WEBVTT - Musk Empire Merger Possibility, Memory Costs Weigh on Apple 0:00:00.080 --> 0:00:13.200 Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is a 0:00:13.280 --> 0:00:17.040 live from coast to coast with Caroline Hyde in New 0:00:17.120 --> 0:00:19.640 York and Eva Low in San Francisco. 0:00:22.560 --> 0:00:24.239 This is Bloomberg Tech coming up. 0:00:24.280 --> 0:00:27.880 President Trump picks Kevin Walsh to be the next Chair of. 0:00:27.840 --> 0:00:31.080 The Federal Reserve. We discuss how tech markets are reacting. 0:00:31.280 --> 0:00:34.440 Plus, Apple delivers record quarterly sales, but the looming start 0:00:34.520 --> 0:00:37.680 of rising memory prices it was worrying investors. 0:00:38.159 --> 0:00:43.680 And SpaceX is considering a merger with Tesla or with Xai. 0:00:43.840 --> 0:00:46.279 We'll discuss what we know so far, some. 0:00:46.320 --> 0:00:48.760 Extraordinary reporting from you and the team, and let's dig 0:00:48.760 --> 0:00:50.800 into what the macro picture is today, because it is 0:00:50.840 --> 0:00:54.200 a macro story that dictates these moves. The next FED 0:00:54.560 --> 0:00:55.400 chair is. 0:00:55.400 --> 0:00:56.480 He going to be hawkish? 0:00:56.640 --> 0:00:59.200 That's the way the market currently thinks a little bit more. 0:00:59.240 --> 0:01:01.560 With seeing the NASA onered or by sixteen percent, we're 0:01:01.640 --> 0:01:03.560 up on the month, and in fact we're having the 0:01:03.560 --> 0:01:06.080 best months since October for the NASLAK one hundred and 0:01:06.120 --> 0:01:08.000 the S and P five hundred. But on the day 0:01:08.280 --> 0:01:11.120 we temper some of our risk on sentiment. We're certainly 0:01:11.160 --> 0:01:14.360 seeing Bitcoin still not feeling any love. We're now at 0:01:14.440 --> 0:01:17.039 just eighty two thousand level at the moment, ed well 0:01:17.080 --> 0:01:18.880 by one point nine percent. We are down for four 0:01:18.880 --> 0:01:21.600 straight months, the longest losing streak for this asset class 0:01:21.760 --> 0:01:25.000 since twenty nineteen. And gold and silver today. While you've 0:01:25.000 --> 0:01:28.680 see the volatility and it is all about the macro picture, yeah. 0:01:28.480 --> 0:01:30.000 A little underperformance in tech. 0:01:30.240 --> 0:01:33.560 Let's get to it with Bloomberg International Economics and Policy 0:01:33.640 --> 0:01:38.880 editor Mike McKee. What is the Kevin wash school of 0:01:39.040 --> 0:01:43.240 monetary policy and economics that the world of technology needs 0:01:43.240 --> 0:01:43.800 to know about? 0:01:44.800 --> 0:01:47.480 Well, worsh is going to be someone who upsets the 0:01:47.560 --> 0:01:49.960 apple cart, which is perhaps a little bit of his 0:01:50.080 --> 0:01:52.880 training out in Silicon Valley. He graduated from Stanford and 0:01:53.360 --> 0:01:56.240 is still a visiting lecturer there and a fellow at 0:01:56.280 --> 0:02:00.440 the Hoover Institution. He believes that inflation is the Fed's 0:02:00.520 --> 0:02:05.600 only job, and that's why he gets this hawkish rec reputation. 0:02:06.520 --> 0:02:09.440 And he also is concerned with some of what happened 0:02:09.480 --> 0:02:13.080 with Silicon Valley Bank and the way the FED regulates banks, 0:02:13.120 --> 0:02:16.000 so look for some changes there. The big question, though, 0:02:16.080 --> 0:02:19.960 is how locent interest rates go, and the President obviously 0:02:20.120 --> 0:02:21.680 wants very low rates. 0:02:21.680 --> 0:02:25.239 How do you get there? AI is what Kevin says. 0:02:25.360 --> 0:02:28.519 He says that AI, along with the big heavy tech 0:02:28.600 --> 0:02:34.000 investments we've seen and the President's deregulatory agenda, will move 0:02:34.080 --> 0:02:38.480 things forward. AI will be a significant disinflationary force, increasing 0:02:38.520 --> 0:02:44.040 productivity and bolstering American competitiveness. Productivity improvements should drive significant 0:02:44.080 --> 0:02:47.680 increases in real take home wages. A one percent point 0:02:47.800 --> 0:02:52.280 increase in an annual productivity growth would double standards of 0:02:52.320 --> 0:02:55.440 living within a single generation. So he's putting a lot 0:02:55.680 --> 0:03:01.280 of his forecast on what Silicon valleycomplish in terms of 0:03:01.280 --> 0:03:03.600 AI and the tech world. 0:03:04.080 --> 0:03:07.440 What's interesting is what he thinks about labor and how 0:03:07.520 --> 0:03:10.799 that will be impacted. We heard Fedshair Pal, the current 0:03:10.919 --> 0:03:14.000 FED chair, just speak on Wednesday about how they see 0:03:14.400 --> 0:03:18.840 AI making significant impact on labor and indeed, more broadly 0:03:18.840 --> 0:03:20.959 the economy as well. Mike McKee, I wish I could 0:03:20.960 --> 0:03:23.160 ask more questions. We so appreciate you being here, but 0:03:23.240 --> 0:03:26.520 let's talk about how tech is currently underperforming the dollar 0:03:26.600 --> 0:03:29.320 pushing higher. Here to discuss how Trump's FED pick Kevin 0:03:29.360 --> 0:03:32.560 Walsh could impact the tech markets. Margi Bateell All Spring 0:03:32.560 --> 0:03:36.480 Global Investment Senior portfolio manager and head of Capital Allocation Margie, 0:03:36.880 --> 0:03:40.200 How do you think the market should interpret this announcement? 0:03:41.880 --> 0:03:44.240 Well, I think the market maybe is focusing too much 0:03:44.320 --> 0:03:48.440 on his interest rate policy and not enough of the 0:03:48.440 --> 0:03:52.280 other posit of their specs that he's indicated, for example, 0:03:52.360 --> 0:03:55.280 the better regulation of the banks. And also you can 0:03:55.320 --> 0:03:57.160 see in the past one of the things a bank 0:03:57.280 --> 0:03:59.560 that the FED did, which I don't think he'll do, 0:04:00.240 --> 0:04:03.760 be extremely activist and pro cyclical, really causing a lot 0:04:03.760 --> 0:04:05.720 of the up and downs in the economy and the 0:04:05.760 --> 0:04:09.120 financial markets. Silicon Value is a great bank, is a 0:04:09.160 --> 0:04:12.480 great example of the FED tightening so quickly that the 0:04:12.520 --> 0:04:15.920 bank simply didn't have time to adjustice investments to get 0:04:15.960 --> 0:04:18.320 in line with those much harder short rates. So I 0:04:18.320 --> 0:04:22.880 think that a less activists FED looking at better regulation 0:04:23.000 --> 0:04:25.159 will actually be very positive for the market and for 0:04:25.240 --> 0:04:25.839 the economy. 0:04:26.520 --> 0:04:30.359 Do you align yourself with the deflationary impact of AI 0:04:30.520 --> 0:04:34.000 in that respect? Do you agree with Kevin Washing that perspective? 0:04:35.800 --> 0:04:38.120 I think the jury is out on how much deflation 0:04:38.240 --> 0:04:40.760 we're seeing, because really, when you look around in the 0:04:40.760 --> 0:04:43.840 real world, it really looks as if we are on 0:04:43.920 --> 0:04:47.840 a track for inflation being higher for longer. Your last 0:04:47.839 --> 0:04:52.000 segment was about the price of antique cars skyrocketing, gold 0:04:52.080 --> 0:04:57.400 and silver skyrocketing, even industrial metals, real estate, fine art, 0:04:57.720 --> 0:05:00.080 all those things look more what you would think if 0:05:00.080 --> 0:05:03.599 we were in an inflationary backdrop. So that's really what 0:05:03.680 --> 0:05:05.600 I think we are. I think interest rates at three 0:05:05.680 --> 0:05:08.000 and a half three quarters on the funds rate is 0:05:08.400 --> 0:05:11.320 really quite quite easy when you look at the financial 0:05:11.360 --> 0:05:13.720 markets and these other tangible asset markets. 0:05:14.720 --> 0:05:17.560 Margie, it's good to see you dead here in SF. 0:05:17.880 --> 0:05:20.200 Later in the program, we're going to hear from an 0:05:20.200 --> 0:05:22.520 interview that I did with the PG and E CEO 0:05:22.720 --> 0:05:27.120 Patty Poppy, California's largest utility, and like mister w Wassh, 0:05:27.640 --> 0:05:30.039 she argues that all the data centers that are being 0:05:30.080 --> 0:05:34.680 built will drive down electricity prices, right and therefore inflation, 0:05:34.880 --> 0:05:37.279 just like mister wash has kind of just been the 0:05:37.400 --> 0:05:40.760 argument outlined by Mike McKee. I don't understand that, and 0:05:40.839 --> 0:05:43.440 I don't have a degree in economics, But if someone 0:05:43.440 --> 0:05:45.880 in the markets, would you just give me your interpretation 0:05:46.000 --> 0:05:49.000 of how that would work. 0:05:49.080 --> 0:05:53.640 I don't really follow that line of reasoning either. Clearly, 0:05:53.680 --> 0:05:58.560 we have a demand for baseload electric generation capacity, and 0:05:58.880 --> 0:06:02.480 that suggests to me that the price of electricity will 0:06:02.680 --> 0:06:05.840 gradually go up even notwithstanding the data centers. So if 0:06:05.839 --> 0:06:10.120 the data centers carve out arrangements with their provider so 0:06:10.160 --> 0:06:13.200 that it doesn't feed over into the retail market the 0:06:14.040 --> 0:06:17.039 industrial market, I think that would be a neutral. But 0:06:17.120 --> 0:06:20.279 really I think the real price of electricity is going 0:06:20.320 --> 0:06:23.360 to go up simply because the cost of building, strengthening 0:06:23.400 --> 0:06:27.719 the grid, the cost of even building new gas fired 0:06:27.760 --> 0:06:30.240 plants is really going to be on the upswing. So 0:06:30.400 --> 0:06:32.440 it's pretty hard for me to see how the price 0:06:32.480 --> 0:06:34.000 of electricity. 0:06:33.480 --> 0:06:34.200 Could come down. 0:06:34.440 --> 0:06:36.760 And I don't think it's closely related to the data centers, 0:06:36.800 --> 0:06:39.400 which are a big source. You know, ten fifteen percent 0:06:39.720 --> 0:06:42.320 increase in demand over the next few years is really 0:06:42.320 --> 0:06:44.960 going to be a deflationary factor when you're dealing with 0:06:45.240 --> 0:06:47.320 real assets like a generator. 0:06:48.240 --> 0:06:49.839 I don't know, Margie, you seem to have a pretty 0:06:49.839 --> 0:06:52.720 good command of it. In the data. I appreciate the response. 0:06:53.279 --> 0:06:55.560 We should probably get to earnings, right, you know, in 0:06:55.600 --> 0:06:57.400 the context of Apple, which we're going to discuss with 0:06:57.400 --> 0:07:00.359 an analysis in a moment. The consideration and there is 0:07:00.400 --> 0:07:03.360 tight supply of memory chips, but just so far in 0:07:03.480 --> 0:07:06.960 aggregate from the mag seven and other companies have reported. 0:07:07.320 --> 0:07:10.560 What is your main takeaway, please, Well. 0:07:10.400 --> 0:07:12.920 I think that's a trend that's going to continue for 0:07:12.960 --> 0:07:16.400 a while. We think the memory chips as being commodity 0:07:16.480 --> 0:07:19.360 chips that one demand is good, they overbuild and the 0:07:19.400 --> 0:07:22.520 prices come down. And this time it's been very different 0:07:22.520 --> 0:07:25.240 because the demand for memory chips is so extremely high 0:07:25.320 --> 0:07:29.400 and there are only a handful of producers of memory chips, 0:07:29.400 --> 0:07:32.280 and even they are being very very slow cautious to 0:07:32.360 --> 0:07:34.640 add capacity. So I think it's just going to be 0:07:34.680 --> 0:07:37.760 a feature that the price of memory chips is going 0:07:37.800 --> 0:07:39.720 to be higher than we're used to and we aren't 0:07:39.720 --> 0:07:42.280 going to see that extreme cyclic go up and down 0:07:42.320 --> 0:07:43.520 in that sector that we've seen. 0:07:45.000 --> 0:07:47.960 Margh Patel all spring low investments back on Bloomberg Tech, 0:07:48.000 --> 0:07:50.960 Thank you very much. Talked about earnings. We've got to 0:07:51.000 --> 0:07:54.040 talk about Apple shares down a percentage point that they've 0:07:54.040 --> 0:07:57.600 been higher in after hours after the print and during 0:07:57.600 --> 0:08:00.520 the cool they kind of chopped around one point session 0:08:00.560 --> 0:08:03.920 will high and now lower. The company delivered record quarterly 0:08:04.000 --> 0:08:08.600 sales and a better than anticipated forecast, but the looming 0:08:08.640 --> 0:08:11.880 threat of rising memory prices is worrying. Invested COEO Tim 0:08:11.920 --> 0:08:14.960 Cook saying he expects quote more of an impact of 0:08:15.000 --> 0:08:19.840 gross margins and continues to see memory prices rising significantly, 0:08:20.120 --> 0:08:23.560 particularly in this current period fiscal second quarter. Richard Kramer, 0:08:23.640 --> 0:08:26.000 a Ready Research founder and senior andast joins us now 0:08:26.120 --> 0:08:27.960 to have a buy and a three hundred and five 0:08:28.000 --> 0:08:31.880 dollars price target on this name. You know, we've said 0:08:32.679 --> 0:08:35.800 throughout my career, at least Apple is the master of 0:08:35.920 --> 0:08:39.360 managing the bottom line. But in this environment, with tight 0:08:39.400 --> 0:08:42.040 supply and pricing of memory chips such as it is, 0:08:42.400 --> 0:08:44.360 there's a limit, it seems to what Apple can do. 0:08:44.760 --> 0:08:46.080 What was your interpretation of that? 0:08:47.120 --> 0:08:51.400 So I think this fixation on memory class is the 0:08:51.440 --> 0:08:55.839 wrong question for Apple because it just go back to 0:08:55.880 --> 0:08:59.520 your basic economics, you know, theory of comparative advantage. Apple 0:08:59.600 --> 0:09:04.720 has had the best supply chain in the world for years. 0:09:05.480 --> 0:09:08.959 They have two hundred billion dollars of product cogs. This quarter, 0:09:09.080 --> 0:09:12.720 gross margins went up year on year and sequentially, and 0:09:12.760 --> 0:09:15.319 they're guiding to an excellent product or gross margin and 0:09:15.400 --> 0:09:19.040 implied product gross margin next quarter. Now, when we get 0:09:19.120 --> 0:09:22.760 later into the year, if they face significant increases in 0:09:22.840 --> 0:09:25.400 memory cost, they have one lever that they can pull, 0:09:25.520 --> 0:09:28.080 which is they can raise prices on the devices, or 0:09:28.120 --> 0:09:31.280 they can raise prices when you get the higher memory 0:09:31.320 --> 0:09:36.200 spect variant of the product and offset some of those 0:09:36.280 --> 0:09:40.000 higher supply chain prices. One other thing that I think 0:09:40.160 --> 0:09:43.800 people should pay attention to is the way that Apple 0:09:43.880 --> 0:09:45.559 has vendored on trade receivables. 0:09:45.559 --> 0:09:47.480 They funded production equipment at. 0:09:47.440 --> 0:09:51.640 Their suppliers so that they have that superior supply chain, 0:09:52.120 --> 0:09:54.680 and I think that puts them in a comparatively much 0:09:54.679 --> 0:09:58.400 better position than everyone else in the tech hardware space. 0:09:59.600 --> 0:10:00.880 Let's go to the product. 0:10:01.760 --> 0:10:05.320 iPhone sales were about four billion dollars above consensus, nine 0:10:05.400 --> 0:10:08.200 percent beyond consensus. Even the top end of the range 0:10:08.240 --> 0:10:11.320 that I saw was about eighty one billion dollars. This 0:10:11.480 --> 0:10:14.200 iPhone seventeen generation has been a success, is it not? 0:10:15.480 --> 0:10:15.960 Yeah? 0:10:16.000 --> 0:10:18.760 Well, I think there's two things about that you need 0:10:18.800 --> 0:10:21.560 to appreciate. One is the company is saying they are 0:10:21.640 --> 0:10:27.920 still considerably supply constrained, and the day that that supply 0:10:28.000 --> 0:10:32.679 demand balance kicks in, they can rebuild channel inventories and 0:10:32.720 --> 0:10:36.400 four weeks of channel inventory is another fifteen billion dollars 0:10:36.440 --> 0:10:38.080 of iPhone sales just. 0:10:38.080 --> 0:10:40.400 To get back to normal distribution. 0:10:40.559 --> 0:10:43.720 And to have warehouses from so they have a long 0:10:43.800 --> 0:10:48.079 runway to realize what it's now. Obviously, this last quarter 0:10:48.200 --> 0:10:51.600 twenty three percent growth in iPhone implied in the in 0:10:51.640 --> 0:10:54.160 the guidance, we were at fourteen percent, the street was 0:10:54.200 --> 0:10:57.800 at eight. They're thirteen to sixteen implies another twenty percent 0:10:57.840 --> 0:11:00.480 growth quarter for iPhone, and they're telling you the still 0:11:00.520 --> 0:11:03.960 supply constraint. So that to me tells you that you 0:11:04.080 --> 0:11:07.280 have again a much longer runway with this product cycle 0:11:07.880 --> 0:11:12.440 than than otherwise. And obviously demand is off the charts, 0:11:12.480 --> 0:11:15.360 and really it's a concern for everyone else in the 0:11:15.400 --> 0:11:18.200 smartphone space just how much market share Apple is poised 0:11:18.200 --> 0:11:18.560 to take. 0:11:19.000 --> 0:11:22.520 Richard. Demand was off the charts in China, thirty eight 0:11:22.520 --> 0:11:23.360 percent growth. 0:11:23.440 --> 0:11:26.480 What happened, well, I mean some of that, if you 0:11:26.559 --> 0:11:31.559 look back, was a relatively easy comp and but equally, 0:11:31.600 --> 0:11:35.040 if you go back to last April or May, you know, 0:11:35.160 --> 0:11:37.520 we had to we had to, we had we had 0:11:37.559 --> 0:11:39.280 to buy on the stock, and we had to battle 0:11:39.360 --> 0:11:41.319 all the people saying, oh, Apple is going to get 0:11:41.360 --> 0:11:42.120 kicked out of China. 0:11:42.280 --> 0:11:44.800 They're they're dead there, They'll never sell any more phones. 0:11:45.040 --> 0:11:46.760 You've got Huawei and Honor. 0:11:46.520 --> 0:11:49.600 And jel Me and Opo Vivo, and and there was 0:11:49.640 --> 0:11:53.040 this huge negativity about their China position, largely because of 0:11:53.080 --> 0:11:57.439 geopolitical elements as well. But Apple has showed that they 0:11:57.480 --> 0:12:00.320 have a huge installed base there. When they come out 0:12:00.320 --> 0:12:04.520 with a highly attractive product portfolio, consumers flop to it. Yeah, 0:12:04.600 --> 0:12:07.920 and they're also seeing good growth in some of the 0:12:07.960 --> 0:12:12.160 other products there, max iPads, wearables, and those tend to 0:12:12.160 --> 0:12:16.400 be to first time Apple Apple customers. Now they under 0:12:16.440 --> 0:12:19.440 index in the China market in services because there's some 0:12:19.520 --> 0:12:23.679 services that aren't available there. But you know clearly that 0:12:23.840 --> 0:12:27.199 those who were writing Apple's habituary in China was a 0:12:27.240 --> 0:12:28.120 little bit premature. 0:12:28.240 --> 0:12:30.880 And look, Apple Intelligence isn't available there, I mean, for 0:12:30.960 --> 0:12:32.880 what it's worth, No one's really raised about it. Of 0:12:32.960 --> 0:12:35.920 course richer, but what does this actually tell us about 0:12:35.960 --> 0:12:40.600 the need for a consumer to buy general to AI products? 0:12:40.640 --> 0:12:44.400 Apple has still owned this particular season, even though Android, 0:12:44.440 --> 0:12:47.640 the Google phones, Samsung phones were far ahead in terms 0:12:47.679 --> 0:12:48.960 of the generative AI offerings. 0:12:49.840 --> 0:12:52.760 Absolutely, And look, people are not going to rush out 0:12:52.800 --> 0:12:56.000 and say I want the new device because it has 0:12:56.080 --> 0:12:59.280 GENAI capabilities. They are going to say I'm locked into 0:12:59.280 --> 0:13:01.080 the Apple equals for the last ten years. 0:13:01.120 --> 0:13:02.720 All of my other products are Apple, and I'm going 0:13:02.760 --> 0:13:03.640 to keep buying Apple. 0:13:04.440 --> 0:13:06.200 The question I asked on the call, which I think 0:13:06.240 --> 0:13:08.160 is the key one, is why has Apple been a 0:13:08.160 --> 0:13:10.920 fast follower in AI? Because they knew it would take 0:13:10.960 --> 0:13:14.240 time for people to get used to the services. And 0:13:14.720 --> 0:13:16.840 right now they only have about four hundred and fifty 0:13:16.920 --> 0:13:19.280 or five hundred million of their one point three billion 0:13:19.320 --> 0:13:24.480 install base of iPhones with AI capable devices. So the 0:13:24.520 --> 0:13:28.000 fifteen pro or later and Apple is now reaching that 0:13:28.120 --> 0:13:30.960 point where half or more of their base can be 0:13:31.000 --> 0:13:34.400 the addressable market for a new sery or AI services, 0:13:34.720 --> 0:13:37.079 and I think over time they'll monetize it by getting 0:13:37.080 --> 0:13:40.560 people to buy better devices, but also adding five bucks 0:13:40.559 --> 0:13:43.599 to the Apple one bundle for some advanced serie features. 0:13:43.880 --> 0:13:46.760 Mis your Kramer, fascinating. Thanks for being with us today. 0:13:47.000 --> 0:13:50.040 I'm at research. Let's talk about JP Morgan. It's among 0:13:50.040 --> 0:13:52.679 the banks that have begun selling down a highly anticipated 0:13:52.679 --> 0:13:56.600 twenty billion dollar debt financing backing the acquisition of Electronic Arts, 0:13:56.679 --> 0:13:59.480 now the biggest beverage buyer on record. Remember, sources are 0:13:59.480 --> 0:14:02.720 saying Middle Eastern Asian smaller European banks are piling into 0:14:02.760 --> 0:14:05.280 a terminn a as much as three billion dollars for 0:14:05.320 --> 0:14:06.120 the video game maker. 0:14:06.440 --> 0:14:07.800 Yeah, okay. 0:14:07.840 --> 0:14:12.360 Coming up, SpaceX is considering a merger with Tesla or 0:14:12.880 --> 0:14:16.240 with Xai. We have the Bloomberg reporting next, this is 0:14:16.440 --> 0:14:27.880 Bloomberg Tech. SpaceX is considering a potential merger with Tesla 0:14:28.360 --> 0:14:32.720 or an alternative combination with AI firm Xai. That's all 0:14:32.760 --> 0:14:37.520 according to sources. Bloomberg's Lauren Grush who covers space Carl Porter, 0:14:37.880 --> 0:14:41.000 who's on the transportation beat, and both of you involved 0:14:41.040 --> 0:14:42.080 in the breaking this. 0:14:42.120 --> 0:14:44.440 Story last night. Join us now. 0:14:44.880 --> 0:14:47.680 I'm going to come to you what we know two 0:14:47.760 --> 0:14:53.400 distinct proposed ideas, scenarios, transactions. My understanding from sources is 0:14:53.440 --> 0:14:57.720 that SpaceX investors are particularly pushing this idea of a 0:14:57.720 --> 0:14:59.400 combination with Tesla. 0:14:59.440 --> 0:15:00.120 Either way. 0:15:00.560 --> 0:15:03.920 Highly unusual because we thought that SpaceX was on track 0:15:04.160 --> 0:15:05.320 for an IPO midyear. 0:15:05.920 --> 0:15:06.680 What do we need to know? 0:15:07.760 --> 0:15:10.520 Well, they still may IPO this year's You know, there 0:15:10.640 --> 0:15:12.480 seems to be a lot of ideas kicking around at 0:15:12.480 --> 0:15:17.280 the corporate table. It's certainly faster to do a combination 0:15:17.880 --> 0:15:19.880 between an existing public company than it is to do 0:15:19.920 --> 0:15:22.840 an IPO. It's cheaper. You don't have to have a 0:15:22.840 --> 0:15:24.800 bank come in and underwrite. You don't have to do 0:15:24.840 --> 0:15:28.560 a road show. But you also have real drawbacks to this. 0:15:28.760 --> 0:15:30.480 You know, you don't get to roll the pitch. You 0:15:30.560 --> 0:15:32.760 could have a sudden share sell off with people don't 0:15:32.760 --> 0:15:36.160 like what they see. You're building a conglomerate, which historically 0:15:36.200 --> 0:15:38.200 people have not enjoyed investing in. 0:15:38.320 --> 0:15:38.640 You. 0:15:38.720 --> 0:15:41.000 People don't feel that they can get anough visibility on 0:15:41.040 --> 0:15:44.040 the existing businesses. So there's a real debate to be 0:15:44.120 --> 0:15:46.280 had even within the company some whether this is a 0:15:46.280 --> 0:15:47.000 good idea or not. 0:15:47.680 --> 0:15:51.320 Lauren talk to why. For example, it might be a 0:15:51.360 --> 0:15:54.640 good idea for SpaceX and Tesla to grow closer in 0:15:54.680 --> 0:15:57.840 their interaction because they already have a relationship, a strong one. 0:15:58.080 --> 0:16:01.960 Yes, there's plenty of cross nation that already happens between 0:16:02.360 --> 0:16:06.480 SpaceX and Tesla and you know all of Elon Musk's empire, 0:16:06.920 --> 0:16:09.160 and if you've noticed, you know, he's talked a lot 0:16:09.240 --> 0:16:12.800 lately about ways in which that cross pollination could you know, 0:16:13.000 --> 0:16:18.000 become more intense. Right, He's spoken about Starship taking optimists 0:16:18.080 --> 0:16:20.280 to the Moon and Mars and things of that nature. 0:16:20.320 --> 0:16:25.200 There's also the option of using energy storage capabilities for 0:16:25.320 --> 0:16:29.080 these data centers and space that SpaceX or that Elon's 0:16:29.080 --> 0:16:33.000 been talking about. So there is some sense to be 0:16:33.120 --> 0:16:37.160 made in combining the companies, and as they already work 0:16:37.240 --> 0:16:38.120 so closely together. 0:16:38.200 --> 0:16:43.600 Already, what we know is again two distinct scenarios are 0:16:43.640 --> 0:16:46.440 being discussed, and that's the new bit, right, They're being 0:16:46.480 --> 0:16:50.440 discussed because you have people like chamaf Palihapatia Bill Ackman 0:16:50.520 --> 0:16:54.280 who have hypothesized about this. Anyway, Kyle, we know that 0:16:54.320 --> 0:16:57.360 Tesla has confirmed an investment in Xai just this week 0:16:57.440 --> 0:17:01.280 two billion dollars, and that SpaceX participated in an early 0:17:01.360 --> 0:17:02.760 around in Xai as well. 0:17:03.520 --> 0:17:04.320 Elon Inc. 0:17:04.400 --> 0:17:07.000 And a conglomerate is a bit of a regulatory headache, 0:17:07.040 --> 0:17:07.359 is it not. 0:17:08.320 --> 0:17:10.480 Oh, it could be a massive regulatary headache. If you're 0:17:10.480 --> 0:17:13.440 looking at two commits of this size, three companies of 0:17:13.480 --> 0:17:16.320 the size, presuming everyone keeps their valuations, you're looking at 0:17:16.359 --> 0:17:20.600 trillions of dollars. That kind of market capitalization is going 0:17:20.640 --> 0:17:23.200 to attract the scrutiny of government and regulators. 0:17:23.240 --> 0:17:28.639 It can't not, Okay, regulatory hurdles abound and actually, just 0:17:28.640 --> 0:17:31.040 to remind viewers, and as if you all have written 0:17:31.080 --> 0:17:34.080 in the story at length, things can change. None of 0:17:34.080 --> 0:17:36.560 this is set in stone. This is still work in progress. 0:17:36.640 --> 0:17:39.440 But Lauren was also work in progress. Is everyone talking 0:17:39.440 --> 0:17:41.679 about wanting to put these data centers into space and 0:17:41.720 --> 0:17:44.119 you just mentioned why there might be some sense to 0:17:44.200 --> 0:17:47.840 TESLA and SpaceX combining, but how what what are the 0:17:47.920 --> 0:17:50.359 hurdles to even that hypothesis that view? 0:17:51.560 --> 0:17:51.760 Right? 0:17:51.920 --> 0:17:54.440 So, obviously a lot of this is being driven by 0:17:54.600 --> 0:17:59.080 Elon's latest grand vision of putting AI data centers into space. 0:17:59.359 --> 0:18:01.840 There's obviously a lot of pros that have been you know, 0:18:01.960 --> 0:18:03.800 talked about in terms of doing so. 0:18:04.240 --> 0:18:06.480 There's depending on where you put them, there's. 0:18:06.359 --> 0:18:10.120 Constant access to solar energy because of where you put 0:18:10.119 --> 0:18:13.119 them in orbit. You know, there's also a lot of 0:18:13.160 --> 0:18:15.120 space in space and a lot of you know, these 0:18:15.200 --> 0:18:17.760 data centers do take up quite a lot of real 0:18:17.840 --> 0:18:20.119 estate here on Earth, and that can also come with 0:18:20.240 --> 0:18:23.440 a regulatory burden in order to get the right permits 0:18:23.480 --> 0:18:25.600 and things to do. So there's a lot of benefits 0:18:25.600 --> 0:18:29.000 to moving to space, but there's also massive engineering challenges 0:18:29.000 --> 0:18:31.439 in order to make it work. For instance, that's solar 0:18:31.480 --> 0:18:35.400 power we're talking about. We're going to need massive solar 0:18:35.480 --> 0:18:38.639 panels in order to run the kinds of data center 0:18:38.720 --> 0:18:42.040 sizes that Elon's been talking about, So that is going 0:18:42.080 --> 0:18:43.400 to be a challenge that they're going to. 0:18:43.320 --> 0:18:43.960 Have to work through. 0:18:44.080 --> 0:18:47.600 You're going to have to put radiators on these vehicles 0:18:47.600 --> 0:18:48.880 in order to cool them down. 0:18:48.920 --> 0:18:51.640 A lot of the infrastructure around data centers here. 0:18:51.480 --> 0:18:55.239 On Earth they need massive, you know, cooling requirements, and 0:18:55.280 --> 0:18:57.480 that doesn't change for space because you're in. 0:18:57.480 --> 0:18:59.760 A vacuum and you have to use those radiators. So 0:19:00.320 --> 0:19:02.560 there's a lot of work to be done, and it 0:19:02.600 --> 0:19:03.440 all relies. 0:19:03.160 --> 0:19:07.119 On Starship, which is SpaceX's next generation vehicle, and that 0:19:07.280 --> 0:19:09.960 vehicle isn't quite ready for primetime yet either. 0:19:10.160 --> 0:19:11.920 So there's a lot to keep an. 0:19:11.840 --> 0:19:14.760 Eye on in order for this grand vision to play out, 0:19:14.760 --> 0:19:17.760 and obviously we won't be keeping an eye on it ourselves. 0:19:17.880 --> 0:19:19.919 Caro, just one last thing, you know, I wrote to 0:19:19.960 --> 0:19:22.640 Elon Musk, I wrote to the board. We haven't heard 0:19:22.680 --> 0:19:25.480 back from any of the parties involved. But when Lauren 0:19:25.520 --> 0:19:28.679 broke the story about SpaceX's tender being settled and the 0:19:28.760 --> 0:19:32.159 internal comms about why SpaceX was going to pursue an IPO, 0:19:32.640 --> 0:19:35.560 the CFO also said this is about dramatically ramping up 0:19:35.920 --> 0:19:40.080 capacity on those existing business lines. But our reporting was 0:19:40.119 --> 0:19:42.240 that they would need tens of billions of dollars to 0:19:42.240 --> 0:19:45.399 buy the GPUs to put into space based data center. 0:19:46.000 --> 0:19:47.920 Team awesome, Caro, big. 0:19:47.720 --> 0:19:50.760 Scoop with some very big numbers and hypotheses. It was 0:19:50.760 --> 0:19:53.679 brilliant to have you all on loanngrash Calport. Thank you, 0:19:53.920 --> 0:19:56.600 ed as always scoop machine. What we got coming up? 0:19:57.240 --> 0:19:59.920 Yeah, Amazon could be making an exensive new bet on 0:20:00.880 --> 0:20:04.240 with talks underway to deep in ties with open AI. 0:20:04.440 --> 0:20:07.480 We have the Bloomberg report next, this is Bloomberg Tech. 0:20:13.280 --> 0:20:14.879 In Video provided. 0:20:14.440 --> 0:20:18.639 Technical support that helped deep Seek improve its breakthrough AI model. 0:20:18.680 --> 0:20:22.320 That's according to the Republican head of the House China Committee, 0:20:22.320 --> 0:20:25.280 who says in Video's technical support allowed deep Seat to 0:20:25.320 --> 0:20:28.600 achieve cutting edge performance with its R one model using 0:20:28.600 --> 0:20:32.600 in Video's H eight hundred processors, undermining the goal of 0:20:32.760 --> 0:20:36.439 US export controls that were designed to restrict access to 0:20:36.520 --> 0:20:37.959 higher end American chips. 0:20:38.040 --> 0:20:41.080 Carol Let's talk about Amazon now because it's reportedly in 0:20:41.160 --> 0:20:43.760 talk said to invest up to fifty billion dollars in 0:20:43.800 --> 0:20:44.320 Open AI. 0:20:44.600 --> 0:20:44.719 Now. 0:20:44.760 --> 0:20:47.320 Person familiar with the matter says the potential deal would 0:20:47.320 --> 0:20:50.000 build on an existing relationship with Amazon already, of course 0:20:50.000 --> 0:20:53.000 applying computing power to the chatching B team. Makup more, 0:20:53.080 --> 0:20:55.760 let's bring in Bloomberg's Matt Day you cover Amazon. There's 0:20:55.760 --> 0:20:57.919