,320
Speaker 14: appetite for these kind of large, late stage growth companies

759
00:38:52,520 --> 00:38:55,920
Speaker 14: is very rational. To give you one very tangible example,

760
00:38:57,080 --> 00:39:00,880
Speaker 14: Tesla went public in twenty ten to two billion dollar evaluation.

761
00:39:01,600 --> 00:39:05,040
Speaker 14: Today SpaceX is still private, valued at eight hundred billion dollars,

762
00:39:05,040 --> 00:39:09,000
Speaker 14: so there's a four hundred x difference there that historically

763
00:39:09,040 --> 00:39:11,520
Speaker 14: the public markets have access to and today that growth

764
00:39:11,560 --> 00:39:14,120
Speaker 14: is happening in the private markets. So I think it's

765
00:39:14,280 --> 00:39:16,440
Speaker 14: perfectly right that people are wanting to get access to

766
00:39:16,480 --> 00:39:18,719
Speaker 14: these companies. And I guess the journey that we've been

767
00:39:18,760 --> 00:39:20,839
Speaker 14: on over the last fourteen years has been helping our

768
00:39:20,920 --> 00:39:25,200
Speaker 14: clients maintain their exposure to the growth of these world

769
00:39:25,239 --> 00:39:28,360
Speaker 14: beating companies despite them remaining private for longer.

770
00:39:29,880 --> 00:39:33,040
Speaker 2: Peter Singlehurst, head of private Companies, that they Gifford, really

771
00:39:33,040 --> 00:39:34,680
Speaker 2: grateful for your time on Bloomberg Tech.

772
00:39:34,680 --> 00:39:35,480
Speaker 5: Thank you very much.

773
00:39:42,680 --> 00:39:46,320
Speaker 2: Amazon's preparing to let go of thousands more corporate employees.

774
00:39:46,320 --> 00:39:49,839
Speaker 2: According to sources, the company plans to begin terminations as

775
00:39:49,880 --> 00:39:52,200
Speaker 2: soon as next week. This comes just a few months

776
00:39:52,360 --> 00:39:55,400
Speaker 2: after Amazon announced it was cutting as many as fourteen

777
00:39:55,560 --> 00:39:59,399
Speaker 2: thousand rolls. The layoffs could affect the company's nearly three

778
00:39:59,480 --> 00:40:02,280
Speaker 2: hundred and fifty thousand corporate personnel.

779
00:40:02,280 --> 00:40:05,839
Speaker 3: OK one to watch, of course, because meanwhile Amazon has

780
00:40:05,920 --> 00:40:08,680
Speaker 3: confirmed its Jew release earnings and the date is going

781
00:40:08,719 --> 00:40:11,680
Speaker 3: to be Thursday, February the fifth, along with a whole

782
00:40:11,719 --> 00:40:14,040
Speaker 3: host of other megacap names that a Jew in the

783
00:40:14,080 --> 00:40:17,160
Speaker 3: next week or so. Equity spporter run Vasilica joins us

784
00:40:17,160 --> 00:40:20,280
Speaker 3: now as we embrace ourselves.

785
00:40:19,520 --> 00:40:21,640
Speaker 6: For what remamber us. It will call the fire hose.

786
00:40:22,080 --> 00:40:26,360
Speaker 3: So are we prepping for good underlying fundamentals this time?

787
00:40:27,520 --> 00:40:32,040
Speaker 16: Fundamentals probably yes. A lot of growth metrics remain very strong,

788
00:40:32,280 --> 00:40:35,560
Speaker 16: much stronger than other sectors of the market. The question is,

789
00:40:35,800 --> 00:40:38,120
Speaker 16: because growth is going to be slower than it was

790
00:40:38,280 --> 00:40:41,480
Speaker 16: last year, is there enough jew to keep pushing these

791
00:40:41,520 --> 00:40:44,759
Speaker 16: megacap tech stocks higher. It does seem like so far

792
00:40:44,920 --> 00:40:48,279
Speaker 16: this year cinemas has really moved to other parts of

793
00:40:48,360 --> 00:40:53,439
Speaker 16: the market. There's been rotations towards sickles cyclical sectors. There's

794
00:40:53,480 --> 00:40:57,640
Speaker 16: been favoring within tech of companies like sand Disk and Micron,

795
00:40:57,680 --> 00:41:01,160
Speaker 16: the memory and storage companies. There's been some changes in

796
00:41:01,239 --> 00:41:04,600
Speaker 16: market leadership and momentum. But I do think people are

797
00:41:04,640 --> 00:41:07,120
Speaker 16: expecting some pretty strong numbers out of the megacaps.

798
00:41:08,200 --> 00:41:10,920
Speaker 2: Of those megacaps and of the different data sets you try.

799
00:41:10,960 --> 00:41:13,879
Speaker 2: What gets from VLAs sellica excited? What is the kind

800
00:41:13,920 --> 00:41:16,239
Speaker 2: of key thing that you'll be scanning at your desk

801
00:41:16,360 --> 00:41:16,880
Speaker 2: next week?

802
00:41:17,640 --> 00:41:19,640
Speaker 16: Well, I think a major focus is going to be

803
00:41:19,760 --> 00:41:22,680
Speaker 16: how much these companies continue to spend on capex, especially

804
00:41:22,719 --> 00:41:25,400
Speaker 16: when it comes to AI, and furthermore, the kinds of

805
00:41:25,440 --> 00:41:28,680
Speaker 16: returns they're seeing on this. If people start giving more

806
00:41:28,680 --> 00:41:31,840
Speaker 16: pronounced guideposts to the kinds of returns they're seeing, how

807
00:41:31,920 --> 00:41:35,600
Speaker 16: much they're able to monetize all this AI related spending.

808
00:41:35,840 --> 00:41:37,120
Speaker 16: I think all of that is going to go a

809
00:41:37,160 --> 00:41:40,040
Speaker 16: long way to sort of dictating sentiment towards AI over

810
00:41:40,040 --> 00:41:42,399
Speaker 16: the coming months. When it comes to Apple, a little

811
00:41:42,400 --> 00:41:45,279
Speaker 16: bit of a unique situation there, the real focus is

812
00:41:45,320 --> 00:41:49,120
Speaker 16: going to be how much memory chip prices have increased

813
00:41:49,160 --> 00:41:52,080
Speaker 16: in recent months. If they indicate that that's going to

814
00:41:52,080 --> 00:41:54,720
Speaker 16: be a real headwind to their margins or their overall growth,

815
00:41:54,880 --> 00:41:56,080
Speaker 16: that's going to be something to watch there.

816
00:41:56,239 --> 00:42:00,280
Speaker 3: And that was something we thinking about with Intel and itself.

817
00:42:00,480 --> 00:42:03,879
Speaker 3: The valuation got crazy more than TSMC. Briefly, Ryan, where

818
00:42:03,920 --> 00:42:05,080
Speaker 3: do we stand on valuations?

819
00:42:06,400 --> 00:42:07,759
Speaker 16: It does seem like a lot of people feel like

820
00:42:07,800 --> 00:42:10,000
Speaker 16: Intel's valuation got kind of ahead of itself. I think

821
00:42:10,040 --> 00:42:11,960
Speaker 16: the stop rose about one hundred and eighty percent off

822
00:42:12,000 --> 00:42:14,840
Speaker 16: of a low hit last year. That's a very steep

823
00:42:14,880 --> 00:42:17,799
Speaker 16: move for a company of this type, especially one that's

824
00:42:17,880 --> 00:42:21,960
Speaker 16: undergoing this sort of really fundamental and dramatic transformation. There's

825
00:42:22,000 --> 00:42:24,359
Speaker 16: a lot of skepticism still about how well they're going

826
00:42:24,400 --> 00:42:26,880
Speaker 16: to be able to get their foundry business kind of

827
00:42:27,000 --> 00:42:28,640
Speaker 16: up and running and able to compete with some of

828
00:42:28,680 --> 00:42:31,000
Speaker 16: the bigger players in the market. So very much to

829
00:42:31,080 --> 00:42:33,760
Speaker 16: show me story, a turnaround story that remains in progress,

830
00:42:33,760 --> 00:42:35,200
Speaker 16: and I think a lot of people just looked at

831
00:42:35,200 --> 00:42:37,640
Speaker 16: how much it moved since a lot of those moves.

832
00:42:37,920 --> 00:42:41,640
Speaker 5: Kind of came on a limited news bloomas Ryan for Seneca.

833
00:42:41,680 --> 00:42:42,920
Speaker 5: Thank you very much. That does it.

834
00:42:42,920 --> 00:42:45,200
Speaker 2: For the addition of Bloomberg Tech, check out the pod.

835
00:42:45,800 --> 00:42:46,879
Speaker 2: This is Bloomberg Tech.