Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and Edlow in Sentrancesco.
Speaker 2: This is Bloomberg Tech coming up. The tech sell of
Speaker 2: accelerates as investors question valuations in the AI trade. This
Speaker 2: is mit flag's concerns about enterprise AI adoption. We speak
Speaker 2: but the return on tech investments, the Bank of America's
Speaker 2: top technology officer, and what AI infused gadgets to expect
Speaker 2: from Made by Google. Event that kicks off this afternoon.
Speaker 2: But first we return to these markets that are having
Speaker 2: another ugly day, two straight days of losses. We are
Speaker 2: sinking significantly on the nastat one hundred, and they accelerate
Speaker 2: off by more than three percentage points. Let's get into
Speaker 2: some of the big points drags. We've got Netflix that's tumbling.
Speaker 2: But I'm also looking at Palenteed. It is having its
Speaker 2: worst two days in at least now four years. It's
Speaker 2: twenty twenty two. We're seeing it sell off. We're off
Speaker 2: by eight percent. Add that to the nine percent we
Speaker 2: saw sell off yesterday. Those valuations that we were questioning
Speaker 2: are actually coming down a fair bit in Video is
Speaker 2: off by three point three percent after yesterday's about two
Speaker 2: or three percent sell off as well. And Intel. It's
Speaker 2: been outperforming the rest of the market previously, of course,
Speaker 2: on the hopes of US investment coming from the government
Speaker 2: and indeed two billion dollars coming from SoftBank, but today
Speaker 2: even it succumbs to some of the anxiety. Let's stick
Speaker 2: with a sell off. Let's get Ryan Rastellika's take. Go
Speaker 2: really talk us through some of the worries in the market. Ryan,
Speaker 2: what are we saying. We're having a questioning of AI valuations,
Speaker 2: Is it macro concerns, is it August? And the fact
Speaker 2: that we've got thin liquidity, what is it?
Speaker 3: You know, I've heard all of those sort of things.
Speaker 3: I've heard that this is sort of a seasonal issue
Speaker 3: that we've seen in past years. So there are some
Speaker 3: people saying this looks like an attractive time to be buying.
Speaker 3: The tech trade remains intact, but you do have a
Speaker 3: number of these names sort of really come up this year.
Speaker 3: You mentioned Palenteer, also companies like Core, We've Nvidia, a
Speaker 3: lot of the MAGS seven names have been very strong
Speaker 3: performance this year that has brought multiples and valuations, so
Speaker 3: levels that are really kind of getting tougher to justify.
Speaker 3: We are out of the earning season, We're in sort
Speaker 3: of a slow news environment right now, and it just
Speaker 3: seems like when you've seen moves like this, some kind
Speaker 3: of consolidation or pullback.
Speaker 4: Is going to be expected.
Speaker 3: And when you have such high momentum names like Palenteer,
Speaker 3: like core Weave, you start to see some of the
Speaker 3: most aggressive selling in names like that.
Speaker 2: First Palenteers, who said worst two days set off in
Speaker 2: three years, currently trading at one hundred and eighty times
Speaker 2: future profit, but that's down from two hundred and forty
Speaker 2: times street ship profits that it was current and previously
Speaker 2: trading app but two days ago. Ryan is interesting. You'd
Speaker 2: been digging into some of the valuations of the high
Speaker 2: fliers that actually had only recently caught a bid. I
Speaker 2: think of Intel and the fact that they'd added what
Speaker 2: twenty four billion dollars in market capitalization in this month alone,
Speaker 2: that's coming down today, and it did show this desire
Speaker 2: to be getting into some AI related names.
Speaker 3: Yeah, so Intel's a bit of a special case. You
Speaker 3: mentioned how there was reports of government wanting to take
Speaker 3: a stake. You had soft Bait coming out and looking
Speaker 3: to invest about two billion dollars into the company. You
Speaker 3: did see a pull up there. I think the stock
Speaker 3: rows twenty to thirty percent something like that. However, this
Speaker 3: is the third twenty percent rally that Intel has seen
Speaker 3: this year. We did see those previous rallies fade pretty quickly.
Speaker 3: There still continues to be a lot of questions and
Speaker 3: concerns about whether Intel will be able to re establish
Speaker 3: itself as a major player within chip manufacturing but also
Speaker 3: chip design. It is very much behind Nvidia and AMD
Speaker 3: and AI chips. It's behind TSMC on the manufacturing side,
Speaker 3: so there's still a lot of questions there. It's not
Speaker 3: necessarily surprising to see the stock pull back after that
Speaker 3: initial excitement, especially since you know, as we reported yesterday,
Speaker 3: the multiple gotta levels last scene in the dot com era.
Speaker 2: And it's interesting that SoftBank's pulling back as well. It's
Speaker 2: sun about seven percent, and in Asia trade we have
Speaker 2: seen a bit of a global anxiety around tech by
Speaker 2: doos lower as well after its results. Telling us a
Speaker 2: little bit though about the next set of catalysts, because
Speaker 2: at the moment we have been treading water more around
Speaker 2: the macro concerns. We do get in Video's results next week,
Speaker 2: that could be a key catalyst.
Speaker 5: Yeah.
Speaker 3: Absolutely, I think a lot of people are waiting to
Speaker 3: see what is said there. I think there's a lot
Speaker 3: of optimism about this report because we did just come
Speaker 3: out of an earning season where all of its major
Speaker 3: customers Microsoft, Meta, Alphabet, Amazon, they really affirmed their plans
Speaker 3: to continue investing aggressively in AI, which is obviously going
Speaker 3: to help Nvidia kind of first and foremost among the
Speaker 3: infrastructure plays. Now, if they say anything about the outlook weakening,
Speaker 3: or there's further skepticism about China or so on and
Speaker 3: so forth, there is room for us to continue moving
Speaker 3: down just because, like I said, we have seen really
Speaker 3: strong gains in some of these stocks so far this year.
Speaker 3: There is room for them to move down now. If
Speaker 3: in Vidia is very strong, It's very possible that that
Speaker 3: is a kind of sig people use to you know,
Speaker 3: buy the step and maybe move back into tech.
Speaker 5: Ran plus SELCA as always, we thank you.
Speaker 2: Let's get you some breaking news now actually revolving around
Speaker 2: a big tech player and China.
Speaker 5: Microsoft is on the move.
Speaker 2: The company says it has curtailed Chinese companies access to
Speaker 2: advance notifications about cybersecurity vulnerabilities in its own technology. That,
Speaker 2: of course, is after investigating whether a leak led to
Speaker 2: a series of hacks exploiting flaws in its share points software. Now,
Speaker 2: the announcement from Microsoft follows a campaign of cyber attacks
Speaker 2: that Microsoft blamed on state sponsored hackers in China who
Speaker 2: targeted security weaknesses in its SharePoint servers. We're off by
Speaker 2: just seven tens percent. It's not as bad as the
Speaker 2: rest of the market, but still trading lower. Let's get
Speaker 2: you full context on this market. Anna Rathbunners with US
Speaker 2: CEO founder of wealth management firm Grenandilla Advisory, And I mean,
Speaker 2: what a difference a couple of days makes. What do
Speaker 2: you make about this sudden AI valuation anxiety?
Speaker 6: Yeah, good morning. In some ways it's expected, right, you
Speaker 6: can't expect everything to go up all the time. I
Speaker 6: do think that there is something to be said about
Speaker 6: the month of August being you know, special in a
Speaker 6: seasonal way. But the other thing is there are people
Speaker 6: who are taking gains. There's also when there's fear that
Speaker 6: comes into the markets. Usually the ones that are casualties
Speaker 6: first are the ones with the highest valuations and those
Speaker 6: are in the big techniques. So you know, this, this
Speaker 6: I think is temporary. I don't think this is a
Speaker 6: start of anything that will become a trend, but certainly
Speaker 6: it's part of being an investor.
Speaker 2: Part of being an investor, and how do you protect
Speaker 2: what have been profits made? Is this actually just a
Speaker 2: profit taking moment and people are locking in really big
Speaker 2: wins that they've seen run up this summer.
Speaker 6: You know, it would be prudent to certainly lock in
Speaker 6: some of those gains, But I don't think you can
Speaker 6: be out of it because AI is where all the growth.
Speaker 4: And investment is going into it.
Speaker 6: I mean, you saw, you know, about a month ago
Speaker 6: Trump administration coming out and basically pledging its support behind
Speaker 6: AI and data centers and all the infrastructure and hardware.
Speaker 4: That's a part of it.
Speaker 6: And certainly I think this move into taking an equity
Speaker 6: stake in Intel is a part of that story and
Speaker 6: also part of the story of bringing manufacturing back into
Speaker 6: the United States.
Speaker 4: So there's a lot of momentum here.
Speaker 6: Now, government being a part of a private company is
Speaker 6: a double edged sword, but if we're to take a
Speaker 6: look at the upside, there's a lot of support around
Speaker 6: AI and text, So I don't think investors can really
Speaker 6: ignore it.
Speaker 2: And to that point, I mean, when you get Intel
Speaker 2: suddenly prior to today running up valuation sword to well
Speaker 2: the most expensive it's been since the dot com era,
Speaker 2: should you be putting that much credence in government backing
Speaker 2: and in the ability for them to secure long term
Speaker 2: demand for future chip innovations.
Speaker 4: Yeah.
Speaker 6: I don't think this is just about the government, because
Speaker 6: we also had softwarek coming in and committing to or
Speaker 6: talking about committing two billion dollars in terms of investment.
Speaker 6: So I don't think this is the end of it.
Speaker 6: And also I know the Trump administraturs said that they're
Speaker 6: not going to be taking a governance role in this,
Speaker 6: but you know, if you're the US government and you're
Speaker 6: one of the largest shareholders, you can definitely influence through tweet.
Speaker 6: And if the government has skin in the game, is
Speaker 6: it really going to sit to the sidelines and look
Speaker 6: at you know, Intel maybe not following through with the
Speaker 6: Ohio foundry. I could see a scenario, there's a speculation,
Speaker 6: but I could see a scenario in which the government
Speaker 6: can help to garner those customers for those chips. I
Speaker 6: don't think this is we'll take an equity steck and
Speaker 6: be done with it.
Speaker 4: I don't think that's that.
Speaker 2: It's interesting SoftBank came on board many fitting that with
Speaker 2: the help of ARM we could start to see real competition,
Speaker 2: maybe even to in video in the longer term. Had
Speaker 2: been some of the analysis written Anna, let's think about
Speaker 2: in video for a moment. It's two down over the
Speaker 2: last couple of days. We anticipate its earnings. Look more broadly,
Speaker 2: of the tech tail wins. The AI trade still on.
Speaker 4: I think it's still on.
Speaker 6: I mean, you know, Meta just came out, and I
Speaker 6: mean there I think there are issues there with the
Speaker 6: management and the team structure and everything, and I don't
Speaker 6: think it's necessarily good news for Meta.
Speaker 2: But you know this hiring s Sorry. Why why is
Speaker 2: the restructuring of the AI department Alexander Wang leading when
Speaker 2: it comes to LMS and the breakdown of these four
Speaker 2: different areas of focus. Why is that perhaps not good
Speaker 2: news for Meta?
Speaker 4: Well, it's not good news.
Speaker 6: Good news in a sense that in the last two
Speaker 6: months we've seen a lot of restructuring.
Speaker 4: This is the type of stuff.
Speaker 6: That makes investors nervous in terms of effective management. You know,
Speaker 6: you can hire the smartest people at high price tag and.
Speaker 4: Put them in a room.
Speaker 6: If they can't work together, and if they can't like
Speaker 6: produce a product, then you don't really have anything.
Speaker 4: You don't have an ROI on that right.
Speaker 6: So this is a type of stuff that makes investors nervous.
Speaker 6: So I think that's a very meta specific problem.
Speaker 2: I love that you have that idea of ROAI because
Speaker 2: that is what many are looking at this MIT report about.
Speaker 2: At the moment, we're blaming and it's in an unnuanced manner.
Speaker 2: This particular report out at MIT is saying, look, ninety
Speaker 2: five percent of the work done by company is to
Speaker 2: integrate AI hasn't returned money or productivity. What did you
Speaker 2: make of the report?
Speaker 6: Ana, Well, I mean what would you expect? I mean,
Speaker 6: this is such new technology, you know. I think you
Speaker 6: have to expect a lot of these efforts to fail
Speaker 6: in the beginning. You have to have a lot of
Speaker 6: failures before you can have the wins. That's why I
Speaker 6: look at the AI efforts by these mag seven names
Speaker 6: as incubation. I mean to look at ROI and expect
Speaker 6: ROI within a year or two of them actually really
Speaker 6: embarking and investing in it. I think it's too soon.
Speaker 6: I think this is more of a long term play,
Speaker 6: and so that report was sort of expected in my mind.
Speaker 5: Anna Rathbund, it's great to have you back on. Thank you.
Speaker 2: Brenna del Advisory now coming up and pleased to say
Speaker 2: we're going to be digging into the return on AI
Speaker 2: investment with Harry go Pel Krishnan is the chief Technology
Speaker 2: and Information Officer for Bank of America. All about where
Speaker 2: they've been focusing in on artificial intelligence and tech more broadly.
Speaker 2: Let's get tech more broadly for a moment. So we
Speaker 2: are in the eye the storm of a bit of
Speaker 2: a sell off today. We're off by one and a
Speaker 2: half percent on the Nasdaq one hundred, coming off of
Speaker 2: our lows, the socks though Semiconductor Index, or by two
Speaker 2: and a half percent. In Video off by two point
Speaker 2: eight percent, Pallenteer having its worst couple of days in
Speaker 2: three years. This is the Bloomberg Tech Oracle's cloud infrastructure unit. Well,
Speaker 2: it's helped to propel CEO Larry Ellison to become the
Speaker 2: second richest person in the world at one point. With
Speaker 2: the AI boom, the company saw huge demand for its
Speaker 2: computing and storage over the Internet, gaining foothold among key customers.
Speaker 2: TikTok Open Ai for more. Bloomberg's Brodie Ford, who covers Oracle,
Speaker 2: joins us now and many point in history, Oracle almost
Speaker 2: pushed against this trend, and now they are well and
Speaker 2: truly into it.
Speaker 7: Two thousand and eight, Larry Ellison gave the speech people
Speaker 7: love citing. He said, this cloud is gibberish. And I mean,
Speaker 7: they were making so much money and continue on old
Speaker 7: school database software. But in the last couple of years
Speaker 7: they've managed to really reinvent themselves from a legacy company
Speaker 7: to one that's at the center of the AI boom.
Speaker 7: And yeah, I mean there's no better example in their
Speaker 7: work with open ai and stargate. Right we have the
Speaker 7: details that on one new data center in West Texas
Speaker 7: they're going to be spending over one billion per year
Speaker 7: just to power the thing with gas. I mean that's
Speaker 7: before construction, that's before all the chips. The scale of
Speaker 7: the cloud build out happening for AI right now is
Speaker 7: just it's a comical scale that we haven't seen before,
Speaker 7: and Oracle has found itself at the center of it.
Speaker 2: Let's just talk about who's driven this because the CEO
Speaker 2: is it called suffracats. How much has she been the
Speaker 2: pinpointing of this growth area. How much has Larry Alison
Speaker 2: really been playing a key role? What do you make
Speaker 2: of the internal work and so good this business.
Speaker 7: We spoke with a lot of folks that are close
Speaker 7: to this business, and you know, the CEO. Everybody wants
Speaker 7: money from you, And for a long time, Saphra said, no,
Speaker 7: we are not giving you all the money that it
Speaker 7: takes to build these data centers. Right, I mean she
Speaker 7: was skeptical the business for a long time, and then
Speaker 7: these big deals started hitting. I mean, TikTok around twenty
Speaker 7: twenty two was making so much money that it was
Speaker 7: bigger than the entire rest of Oracle's Cloud all put together.
Speaker 7: And so she saw deals like that, she saw deals
Speaker 7: like open Ai, and that's when it became clear that
Speaker 7: this isn't just part of Oracle's business. This is going
Speaker 7: to be the business. Wall Street expects that by twenty
Speaker 7: twenty nine that cloud Infra will actually be the largest
Speaker 7: share of Oracle's revenue. And so this is a true
Speaker 7: reinvention of the company for good and potentially for bad. Right,
Speaker 7: I mean it's a much lower margin business. There's more
Speaker 7: risk to it. But clearly for now the sentiment is
Speaker 7: good and something is working well for them and the.
Speaker 2: Breadth of customer here, Brodie, because we think of TikTok
Speaker 2: and we know they're a key strutch player for them,
Speaker 2: we know the relationship with Stargate and therefore open Ai.
Speaker 7: But how broad is this getting It is a bit
Speaker 7: of a whale business right now. It's a bit concentrated,
Speaker 7: right The majority of their backlog is AI deals, largely training.
Speaker 7: There are questions out there around how long does the
Speaker 7: training boom last? What are the margins of it. It's
Speaker 7: a very impressive customer list for sure, right. I mean,
Speaker 7: as you said, we got open Ai, we got TikTok,
Speaker 7: we got Elon Musk's Xai, we have Meta, we have
Speaker 7: a kind of cadre of you know, all the AI
Speaker 7: names that we all know, and so they've signed all
Speaker 7: the right people. But the real test I'm going forward
Speaker 7: is can you sell these folks more than just GPUs
Speaker 7: and what can.
Speaker 2: They do with them? Punning Meg's Brodie Ford, fantastic to
Speaker 2: have you, thank you. Let's talk about what you can
Speaker 2: do with all of this GPU, this compute and how
Speaker 2: it ultimately brings productivity to study from MIT saying that actually,
Speaker 2: despite the billions enterprises have spent on general to AI,
Speaker 2: perhaps only ninety five percent of organizations, well they say
Speaker 2: they're actually getting a zero return. Thus far, only five
Speaker 2: percent have got any return. This is really true. Harry
Speaker 2: gopel Chrishnan is with us. He is the new Chief
Speaker 2: Technology and Information officer over at Bank of America, but
Speaker 2: he leads the bank's global technology approach. You've been at
Speaker 2: Bank of America for fourteen years, but you've very recently
Speaker 2: taken on this real global helm job. And there is
Speaker 2: more nuance to that MIT report than the market has
Speaker 2: given credence to. Basically, it's saying, look, if you just
Speaker 2: tried to make it up and perhaps build some CHATCHBT
Speaker 2: like products yourself, it didn't always work. But what have
Speaker 2: you been doing internally to make things work for Bank
Speaker 2: of America? Yeah?
Speaker 8: Great, thanks for having me. And look, we get to
Speaker 8: serve seventy million clients every single day and AI is
Speaker 8: not new to us.
Speaker 4: It's been part of our journey.
Speaker 8: So if I could offer you some soundbites of what
Speaker 8: we've seen in the last five years, ninety nine percent
Speaker 8: of our customers and clients today interact with us digitally
Speaker 8: fully self serviced. Ninety nine percent of interactions in the
Speaker 8: consumer business our self service digital. We have sixty five
Speaker 8: percent of our account opening is digitally done. Ten years
Speaker 8: ago zero percent. Our client satisfaction number, which we care
Speaker 8: a lot about, has gone from the high seventies to
Speaker 8: eighty nine point one. And yes we're counting, and so
Speaker 8: you think about it, better client satisfaction. Shift to more
Speaker 8: self service channels and more automation always yields great results.
Speaker 8: And AI has been part of that.
Speaker 4: Journey for us.
Speaker 2: And I think of as the client. The customer perspective
Speaker 2: is Erica. But your client and your other stakeholders, you
Speaker 2: can your own employee base. How have they been adopting
Speaker 2: general TODAI? Have them am using assistance?
Speaker 4: Yeah?
Speaker 8: And maybe if you just ruround the clock a bit right.
Speaker 8: Our first journey into AI started with things like fraud
Speaker 8: models and fraud algorithms. We have fourteen hundred plus patents
Speaker 8: and two hundred and fifteen models in production with things
Speaker 8: like AI models, and what we realized seventy eight years
Speaker 8: ago is humans wanted to interact with machines in a
Speaker 8: more humanistic fashion. And long before the large language models
Speaker 8: came along, we thought about things like Erica, which allows
Speaker 8: a customer to simply say a few words and for
Speaker 8: us to figure out what they want rather than them
Speaker 8: trying to figure out what our systems actually did. And
Speaker 8: that's where we've now seen significant adoption. So this morning
Speaker 8: we had a press release that we now had three
Speaker 8: billion transactions that have been conducted on an aircut and
Speaker 8: that continues to grow at.
Speaker 4: An exponential pace.
Speaker 8: So that's our clients and customers saying we actually like.
Speaker 4: To engage with you in this way.
Speaker 8: When you then pivot to our employee base, they're like, well,
Speaker 8: why can't we use the same capability. So we've taken
Speaker 8: this platform and broadened it use. So today a high
Speaker 8: network advisor can actually look to Erica to say, look,
Speaker 8: I need to hear about some complex trust policy in Delaware.
Speaker 8: Can you summarize it for me and tell me how
Speaker 8: I should talk to the client about it. And one
Speaker 8: of the more recent implementation has been is I'm about
Speaker 8: to meet a client, how do I prepare for that meeting?
Speaker 8: Before a junior banker would take days to prepare a
Speaker 8: docier for that. Now we can actually use Generati VI
Speaker 8: models to create the first version of a draft that
Speaker 8: saves hours and minutes, if not time, which then drops
Speaker 8: to the bottom line.
Speaker 2: Harry, I know in many ways this is your secret source.
Speaker 2: But I'm reading that you've got what seven eight hundred
Speaker 2: patents of your own. How much are you having to
Speaker 2: depend on purpose built general to AI. How much are
Speaker 2: you looking to an open AI for the enterprise offering
Speaker 2: or are you going to build it yourself?
Speaker 8: Well, I think we have a multi level approach to this, right,
Speaker 8: We're not you know, we have enough reality to know
Speaker 8: that we're not going to go build foundation models. We
Speaker 8: want to build upon all the investments that are happening
Speaker 8: in the industry. But the reason they're called foundation models
Speaker 8: is they let you do a lot of things on
Speaker 8: top of them. So we have a level of the
Speaker 8: stack where we absolutely will embrace.
Speaker 2: Commodity, which ones I don't interest.
Speaker 8: Well, I think a little bit of everything. Right, We
Speaker 8: are looking at it, and we intentionally want to be madalagnostic. Right,
Speaker 8: We intentionally do not want to be wedded to any
Speaker 8: one single solution, but then built upon it. When it
Speaker 8: comes to our complex workflows. When you think about our
Speaker 8: business processes, if it was just as simple as buy
Speaker 8: something off the shelf, every one of us would be done.
Speaker 8: The reality is you have to take these models in
Speaker 8: and back to your productivity question, the way you unleash
Speaker 8: productivities applying these to your business process. Understanding how your
Speaker 8: current process work. Don't just try to replicate it, figure
Speaker 8: out where you can eliminate parts of it, simplify it,
Speaker 8: and then use AI to go after it.
Speaker 4: And what we've seen is it's yield a tremendous results
Speaker 4: for us.
Speaker 2: I mean you said, and we're counting. How are you
Speaker 2: measuring that productivity gain apart from the sheer scale of
Speaker 2: interactions and numbers that you're seeing?
Speaker 8: Yea, I'll give you an example of it.
Speaker 1: Right.
Speaker 8: We now have seventeen thousand developers in my own team
Speaker 8: that use coding agents to help their day to day activities.
Speaker 8: Within that, we actually measure things like cost per story point,
Speaker 8: defect density. There's a set of metrics productivity metrics that
Speaker 8: we look at and we look at it before and
Speaker 8: after we expect to do similar things on a business
Speaker 8: process by business process basis. To actually understand the metrics
Speaker 8: when we went into the problem how we deploy these
Speaker 8: capabilities because they're not cheap, so we need to make
Speaker 8: sure there's an ROI component to it. But coming out
Speaker 8: of it, be able to see what comes out and
Speaker 8: fail fast if it seems like a given process doesn't
Speaker 8: lend itself appropriately.
Speaker 2: So I go to the sensitive question of those employees
Speaker 2: that are embracing these coding agents.
Speaker 5: Yeah, to have a few of them.
Speaker 2: How are they feeling about being augmented or replaced?
Speaker 8: Well, I would say it actually allows us to get
Speaker 8: to a backlog we could never get to. There's always
Speaker 8: more work than you can get to. There's always things
Speaker 8: that you could modernize, There's always more things to do.
Speaker 8: And I actually tell you that our first reaction from
Speaker 8: our teammates is been this frees them to do more
Speaker 8: innovative work rather than the mundane work that was consuming
Speaker 8: their time and resources. And I think we're going to
Speaker 8: see that pattern play itself out over time.
Speaker 2: Sunny One, what a few weeks into the leading job.
Speaker 2: It's wonderful to speak with you, Harry. Harry go for
Speaker 2: Christian who's the chief technology and information officer over Bank
Speaker 2: of America. Time now for talking tech and first up,
Speaker 2: Shaomi says it's looking to sell its first EVS in
Speaker 2: Europe by twenty twenty seven, taking on the likes of
Speaker 2: Tesla and byd Now. The company announced its strategy after
Speaker 2: posting a thirty one percent rise in quarterly revenue, boosted
Speaker 2: by the launch of its second EV Now. According to
Speaker 2: the Shaomi president, the company is doing research and preparation,
Speaker 2: has no specific product plan yet, plus shares a by
Speaker 2: do where they're lower today. The company posting second revenue
Speaker 2: that slips slightly as it faces an economic downturn in
Speaker 2: China and our AI rivals and difficulties in net growth areas.
Speaker 2: In particular, China's Internet search is looking to Genai to
Speaker 2: drive future growth, but it is struggling as open source
Speaker 2: models like Deep Sea gain traction and startup. Game Science
Speaker 2: has unveiled its working on a successor to one of
Speaker 2: last year's best selling RPG titles now at games Con
Speaker 2: conference it was over in Germany, the company showed off
Speaker 2: a teaser trailer to Black Myth chron Qui, a sequel
Speaker 2: to twenty twenty fours Black Myth Wukong.
Speaker 4: Now.
Speaker 2: According to game Science back at tencent, the project is
Speaker 2: quote little more than an empty folder at its current stage,
Speaker 2: coming up Meta making those restructuring moves of its AI group.
Speaker 2: They have the details. Next, at first, that's check in
Speaker 2: on these markets. We are down, and we're down significantly.
Speaker 2: Then a's that one hundred really accelerating yesterday's losses. We
Speaker 2: bounce off our lowers, but still we're seeing some of
Speaker 2: the worst sell off that we've seen in a few months.
Speaker 2: Are also saying names like Palenteer really eroding some of
Speaker 2: that valuation that we've seen, having its worst couple of
Speaker 2: days in three years, Other names such as Apple and
Speaker 2: contributing to the points perspective. This is the Blombg Tech.
Speaker 2: Welcome back to Bloomberg Tech. Let's take a look at
Speaker 2: these markets. We're in sell off mode. We are bouncing
Speaker 2: off our lows. Nevertheless, we're off by two point four
Speaker 2: percent in the last two days, worst sell off since
Speaker 2: about April. In fact, we have some deep anxiety surrounding valuations,
Speaker 2: particularly in the AI trade, whether it's macro concerns as
Speaker 2: we anticipate. J. Powell and an awful lot of FED
Speaker 2: talk what rates mean, but also more broadly, what these
Speaker 2: valuations have got to extreme levels really mean. When you've
Speaker 2: got perhaps Enterprise not fully adopting in the productivity means
Speaker 2: that some anticipated that MIT research report causing some girations.
Speaker 2: Let's move on to the individual movers that we keep
Speaker 2: an eye on. Look, I'm off by overall in the
Speaker 2: last few days, well five and a half percent for Palenteer,
Speaker 2: but worst couple of days set off in a few years.
Speaker 2: Intel is off by more than six percent, wiping out
Speaker 2: a lot of yesterday's gains. After we were enthusiasmor and
Speaker 2: soft Bank investing in this company, and indeed talk of
Speaker 2: the US government taking at least a ten percent stake.
Speaker 2: But we pull back on Intel as people really lock
Speaker 2: in profits. On Meta as well, we're off by one
Speaker 2: point four percent. It's down the three straight trading days,
Speaker 2: having lost five point six percent in the course of
Speaker 2: those three days. Let's just stick with Meta more broadly.
Speaker 2: In the company announcing yesterday yet another restructuring of its
Speaker 2: AI group, pursuing superintelligence. Now it will be splitting its
Speaker 2: AI team into four distinct teams and move. The company says,
Speaker 2: we'll allow it to better capitalize on its recently acquired talent.
Speaker 2: Bloomberg's tech reporter Riley Griffin is here to break it
Speaker 2: all down. You're in San Francisco really digesting what seems
Speaker 2: to be a focus on llms, still on the frontier research,
Speaker 2: but then there's the application of this research and the infrastructure.
Speaker 2: Of course, no doubt.
Speaker 9: Yesterday we were able to obtain a memo that was
Speaker 9: shared by Alan are Weighing, the new chief of Metasuperintelligence Labs,
Speaker 9: and he's really laying out the new structure for this
Speaker 9: organization after weeks and weeks of an incredible effort to
Speaker 9: hire talent. As you might remember, Caroline, this is hundreds
Speaker 9: of millions of dollars sometimes nearing billion dollars in total
Speaker 9: compensation for individual AI researchers, and now they are finding
Speaker 9: their home within META, within these four teams.
Speaker 2: Yeah, and the home how are you seeing the perhaps
Speaker 2: what some have reported by the scenes of some jostling
Speaker 2: or discomfort with what had been suddenly incredibly expensive talent
Speaker 2: coming in and a reorientation of where the focus is.
Speaker 2: Does this help better align that talent and actually push forward?
Speaker 2: And ultimately is it open large language models for example?
Speaker 2: Are they going to delve into closed ones? Potentially?
Speaker 9: That is a really a burning question for all of us.
Speaker 9: What we do know is that one team will continue
Speaker 9: to be dedicated to large language models, the Lama product
Speaker 9: that under pins metas AI efforts broadly.
Speaker 2: And the one team that I.
Speaker 9: Really am keeping an eye on is the infrastructure team.
Speaker 9: Mark Zuckerberg has pledged to spend hundreds of billions of
Speaker 9: dollars specifically on AI infrastructure, and now we are seeing
Speaker 9: talent from within the company go and lead that specific effort.
Speaker 9: We expect more capital to be deployed there this year
Speaker 9: and then certainly next some.
Speaker 2: Great reporting Ridley Griffin, we so appreciate it. Let's get
Speaker 2: some of the investor and analysis take now. Rohit kol
Speaker 2: Con is with this managing director and scene analyst covering
Speaker 2: Internet and capital markets research at Growth Capital Partners. And
Speaker 2: that commitment to infrastructure that Riley articulates there, that money
Speaker 2: is it proving out?
Speaker 4: I hey, thanks for having me.
Speaker 10: I think so far, what we have seen looking backwards
Speaker 10: last twelve perhaps fifteen months, Meta is probably the best
Speaker 10: poster child in providing qualifiable returns on investment in AI
Speaker 10: in ffrastructure. By that, what I mean is the company
Speaker 10: has demonstrated accelerating revenues. The company has demonstrated upside to
Speaker 10: industry growth and a lot of other belts and vestles
Speaker 10: around AI investment. So looking backwards, yes, definitely is the
Speaker 10: poster child of showing written on investment looking forward.
Speaker 4: That's the question mark in the stock today.
Speaker 2: Okay, so they've been able to make it work for
Speaker 2: advertising in the business model, but now for superintelligence and
Speaker 2: the race to be one what business model does that
Speaker 2: align itself with?
Speaker 5: For Meta?
Speaker 2: How much are we going to see generative AI affect
Speaker 2: the way in which we interact and communicate.
Speaker 10: I believe the problems that Meta is trying to solve
Speaker 10: using AI and using superintelligence are just compounding with the
Speaker 10: data that they're collecting and the possible business models that
Speaker 10: they are exploring. Remember, they have invested a lot of
Speaker 10: money in the augmented reality virtual reality glasses they are
Speaker 10: They have been working on that over the last four years.
Speaker 10: There has been a reset in that and now probably
Speaker 10: we are not now looking at twenty twenty seven for
Speaker 10: the actual launch, So there is a timetable to build
Speaker 10: AI within those glasses. I believe that's going to take
Speaker 10: up a lot of money. And second, integrating the three
Speaker 10: apps that they have, and those are the three largest
Speaker 10: mobile apps in the world with billions of people using
Speaker 10: on a daily basis. To make those apps super intelligent
Speaker 10: and to make them extremely sticky is probably a monumental
Speaker 10: investment opportunity for them. So these two are orthogonal investment opportunities,
Speaker 10: but I think both are probably going to be something
Speaker 10: that Zuckerberg is going to be fully invested in.
Speaker 2: At one point eight seven trillion dollars, is that a
Speaker 2: full valuation for this full investment theme.
Speaker 10: That you have ro head, I believe, like the layers
Speaker 10: unpacking in the future, it's just going to be something
Speaker 10: that we are going to be excited about.
Speaker 4: I feel we are.
Speaker 10: We have still not yet scratched the surface of the
Speaker 10: potential of jen Ai on a very large, multi dimensional
Speaker 10: platform like Meta, and I feel Zuckerberg has the founder
Speaker 10: whip if you feel he's investing behind this as if
Speaker 10: it's an existential, once in a lifetime opportunity, even bigger
Speaker 10: than when iPhone was launched. So I feel the excitement
Speaker 10: and the kind of attitude that they can disrupt the
Speaker 10: Apple card while redoing something new is something that the
Speaker 10: investors are willing to be patient around on Metasta, and
Speaker 10: so are we.
Speaker 2: Your patient is still got a buy rating. Compare and
Speaker 2: contrast to some of the other key companies that you
Speaker 2: do analyze. When I'm thinking that, you're looking at Alphabet
Speaker 2: and Amazon and they as bigger winners. Have they been
Speaker 2: as bigger winners in the capex? They've already spent and
Speaker 2: do they have as good a road map as you
Speaker 2: currently articulate for Meta?
Speaker 4: So far, I think Meta is the clear winner.
Speaker 10: Amazon is so far probably a number three, and Google
Speaker 10: is a number two player, number two winner as far
Speaker 10: as demonstrating returns on GENEI investments. Having said that, I
Speaker 10: think the complex problems that each of these very large,
Speaker 10: massive companies are solving or trying to solve using AI
Speaker 10: are essentially compounding with every day, and that is leading
Speaker 10: to more investment and more investment needed to solve those problems.
Speaker 10: Think of the multi dimensional e commerce, cloud, advertising, prime video,
Speaker 10: same day delivery.
Speaker 4: All of these elements.
Speaker 10: Can be optimized using AI, and at any given time,
Speaker 10: probably Amazon.
Speaker 4: Is focused on maybe one or two of those.
Speaker 10: So I feel over the longer arc, the bigger winner
Speaker 10: is probably going to be a company like Amazon.
Speaker 4: Given the surface area of improvement.
Speaker 10: They have the potential, but in the near term probably
Speaker 10: a one pony like a Facebook, has executed better in
Speaker 10: the last eighteen months, and they are demonstrating better returns today.
Speaker 2: I hate to talk about the near term because I
Speaker 2: know you're a man who likes to give longer term
Speaker 2: projections and price targets. But when you're seeing a sell
Speaker 2: off like we've had after the last couple of days,
Speaker 2: a lot of it tied up with worries about ROAI
Speaker 2: and the report coming out of MIT, the GENAI divide,
Speaker 2: and the state of AI and business. Do you give
Speaker 2: credence to that? Do you think there's a lack of
Speaker 2: nuance or do you think actually we should be worried
Speaker 2: about how much we're investing in the returns on it.
Speaker 4: I think there are two ways to.
Speaker 10: Interpret miit and just the overall questions that are being
Speaker 10: raised that hey, by the way we applied Genni algorithms llms,
Speaker 10: we invested so much, but we are not getting the
Speaker 10: returns as much as we wanted. I think these large
Speaker 10: companies are trying to solve really large problems. The efficiency
Speaker 10: gains that they will provide over the next twelve months
Speaker 10: are something that we are very confident on whether that
Speaker 10: translates into revenue uplift that remains to be seen only
Speaker 10: a company like Meta has demonstrated that other guys are
Speaker 10: kind of TVD. That's why from AI winner standpoint, Meta
Speaker 10: is the one to buy on this weakness today.
Speaker 2: Right here, Kolk Carney, Managing director and Senior analyst at
Speaker 2: Growth Capital Partners, it's great to catch up with you.
Speaker 2: This is Bloomberg Tech and you're looking at a live
Speaker 2: shot of the principal room. Bloomberg is live at Jackson
Speaker 2: Hole this week. Tune in a continuing coverage leading up
Speaker 2: to a special episode of Bloomberg Surveilience on Friday. This
Speaker 2: is Bloomberg. Elisei, which ultimates complex healthcare housing systems, has
Speaker 2: just announced a two hundred and fifty million dollars Series
Speaker 2: E round led by Andrews and Horowitz. The startup, which
Speaker 2: was founded back in twenty seventeen, off is Conversational AI,
Speaker 2: a platform for users. And I'm pleased to say that
Speaker 2: the CEO and founder and Lisa Mina Song is here
Speaker 2: with me. You're based in New York and just how
Speaker 2: was it raising these funds? How quickly are you able
Speaker 2: to raise such an enormous amount of money?
Speaker 11: Thank you for having me.
Speaker 12: It was pretty quick actually to raise the round of funding.
Speaker 12: I think investors are incredibly excited about investing in vertical AI,
Speaker 12: which is AI that solves specific problems for specific industries,
Speaker 12: which is exactly what we do, particularly focused in the
Speaker 12: housing and healthcare industries.
Speaker 2: And why those particular industries. Was it just the pain
Speaker 2: points were just so obvious and glaring to you.
Speaker 12: I think so it's pretty obvious to all of us
Speaker 12: how inefficient and how limited the technology is when we
Speaker 12: interact with these industries. But the core mission of the
Speaker 12: company has always been to develop advanced technology for industries
Speaker 12: that serve fundamental human needs.
Speaker 11: So housing and healthcare are some of the.
Speaker 12: Most important decisions we make and the important, most basic
Speaker 12: needs that we have as humans.
Speaker 2: So the way in which the business works is you're
Speaker 2: selling your conversational AI in a B to B manner,
Speaker 2: but then it's me that ends up experience it as
Speaker 2: a consumer. How have you seen healthcare institutions, housing institutions
Speaker 2: willingness to just these sorts of products thus far?
Speaker 12: Yeah, they're extremely excited to use it. So we serve
Speaker 12: on the housing side, One in every eight apartments in
Speaker 12: the US today are using our AI software and they
Speaker 12: we're using AI to automate manual processes to make operations
Speaker 12: more efficient and to make them more cost effective. And
Speaker 12: these inefficiencies really affect all of us. When an industry
Speaker 12: is inefficient, then those that drives up costs for owners,
Speaker 12: which ultimately trickles down to renters, which is really important
Speaker 12: and really affects all of our lives. So there's a
Speaker 12: lot of excitement about AI.
Speaker 2: Okay, And so with the money you do want.
Speaker 12: A significant amount of the funds are going to be
Speaker 12: going to expanding our teams, so a lot of engineering
Speaker 12: team members, product team members, research operations and more. We're
Speaker 12: expanding our offices in New York City, San Francisco, Chicago,
Speaker 12: in Boston. So we're looking for people who want to
Speaker 12: have real world impact and solve really important problems that
Speaker 12: impact millions of people's lives.
Speaker 2: We've talked a lot about talent wars and how expensive
Speaker 2: certain researches have become. Is it the mission that therefore
Speaker 2: attracts them or have you got to up the paycheck significantly?
Speaker 2: And indeed, the.
Speaker 12: Reward of equity absolutely the mission. I think people who
Speaker 12: want to apply these great advancements in artificial intelligence, but
Speaker 12: want to see that that has real world impact and
Speaker 12: that it can affect all of us is what attracts
Speaker 12: people to working at alys Ai.
Speaker 2: How do you tend to offer when you think about packages.
Speaker 2: Are people coming on board wanting to see a roadmap
Speaker 2: for you to go public? I mean you're already a
Speaker 2: series stage.
Speaker 12: We're focused on building a generational company. That's what's really
Speaker 12: important to us. We want to change the face of
Speaker 12: housing and healthcare and want people to look back on
Speaker 12: it and say, I can't imagine what it was like
Speaker 12: back when all of these services were so expensive expensive?
Speaker 11: Were they like that?
Speaker 12: And people who are joining want to be part of
Speaker 12: making that change happen.
Speaker 2: How do you calm any anxiety that you're not going
Speaker 2: to do a wind surf, You're not going to do
Speaker 2: suddenly a big purchase where you, as the founder get
Speaker 2: lifted Alexander Wang style but leave others behind. How do
Speaker 2: you ensure that this idea that you take the team
Speaker 2: with you remains resilient.
Speaker 12: I think we've been through and through dedicated to the
Speaker 12: mission of the company, and there's so much more that
Speaker 12: we all want to be a part of. To make
Speaker 12: this happen and it's a really exciting journey to be on.
Speaker 2: We have no plans to do that well. Thus far,
Speaker 2: it seems as though the clients have loved you and
Speaker 2: speak very highly about the impact that your technology is
Speaker 2: having serving people in healthcare, people in housing. Mina Song,
Speaker 2: founder and CEO of Elise AI.
Speaker 5: On that fundraise, we can gractually done.
Speaker 2: Meanwhile, soaring valuations are coming from the likes also of
Speaker 2: the major foundational models think open Ai, think Anthropic, but
Speaker 2: also data bricks. They've also been boosting, but they're creating
Speaker 2: perhaps a bit of a full sense of strength among
Speaker 2: the VC markets. In reality, only the top one percent
Speaker 2: of companies are pulling in the majority of capital, and
Speaker 2: now more investors are beginning to worry about the health
Speaker 2: of the young Silicon Valley startups who most k Clark
Speaker 2: joins us for more And really you've been uncovering, as
Speaker 2: you always do within tech and venture capital. That's some
Speaker 2: of the trends. So these big whopping valuations cover up
Speaker 2: a dark side.
Speaker 11: Yeah, there's a tale of two markets and venture capital.
Speaker 13: Right now.
Speaker 11: You have the AI mega companies Open ai Andthropic, Deta
Speaker 11: Bricks raising rounds in what feels like in a monthly cadence.
Speaker 11: And then you have all of the other startups and
Speaker 11: many of them are actually struggling or even raising down rounds.
Speaker 2: So who are those types of startups because we just
Speaker 2: had a lease AI on these very two hundred and
Speaker 2: fifty million, relatively young startup and actually managing to well raise.
Speaker 2: But who are those who have been left behind, particularly
Speaker 2: those peraps who did well in twenty twenty one and
Speaker 2: don't really want to admit that they're going to have
Speaker 2: to face a downroute.
Speaker 11: I mean, it's exactly companies like that. A lot of
Speaker 11: the unicorns that were minted in twenty twenty one, a
Speaker 11: lot of the companies that were founded before twenty twenty one.
Speaker 11: The vcs like to call these sort of the non
Speaker 11: A native companies that are maybe trying to catch up,
Speaker 11: trying to incorporate AI, but really they were They were
Speaker 11: born before chat GPT, born before CHATCHAPT.
Speaker 2: Some of them have made the pivot, like I think
Speaker 2: of a Figma, for example, managed then IPO at evaluation
Speaker 2: that they were previously going to be bought at, and
Speaker 2: people have really managed to think of them as generative
Speaker 2: AI business even though they've integrated it as they grew.
Speaker 2: Where are some of the pitfalls? Where are the industry
Speaker 2: exposures that we're not liking right now?
Speaker 11: I mean, I think you have to look at e commerce, fintech, cryptocurrency.
Speaker 11: There are many areas in which investors are not as
Speaker 11: excited because they don't see how generative AI can really
Speaker 11: help that business. I think, though, the main point of
Speaker 11: weakness are the companies that raise at extremely high valuations
Speaker 11: during the last hype cycle, and investors now just don't
Speaker 11: see a path to allowing them to raise money at
Speaker 11: an even higher price. So those companies are kind of
Speaker 11: becoming what again VCS call like zombie unicorns and are
Speaker 11: just sort of slowly, slowly dying.
Speaker 2: Will they be allowed to die? Will they be forced
Speaker 2: to consolidate?
Speaker 5: What happen?
Speaker 11: I think there'll be some consolidation, But I do think
Speaker 11: you'll you'll sadly see a lot of just companies quietly
Speaker 11: disappearing and slowly dying over time. But of course there'll
Speaker 11: be M and A, and of course there will be winners.
Speaker 11: There will be companies like Figma and many others that
Speaker 11: were born pre CHATDPT and still find success.
Speaker 5: And you'll be there to document it. Okay, comeup, we
Speaker 5: appreciate it.
Speaker 2: Google. Well, it's set to show off new Pixel hardware
Speaker 2: later today and it's made by Google. Event just bringing
Speaker 2: man leap Sing who has technearch of Bloomberg Intelligence and
Speaker 2: talk about well, how important is the hardware for Alphabet
Speaker 2: parent company of Google.
Speaker 13: I mean everyone realizes Google has an advantage on the
Speaker 13: custom chip side because of their TPUs. I think that's
Speaker 13: going to show up in repeatedly, like they release Pixel
Speaker 13: every year, so you will see a much better Pixel
Speaker 13: version that can run LLLMS natively. That's the one thing
Speaker 13: everyone wants Apple to do. I think Google is already
Speaker 13: doing that obviously on device l LAMS is not that
Speaker 13: big off an opportunity right now. But look, whatever people
Speaker 13: think in terms of AI agents, to me, AI agent
Speaker 13: opportunity will come through on device l LAMS and yes
Speaker 13: there will be apps that run AI. LLMS browser is
Speaker 13: very important. I mean, in the case of Google, they
Speaker 13: have the Chrome browser for now now and then layering
Speaker 13: it on operating system I think gives them a unique
Speaker 13: advantage along with the chips. So that's what I feel
Speaker 13: they will emphasize at the event.
Speaker 2: This asset is incredibly useful to them and really only
Speaker 2: useful to them and will wither and die on the
Speaker 2: vine if sold to another. But compare and contrast how
Speaker 2: important it is to show off it within their hardware.
Speaker 2: That's to say, a Samsung which was also infused with
Speaker 2: Gemini too.
Speaker 13: Yeah, and look, Android operating system is used by a
Speaker 13: lot of other OEMs. So from that perspective, what Google
Speaker 13: has done well is to showcase AI capabilities on all
Speaker 13: kinds of hardware. I mean, even the earbuds that they
Speaker 13: will showcase I expect at the event will have some
Speaker 13: integration of AI into variables because that's what they want
Speaker 13: to show. At the end of the day. Your llms
Speaker 13: right now will be distilled into smaller versions that can
Speaker 13: do intelligent tasks, whether it's scheduling or voice assistance. And
Speaker 13: that's where Google has a unique advantage because it has
Speaker 13: the chips, it has the LLM, it has all the data,
Speaker 13: and it has the family of apps with you know,
Speaker 13: over two billion plus users, and that is why it
Speaker 13: knows so much that it can do personalized AI that
Speaker 13: others can. So to my mind, they are in a
Speaker 13: unique position. Obviously, they have a small market share when
Speaker 13: it comes to smartphones, but they're doing enough to showcase
Speaker 13: that embedded AI element which could potentially drive up their
Speaker 13: share when it comes to the hardware side.
Speaker 2: Yeah, briefly, how much could they steal from a cluster
Speaker 2: theory offering.
Speaker 13: Well, I mean, look, Apple has their problems. They have
Speaker 13: to figure out a way to integrate llms, whether through
Speaker 13: partnerships or through their own I think it will be
Speaker 13: through partnerships. In the case of Google, they will use
Speaker 13: all the OEMs, so really the advancements will be at
Speaker 13: the operating system later, but they have to showcase that
Speaker 13: in their own hardware first. So that's why this event
Speaker 13: is quite important.
Speaker 2: So too is as we wait in anticipation of Judge
Speaker 2: Metas ruling on whether or not they're able to keep
Speaker 2: Chrome as well. Bloombig Intelligence man Deep saying we love
Speaker 2: having him as always as we anticipate some of that
Speaker 2: hardware coming out. But that does it for this edition
Speaker 2: a Bloomberg Tech. One last check on these markets before
Speaker 2: we leave, because it's been a volatile hour of trading
Speaker 2: during the show. We're off by one and a quarter
Speaker 2: percent on then astat one hundred socks is feeling the
Speaker 2: pain and video is down significantly. We're off by two
Speaker 2: percent on the Semiconductor Index scrypto though turning back into
Speaker 2: the red. There is risk and anxiety building about some
Speaker 2: of the valuations in the market. We see some profit taking.
Speaker 2: Don't forget, though, to check out our podcast. You can
Speaker 2: find it on the terminal as well as you do
Speaker 2: online on Apple, Spotify, and iHeart from New York. This
Speaker 2: is Boomberg Tech.
Speaker 6: Mm hmmm mm hmmmmmmmmmmmmmmmm