Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Vla Low in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: US Defense Secretary Pete Hegsev gives an update on Iran.
Speaker 2: As we near the end of week two of the war.
Speaker 4: You know, the new so called not so Supreme leader
Speaker 4: is wounded and likely disfigure.
Speaker 2: Class.
Speaker 3: Adobe CEO Shantanu and the Ryan will resign amid skepticism
Speaker 3: about the company's ability to thrive in the AI era,
Speaker 3: and the S ANDP is considering changes to rules governing
Speaker 3: how companies join its index, which could fast track SpaceX's
Speaker 3: entry after an IPO. Let's get to markets, and this
Speaker 3: is what the financial markets look like this Friday. It's
Speaker 3: a kind of continuation of the broader theme of the week.
Speaker 2: There is slight.
Speaker 3: Pressure on equities and asat one hundred is modestly lower,
Speaker 3: basically flat. And you see Brent crude, the global benchmark
Speaker 3: for oil above one hundred dollars a barrel. With a
Speaker 3: micro focus of what's happening in the Middle East and
Speaker 3: the Gulf, there has been some other news flow and
Speaker 3: earning considerations around that. When it comes to the tech sector,
Speaker 3: we can get to those later in the hour, but
Speaker 3: right now it is very much the macro and what
Speaker 3: is happening with the war in Iran. President Trump and
Speaker 3: Iran's leadership are both striking a defiant tone as the
Speaker 3: war in Iran is in its second week, with Trump
Speaker 3: vowing new strikes with quote unparalleled firepower. US Defense Secretary
Speaker 3: Pete Hegseff has also weighed in saying Iran's new Supreme
Speaker 3: leader is likely wounded following recent attacks. Here with all
Speaker 3: of the latest is Bloomberg's Washington correspondent Tyler Kendall, what
Speaker 3: do we need to know?
Speaker 5: Yeah, hey, and good morning. While as you mentioned, the
Speaker 5: US is threatening Iran with fresh attacks, the latest suggestion
Speaker 5: that there is going to be no let up in
Speaker 5: this conflict. We heard from President Trump in a post
Speaker 5: on truth Social earlier where he said that the US
Speaker 5: maintains unlimited ammunition and has quote plenty of time.
Speaker 2: Plus.
Speaker 5: We heard from the US Defense Secretary Pete Hegseth and
Speaker 5: a briefing to reporters earlier today where he confirmed the
Speaker 5: US and Israel have hit more than fifteen thousand Iranian
Speaker 5: targets and says that Iran's one way drone usage is
Speaker 5: now down ninety five percent, that.
Speaker 4: The United States is decimating the radical Iranian regimes military
Speaker 4: in a way the world has never seen before. Never
Speaker 4: before has a modern capable military which Iran used to
Speaker 4: have been so quickly destroyed and made combat ineffective, devastated from.
Speaker 5: An operational level. We know that insuring safe passage through
Speaker 5: the Strait of Hermus remains a top priority, as Secretary
Speaker 5: Hegseth went on to say, quote, We've been dealing with it.
Speaker 5: Bloomberg News is now reporting that several back channels have
Speaker 5: been opened between US allies and Iran about reopening the
Speaker 5: straight Those sources caution that they are not optimistic that
Speaker 5: the efforts are going to yield results. Earlier today, a
Speaker 5: Turkish government official did confirm that a Turkish flagged vessel
Speaker 5: did make its way through the critical waterway, the latest
Speaker 5: example about negotiating for safe passage, but ed as there
Speaker 5: is mounting political pressure on President Trump when it comes
Speaker 5: to higher energy prices. We did see the US and
Speaker 5: move yesterday move to wave certain sanctions related to Russian oil.
Speaker 5: We saw a second temporary waiver issued for those cargoes
Speaker 5: that are already at c ED at this point. Are
Speaker 5: data analyzed by Bloomberg estimates that this could impact nearly
Speaker 5: three hundred and ten thousand refined products bluebooks.
Speaker 2: Tyler Kendall, thank you.
Speaker 3: With the war in Iran continuing to Royal Region, Meta
Speaker 3: has announced its pausing part of its major internet expansion
Speaker 3: efforts in Africa, specifically work on a key underwater cable
Speaker 3: system that would have run through parts of the Middle East,
Speaker 3: including Oman, the UAE, and Saudi Arabia. Here with the
Speaker 3: details is Bloomberg's tech editor Olivia Solon. We're showing that
Speaker 3: the kind of map the network, Olivia, of the cables
Speaker 3: zoomed in on the Gulf region explain the actions the
Speaker 3: metas taking and the details that we need to know.
Speaker 6: Right well, because of the war in Iran and the
Speaker 6: missiles that have been coming across the Persian Gulf, Meta
Speaker 6: well has been kind of forced to take the decision
Speaker 6: to stop building part of this enormous cable system that's
Speaker 6: been building for.
Speaker 2: A while called to Africa.
Speaker 6: They've actually built the bigger part of it around the
Speaker 6: continent of Africa, but last year they were forced to
Speaker 6: sort of delay work on a section running through the
Speaker 6: Red Sea because there were whothy missile attacks on ships there.
Speaker 2: And when they.
Speaker 6: Did that, they said, it's okay, We've still got this
Speaker 6: other section going through the Persian Gulf, and that's the
Speaker 6: part that we're talking about now. Well, now, because of
Speaker 6: the missile attacks there, the boats that install cables have
Speaker 6: issued of what's called a force measure notice saying they
Speaker 6: can no longer continue to meet their contractual obligations due
Speaker 6: to obviously the massive safety concerns, And so that means
Speaker 6: this part of this very important new high capacity fiber
Speaker 6: optic cable is on hold.
Speaker 3: The bigger picture for Meta, what is it that they
Speaker 3: were trying to achieve in Africa in the region more
Speaker 3: broadly in laying down basically what is updated infrastructure.
Speaker 6: Right, they want to bring a huge amount more connectivity
Speaker 6: to the Middle East and Africa, and I think they will.
Speaker 6: You know, they've already succeeded that partially, but this huge
Speaker 6: section both in the Red Sea and now in the
Speaker 6: Persian Gulf means that this additional capacity that was going
Speaker 6: to really help sort of fuel the data center build
Speaker 6: out that's happening in the region is not to be available,
Speaker 6: at least in the short term.
Speaker 3: Bloomberg's Olivia Solon thank you another meta headline. The company
Speaker 3: is reportedly delaying the role out of its latest AI
Speaker 3: model after internal testing showed it underperformed compared with rival systems.
Speaker 3: That's according to a report by The New York Times.
Speaker 3: This is how equity markets reacting to that meta under
Speaker 3: pressure down almost three percent. Then, you know, looking at
Speaker 3: the trading, particularly in the pre market, alphabet Pairent of
Speaker 3: Google is up percentage point now but had been up
Speaker 3: a little bit more markedly. For more on what this
Speaker 3: kind of indicates about the competitive landscape and what it
Speaker 3: means for investors, Ioka, Yoshioka, portfolio consulting director a wealth
Speaker 3: enhancement group and you know interesting case study, right, Meta
Speaker 3: in alphabet both names that you hold that you look at,
Speaker 3: there are let's say three or four berths for big
Speaker 3: frontier model labs or the big tech companies working on
Speaker 3: next generation models. And when you get a piece of
Speaker 3: news like this, you see meta move to the downside,
Speaker 3: alphabet moved to the upside.
Speaker 2: What do you interpret from that?
Speaker 7: Sure ed?
Speaker 8: So you know, when we think about both of these stocks.
Speaker 8: You know, we try to look at things in the
Speaker 8: context of the long term versus some of these short
Speaker 8: term moves that we're seeing in markets. You know, we
Speaker 8: do see these dislocations from time to time, but over
Speaker 8: the long term, we know that the growth rates for
Speaker 8: both of the stocks are very high and they're you know,
Speaker 8: they've got high quality balance sheets supporting the growth that
Speaker 8: they're trying to accomplish.
Speaker 3: Right now, we're trying to digest still ongoing data, largely
Speaker 3: rearing relating to earnings, and I think just before the
Speaker 3: earning season hit, you had many people in the markets
Speaker 3: come out and say, this is this is what we
Speaker 3: will will judge momentum by simply earnings performance in aggregate
Speaker 3: at this point when it comes to particularly the hyperscalers,
Speaker 3: but our focus on AI. What was it that you
Speaker 3: learned from the earnings season?
Speaker 8: You know, earning season provided a lot of incremental information
Speaker 8: just regarding the overall buildout of AI and where we
Speaker 8: are and the focus that investors have on that return
Speaker 8: on investment that everybody wants to see, just given how
Speaker 8: much CAPAX is being spent by the overall hyperscalers. But
Speaker 8: you know, we also saw that earnings wasn't everything, you know,
Speaker 8: especially in the software space in which earnings continue to
Speaker 8: go higher and yet the multiples got destroyed.
Speaker 2: So the software space interesting.
Speaker 3: I guess if you look below the index level and
Speaker 3: take a look at January, February, now March, what was
Speaker 3: it you saw in investor behavior and the attitude towards
Speaker 3: the tech sector?
Speaker 8: Sure, so you know, it really depends on some of
Speaker 8: the macro economic data that we've been dealing with, some
Speaker 8: of the geopolitical data. To January and February, we clearly
Speaker 8: saw that sell off in software and it reverse in
Speaker 8: March as a little bit of a flight to quality again,
Speaker 8: seeing a little bit of a balance from something that
Speaker 8: had sold off quite a bit and less cyclical per se.
Speaker 8: And you know, you saw the safety of the mag
Speaker 8: seven as well. During this sort of geopolitical conflict that
Speaker 8: has been going on.
Speaker 3: What's dominating the news cycle is war in Iran. Again,
Speaker 3: you know, from the technology investors' perspective, what is the
Speaker 3: incremental data, the soft data, the macro level data that
Speaker 3: you're tracking to make decisions with the portfolio.
Speaker 8: I think from our standpoint, it's clearly the duration of
Speaker 8: this conflict, which is going to be key. I think
Speaker 8: everybody else has talked about this, and it's the one
Speaker 8: thing that nobody really can forecast. If it's short, it's great.
Speaker 8: If it's a little bit longer, it's a little bit
Speaker 8: more detrimental. There's key raw materials, especially for semiconductors that
Speaker 8: could sort of offset some of the production issues that
Speaker 8: we've seen in the past, and so, you know, really
Speaker 8: supply chain issues. We don't want them to kind of
Speaker 8: come back again, and you know, really hit inflation. And
Speaker 8: so those are some of the key metrics we're looking at.
Speaker 8: But tech specifically, I think can be a little bit
Speaker 8: more isolated, just because of the long term secular growth
Speaker 8: nature of a lot of the companies in the tech sector.
Speaker 2: AI is still the dominant theme for.
Speaker 8: You absolutely, especially when it comes to technology and for
Speaker 8: the overall market, it's just the overall contribution from the
Speaker 8: hyperscalers and capex and what that means for the overall
Speaker 8: US economy and globally as well, and you know, just
Speaker 8: the use cases and the workflow changes for a lot
Speaker 8: of enterprises. I think is the predominant sort of you know,
Speaker 8: issues that we're all trying to figure out over the
Speaker 8: next several years.
Speaker 3: Okay, so next week we either do or we don't
Speaker 3: have a big macro event, which is in Nvidia's GtC conference.
Speaker 3: You know, it's so difficult to gauge how that moves
Speaker 3: the need or are you genuinely sort of braced for
Speaker 3: it is a big item on the calendar or kind
Speaker 3: of noise really and hype around what's happening.
Speaker 8: You know, it's really going to depend on what kind
Speaker 8: of information sort of comes out there. You know, in
Speaker 8: video stock has been a little bit range bound for
Speaker 8: the last several months, and hopefully, you know, if they
Speaker 8: have some sort of big announcement, perhaps it moves the stock.
Speaker 8: But I think that the bar is high. You know,
Speaker 8: you've seen Earning's growth of over seventy percent, and you
Speaker 8: know the stock is trading at twenty two times. We're
Speaker 8: going to see some updates on Vira and via Rubin
Speaker 8: and even Fineman, and I think when we get some
Speaker 8: of that additional detail, perhaps it will move the stock.
Speaker 2: Right.
Speaker 3: You know, at Nvidia GtC and DC we got that
Speaker 3: surprise half a trillion dollar figure from Jensen one which
Speaker 3: was literally on a slide behind him and a little
Speaker 3: more information than that. Yoko Yoshioka wealth Enhancement grew. Great
Speaker 3: to have you back on the program, Thank you very much.
Speaker 2: Some news.
Speaker 3: Amazon plans to use chips from startups Cerebras alongside its
Speaker 3: own training and processors.
Speaker 2: It's a combination that.
Speaker 3: The companies say we'll be able to better run AI software.
Speaker 3: AWS will begin offering a new service based on the
Speaker 3: arrangement in the second half of twenty twenty six. According
Speaker 3: to a statement, financial terms weren't disclosed, and when that
Speaker 3: headline hit, By the way, there was a little move
Speaker 3: lower in nvideo to session lows, but it kind of
Speaker 3: bounced back after Okay, coming up. Leadership uncertainty at Adobe
Speaker 3: overshadows otherwise pretty steady results. We're going to discuss that next.
Speaker 3: This is blim big tech. Shares of Adobe are really
Speaker 3: under pressure here. We're off session lows down six and
Speaker 3: a half percent. At one point in the session, we're
Speaker 3: on track for our biggest drop in exactly one year
Speaker 3: to the day. On the week, Adobe very close to
Speaker 3: having its worst five day performance since the end of
Speaker 3: twenty twenty four.
Speaker 2: The news.
Speaker 3: The company announced on its earnings call that Shantanu Nuran,
Speaker 3: who served as CEO for.
Speaker 2: Nearly two decades.
Speaker 3: Is stepping down the stock has already been under pressure anyway,
Speaker 3: down over thirty percent on the last year or so.
Speaker 3: Is it faces concerns about its ability to thrive in
Speaker 3: the AI era. Let's get to it. Bloombok's Brodie Ford
Speaker 3: is here with us. I mean, this is not a
Speaker 3: new story with Adobe and whether it is managing well
Speaker 3: transition into the AI era.
Speaker 2: But we'll start with Shantanu.
Speaker 3: You and I exchanged emails about well what happens next?
Speaker 3: So tell us you know, there's an effort to find
Speaker 3: a successor. And I guess did we get any insight
Speaker 3: as to why Shantanu's decided to take this decision at all?
Speaker 5: Yeah?
Speaker 9: Well, Shantanu was a legend, right, I mean, he was
Speaker 9: in that seat for eighteen years, and he gets a
Speaker 9: lot of credit for turning Adobe from a company where
Speaker 9: you just buy a photoshop or another product tool in
Speaker 9: time to one of these recurring subscription businesses that is
Speaker 9: just normal, but at the time was quite novel.
Speaker 10: But at the end of the day, I.
Speaker 9: Think he was seen as a CEO of that era
Speaker 9: and the AI era. A lot of these SaaS companies
Speaker 9: are needing to undergo a transition or reinvention, and it
Speaker 9: appears that he or the board or somebody decided that
Speaker 9: he might not have been the right person to lead
Speaker 9: that transition.
Speaker 3: There were some data points in the earnings themselves, you know,
Speaker 3: customer behaviors for example, particularly about images, things like that.
Speaker 3: What did you learn about the AI story for Adobe?
Speaker 9: People that are using AI within Adobe products? But the
Speaker 9: big risk for them is that the cost of content
Speaker 9: creation has gone down a lot. A lot of the
Speaker 9: hit creative programs are not made by Adobe, right. I mean,
Speaker 9: Adobe's valuation for a long time was based on being
Speaker 9: really kind of the only game in town if you
Speaker 9: were a professional, and every day that becomes a little
Speaker 9: less true. And that's what they have to reckon with.
Speaker 3: We said at at the start of the segment, so
Speaker 3: we should probably go back to it that actually earnings
Speaker 3: were okay. You know, if you if you can move
Speaker 3: past the news that the CEO of the last two
Speaker 3: decades is moving on, what did the numbers say about
Speaker 3: the business.
Speaker 9: It's quite similar to a lot of the big sass names,
Speaker 9: whether it be Workday or Salesforce, that they're seeing steady
Speaker 9: growth slight decelerations some uptick of their AI products, but
Speaker 9: at the end of the day, it's just not enough
Speaker 9: to convince investors that AI will be an additive and
Speaker 9: not a competitive force against their business.
Speaker 3: Being Boss Brady Ford all across the software space, thank
Speaker 3: you very much. Another news item, a jury in Los
Speaker 3: Angeles will soon decide the outcome of the high stakes
Speaker 3: social media trial and the claims that sites like Instagram
Speaker 3: and YouTube are dangerously addictive to young people. Final arguments
Speaker 3: just concluded after roughly four weeks testimony from medical experts,
Speaker 3: a whistleblower, and Mark Zuckerberg himself. The jury of seven
Speaker 3: women and five men is set to begin deliberations today.
Speaker 3: Now coming up, Ramp CEO Eric Lyman joins us to
Speaker 3: discuss the company's latest acquisition and an expansion into Europe.
Speaker 3: That conversation is coming up next. This is Bloomberg Tech.
Speaker 3: Fintech startup Ramp is acquiring European payments platform bill Hop.
Speaker 3: The deal will help Ramp expand its footprint, in large
Speaker 3: part because bill hop is licensed in the UK and Sweden.
Speaker 3: To speak with RAMP CEO Eric Lyman and like this
Speaker 3: is interesting, right, I think the best place to start
Speaker 3: is Europe. If you regard UK is Europe and Sweden
Speaker 3: and then Audics. You know, why Europe and why now
Speaker 3: with this Eric.
Speaker 10: And thanks so much for having me on, And it's
Speaker 10: a reason that we're incredibly excited about.
Speaker 11: We're already working with so many of the fastest growing
Speaker 11: companies based in Europe. We think about companies like eleven Labs,
Speaker 11: to great companies started by European founders like Stripe in Versell,
Speaker 11: and I would say Europe is having a moment and
Speaker 11: we want to be there for it and bring so
Speaker 11: much of it be brought to American companies, to the
Speaker 11: companies operating in that region.
Speaker 2: That's an interesting point.
Speaker 3: Like when you posted the news this morning on different
Speaker 3: social platforms, you know, one of the interesting points of
Speaker 3: discussion is what is the competitive landscape like for you
Speaker 3: in Europe and how is it different to in the US?
Speaker 3: Like in America? And correct me if I'm wrong, but
Speaker 3: you go up against kind of the big banks. Is
Speaker 3: that the same in Europe or is it a different
Speaker 3: industry there?
Speaker 11: In many ways, it's very consistent, I would say, whether
Speaker 11: it's the US or even in Europe. Classically, if you
Speaker 11: were a bank you were able to move money, and
Speaker 11: if you weren't, you could sell weird after market software
Speaker 11: to do your expenses or pay your bills or things
Speaker 11: like that. And the result was probably what most people
Speaker 11: still feel of. You know, one hour a month, you
Speaker 11: have the worst hour slowly doing your expenses across different systems.
Speaker 11: And part of what we proved out in the US
Speaker 11: is it doesn't have to.
Speaker 10: Be so hard.
Speaker 11: You know, we've created cards where you tap them and
Speaker 11: your expense report is done for you, your books are
Speaker 11: closed for you. And the result is that companies spend less.
Speaker 11: The average business spends about five percent less, and the
Speaker 11: average business on Ramp grew last year by about sixteen percent,
Speaker 11: which is multiple times the US average.
Speaker 10: And so just as we've brought this to the US, we.
Speaker 11: Want to bring that same innovation and more to the
Speaker 11: great companies being built and operate out of Europe.
Speaker 3: Operate out of Europe. But like Lot's, it's a global world.
Speaker 3: Is a funny thing to say, but you know, many
Speaker 3: of your customs or clients, right they would have a
Speaker 3: footprint operationally in different jurisdictions like the US and Europe.
Speaker 3: And you know, is this kind of therefore about like
Speaker 3: the multinational client that you're trying to go after.
Speaker 10: It's a bit of both.
Speaker 11: I mean, so for today, let's say you're a multinational
Speaker 11: leader like a Shopify or like a CB. You can
Speaker 11: issue cards today locally and make payments all around the
Speaker 11: world in Europe, in Asia, in Latin America, you name it.
Speaker 10: Ramp is able to do that.
Speaker 11: But part of what this acquisition brings is the capabilities
Speaker 11: to serve European headquartered or based companies without operations in
Speaker 11: the United States, and so they're able to benefit from
Speaker 11: that same global infrastructure. But it really allows us to
Speaker 11: reach a much larger market.
Speaker 3: Talking a little bit about RAMP the company, the startup
Speaker 3: and you running it, you have like the who's who
Speaker 3: list of investors. And what I find interesting is not common,
Speaker 3: not unique to you. You know, it's come up a
Speaker 3: lot recently. You sat on a lot of the money
Speaker 3: that you raised for quite a long time. You've gone
Speaker 3: out and done an acquisition. You know what's that like,
Speaker 3: you know, deciding to spend the funds raised.
Speaker 11: It's look, with everything we do, just as we're trying
Speaker 11: to help our customers get more from every dollar an hour,
Speaker 11: we want to too and I think you're exactly right.
Speaker 11: The business has raised more than two billion dollars of
Speaker 11: equity capital, the vast, vast majority of it is still
Speaker 11: on balance sheet, and RAMP is even generating cash even
Speaker 11: as we're one of the fastest growing companies in the world.
Speaker 3: Now interesting, would you would you give me a number
Speaker 3: on that, you know, any sort of financial metric on
Speaker 3: the health of how it's going.
Speaker 11: You know, I would say this, We've had four straight
Speaker 11: quarters of accelerating growth. The businesses call it doubling every year,
Speaker 11: which is really an outlier. And last year, I believe
Speaker 11: together we shared that last summer we passed more than
Speaker 11: a billion dollars a year in revenue and US dollars,
Speaker 11: and so we've seen that growth rate even accelerate.
Speaker 10: So it's quite unique.
Speaker 3: You run a tight ship and you know you're trying
Speaker 3: to grow RAMP, and I really appreciate you know, sharing
Speaker 3: the dates are on that point.
Speaker 2: The landscape's very interesting.
Speaker 3: Like Brex selling to Capital One as an example, over
Speaker 3: many years on the show, the guys of Brex would
Speaker 3: never have said that that would be the case. How
Speaker 3: do you feel about ramps independence, you know, long term
Speaker 3: and where it fits in a big sea of large
Speaker 3: financial players.
Speaker 11: I think it's a really special thing. If you talk
Speaker 11: to let's say a finance leader of a company, let's
Speaker 11: say with five hundred employees, their finance suite looks like
Speaker 11: a mess. There we find there's something like twenty tools
Speaker 11: on average, something for cards and for bill payments, something
Speaker 11: for ar something for expenses, something for procurement, something for approvals.
Speaker 10: It's horrific.
Speaker 11: And part of what we've done is collapse that and
Speaker 11: really simplify it. And I think that has first made
Speaker 11: us unique in the market and allowed us to grow
Speaker 11: even faster than the largest financial institutions.
Speaker 10: And so we're excited.
Speaker 11: We're over two percent of all the corporate and small
Speaker 11: business card transactions in the US, and well.
Speaker 10: We're very excited about that.
Speaker 11: We look forward to taking on the next ninety eight
Speaker 11: percent and delivering something better.
Speaker 2: Eric, we just have thirty seconds.
Speaker 3: But looking at Block as an example, will you reduce
Speaker 3: headcount because of AI?
Speaker 11: Look, we have salespeople who were closing two three times
Speaker 11: the dollar value of deals than we did last year.
Speaker 11: And from my vantage point, when you have people who
Speaker 11: can do that, you want to hire as many as
Speaker 11: you can as.
Speaker 10: Fast as possible.
Speaker 3: Eric Lyman Cram is really great to have you back
Speaker 3: on Bloomberg Tech.
Speaker 2: Thank you very much.
Speaker 3: Now, coming up on the show, changes to rules governing
Speaker 3: the S and P five hundred could rocket SpaceX onto
Speaker 3: the index. We're gonna have details on that Bloomberg story.
Speaker 3: Next it is halftime. These are the markets, and this
Speaker 3: is Bloomberg Tech. Welcome back to Bloomberg Tech. I'm Ed Ludlow,
Speaker 3: SMP dal Jones Indices considering changes to how companies join
Speaker 3: the S and P five hundred.
Speaker 2: That's all.
Speaker 3: According to sources, the move could potentially fast track elon
Speaker 3: musk SpaceX onto the lists after it's expected to be
Speaker 3: a blockbuster public market daily later this year. Bloombergs car
Speaker 3: Porto is here with the details. It's a big story
Speaker 3: that the team broke and tried to explain in detail
Speaker 3: the considerations that are happening. And they are considerations, So
Speaker 3: let's start with that. What have we learned in our reporting?
Speaker 12: Well, yeah, it's important to note that no final decisions
Speaker 12: have been taken on this. However, should S and P
Speaker 12: decide to change its rules its committee, it would be
Speaker 12: absolutely momentous. Who would you excuse the pun put rocket
Speaker 12: fuel on the trading of SpaceX as a new company.
Speaker 3: You and I did a story together yesterday. It was complicated,
Speaker 3: in part based on regulatory filing, in part the people
Speaker 3: we spoke to. But in short, SpaceX's acquisition of Xai
Speaker 3: has closed and there is some ownership cans that took place.
Speaker 2: Explain it to our audience.
Speaker 12: Well, I wish we had half an hour, But in short,
Speaker 12: it's effectively tiding up the balance sheet, putting different pieces
Speaker 12: of equity into different boxes. Tesla's investment in Xai has
Speaker 12: been rolled over into SpaceX. Some of the early investors
Speaker 12: who've been with Elan for a long time across different companies,
Speaker 12: those like Vallar and DFJ have also had the stakes
Speaker 12: in SpaceX slightly increased as part of these changes.
Speaker 10: It's all designed to make your.
Speaker 12: Equity term sheet look a little bit more normal as
Speaker 12: you approach the IPO process, which we still expect to
Speaker 12: happen this summer or into Neil Autumn.
Speaker 3: Okay, Bloembos card Border part of the team that's done
Speaker 3: a lot of reporting on I guess mechanics of what's
Speaker 3: happening with SpaceX ahead of an anticipated public market debut.
Speaker 2: Let's get an investors perspective on all of it.
Speaker 3: Peter Singlehurst leaves the private company's team at Bailey Gifford
Speaker 3: an investor in SpaceX, but other names that I guess
Speaker 3: we've talked in the text of being potential blockbuster IPOs
Speaker 3: down the line. Anthropic is another example. Peter, you welcome
Speaker 3: back to the show. I think it's the first time
Speaker 3: we've had the opportunity to speak since SpaceX acquired XAI.
Speaker 3: And I guess just what's your reaction to that, How
Speaker 3: you guys felt about it, the interpretation of the rationale
Speaker 3: behind it.
Speaker 13: I think when you step back and you consider what
Speaker 13: has made SpaceX such an incredible business over the last
Speaker 13: ten years, it's their ability to drive down the cost
Speaker 13: of launch. It's the deflationary nature of their business. And
Speaker 13: when you look at other hardware categories where we've seen
Speaker 13: that historically, such as Moore's law in transistors or Flatley's
Speaker 13: law in genomics, when you drive down cost.
Speaker 2: By order of the magnitude, it.
Speaker 13: Opens up phenomenal unforseeable use cases, and we're seeing that
Speaker 13: in the domain of space now. Starlink has been the
Speaker 13: first application of that, and we think there's a statable
Speaker 13: case that data centers in space could well be the
Speaker 13: next application that opens up as you drive down that
Speaker 13: cost of launch. Now it's early days for that, it
Speaker 13: remains unproven, but if that is to be something that
Speaker 13: is feasible, being vertically integrated into an LM model such
Speaker 13: as the Rock model will be an advantage for SpaceX.
Speaker 3: At the time that the news came that SpaceX would
Speaker 3: acquire Xai, we did some reporting that essentially XAI operates
Speaker 3: as a subsidiary of SpaceX in parts. There's also itar considerations,
Speaker 3: but there's also xai's financial situation, which is the debt
Speaker 3: burden and its rate of cash burn. How did you
Speaker 3: feel about SpaceX taking on that balance sheet?
Speaker 13: Essentially, I think if any business is going to take
Speaker 13: on a company that has those necessary capex requirements, it
Speaker 13: needs to be a company that's in a very robust
Speaker 13: financial position, and SpaceX is in a privileged position of
Speaker 13: having not only a very strong balance sheet, but having
Speaker 13: strong profitability in cash flow dynamics. And so the combination
Speaker 13: of a business that does require significant CAPEX in the
Speaker 13: form of Xai, alongside a business that has a history
Speaker 13: of high capex investment, but has been able to show
Speaker 13: how that can translate into help very strong levels of profitability.
Speaker 2: I think could be a strong combination.
Speaker 3: Kyle did I think a pretty good job a few
Speaker 3: moments ago explaining the sort of technicalities of a transaction
Speaker 3: closed like this. But the big picture is the net
Speaker 3: result of Tesla now having literally a financial stake in
Speaker 3: SpaceX because of the investment it made of the series
Speaker 3: of XAI that being rollover in SpaceX, the Elon Inc.
Speaker 3: Story is kind of coming together. How do you feel
Speaker 3: about that?
Speaker 2: You know, the proximity of those two giants.
Speaker 13: I think there's always been a complicated web of interconnections
Speaker 13: between Elon Musk's companies and we saw this as Tesla
Speaker 13: owners when they acquired solar City. Ultimately, what will drive
Speaker 13: shareholder returns will be to strong execution and growth of
Speaker 13: these businesses. And at the time of the Solar City
Speaker 13: acquisition by Tesla, it was controversial, but in the end
Speaker 13: it turned out not to really matter because Tesla was
Speaker 13: such a phenomenally successful business and we believe that dynamic
Speaker 13: will exist here with SpaceX. It is probably one of
Speaker 13: the businesses in our portfolios with one of the most
Speaker 13: robust competitive advantages and growth opportunities. If you look at
Speaker 13: orbital launches done annually, SpaceX is leap and bounds ahead
Speaker 13: of anybody else. It has an incredibly strong market position,
Speaker 13: a very strong proposition to its customers, and we think
Speaker 13: ultimately that will be the main driver of return to shelders.
Speaker 3: We're showing kind of the rest of your portfolio of
Speaker 3: private company investments, and I get that's actually split across
Speaker 3: a you know, more than one trust, right, But what
Speaker 3: those companies all have in common is the staying private longer.
Speaker 3: Many of them have done tenders or secondaries. Explain, you
Speaker 3: know what's happening in that private markets, in that private
Speaker 3: market that's supporting that theme.
Speaker 13: Yeah, So there is a two kinds of transactions that
Speaker 13: we see happening in the later stages of the private markets.
Speaker 13: We are continuing to see very large primary capital rounds
Speaker 13: where companies are raising capital to invest in their businesses.
Speaker 13: And they're it's businesses such as anthropic such as and
Speaker 13: ill such as Wave that are raising billions of dollars
Speaker 13: to invest in the huge market opportunities that they have.
Speaker 13: But that capital that they're raising is going into their
Speaker 13: businesses for investment. You then have a second category of
Speaker 13: large late stage transaction, which are secondary transactions where either
Speaker 13: early shareholders or employees are selling to other shareholders. And
Speaker 13: I would categorize the transactions done by the likes of
Speaker 13: Data Bricks or Stripe or indeed some of the transactions
Speaker 13: that SpaceX have done in this cap. Now, what's making
Speaker 13: that possible is the fact they have businesses in very
Speaker 13: strong financial positions that are in many cases generating cash
Speaker 13: flow where they actually don't need more external capital, but
Speaker 13: where there's clear demand for their shares, and so matching
Speaker 13: off some of that demand and supply is good for
Speaker 13: employees who want to be able to realize some of
Speaker 13: the gains from their options. It's good for the companies
Speaker 13: as they start to potentially reduce some of the overhe
Speaker 13: that might exist as they come to the public markets.
Speaker 13: And it's good for investors who want to buy shares
Speaker 13: in those companies.
Speaker 3: Peter, we've been very focused on anthropic and anthropics relationship
Speaker 3: with the US government, with the Department of Defense. My
Speaker 3: understanding is that there's like this group of investors that
Speaker 3: basically applaud Dario Ammi Day for having redlines, but also
Speaker 3: you know that there's this belief that there is a
Speaker 3: commercial advantage in holding that moral high ground. They would
Speaker 3: cite the data of Claud's placement on the different app
Speaker 3: stores and downloads activity after the Pentagon labeled it at
Speaker 3: potential supply chain risk. But it's that sort of commercial
Speaker 3: opportunity of taking the moral high ground that I wanted
Speaker 3: to ask you about and your thesis towards Anthropic in
Speaker 3: that respect.
Speaker 13: I personally wouldn't contextualize it within the realms of moral
Speaker 13: high ground. I think this actually comes down to business culture.
Speaker 13: So one of the things that we really focus on
Speaker 13: when we diligence business is the cultures of organizations. And
Speaker 13: then we're not looking for good cultures or bad cultures.
Speaker 13: We're looking for effective cultures, and we're looking for cultures
Speaker 13: that will be instrumental in driving the performance of businesses.
Speaker 13: And one of the things that's striking about Anthropic is
Speaker 13: that they have a very strong culture around AI safety
Speaker 13: and over the long run, you do need to make.
Speaker 2: Sacrifices to maintain cultures.
Speaker 13: And so where we see companies and we're seeing this
Speaker 13: in the case of Anthropic making sacrifices and taking difficult
Speaker 13: decisions to act in ways that are congruent with their cultures.
Speaker 2: We applaud that.
Speaker 13: Because we think it enables companies to survive and thrive
Speaker 13: in the long term.
Speaker 3: Peter Singlehurst, head of private Companies at beg IF it
Speaker 3: has been great to have you back on bloom Betel.
Speaker 3: I really appreciate the depth that we went into across
Speaker 3: some of the companies in the portfolio. Now coming up
Speaker 3: in the show, we're going to speak to Lucid's c FO.
Speaker 3: Topic with Sayid. After a kind of difficult day for
Speaker 3: the shares yesterday, simple story invest Today, they told us
Speaker 3: about the future and more about their plans for Robotaxi.
Speaker 3: That conversation. Next, this is Bloomberg Tech. Lucid is trying
Speaker 3: to prove it can be more than in a luxury
Speaker 3: ev maker, and it's invested day. The company laid out
Speaker 3: a plan to scale into the high volume mid size market,
Speaker 3: partner more details on the partnership with Uber on Robotaxi,
Speaker 3: and most importantly, shortened the path to positive free cash flow.
Speaker 3: The big question now is execution and how they pay
Speaker 3: for growth without burning through too much capital. Joining us
Speaker 3: now is lucid CFO to think you said and welcome
Speaker 3: to the program.
Speaker 2: It's good to see you.
Speaker 3: I want to start, actually if I may, with the
Speaker 3: environment that we're in and just the supply chain impact,
Speaker 3: but also the financing impact that you're seeing from the
Speaker 3: war in Iran, because of course Saudi Arabia and different
Speaker 3: Saudi entities are your biggest backers. What are you saying
Speaker 3: on your desk right now?
Speaker 14: Well, for the moment, I mean, the disruption that we
Speaker 14: have seen have been rather minimal. So we have not
Speaker 14: noticed major disruption as far as our supply chain and
Speaker 14: so for we did see some tactical adjustment of some
Speaker 14: of the logistic costs of the shipping companies hav indeed
Speaker 14: increased some of the pricing, but as far as our
Speaker 14: operation is concerned, we didn't see any disruption for the
Speaker 14: time being. So we will need to see long term
Speaker 14: if the events and the tension are for too long,
Speaker 14: how it will impact the business. But for the moment,
Speaker 14: I have to say that the disruption is rather minimal.
Speaker 3: The big headline for you in the Finance Org was
Speaker 3: a timeline or a plan to get to positive free
Speaker 3: cash flow. Yes, I'd kindly ask for a little bit
Speaker 3: more detail. What is the timeline on that and mechanically,
Speaker 3: what are the levers you can use to achieve positive
Speaker 3: free cash flow.
Speaker 14: So we have two important linstones. The first one is
Speaker 14: the gross margin positive and this is expected to happen
Speaker 14: in the medterm and you should read the midterm basically
Speaker 14: the next three years. And the free cash flow positive
Speaker 14: expected by the late decades.
Speaker 10: So this is the plan that we have.
Speaker 14: This is the guidance that we have provided yesterday during
Speaker 14: our investor day. So several levers that we will be
Speaker 14: activating to get there. First of all, I mean we
Speaker 14: are in an industry where scale is important. School scale
Speaker 14: coming out of mid size is one of the key
Speaker 14: catalysts to allow us to go to break even margin
Speaker 14: and cash flow positive. So that's the first liver. The
Speaker 14: second one is the margin improvement and the additional revenue
Speaker 14: streams that we will be adding.
Speaker 10: To our top line.
Speaker 14: So the margin is expected to improve on the back
Speaker 14: again of the scale. The various improvements that we're doing
Speaker 14: not only in terms of constraining the bill of material
Speaker 14: or constraining some of the cost lines that we have
Speaker 14: in the company. It's also about simplifying what we will
Speaker 14: be bringing to the market. Going forward. So when you
Speaker 14: work on a platform with the ninety five percent part
Speaker 14: communality over time, this is how you leverage the cost
Speaker 14: and this is how you constrain it and you accelerate
Speaker 14: the journey towards the gross margin positive. Then there's the
Speaker 14: additional revenue stream and I guess that we will be
Speaker 14: talking about that. The fact of we winning software revenue
Speaker 14: revenue from business partnerships on robo taxes. This is additional
Speaker 14: catalyst which we'll accerate the journey.
Speaker 3: So we are so focused right now on the business
Speaker 3: model for Robotaxi for all the different conduits of what
Speaker 3: is a web of partnerships. Right you have announced Project
Speaker 3: Lunar purpose Built Robotaxi to see that. But what I
Speaker 3: want to understand is at volume, there's a financing risk
Speaker 3: and an execution risk from taking the vehicles off the
Speaker 3: production line and then a fleet operator taking them. So
Speaker 3: who takes on that burden? Whose balance sheet gets that done?
Speaker 10: Well?
Speaker 14: There are different models and these models are not meant
Speaker 14: to be static. So I mean speaking about what exists
Speaker 14: and what we already know. So the first deal that
Speaker 14: we have done with our partners with Nuru and Uber
Speaker 14: was a deal, which was based on the assumption that
Speaker 14: Lucid provides the technology and the platform, and the car
Speaker 14: or provides the software and the AI autonomous driving capabilities,
Speaker 14: and Uber takes on the asset. So this is how
Speaker 14: we have set up the first iteration of the deal,
Speaker 14: and we have always said that there will be older iterations,
Speaker 14: and yesterday the first step has been announced. It's not
Speaker 14: completely finalized. It will be finalizing in the coming weeks,
Speaker 14: but we have announced what the next step would be,
Speaker 14: and we can perfectly imagine that things will evolve over time.
Speaker 14: So the whole question is about the value chain in
Speaker 14: the ecosystem and how it is split between the different
Speaker 14: components or partners being involved in this business.
Speaker 3: We're having a finance conversation, which is, you know it's
Speaker 3: appropriate you are the CFO. I wonder like how interesting
Speaker 3: the mechanisms can get, Like, you know, Uber has a
Speaker 3: financial interest in this, the capital light models. So do
Speaker 3: you see maybe private equity or the banks coming in
Speaker 3: with some kind of special purpose vehicle? Right, they finance
Speaker 3: that block of volume production until sometime where the fleet
Speaker 3: operator pays you and says, here, here's the money for
Speaker 3: all the cars that we're taking from you because you're
Speaker 3: not going to operate the service, right, You're not going
Speaker 3: to operate the fleet. And then you know, to what
Speaker 3: extent do you need some revenue guarantees from those other partners?
Speaker 14: Yeah, so obviously, I mean the gold standard in these
Speaker 14: kind of businesses is too secure recurring revenues. So this
Speaker 14: is how you spread the risk over time, and this
Speaker 14: is how you give confidence on the validity of the
Speaker 14: business case. Having said that, I mean we are also
Speaker 14: staying away from whatever is associated with the capital intensive business.
Speaker 14: So I don't think that we will ever have a
Speaker 14: model where we own the assets we generate revenue out
Speaker 14: of it. There are companies who do this kind of
Speaker 14: business very well, companies, institutions, businesses who are experts in
Speaker 14: managing assets. So I think that over time, with the
Speaker 14: growing grobotaxi market and the expectation in terms of growth,
Speaker 14: and you saw the various assumptions in terms of market size,
Speaker 14: it's really rearranging from three hundred billion dollars to over
Speaker 14: a trillion depending on the study you look at.
Speaker 2: I think that this will create.
Speaker 14: New business models and new operators who will start joining
Speaker 14: the overall value chain over time.
Speaker 3: And that's the bit that our audience really wanted to understand.
Speaker 3: You say, Licid TFA, it's great to have you on
Speaker 3: Bloomberg Tech.
Speaker 2: Thank you know.
Speaker 3: Coming out, we're going to talk about US government effort
Speaker 3: to enlist Silicon Valley in its AI warfare ambitions.
Speaker 2: Stick around. This is bloombag Tech.
Speaker 3: The Trump administration's decision to blacklist Anthropic after its dispute
Speaker 3: with the Pentagon to spark debate about how the government
Speaker 3: does business with the technology sector and buys AI. Here's
Speaker 3: what the CEO of Dell, whose biggest customer is the
Speaker 3: US government, told Bloomberg.
Speaker 7: We're kind of a foundational provider of the infrastructure. What
Speaker 7: I can say from our standpoint is, obviously we have
Speaker 7: various controls and systems to make sure we're selling to
Speaker 7: the right, you know, to to the authorized users.
Speaker 10: But we, you know we I don't think.
Speaker 7: A company can dictate to a sovereign government what it
Speaker 7: does with its tools.
Speaker 3: It's also costs a spotlight on efforts to enlist Silicon
Speaker 3: Valley into the government's vision for AI warfare. That's the
Speaker 3: focus of the forthcoming book from Bloomberg's owning Katrina Manson
Speaker 3: Project Maven, Katrina joins us. Now the timing of of
Speaker 3: this book, the recent reporting that you've been doing, this
Speaker 3: is the story right now the use of technology in
Speaker 3: the government's relationship with the technology sector. I guess take
Speaker 3: us inside what you've written and the conclusions that you've reached.
Speaker 15: Thanks so much. I think the thing that I've discovered
Speaker 15: is that this effort to bring AI to war that
Speaker 15: started in twenty seventeen with Project Maven, and then we
Speaker 15: learn much less about it after Google workers protested and
Speaker 15: Google obviously didn't renew its contract. But the effort kept
Speaker 15: going in two key ways. We already publicly know about.
Speaker 15: One of them, which is ma even smart system, the
Speaker 15: system designed by palent Here but including lots and lots
Speaker 15: of different data feeds to help narrow down target selection
Speaker 15: on a sort of digital almost a Google Earth platform.
Speaker 15: That's one thing. But the thing that we really look
Speaker 15: at in the story that we've published today is the
Speaker 15: way the military has tried to put AI onto drones.
Speaker 15: This is this big effort that of course is at
Speaker 15: the center of Dario Amaday's concern about the development of
Speaker 15: fully autonomous weapons and the way AI might be used
Speaker 15: at it I've looked at one element, which is computer vision.
Speaker 15: That isn't the thing that he was worried about. He's
Speaker 15: worried about LMS. But the effort to get computer vision
Speaker 15: onto drones is about allowing drones to recognize targets, select them,
Speaker 15: and then be able to execute fire on them.
Speaker 3: Bloombergs Katrina Manson, author of the new book Project Maven,
Speaker 3: Thank you very much, and it's due out very soon
Speaker 3: later in this month. That does it for this edition
Speaker 3: of Bloomberg Tech. Actually, since we've come on air, this
Speaker 3: is what financial markets look like. Now's that one hundreds
Speaker 3: now down half of percent, a big move higher in
Speaker 3: the US tenure yield, and again Brent crewed the global
Speaker 3: oil benchmark.
Speaker 2: We're above one hundred dollars a barrel.
Speaker 3: We focus on the war in Iran and the tech
Speaker 3: ology sector. Check out the podcast for the recap. You
Speaker 3: know where to find it. This is Bloomberg Tech.