Speaker 1: From Marhard.
Speaker 2: We're Innovation Money and Power Collie in Silicon Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: And Ed Ludlow in San Francisco. Caroline hides off today.
Speaker 3: This is Bloomberg Technology. Coming up on the program, IBM's
Speaker 3: four point six billion.
Speaker 4: Dollar deal for Attio.
Speaker 3: We'll speak to the company's chief commercial officer about the acquisition.
Speaker 3: Is Big Blue goes on a buying spree seven deals
Speaker 3: this year, plus Aston Martin and Lucid strike a deal
Speaker 3: shares of the company's surge after the luxury names joined
Speaker 3: forces on the future of electric vehicles. We'll bring you
Speaker 3: the details and we get the outlook for tech stocks
Speaker 3: and crypto with Stonex Group chief strategist Kathrine Rooney Vera.
Speaker 3: It's going a state of play when it comes to
Speaker 3: markets really quickly. We're coming off the biggest weekly decline
Speaker 3: in technology shares since March that week where the banking
Speaker 3: crisis was unplaying in the session right now now that
Speaker 3: one hundred is soft by three tens and one percent.
Speaker 3: There's a big focus on the macro, on economics and
Speaker 3: what central banks around the world will continue to do
Speaker 3: in the face of inflation, some outperformance in the US
Speaker 3: listed shares of Chinese technology companies. To look at the
Speaker 3: Golden Dragon up by eight tens and one percent. We're
Speaker 3: hovering around three point seven percent on the US tenure yield.
Speaker 3: There was a move into bonds Thursday Friday last week
Speaker 3: at the expense of technology shares and then Bitcoin holding
Speaker 3: above thirty thousand US dollars per token. In terms of
Speaker 3: single movies, it's all about IBM.
Speaker 4: It's getting a bit of a boost.
Speaker 3: We're up kind of a percentage point there, or there's
Speaker 3: about on IBM shares. It's all about four point six
Speaker 3: billion dollar deal for Attio seventh of the year. It
Speaker 3: kind of fits in with IBM's Highbury cloud strategy. I
Speaker 3: want to get quick analysis and reaction on this deal
Speaker 3: from Bloomberg Intelligence senior technology analyst Anirag Rana. Anirag do
Speaker 3: you think this is a smart move by IBM. I
Speaker 3: think we might be having some trouble with Aniag right now.
Speaker 3: But what we can do is we can pivot and
Speaker 3: we get the inside scoop on what's happening with this deal.
Speaker 3: I want to bring a IBM Chief Commercial Officer, Rob Thomas, Rob,
Speaker 3: you kind of heard the preamble there. This is kind
Speaker 3: of a move that matches what you've done with red
Speaker 3: hat hybrid cloud strategy. But just give us the why
Speaker 3: and when you went shopping for Actio and.
Speaker 2: Thanks for having me. Great to be with you. CIOs,
Speaker 2: CEOs and CFOs are all trying to deal with technology
Speaker 2: complexity and technology spending. Think of app deal as a
Speaker 2: virtual command center to understand your technology spend, your cloud spend,
Speaker 2: and your labor spend. I would say time means everything.
Speaker 2: Is there a better time to have software that can
Speaker 2: do that type of analysis? I don't think so every
Speaker 2: company is thinking about how do I optimize my spend
Speaker 2: on technology reduce complexity. I think this is perfect time
Speaker 2: for what's happened in the market.
Speaker 3: You're taking otto from Vista Equity Partners. What role did
Speaker 3: Robert Smith play in this?
Speaker 4: Rob? Was he very active in negotiations?
Speaker 3: And can you give me a sense of how he
Speaker 3: financially benefits from what is an all cash deal?
Speaker 5: Right?
Speaker 2: Yeah? I think only they can answer the returns question.
Speaker 2: We've been partners with Aptio for a couple of years
Speaker 2: and so this is not a new management team. It's
Speaker 2: not a new company to us. We've been working with
Speaker 2: him for a number of years now. They were founded
Speaker 2: in two thousand and seven. And what attracted us to
Speaker 2: this space is that it's recurring revenues, it's software. These
Speaker 2: are big focuses for IBM. It's an attractive growth rate,
Speaker 2: it has all the attributes that we look for in
Speaker 2: a deal, and because we were users of the product
Speaker 2: and because we've been partners, we've got a pretty good
Speaker 2: idea of what it could do, which is what made
Speaker 2: this the right time, Rob.
Speaker 3: What does the deal tell us about strategy going forward?
Speaker 3: Seventh deal, there's a lot of emphasis on the kind
Speaker 3: of buying spree. Will you continue to be active in
Speaker 3: M and A.
Speaker 2: We are always active and open minded about M and A,
Speaker 2: Like you say, it's the seventh deal of the year,
Speaker 2: mix of consulting and software, and we're always looking for
Speaker 2: how to accelerate our strategy around how hybrid cloud and AI.
Speaker 2: As you may be aware, in May, we announced our
Speaker 2: generative AI platform, Watson X, so we're thinking about what
Speaker 2: are capabilities that we could bring into that. Another thing
Speaker 2: that was interested about app deal is they collect data
Speaker 2: that represents four hundred and fifty billion dollars of it spend.
Speaker 2: We think that is very unique in terms of how
Speaker 2: we can then help clients together to optimize and manage
Speaker 2: their spend.
Speaker 3: We're kind of calling this m and a Monday. There
Speaker 3: are some other deals out there as well, but it's
Speaker 3: been quiet, you know, in tech at least twenty twenty
Speaker 3: three so far. Do you see yourselves as being opportunistic therefore,
Speaker 3: in that sense taking advantage of kind of the lack
Speaker 3: of activity out there.
Speaker 2: I think you also have to be patient and you
Speaker 2: have to run a discipline process. To your point, if
Speaker 2: you look at the market, over the last couple of years,
Speaker 2: we've gone through adjustments around interest rates, so for a
Speaker 2: time it was hard to figure out deals that would
Speaker 2: make sense as we look at our financial model and
Speaker 2: what we want to do. But we're open minded that
Speaker 2: that will start to change, and this is a good
Speaker 2: example where we saw the right equation for a deal.
Speaker 2: But we'll continue to look. Really in the areas that
Speaker 2: we're focused on, hybrid cloud, automation, data, cybersecurity, sustainability. These
Speaker 2: are the areas that we're investing in aggressively.
Speaker 4: Of those, which is the priority.
Speaker 3: You know, a lot of emphasis right now in the
Speaker 3: field of artificial intelligence generative AI as well.
Speaker 4: Do you see yourselves prioritizing that.
Speaker 2: I think it's hard to pick one priority because if
Speaker 2: you link it back to app deio, this is about
Speaker 2: our thesis around automation, which started nearly two years ago,
Speaker 2: where we've done deals around robotic process automation, we've done
Speaker 2: deals around AI operations. This is kind of the third
Speaker 2: piece to the puzzle. So I wouldn't pick one or
Speaker 2: the other, but certainly there's a lot happening in generative AI.
Speaker 2: WATSONEX is about data, it's about building models, it's about
Speaker 2: models from IBM, it's about AI governance. So I would
Speaker 2: say all of those are potential spaces where today we're
Speaker 2: aggressively building, but we would also look to partner potentially.
Speaker 3: The final one on the markets, is there an advantage
Speaker 3: in going out into the private markets and doing deals
Speaker 3: with private business versus looking at some of the publicly
Speaker 3: traded piers of an antio.
Speaker 2: It's really not part of our criteria when we're looking
Speaker 2: at deals. We're looking more at strategic fit. What's the
Speaker 2: synergy as part of IBM where the ownership resides. It
Speaker 2: really is not anywhere in our criteria, because those all
Speaker 2: just things you'll have to work through regardless of where
Speaker 2: a company sits.
Speaker 3: Rob In this AI boom, there's going to be increased
Speaker 3: demand on the data center and compute side. What are
Speaker 3: you seeing there in the context of IBM in what
Speaker 3: times you'll need going forward as well?
Speaker 2: I would say, what's interesting, what's happening in compute. It's
Speaker 2: probably perfect for the strategy we set down three years ago,
Speaker 2: which is hybrid cloud, because with hybrid cloud, you can
Speaker 2: run your applications, you can manage your data, and you
Speaker 2: can do that across any cloud. So now clients with
Speaker 2: a hybrid strategy, which I think is almost every client now,
Speaker 2: they can choose the right price and right performance.
Speaker 6: Depending on what they want to do.
Speaker 2: If you're in just one cloud, you only have that flexibility,
Speaker 2: so you have to deal with increasing compute costs something
Speaker 2: like that. We think hybrid cloud is actually perfect for
Speaker 2: this moment because you can optimize your spend and the
Speaker 2: economics around how you deploy technology.
Speaker 3: And you'll selves in terms of capacity planning. From the
Speaker 3: data center perspective, how active you being.
Speaker 2: We're always thinking about what is coming next. But I
Speaker 2: would say it's beyond the data center. We announced with
Speaker 2: General Motors earlier this year work that we're doing around
Speaker 2: Linux on vehicles, So think of that as as edge computing.
Speaker 2: So I don't think it's just about data centers. It's
Speaker 2: about compute can happen anywhere from edge to public cloud
Speaker 2: to private cloud. We're looking to deploy capital smartly across
Speaker 2: any of those.
Speaker 3: I think the street really likes this At toodeal, you
Speaker 3: know a lot being complementary of how it fits in
Speaker 3: with your existing hybrid cloud strategy. But if there's one
Speaker 3: takeaway you want to leave investors with and why we
Speaker 3: care about, you know, what is it? What is it
Speaker 3: that you are sort of most excited about to get
Speaker 3: this deal closed on.
Speaker 2: Every client is trying to put more technology to work
Speaker 2: for their business, and there's this old rule of thumb
Speaker 2: that says maybe eighty percent is about keeping the lights
Speaker 2: on twenty percent for innovation. With app deal and IBM,
Speaker 2: I think we can change that to free up more
Speaker 2: dollars for innovation, and that will be just the start
Speaker 2: of creating more investments for hybrid cloud for AI. So
Speaker 2: this is really about unleashing innovation.
Speaker 3: Ultimately, IBM Chief Commercial Officer, Rob Thomas, Thank you so
Speaker 3: much for your time on that four point six billion
Speaker 3: dollar deal.
Speaker 4: Aston Martin banking on.
Speaker 3: A new partnership with luxury electric car maker Lucid to
Speaker 3: help lead its growth in the EV market. Lucid will
Speaker 3: receive more than two hundred and thirty million dollars in
Speaker 3: stock and cash in exchange for its battery components and
Speaker 3: other parts.
Speaker 4: Joining us to break.
Speaker 3: Things down Bloomberg Shaan Okaine, who covers all things EV
Speaker 3: and also for us out in Austin, Texas. I guess
Speaker 3: the best place to start shorwe is what does Aston
Speaker 3: Martin get out of this?
Speaker 1: They get them a clearer path to making an actual EV.
Speaker 1: This is something Aston Martin's bed at for a long time.
Speaker 1: You go back more than half a decade. They had
Speaker 1: actually partnered up with a Chinese technology company, le Echo,
Speaker 1: whose founder was making electric vehicles at the time, and
Speaker 1: that project sort of went nowhere. They almost got to
Speaker 1: the point of releasing that car. The repde and then
Speaker 1: sheld it basically after more strug came in and they've
Speaker 1: been kind of stumbling around ever since. He's been trying
Speaker 1: to write the ship there and raise money to move
Speaker 1: them into this new world. So this gives them really
Speaker 1: just a better view of something and honestly access to
Speaker 1: what is thought of as some of the sort of
Speaker 1: better powertrain components in an ev rate now right.
Speaker 3: You know Lucid, you and I have covered this company
Speaker 3: for a long time now, and Lucid's always leaned into
Speaker 3: the idea that they are a technology leader, right the
Speaker 3: energy density of the pack. And yet you know, Lucid
Speaker 3: can't get his own house in order from a production perspective.
Speaker 3: I guess for Lucid, what do they get out of it?
Speaker 3: They become a supplier of parts.
Speaker 1: Yeah, this is something of a return to form to them.
Speaker 1: I mean, remember, this is a company that was founded
Speaker 1: something like fifteen years ago as a battery manufacturer and
Speaker 1: ostensibly with the goal of becoming supplier as a TIVA
Speaker 1: and they were you know, it took them a long
Speaker 1: time before they actually decided to go out and try
Speaker 1: to make their own car and come up with this
Speaker 1: Lucid brand and that has obviously sort of flipped things
Speaker 1: around and sort of eaten that original goal to some respects.
Speaker 1: But now they're back in that role and it's something
Speaker 1: that they have talked about for a while. I mean
Speaker 1: when they were trying to raise money when they were
Speaker 1: still private, they weren't talk to just about everybody. They
Speaker 1: almost partnered up with Ford at one point, So this
Speaker 1: is something that I think has spent a long time coming.
Speaker 4: For them coming up.
Speaker 3: Japan's government unveiled its six billion dollar deal to buy
Speaker 3: out and take direct control of the world leader in
Speaker 3: chip making.
Speaker 4: This is bloomberg time for talking tech.
Speaker 3: First start education technology firm buid Us begun damage control
Speaker 3: after losing its auditor and three board members in a week.
Speaker 3: His billionaire founder reached out to investors to assure them
Speaker 3: that the Indian startup will finally release long delayed financials
Speaker 3: and strengthen its accounting processes. And Japan's government unveiled a
Speaker 3: six point three billion dollar deal to buy out and
Speaker 3: privatize JSR, taking direct control of the world leader and
Speaker 3: chip making. The move could help Tokyo expand its power
Speaker 3: over compounds essential for making advanced semiconductors like those in
Speaker 3: missile control systems and Apple's iPhones. Plus, JD dot Com
Speaker 3: aims to create what it calls an innovative retail division
Speaker 3: for groceries China's number two e commerce company plans to
Speaker 3: partner with seven Fresh supermarket chain and group buying platform
Speaker 3: Pinpin to deliver food to millions and rivals similar business
Speaker 3: models like Ali Barba.
Speaker 4: And speaking of.
Speaker 3: Ali Barba, the company panning to seek approval of it
Speaker 3: his own grocery arms spin off for listing from the
Speaker 3: Hong Kong Stock Exchange in two weeks. This according to
Speaker 3: hons Kong's Economic Times. Bloomberg's Isabelle Lee in New York
Speaker 3: with the latest tell me about this spinoff move?
Speaker 7: Hi Ted, Hi Ed, I'm sorry, tell thank you you
Speaker 7: were ed. We're good friends. So this has been the
Speaker 7: subject of talks for a while now, ever since the
Speaker 7: historic shakeup that Ali Baba has gone through when it
Speaker 7: said that it's big conglomerate will split into six Baby Baba's.
Speaker 7: It was announced earlier this year, so this is among
Speaker 7: the first in the pipeline. So many were expecting it
Speaker 7: to be toward the end of this year and it
Speaker 7: might just come into fruition. So it will list as
Speaker 7: early as two weeks, which is July or August, and
Speaker 7: it will go public in November. Apart from this grocery spinoff,
Speaker 7: we also have the logistics arm of Ali Baba Taiyo,
Speaker 7: so that's also looking to go public next year if
Speaker 7: things go as planned.
Speaker 4: Ted Ed you've been watching Ted Lasso. I know you have.
Speaker 3: It's okay, miss, I'm not worried about being much faken
Speaker 3: for Ted. Let's go back to the story we started
Speaker 3: on JD making a kind of obvious move right to
Speaker 3: take on Ali Baba.
Speaker 4: What's the latest there?
Speaker 6: So that is interesting.
Speaker 7: So JD had a big meeting last week and recently
Speaker 7: it said that it will create an independent arm. It
Speaker 7: will merge at seven Fresh, which is its grocery retail store,
Speaker 7: with other units to create something like the innovation retail
Speaker 7: that you said. So, I don't want to say it's
Speaker 7: meant to compete with Ali Baba's cursory is one off,
Speaker 7: but it does kind of look like that because to
Speaker 7: Ali Baba, it's kind of a lot of people compared
Speaker 7: to Sam's Club, because it's interesting. It has dine in,
Speaker 7: it has a delivery, and it has grocery all in one,
Speaker 7: and maybe that's what JD dot Com is looking to
Speaker 7: do as well, especially because last year China so growth
Speaker 7: really didn't pan out as people as expectors of maybe
Speaker 7: they're banking on this year with this new thing. They
Speaker 7: had a big meeting last week where they announced it
Speaker 7: it will create seven listed firms with market values of
Speaker 7: at least fourteen billion, and this is probably one of them. Men.
Speaker 3: I just was looking at the home the NASA Gonen
Speaker 3: Dragon China Index earlier and there was outperformance. You know,
Speaker 3: a lot of newsflow related to the US listed shares
Speaker 3: of China.
Speaker 4: Tech, you know Ali Barba JD.
Speaker 3: I think there is a lot of focus on the
Speaker 3: health of Chinese tech right now. In Ali Baba's case,
Speaker 3: what's the big one we're waiting on? You know, this restructuring,
Speaker 3: we had, the management changes. What is it that investors
Speaker 3: are most focused on.
Speaker 7: I think they're just really curious about how this will
Speaker 7: pan out, because again, this is Ali Baba. It's one
Speaker 7: of the first in China to do this ever since
Speaker 7: the intense crackdown we've seen from the government where they
Speaker 7: were getting angry at monopolies, saying that they're being reckless
Speaker 7: and all that. So Ali Baba's big move was why
Speaker 7: they see in this kind of a response to the government.
Speaker 7: It's hard to imagine that this happened just on their own,
Speaker 7: especially with the disappearance of Jack Moss. Likely this is
Speaker 7: with the blessing of the government. So that's what a
Speaker 7: lot of investors are looking for in China and outside.
Speaker 6: How will this play out?
Speaker 7: It's historic and maybe this will be the blueprint for
Speaker 7: other companies. Can JD follow it? Can other big rivals
Speaker 7: of Ali Baba? Probably follow it? Because this six Baby
Speaker 7: Baba's it's a lot of people are saying it may
Speaker 7: be good because it will make more nimble companies. They
Speaker 7: will have EHCEO board of directors and probably increase share value.
Speaker 7: Who knows, the six Baby bubbus might even be bigger
Speaker 7: than the big Ali Baba. As we know, big companies
Speaker 7: can move a bit slower, So that's really what people
Speaker 7: are looking up for. How this will play out down
Speaker 7: the line.
Speaker 3: Bloomberg News Isabelle Lea out in New York. Thank you
Speaker 3: so much. Welcome back to Bloomberg Technology. I'm Ed Ludlow
Speaker 3: in San Francisco. I want to get a quick check
Speaker 3: on the markets. We've sort of seen declines accelerate, particularly
Speaker 3: on the.
Speaker 4: NASDA one hundred.
Speaker 3: We're now softer by a percentage point at session lows.
Speaker 3: The story is that we're coming off the worst week
Speaker 3: for markets since March, and there's a lot of focus
Speaker 3: right now on the macro picture what the Fed will
Speaker 3: or won't do in terms of moving towards rate cutting,
Speaker 3: and there's a reevaluation on the timing of that that
Speaker 3: impacts the tech sector. Higher rates discount the present value
Speaker 3: of future cash flows. That's the story, and it has
Speaker 3: been for really long time. Some outperformance in semiconductor stocks.
Speaker 3: The Philadelphia Semiiconductor Index or socks up eight tenths or
Speaker 3: seven tenths of one percent, and the US tenure yield
Speaker 3: holding at around three point seven percent. Bitcoin still above
Speaker 3: thirty thousand US dollars, remember the story Friday hitting its
Speaker 3: highest level in one year. There are two movers to
Speaker 3: the downside that we're paying attention to, the first being Tesla,
Speaker 3: its declines also really accelerating beyond five percent now Goldman
Speaker 3: downgrading the stock too neutral from by the recent run
Speaker 3: up in the shares were up more than one hundred
Speaker 3: percent year to date, but also looking at other factors
Speaker 3: like the declining price of evs Mark Delaney moving probably
Speaker 3: the four fan list in about a week to downgrade
Speaker 3: that stock in Alphabet also downgraded at UBS too neutral
Speaker 3: from by near term monetization risks in the medium term,
Speaker 3: talking about this pivot to generative AI in the context
Speaker 3: of search and what that will do in terms of
Speaker 3: impacting AD inventories. That's all to say that we should
Speaker 3: zoom out and get more markets analysis and Catherine Rooney
Speaker 3: vera Chief Market Strategies as stone X Group. What happened
Speaker 3: last week? Right, you look at the NASA one hundred.
Speaker 3: We have the biggest weekly decline since March, the week
Speaker 3: where the banking crisis kind of unfolded. Bitcoin hits a
Speaker 3: one year high Friday. What was driving both of those things?
Speaker 5: Well, all signs point to the Federal Reserve driving most
Speaker 5: of the market action and the expectation of additional right
Speaker 5: hikes rate hikes being discounted after previous to that, the
Speaker 5: market had wholeheartedly embraced the idea of rate cuts being
Speaker 5: the next step for the Federal Reserve.
Speaker 6: The dot plot shows that the Fed.
Speaker 5: Is expecting two more hikes at twenty five business points each.
Speaker 5: But even today the markets are not believing the Fed
Speaker 5: and expecting one rate hike this week. I think economic
Speaker 5: data are going to be clutch in terms of market
Speaker 5: movement going forward, whether the economic data from for example,
Speaker 5: initial jobless claims, core PCE, the Supercore index, all of
Speaker 5: that coming out this week indicating whether or not the
Speaker 5: market is right or the FED has got it right.
Speaker 5: So I think that's where where the markets are focused,
Speaker 5: especially as you highlighted on the technical or the technology sector,
Speaker 5: which has been the foremost front runner of the rally
Speaker 5: that we've seen here to date.
Speaker 3: Catherine, what does the FED need to see in that
Speaker 3: data to move from hiking to pausing to eventually cutting rates.
Speaker 5: There has to be irrefutable evidence that the labor market
Speaker 5: is rolling over. There has to be a clear trend,
Speaker 5: not just this data dependency focused on one or two months,
Speaker 5: a clear trend with regard to the supercore, which is
Speaker 5: what the FED most looks at X shelter of course,
Speaker 5: which seems like it's going to start a trend lower.
Speaker 6: But there really has to be trends.
Speaker 5: With regard to getting to the two percent core PCE target.
Speaker 6: This is a FED that has grappled with credibility.
Speaker 5: Remember the fiasco with regard to transitory inflation overrunning the
Speaker 5: easing policy, for I think went long in the tooth
Speaker 5: by about a year. So I think the markets could
Speaker 5: be disappointed ed with regard to the Fed's propensity to
Speaker 5: prop up economic growth versus inflation. I think this is
Speaker 5: a FED that really needs to claw back some inflation
Speaker 5: fighting credibility and more likely than not will hike or
Speaker 5: hold rates at a terminal rate I estimate of five
Speaker 5: twenty five, but more likely five point fifty for an
Speaker 5: extended period of time, longer than what the market is
Speaker 5: currently discounting. That in itself is negative for stocks, negative
Speaker 5: for cyclicals, negative for interest rate sensitive sectors, which technology
Speaker 5: certainly is.
Speaker 3: On that note, we're showing them as that one hundred
Speaker 3: year to day performance up thirty five percent or so.
Speaker 4: A big part of that story was just a.
Speaker 3: Few single names and it was all AI related. So
Speaker 3: when you look at the breadth of the market, how
Speaker 3: do you see investors offsetting that AI height driving us
Speaker 3: to the upside and then the FED risk to the downside.
Speaker 4: Well in the.
Speaker 5: Short term, if you believe that the market has further upside,
Speaker 5: which certainly could if we get very good inflation data
Speaker 5: showing that the FED maybe doesn't have to go so
Speaker 5: long or so much higher for longer then you could
Speaker 5: get additional upside and if you want to play that
Speaker 5: trade ed, I think that you would want to look
Speaker 5: at the laggards. So you see this divergence between the
Speaker 5: NASDAC and small caps, then you could play the laggards
Speaker 5: such as small caps financials or energy. My perspective over
Speaker 5: the course of the next six to twelve months, however,
Speaker 5: is that we should be disproportionately overweighted on defensive sectors
Speaker 5: which have not seen a significant run up.
Speaker 6: A year to date.
Speaker 5: That has been, of course in favor of technology, and
Speaker 5: as you mentioned, this very narrow breadth of the SMP
Speaker 5: five hundred's recent surge. So I would say look at
Speaker 5: defensives this in US equities and specifically look in rates.
Speaker 5: I mean, you could look at the twos tens steepener
Speaker 5: play in the treasury curve, hold a position in gold
Speaker 5: in cash. I mean, even Bloomberg had this beautiful chart
Speaker 5: you guys put out where it showed that high grade bonds, earnings, yield,
Speaker 5: and three month cheaper are all pretty much within a
Speaker 5: range of twenty to thirty basis points. So I think
Speaker 5: the risk reward favors being defensives. Defensive over chasing the market.
Speaker 3: Another beautiful chart that we've been looking at recently is
Speaker 3: near term bitcoin. What happened on Friday? What is the
Speaker 3: driver behind bitcoin right now? I think a lot of
Speaker 3: people put emphasis right. A lot of people put emphasis
Speaker 3: on the black Rock filing June fifteenth, that happened. Others
Speaker 3: points are sort of long term indicators around. Well, all
Speaker 3: the chaos is out the way now, we can all
Speaker 3: move on with our lives. But for you, what is
Speaker 3: driving that risk asset? I think we may have some
Speaker 3: technical issues with Catherine Rooney Verra. It's a m and
Speaker 3: a Monday. It is a Mayhem Monday, but we thank
Speaker 3: you for your time. Stone X's chief strategists. Interesting conversation.
Speaker 3: The market's coming up. We're going to talk about guess
Speaker 3: what generative AI is impact but on the retail space.
Speaker 3: We're going to go from the public markets to the
Speaker 3: private markets to talk with N thirteen partner Lizzie Francis,
Speaker 3: all things VC in our VC spotlight.
Speaker 4: That is next. This is Bloomberg all right. Back to
Speaker 4: that m Anda Monday.
Speaker 3: Vibe Data Bricks has agreed to buy generative AI platform
Speaker 3: Mosaic mL for about one point three billion dollars. The
Speaker 3: company said in the statement today that struck the deal
Speaker 3: with the goal of making generative AI accessible to all
Speaker 3: organizations so they can build with their own tools and
Speaker 3: their own data. The acquisition expected to close July thirty.
Speaker 4: First, let's start deeper.
Speaker 3: Into AI, how it's playing out in the VC space
Speaker 3: and in the context of the consumer. Lizzy Francis, partner
Speaker 3: and head of operations at M thirteen, has nine hundred
Speaker 3: million dollars or so in assets under management. So, Lizzie,
Speaker 3: everything is at the intersection of everything else. But for you,
Speaker 3: how do you see the world tech, consumer and now
Speaker 3: generative AI.
Speaker 8: Good morning, ED, Thank you so much for having me
Speaker 8: on today. Yeah, it's just an incredibly exciting time for
Speaker 8: innovation across the board with AI. But there's no sector
Speaker 8: that is more ready or ripe for transformation than retail.
Speaker 8: And I think what we're seeing is that in the
Speaker 8: last decade or so, commerce has had an unbelievable tailwind
Speaker 8: at its back, and particularly the adoption of digital for
Speaker 8: consumers post COVID. Moving online means that brands and retailers
Speaker 8: have to meet consumers in multiple places now, and consumers
Speaker 8: are expecting a great experience, and so what that means
Speaker 8: is AI can actually impact that in two really ways.
Speaker 8: The first is it can improve productivity in very rote
Speaker 8: ways for very complicated retail businesses. And on the consumer side,
Speaker 8: it can actually delight consumers by allowing brands and retailers
Speaker 8: to think about ways that they can better personalized consumer
Speaker 8: experience and create exciting ways for consumers to remove pain
Speaker 8: points for them, but also display and show products and
Speaker 8: services in ways that they have not seen before. And again,
Speaker 8: all of that is powered by AI and we're seeing
Speaker 8: really rapid transformation happening this year.
Speaker 3: So when you think about potential portfolio companies that you're
Speaker 3: investing in in the context of consumer facing companies all
Speaker 3: their technology, are you looking to them to be sort
Speaker 3: of AI adjacent or AI native companies?
Speaker 9: Yeah, it's a great point ed.
Speaker 8: We're looking at both, and I think what you'll find
Speaker 8: is that there are companies being born that are powered
Speaker 8: by AI, and then there's companies that are really leveraging
Speaker 8: AI for the application layer. So the way that we're
Speaker 8: thinking about the future of commerce at M thirteen, and
Speaker 8: what we're keenly interested in when it comes to investing
Speaker 8: is where will that transformation occur over the next ten years,
Speaker 8: and how can I have a deep impact on the consumer.
Speaker 8: And so, for instance, we've just recently invested in a
Speaker 8: company called Pietra, which is a really fantastic one stop
Speaker 8: shop for entrepreneurs and founders to both ID eight new
Speaker 8: brands and products and then bring them to market rapidly.
Speaker 9: They're entirely powered by AI.
Speaker 8: And so what used to be a very long and
Speaker 8: cumbersome process to launch new products or brands now just
Speaker 8: takes a matter of days. Right this in retail, those
Speaker 8: of us who've been in it know oftentimes even internally
Speaker 8: when you're launching new lines of products that can take
Speaker 8: up for a year to both ID eight, then source
Speaker 8: and QA and test. Now imagine all of that happening
Speaker 8: within days. So ed, you could this weekend sign up
Speaker 8: on Pietra. Perhaps you want to launch a new mustache
Speaker 8: grooming brand, and within days you could have both a
Speaker 8: fantastic brand, a new design. You could source products and
Speaker 8: bring it all to market and days.
Speaker 9: These are the types of businesses.
Speaker 8: Powered by a AI that are really where we're interested
Speaker 8: in investing. You also have the application layer, so imagine
Speaker 8: rebuy or max retail two of our portfolio companies that
Speaker 8: are leveraging AI in very interesting ways. Rebuy is creating
Speaker 8: a more personalized experience for.
Speaker 9: Consumers when they shop.
Speaker 8: So imagine for consumers now when they go shop at
Speaker 8: a brand or a retailer, they could have a totally
Speaker 8: new store or new experience every day that is personalized
Speaker 8: for them based on these large data sets that retailers
Speaker 8: and brands can crunch in real time, leveraging AI in
Speaker 8: ways that.
Speaker 6: They could not before.
Speaker 3: You know, Lizzie, we talk on the show Bloomber Technology
Speaker 3: every day about the energy that AI is given all
Speaker 3: kinds of subsectors. How has it impacted valuations in the
Speaker 3: consumer tech space?
Speaker 4: What are you seeing?
Speaker 8: Yeah, it's really interesting what we're seeing. So obviously this
Speaker 8: is not twenty twenty or twenty twenty one anymore, but
Speaker 8: we are seeing that pricing for AI, even at the
Speaker 8: earlier stage, is higher than it would be another sector,
Speaker 8: or i should say companies that are powered by AI
Speaker 8: or are AI driven. And you can see that even
Speaker 8: in unicorns. For this year, the last five unicorns, three
Speaker 8: of them are AI.
Speaker 9: And then obviously today has been quite a day for
Speaker 9: M and A.
Speaker 8: Right when it comes to AI in the markets, so
Speaker 8: both at the very early stage in later stage, we're
Speaker 8: starting to see some really healthy and rich pricing for
Speaker 8: AI driven companies. Now, having said that, I think it's
Speaker 8: a really important moment in time for us to realize
Speaker 8: that much like the adoption of commerce online or mobile
Speaker 8: or cloud, this is one of those moments in the
Speaker 8: market where we will see a really rapid pace of
Speaker 8: innovation in this particular sector. And even though the pricing
Speaker 8: is rich, this is one those moments when.
Speaker 9: Great companies are born.
Speaker 8: And this is what we love to do invest at
Speaker 8: M thirteen, invest in the very early stage of companies
Speaker 8: being born during interesting moments that will transform lives over
Speaker 8: the next decade or more so nineteen ninety nine rich
Speaker 8: pricing Google, PayPal, eBay. These are transformative brands and businesses
Speaker 8: that have driven tremendous values. So I think that we'll
Speaker 8: continue to see this throughout the year and exciting to
Speaker 8: see again the rapid rate at which these businesses are
Speaker 8: being born.
Speaker 3: What we've tried to do here on Bloomberg Technology in
Speaker 3: our venture spotlight is us where the innovation's happening and
Speaker 3: where the check's getting written. You're coming to us from
Speaker 3: Los Angeles. You know, we associate LA with maybe the
Speaker 3: entertainment industry TMT and startup innovation in the gaming space.
Speaker 4: Is it more than that.
Speaker 8: Oh, LA is just a wonderful ecosystem for entrepreneurs and
Speaker 8: M thirteen is really happy and privileged to have our
Speaker 8: headquarters here in LA. There's deep roots in the communit
Speaker 8: here community here on the tech side over the last
Speaker 8: twenty years of entrepreneurs and founders that have started great businesses.
Speaker 6: It's a very close knit.
Speaker 8: Community and one of the things we love and an
Speaker 8: inclusive community. One of the things I love that we've
Speaker 8: seen over the last decade is we're producing more engineers
Speaker 8: that are graduating out of our universities. We're seeing that
Speaker 8: people love to be in a community that supports and
Speaker 8: nurtures each other at this very earliest stages.
Speaker 6: And so I think what you'll find is that.
Speaker 8: This convergence of community and technology and venture dollars flowing
Speaker 8: into the very earliest stages with a diverse and interesting
Speaker 8: group of founders across commerce, chierpoint at media, technology, we
Speaker 8: will see many new brands being born here and many
Speaker 8: great new businesses to invest in.
Speaker 3: When we cover consumer tech and the program. There's often
Speaker 3: an association with celebrity endorsement, you know, from a VC
Speaker 3: perspective or just a product perspective.
Speaker 4: Is that something that you're encounter as well?
Speaker 8: I think there's always a great story to be told,
Speaker 8: and I think yes, and LA lends itself to incredible
Speaker 8: celebrities who can share and amplify that story.
Speaker 9: You know, and you're starting to see now.
Speaker 8: That you didn't see twenty years ago, that people realize
Speaker 8: they can quickly move to market if they have a
Speaker 8: passion or conviction around.
Speaker 9: A particular area.
Speaker 8: Obviously, like Honest Company or other folks that have celebrities spokespeople.
Speaker 8: You know, if you're really passionate about something, why not
Speaker 8: amplify and use your voice. We have an incredible portfolio
Speaker 8: company at M thirteen called Life Force, which has Tony
Speaker 8: Robbins behind it, and you know, being able to leverage
Speaker 8: Tony's community as well and amplify the message and value
Speaker 8: proposition of life Force, that's an unbelievable opportunity. So again,
Speaker 8: I think all of these things make sense and we'll
Speaker 8: continue to see this scale and evolve over time.
Speaker 3: Lizzie Francis, Partner in head of box at M thirteen
Speaker 3: coming to us from Los Angeles.
Speaker 4: You know, we don't do that as often. On Venure Spotlight.
Speaker 3: Interesting conversation about this startup ecosystem there, Thank you so much.
Speaker 10: There are really a tremendous number of changes between the
Speaker 10: last Starship player and this one, earing well over one thousand,
Speaker 10: So I think the probability of this next like working
Speaker 10: is getting to orbit is much higher than the last one.
Speaker 10: You know, maybe it's like sixty percent.
Speaker 3: So that was Elon Musk speaking over the weekend on
Speaker 3: a Twitter spaces with Bloomberg's actually advanced saying SpaceX has
Speaker 3: a much better chance now after making over a thousand
Speaker 3: changes to Starship. Let's bring in Bloomberg's Lauren Grush space reporter.
Speaker 4: What a way to spend a Saturday morning.
Speaker 3: But but what did we learn about out these changes
Speaker 3: that SpaceX is made to Starship?
Speaker 11: Right, So Elon highlight a few of those changes. Perhaps
Speaker 11: the biggest one that he talked about was that the
Speaker 11: SpaceX is going to implement something called hot staging. So
Speaker 11: for non rocket enthusiasts out there, if you watch the
Speaker 11: last Starship launch, they had a bit of a problem
Speaker 11: with the staging that's when the starship the top of
Speaker 11: the vehicle separates from the super heavy booster.
Speaker 6: It did not separate as.
Speaker 11: Planned during that flight, and the vehicle started twirling out
Speaker 11: of control. So moving forward, they're going to introduce something
Speaker 11: known as hot staging, which sounds kind of interesting. Basically,
Speaker 11: the engines on the Starship spacecraft, which you can see
Speaker 11: in that video there on the top, they're going to
Speaker 11: ignite while the super heavy booster is still attached, and
Speaker 11: so they It's something that Russians have done with their
Speaker 11: vehicles before, but it just means they're going to have
Speaker 11: to take some extra precautions to make sure that top
Speaker 11: of that super heavy booster.
Speaker 6: Doesn't get scorched by those engines.
Speaker 11: So that was probably one of the biggest things that
Speaker 11: we learned. Elon also detailed some updates to the engines
Speaker 11: that they made. If you remember, plenty of those engines
Speaker 11: on the the bottom of the booster did flame out
Speaker 11: during the launch, so hopefully that will prevent that from
Speaker 11: happening in the future.
Speaker 3: Kind of in case you missed it, but we reported
Speaker 3: Friday afternoon myself and colleagues to the in Tan and
Speaker 3: Katie Ruth that SpaceX is doing a tender basically selling
Speaker 3: employee shares or offering them, valuing SpaceX one hundred and
Speaker 3: fifty billion dollars. You know, the valuation keeps going up.
Speaker 3: But what was interesting that we reported, Lauren was the
Speaker 3: cash on the balance sheet about five billion dollars private company.
Speaker 3: You get a sense of its financial health. But on
Speaker 3: the Spaces after that, must did talk about how much
Speaker 3: they're spending on the Starship program.
Speaker 4: What did he say, right?
Speaker 11: He said that so far they've invested about two billion,
Speaker 11: and he expects that to approach three billion dollars this year.
Speaker 11: And it's no surprise, it's probably no It is the
Speaker 11: most complicated program that SpaceX has implemented in dates. So
Speaker 11: when I would expect that number to.
Speaker 3: Continue to go up, I guess what's the roadmap from here?
Speaker 3: You know, Musk always misses his own self imposed deadlines
Speaker 3: and timelines, but what do we know about the roadmap
Speaker 3: for more Starship launches?
Speaker 11: So I think he very much loves the number six.
Speaker 11: I don't know if you've noticed, but each time he
Speaker 11: gives an update, it's six weeks away. So there was
Speaker 11: no different. During the Spaces he said that the pad
Speaker 11: upgrade that they'll be doing to starbase.
Speaker 6: If you remember when.
Speaker 11: They did launch, they quite caused quite a bit of
Speaker 11: damage to the surrounding area and to their own launch
Speaker 11: pad when they when they launched. But they're doing a
Speaker 11: bunch of pad upgrades. He said the expects those to
Speaker 11: be done in approximately six weeks. But just to remind
Speaker 11: you that he has said six weeks before. In fact,
Speaker 11: right after a Starship launched the first time, he said
Speaker 11: they'd be launching again in four to six weeks.
Speaker 4: So taking that.
Speaker 3: Whether it's six weeks notice or six minutes notice, Lauren Grush,
Speaker 3: I know I can always call on you for all
Speaker 3: things SpaceX Bloomberg'slauren Grush out of Texas. There, thank you
Speaker 3: so much. That does it for this edition of Bloomberg Technology.
Speaker 3: Don't forget to recap what has been an m and
Speaker 3: a focused Monday. We have our podcast wherever you get
Speaker 3: your podcast, but it is on Apple, Spotify, iHeart, and
Speaker 3: of course on all of the Bloomberg apps and Bloomberg
Speaker 3: dot Com. We're one day into what's going to be
Speaker 3: a big week for the technology sector. We think about
Speaker 3: the markets, We're coming off the biggest drop for the
Speaker 3: Nazak one hundred on a weekly basis since March. We're
Speaker 3: thinking about the FED, but there is some green shoots
Speaker 3: and there is some energy in the private markets. We're
Speaker 3: seeing M and A, but what happens with bench capital.
Speaker 3: We're going to continue that conversation. A big one coming
Speaker 3: tomorrow as well. You don't want to miss it. This
Speaker 3: is Bloomberg Technology