Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and Eva Low in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: TSMC reports third quarter results, beating expectations and giving a
Speaker 3: positive outlook, buoyed by strong AI demand.
Speaker 4: Glass's trade tensions re escalate between China and the US.
Speaker 5: Good president. She's rare US hardbules, but a global pushback.
Speaker 3: And yet another exec departure from Apple with its head
Speaker 3: of the chat GPT. Like AI search efforts going to Meta.
Speaker 4: For first ed we dig into the market instead of
Speaker 4: shaking off that trade anxiety and refocusing on the AI trade.
Speaker 5: Of course, you just just TSMC will dig into it.
Speaker 4: NASA up three quarters percent with trading higher for two
Speaker 4: straight days. People focus on that and indeed potential talks
Speaker 4: between President Putin and indeed the United States President.
Speaker 5: But what are we looking at underneath the hood?
Speaker 3: Yeah, TSMC the world's biggest and most important contract manufacturer
Speaker 3: of semiconductors. The news is that it is hypedic sales
Speaker 3: growth outlook for twenty twenty five for the second time
Speaker 3: this year. Then we look at the shart we open
Speaker 3: up two percent. We've given off some of those gains
Speaker 3: if you read on the Bloomberg terminal or some of
Speaker 3: the market stories. The early part of the morning was
Speaker 3: TSMC driving US up positivity. But the trade story is
Speaker 3: overtaking a little bit AI demand intact character.
Speaker 5: It is, let's just talk about that being an impact.
Speaker 4: Bloomos Peter Elstrom, who needs that tech coverage from the US, Europe,
Speaker 4: in Asia, and Peter, look, TSMC did almost what ASML did.
Speaker 5: They said, Look, AI, the.
Speaker 4: Mega trends still there even if China pulls away in
Speaker 4: terms of demand.
Speaker 2: Yeah, it's a little bit more than that.
Speaker 6: CC way, the CEO had this conference call after the
Speaker 6: earnings results and as Ed was talking about, they hike
Speaker 6: their forecast for twenty twenty five for the second time.
Speaker 6: Just three months ago, they hike their forecast. And now
Speaker 6: what CC, what you're saying is that this AI mega
Speaker 6: trend is actually getting stronger. They of course are making
Speaker 6: the chips for Nvidia and for many others too, and
Speaker 6: what they're seeing is that the demand for those chips
Speaker 6: is getting stronger. At this point, they're watching the capital
Speaker 6: spending from some of the big customers out there, including
Speaker 6: Open Ai. They realize that in Video is going to
Speaker 6: have to supply those customers, and the trends are going
Speaker 6: up from here. So we're starting to get a fuller
Speaker 6: picture of what's going on in the chips business. We've
Speaker 6: got preliminary results from Samsung earlier this week, and we
Speaker 6: got ASML, the chip equipment maker after that, and now
Speaker 6: we have TSMC, the biggest contract chip manufacturer, which is
Speaker 6: giving us a very strong forecast too.
Speaker 3: That's kind of the demand side, right, Peter. But on
Speaker 3: the supply side, there was lots of interesting information. The
Speaker 3: two headlines that jump out at me are there massively
Speaker 3: supply constrained. Capacity is tight, but they're moving really quick
Speaker 3: to expand manufacturing capacity here in the United States.
Speaker 5: That's right.
Speaker 6: Yeah, Well, it takes a while to build these chip plants.
Speaker 6: They've begun construction in the US a few years ago,
Speaker 6: and they've now said that they want to build on
Speaker 6: top of that. They want to expand even more than they.
Speaker 5: Have in the past.
Speaker 6: But they're trying to add capacity in the US while
Speaker 6: they also build up their capacity in Taiwan right now.
Speaker 6: So it's taken a while for them to bring those
Speaker 6: fabs online and then meet this very strong demand that
Speaker 6: they're getting from customers like Nvidia, also from Apple, they're
Speaker 6: supplying a number. They also make the chips for AMD too,
Speaker 6: as AMD tries to compete with Nvidia, so they're really
Speaker 6: the big beneficiary. They're kind of the picks and shovels
Speaker 6: that are helping with this AI boom.
Speaker 4: Look, we are looking at the ADRs a little lower, Peter.
Speaker 4: They're at a record high in trading over in Asia.
Speaker 5: Is perhaps just a lot already priced in?
Speaker 6: Yeah, maybe, as Ed was talking about, there are a
Speaker 6: lot of factors going on in the market right now.
Speaker 6: The primary trading forum for TEA SMC shares is in Taiwan,
Speaker 6: so we'll see how they do tomorrow as they open
Speaker 6: up there. But the ADRs are getting buffeted a bit.
Speaker 6: Probably there are some high expectations going into this. I
Speaker 6: think investors did anticipate that there was going to be
Speaker 6: some pretty strong numbers from TSMC, But on top of that,
Speaker 6: there are a lot of trade factors that are playing
Speaker 6: into this. The US China tension certainly kind of overlay
Speaker 6: a lot of what we are seeing in the market
Speaker 6: right now.
Speaker 3: The index Peter Alstrom, Thank you very much. Our next
Speaker 3: story is trade tensions between China and the US. This
Speaker 3: is what Treasury Secretary Scott Besson had to say about
Speaker 3: how negotiations are going, and in particular about one top
Speaker 3: Chinese trade official.
Speaker 7: We've had four rounds of talks Geneva, London, Stockholm, and Madrid,
Speaker 7: and both sides approached them with great respect, and this
Speaker 7: individual did not. He showed up uninvited and said, quote,
Speaker 7: China will cause global chaos if if the poor shipping
Speaker 7: fees go through. So I don't believe that China wants
Speaker 7: to be an agent of chaos. And maybe maybe they
Speaker 7: used to have the wolf warrior diplomats, so maybe he
Speaker 7: thinks he's a wolf warrior.
Speaker 8: We don't know.
Speaker 2: This is happening.
Speaker 3: Is China's decision to unveil export controls and the rare
Speaker 3: earth supply chain is now sparking a global pushback. Bloomberg
Speaker 3: Senior Tech editor Mike Shepherd joins us to break it
Speaker 3: all down. Based on what the Treasury Secretary was talking
Speaker 3: about and recent reporting, China sees its hand with rare
Speaker 3: earths as being leverage in a negotiation. There are two
Speaker 3: sides and question Mike is whether China is or is
Speaker 3: not overplaying that hand.
Speaker 9: Well, that is a big question right now in the market,
Speaker 9: and certainly here in Washington where we're seeing the IMF
Speaker 9: and World Bank meetings being held, in so many global
Speaker 9: officials in town to watch these trade negotiations unfold on
Speaker 9: in real time between the US and China with so
Speaker 9: much at stake, and the question is how much of
Speaker 9: an impact there will be on other economies in the
Speaker 9: US is banking on other nations, other trading partners and
Speaker 9: other allies also feeling that pain and joining the US
Speaker 9: and trying to counter whatever China may try to do
Speaker 9: in restricting the shipment and export of rare earth materials
Speaker 9: from China to buyers outside China, and that is something
Speaker 9: that will affect the European Union and other nations and Japan.
Speaker 9: We have seen a push led by the US to
Speaker 9: try to get the Group of Seven to somehow counter
Speaker 9: and respond to China's intention here and look what we're
Speaker 9: seeing is even as China is trying to exert some leverage,
Speaker 9: the US is also expressing a little bit of skepticism
Speaker 9: about whether this will actually go through. Jamison Greer, the
Speaker 9: US Trade representatives said yesterday he doesn't think China will
Speaker 9: actually take this step, owing to the geopolitical implications and
Speaker 9: the fallout it would have on the global economy. And
Speaker 9: we can see a sign of that step the sism
Speaker 9: in the counteroffer that the US made at the US
Speaker 9: is really only stepping forward with a longer pause and tariffs,
Speaker 9: and that's not nearly enough for what Beijing had been
Speaker 9: hoping for. They have been really angling to get a
Speaker 9: relaxation of years of export controls as a result of
Speaker 9: that leverage.
Speaker 4: That did seem to be real anger coming from Treasury,
Speaker 4: Sectary Scott VESNT.
Speaker 5: Their MinC.
Speaker 4: And I'm interested as to reminding us how important the
Speaker 4: hand is that China has when it comes to technology.
Speaker 5: The fact that they.
Speaker 4: Mine an awful lot of the rare earth, but the
Speaker 4: main point is they also produce and refine most of
Speaker 4: the rare earths.
Speaker 9: Well they do, they own, They really hold more than
Speaker 9: half of the world's reserves, and they dominate the refining
Speaker 9: and production of these elements are critical across the economy
Speaker 9: and consumer electronics and automobiles, and in military equipment. Think
Speaker 9: of night vision goggles. You can't run those without some
Speaker 9: rare earths, and so the importance of this is something
Speaker 9: that hits a nerve with trade officials around the world,
Speaker 9: but especially with the US, because American officials had thought
Speaker 9: the rare earth's issue have been settled during the last
Speaker 9: round of trade talks, and here China goes, in their view,
Speaker 9: reopening it and trying to use it as a last
Speaker 9: minute bit of leverage heading into this all important meeting
Speaker 9: between President Donald Trump and his counterpart Hijiping at the
Speaker 9: end of the month, And rather than seeing a narrowing
Speaker 9: list of trade issues to be resolved heading into that meeting,
Speaker 9: we're actually seeing a growing list. And you heard the
Speaker 9: Treasury Secretary talk about the sensitivity around shipping. And there
Speaker 9: is also the question, Carol, of the US move to
Speaker 9: expand coverage of sanctioned firms to include subsidiaries, and that's
Speaker 9: something that hits some of the Chinese champions like Huawei
Speaker 9: and SMIC, and that is something that Beijing also has
Speaker 9: objected to. And we've seen this all play out just
Speaker 9: in the last few weeks, and it raises questions, Carow,
Speaker 9: about whether the two leaders can actually sort all of
Speaker 9: this at the end of the month, if and when
Speaker 9: they sit down.
Speaker 4: If is a big if right now, Mike Shephard, thank
Speaker 4: you very much. Indeed, from DC, look amid this geopolitical tension,
Speaker 4: you are still seeing the markets relatively calm. I'm looking
Speaker 4: at the tech markets up sevent ten percent on the
Speaker 4: nastat one hundred. We've been whipped a little bit about
Speaker 4: the concerns on resurgence, trade frictions more broadly, but the
Speaker 4: AI real feel factor is still there. Angeloukakafas is with
Speaker 4: us seeing global investment strutres to Edward Jones.
Speaker 5: Today is AI winning out.
Speaker 10: It is a good tech for a good day for technology.
Speaker 10: That the SMC results and guidance provide some confidence in
Speaker 10: the durability of the AI theme. There's no AI related
Speaker 10: slow down, at least not yet, and AI is going
Speaker 10: to remain a kid driver for markets and Joe.
Speaker 3: One of the most read stories today on the Bloomberg
Speaker 3: terminal and on the website is Ken Griffin, the founder
Speaker 3: of hedge fund in Citadel saying that jen AI is
Speaker 3: not helping hedge funds beat them market with astonishing returns.
Speaker 2: We're going to pull up what it is that he said.
Speaker 3: But as somebody that is in the markets as a strategist,
Speaker 3: your reaction to that news story and also what Jeni
Speaker 3: better than you in strategy.
Speaker 10: I don't think we're quite there yet. We are still
Speaker 10: in our view in the early stages of adoption. Of course,
Speaker 10: there's a lot of spending going in now to make
Speaker 10: this technology and incorporated. But thinking about major technology firms
Speaker 10: and really many different businesses, including in finance, they are
Speaker 10: all requiring their operating system to incorporate AI. So it
Speaker 10: will take a little bit while to see productivity gains,
Speaker 10: but we do think that these gains are on the way.
Speaker 10: Of course, from an investment standpoint, we need to be
Speaker 10: ware of complacency or euphoria. At some point that's going
Speaker 10: to be increased competitions and overbuilding over capacity. We are
Speaker 10: not quite there yet, but something to what's out for
Speaker 10: and I think the reaction in the c SMC results
Speaker 10: in the stock today, the meat reaction reflects the high expectations.
Speaker 3: So it's the two very distinct story, right, how market
Speaker 3: participants use AI and then the impact of the ALI
Speaker 3: story on markets. But you went there with TSMC, So
Speaker 3: what did that sort of outlook from them tell you
Speaker 3: about the staying power of this cycle?
Speaker 10: Yeah, I do think it provides confidence that this will continue,
Speaker 10: especially thinking about the next six to twelve months only
Speaker 10: the direction of travel force spending is higher, and there's
Speaker 10: a lot of push for many different businesses and industries
Speaker 10: to incorporate AI. So I think that the mega trend
Speaker 10: of adoption remains alive and well. And yes, we can
Speaker 10: debate all day about valuations, but the results speak for themselves,
Speaker 10: especially as we enter a key earning season.
Speaker 4: We don't have all day, but let's debate where would
Speaker 4: you go? Evaluations are high for some of the big names.
Speaker 2: So we favor a Barbel approach.
Speaker 10: So having continue to participate in this AI long term
Speaker 10: secular theme as I would call it, but at the
Speaker 10: same time, for especially new capital, start to complement portfolios
Speaker 10: with areas of the market that have been left behind,
Speaker 10: and that could include value style investments, small cap stocks
Speaker 10: that may benefit from the Federal Reserve rebooting its rate
Speaker 10: cutting cycle. So having this balanced approach and again avoid
Speaker 10: chasing some of the unprofitable, more speculative parts of the market.
Speaker 4: What is the catalyst for those speculative parts of the
Speaker 4: market to actually be popped? Do you think that we
Speaker 4: can remain irrational for a little bit longer if you
Speaker 4: see it that way, you know.
Speaker 10: As they say, you can only tell a bubble kind
Speaker 10: of with the benefit of hindsight. But at the same time,
Speaker 10: there's some key differences between now and the late nineties.
Speaker 10: A lot of these companies that are doing all these
Speaker 10: heavy spending, they are financing that from their own cast
Speaker 10: from operations, so not that finance. They are very mature,
Speaker 10: profitable businesses, and they have a diversified stream of revenue.
Speaker 10: So we're not quite there yet. Valuations are not at extremes,
Speaker 10: But at the same time, markets are going to be
Speaker 10: sensitive to any news about return on investment from all
Speaker 10: this spending that is taking place, and also paying attention
Speaker 10: to science of euphoria, which we do not see yet.
Speaker 3: In this environment anger. I think we should continue to
Speaker 3: talk about tariffs. The idea when the President took office
Speaker 3: in January was that consumers would take on the burden
Speaker 3: of tariffs, right because companies would raise prices across all
Speaker 3: sorts of domains. That hasn't really materialized. What has been
Speaker 3: impact impacted is the labor market in different ways. Are
Speaker 3: the people of cutting back, how are you reading that
Speaker 3: play out right now?
Speaker 10: Yeh, couple of things here about prices. As we navigated
Speaker 10: the very period of high uncertainty, especially in April and May,
Speaker 10: companies really try to absorb a lot of that and
Speaker 10: not pass these increased costs to the consumer. Now that
Speaker 10: we have a little more clarity, we may see a
Speaker 10: little more even distribution of these increase in costs. We
Speaker 10: have seen goods prices increase, but at the same time
Speaker 10: they increase. The apptic in inflation remains manageable now as
Speaker 10: it relates to the labor market. We remain in a
Speaker 10: low hiring and low firing mode. The labor market remains balanced.
Speaker 10: Corporate Corporate profits remain at record highs, even as we've
Speaker 10: seen a significant slowdown in hiring, which to me applies
Speaker 10: productivity gains, so we do not expect a major uptick
Speaker 10: in unemployment. Companies have been very profitable, so they have
Speaker 10: really no pressure to continue to cut costs to protect
Speaker 10: margins because margins again aurt all time highs. But something
Speaker 10: to monto, there's going to be some disruption from AI,
Speaker 10: But so far it seems like only a small part
Speaker 10: of that slowdown in the laboral market is because of AI,
Speaker 10: or you know, Tarish for.
Speaker 3: That matter, and I take you, I ask you, that
Speaker 3: takes us nicely into earning season that's about to hit
Speaker 3: us hard next week. Angelocal cofas of Edward Jones, thank
Speaker 3: you very very much. Indeed, Okay, coming up, Salesforce looks
Speaker 3: to reinsure investors worried the company could lose out in
Speaker 3: the AI boom. We have more on Salesforce next. This
Speaker 3: is Bloomberg Tech.
Speaker 5: Salesforce shares.
Speaker 4: As you can see, they spite this morning after chief
Speaker 4: financial and operating officer Robin Washington has said the company
Speaker 4: expects to return to double digit revenue growth in the
Speaker 4: coming years.
Speaker 5: More in the company's outlook.
Speaker 4: Let's bring in Bloomberg's Brodie Ford, who covers enterprise software companies.
Speaker 4: It's still down a quarter so far this year in
Speaker 4: terms of its market cap, but some reassuring points that
Speaker 4: to reacceleration of growth exactly.
Speaker 11: I mean, this is a stock that was beat up
Speaker 11: thirty percent year to date yesterday, and so it's up
Speaker 11: seven today and that's pretty cool, but it's still investors
Speaker 11: are a little anxious whether these kind of traditional application
Speaker 11: leaders like Salesforce are going to be the ones to
Speaker 11: successfully sell ai products. We got a decent outlook from
Speaker 11: Salesforce yesterday, but you know, it's not a resounding celebration.
Speaker 11: At this point.
Speaker 3: You've been reporting on the close relationship between open ai
Speaker 3: and Oracle and how maybe the publicly traded and at
Speaker 3: this stage slightly bigger of the two is helping that
Speaker 3: company navigate chip export controls.
Speaker 2: What do we need to know? It's interesting.
Speaker 11: I mean, Oracle is kind of a famous lobbyist, right
Speaker 11: they know Washington, They're pretty tight with the Trump admin
Speaker 11: right now. And yesterday open ai said when we're having
Speaker 11: trouble getting chips into UAE or Argentina, we call up
Speaker 11: Oracle and they are the ones that have kind of
Speaker 11: been able to help us get our chips around the world.
Speaker 11: And we found that pretty interesting because our arcle is
Speaker 11: playing an increasingly large role in open Aiyes in for
Speaker 11: a bill.
Speaker 3: Out Bloomberg's Brady Ford across a lot of stories, thank
Speaker 3: you very much. Another top top story, Apple can't catch
Speaker 3: an AI break. The executive who is in charge of
Speaker 3: developing a chat GPT like search feature within Apple is
Speaker 3: stepping down and heading to Meta. That's according to sources.
Speaker 3: For more, bloombergs Mark gunman who brokes that story joins us. Now,
Speaker 3: who is this executive and how significant is it Mark
Speaker 3: that he's jumping to Meta.
Speaker 2: Yeah, this is keying.
Speaker 8: And to give you an idea of how significant this is,
Speaker 8: we've talked about maybe a dozen Apple AI departures over
Speaker 8: the last few months. This is probably the most significant
Speaker 8: or second most significant of that group. This person was
Speaker 8: a direct purport to John g and Andrea, the senior
Speaker 8: VP who runs all of AI at Apple. This person
Speaker 8: was actually put into their role only a few weeks
Speaker 8: ago when his predecessor, Robbie Walker left Apple. Walker had
Speaker 8: been in charge of Siri, but he was removed from
Speaker 8: being in charge of Siri in March after the major
Speaker 8: delays and the blowback against Apple Intelligence.
Speaker 12: And then he.
Speaker 8: Started a new team called AKI Answers Knowledge and Information,
Speaker 8: and that team is focused on AI powered web search tools,
Speaker 8: so basically adding chat, GPT, perplexity, Gemini like functionality to
Speaker 8: Siri and other parts of the Apple operating system. And
Speaker 8: Yang he became in charge of that program just a
Speaker 8: few weeks ago. Before that, he was running the search
Speaker 8: related functionality, then he was running the whole thing. And
Speaker 8: so now Apple's AI team is going through another major
Speaker 8: reorganization in light of that significant departure.
Speaker 4: And a key line in your story is several of
Speaker 4: the Apple team members think that this is going to
Speaker 4: continue to happen, more departures to come.
Speaker 2: This is going to keep happening.
Speaker 8: I mean the core team developing the models underlying Apple Intelligence.
Speaker 8: It's a team called AFM or Apple Foundation Models. They've
Speaker 8: been breeding bleeding talent since July. The creator of that
Speaker 8: team and the person who ran that team, Roman Paying.
Speaker 8: He left for a two hundred and fifty million dollar
Speaker 8: multi year pay package and is now a senior AI
Speaker 8: executive at Meta. Since his departure, they've lost about a
Speaker 8: dozen people. I'm told there's several other people on that
Speaker 8: team continuing to interview. Other people are going to met
Speaker 8: Us still. Other people are going to start ups Open
Speaker 8: AI and Google. We've been reporting this out as these
Speaker 8: departures have been happening, and these new companies have been
Speaker 8: hiring these folks, and this is going to continue, given
Speaker 8: the pay packages that these competitors are offering, and given
Speaker 8: the embarrassments that Apple's AI AI efforts have become for
Speaker 8: some of these people actually working on them.
Speaker 3: Mark you've come on Bloomberg Tech and you've broken all
Speaker 3: these stories about people to Apple. A reasonable question and
Speaker 3: we just have sixty seconds, is is there actually anyone
Speaker 3: left at Apple of notes working on AI.
Speaker 12: Oh.
Speaker 8: Apple has tons of folks. They're working on acquisitions to
Speaker 8: try to refuel the ranks there. John g and Andrea,
Speaker 8: despite their being rumors and discussions about him stepping down,
Speaker 8: are being pushed out of the company for several months now,
Speaker 8: he remains in charge.
Speaker 2: He may not be.
Speaker 8: There for long, as I'm told that Apple has been
Speaker 8: looking for outside replacements for him, but for now he's there.
Speaker 8: Creig Federighi, who runs all software engineering, has now taken
Speaker 8: an ownership role over all the AI.
Speaker 2: Strategy at Apple.
Speaker 8: Mike Rockwell, who created the Vision pro he's heavily involved
Speaker 8: in the AI strategy there now too. So yeah, they
Speaker 8: have definitely had folks, but it's just about refueling the
Speaker 8: ranks and putting the right people in place. But certainly
Speaker 8: this is another considerable setback to Meta's game potentially.
Speaker 5: As always, we thank you so much for joining us.
Speaker 4: Meanwhile, coming up potentially catastrophic breach of a US based
Speaker 4: cybersecurity firm it's being blamed on Chinese state backed hackers.
Speaker 5: That detail and the fallout.
Speaker 4: Next, this is Bloomberg, Bloomberg Tech, and it's time now
Speaker 4: for talking tech and first up. US cybersecurity provider F
Speaker 4: five disclosed that Nation state hackers from.
Speaker 5: China breached its networks and gained.
Speaker 4: Long term, persistent access to certain systems, including source code now.
Speaker 5: The breach prompted warnings from the.
Speaker 4: US and UK authorities, describing the attack as a significant
Speaker 4: cyber threat that could be used.
Speaker 5: To exploit vulnerabilities.
Speaker 4: Plus, Uber is giving some drivers in the US the
Speaker 4: option to earn money by completing tasks related to the
Speaker 4: companies new data labeling business. This is an area where
Speaker 4: the rideshare giant sees an opportunity to shine in the
Speaker 4: AI boom. And Microsoft is pushing Windows users to talk
Speaker 4: to their computers. But the company is rolling out a
Speaker 4: new AI voice feature activated by saying hey, Copilot. It's
Speaker 4: part of a broader effort to rebuild Windows around AI,
Speaker 4: including expanding use of tool including copalant Vision, which lets
Speaker 4: software see what's on a user's screen.
Speaker 3: Ed Okay, coming out, We've got a riddle for you.
Speaker 3: How do stocks get weaker? And more valuable. More on
Speaker 3: how the AI boom is impacting equity dilution next, Also
Speaker 3: quick look at markets right.
Speaker 2: The story has been.
Speaker 3: Split between the early part of the day where TSMC's
Speaker 3: outlook was really boosting US, but TSMC US listed shares
Speaker 3: at least have fallen away. The market is modestly higher.
Speaker 3: There was some sort of nervousness and now calm about
Speaker 3: what is happening in trade talks between US and China.
Speaker 3: Will continue to track those stories throughout the range of
Speaker 3: the show.
Speaker 2: This has been big Tech. Welcome back to bloombog Tech.
Speaker 3: Our top story is TSMC, the world's biggest, most important
Speaker 3: contract manufacturer of semiconductors. It's US listed shares are now
Speaker 3: down a percent. They had opened up two percent and
Speaker 3: quickly fell away.
Speaker 2: The story is.
Speaker 3: That they have for the second time this year, hiked
Speaker 3: their sales growth outlook to the mid thirty percent range
Speaker 3: for twenty twenty five, and the writing on the Bloomberg
Speaker 3: terminal is really clear. That's given the market at large
Speaker 3: a lot of optimism about the outlook for AI and demand. Remember,
Speaker 3: TSMC is the contract manufacturer of Nvidia chips as an example,
Speaker 3: not doing much for their own US listed shares, though
Speaker 3: it's an important one that will stick with.
Speaker 5: Caraen we will.
Speaker 4: Let's just turn our attention back to that riddle that
Speaker 4: you left us with, ed because unusually, well usually we
Speaker 4: see a company's equity gets diluted. We tend to see
Speaker 4: investor Sara on the stock. But the AI boom has
Speaker 4: turned that on its head. Take a look at Intel shares.
Speaker 4: August is when the chip maker began selling newc to
Speaker 4: the US government from SoftBank and Nvidia wanted to Bloomberg calculations.
Speaker 4: That waters down the stake of existing investors by around
Speaker 4: fourteen percent.
Speaker 5: So why are shares up so much?
Speaker 4: Markets reporter common Rhyinicky has been answering the red ule
Speaker 4: and it's just all about the AI boom.
Speaker 12: Yeah, it really is. So it basically boils down to,
Speaker 12: you know, Intel was really not doing very well. It stocked,
Speaker 12: was very beaten down. There was a lot of worries
Speaker 12: about how the company was going to turn itself around.
Speaker 12: And this new influx, this new cash on the balance
Speaker 12: sheet is really positive and investors are saying, basically, we'd
Speaker 12: rather own eighty five percent of something than you know,
Speaker 12: zero percent or one hundred percent of nothing. Right, So
Speaker 12: it's basically this idea that this is going to help
Speaker 12: the company grow more, that it's going to do better
Speaker 12: in the future, and so taking a little bit of
Speaker 12: dilution on the profits is okay for now.
Speaker 2: Commen.
Speaker 3: This is about hype and the golden tickets of AI.
Speaker 2: Right.
Speaker 3: You write in your story about AMD gets its partnership
Speaker 3: with open AI, Intel gets its partnership and investment from Nvidia.
Speaker 2: The stock story is history from that point.
Speaker 12: Yeah, it's so true. And AMD shares are up, you know,
Speaker 12: just as much forty three percent, you know, since that
Speaker 12: deal was announced, and you know, Intel's been up ninety
Speaker 12: percent just since the end of August. So we're seeing
Speaker 12: so much enthusiasm about AI and all of these deals,
Speaker 12: even though they're in such rapid succession, have been really beneficial.
Speaker 12: Investors are excited about it. They want to be buying
Speaker 12: into these shares, and they want to see the growth
Speaker 12: going forward.
Speaker 3: Bloem moost Calm, and Ryan Key, thank you very much.
Speaker 3: Meta has announced plans to build a new gigawatts scale
Speaker 3: data center in Texas, committing more than one point five
Speaker 3: billion dollars to the project. The investment marks the social
Speaker 3: media giants twenty ninth data center and underscores it's pushed
Speaker 3: to keep pace in the rapidly evolving AI race. The
Speaker 3: news comes mid a wave of major data center announcements yesterday,
Speaker 3: including a Microsoft ndscale partnership, a new collaboration between Coreweave
Speaker 3: and Paul Side, and a forty billion dollar consortium acquisition
Speaker 3: of a ligned data centers. Here to discuss their identity
Speaker 3: center further, Nancy Tegler Laffer Tengler Investment CEO, who says, quote,
Speaker 3: it's about the power stupid Okay, hit me with that thesis.
Speaker 13: Oh and do you always find the right nugget to
Speaker 13: pull out?
Speaker 14: Yeah, Well, I mean, look, there's expected to be I
Speaker 14: mean Open AI has said they need twenty gigawatts of power.
Speaker 14: At sixteen billion per two gigawatts, that's a fair amount
Speaker 14: of change. And then you have all of these just
Speaker 14: using Texas as an example, you have all of these
Speaker 14: companies opening data centers in Texas.
Speaker 13: It's kind of the perfect place.
Speaker 14: Horizon is the only one that comes with its own
Speaker 14: power source, which is natural gas on the Mitchell family
Speaker 14: Longfellow ranch. And so that's great news, but powers a
Speaker 14: lot of power is going to be needed for the
Speaker 14: rest and Texas already has a grid problem.
Speaker 13: So we are looking at Laffer Tangler, at names.
Speaker 14: To names that can that can solve some of the
Speaker 14: data center problems and some of the grid problems that
Speaker 14: are coming with this major buildout.
Speaker 13: And photonics is a hope. It's not yet.
Speaker 14: We're not yet there in reducing power consumption, and buildouts
Speaker 14: are are critical. What we heard from Oracle recently, from
Speaker 14: the co CEOs was that you know, it's not about
Speaker 14: demand demand, it's about supply.
Speaker 13: They can't get these data centers built fast enough.
Speaker 4: Let's go to the promise of photonics, because you're already
Speaker 4: looking at a particular company cohere. Remind us of what
Speaker 4: the thesis is there, Nancy, and how quickly you think
Speaker 4: it can become a reality.
Speaker 14: Yeah, so that's the question, Caroline, I mean, Coherent is
Speaker 14: you know, really focused on building photonics around the quantum
Speaker 14: computing needs, which is just going to add another layer
Speaker 14: onto this whole power question. And so what we've done
Speaker 14: we've launched a new strategy called Macrocycle Opportunities and we
Speaker 14: have four themes space, robotics, quantum and nuclear and in
Speaker 14: that we are trying to identify the companies that are
Speaker 14: going to drive the next wave of transformation overlaid with
Speaker 14: AI because it's essential to many of those themes, or
Speaker 14: most of those themes.
Speaker 13: So coherence. One.
Speaker 14: One of the other names that is important to us
Speaker 14: is not a photonics name, but is quantum services. We
Speaker 14: own that in our twelfth best we own it in macrocycle,
Speaker 14: and we own it in our growth portfolio. They've got
Speaker 14: a thirty six billion dollar backlog in modernizing existing grids
Speaker 14: or power providers.
Speaker 4: Nazi, You're doing what so much of the market is
Speaker 4: having to do right now, which is have a lot
Speaker 4: of hope baked into these forward looking not only promises
Speaker 4: of the actual returns on investment in AI, but promise
Speaker 4: of photonics, promise of quantum. What is the fundamental research
Speaker 4: you bring to bear to be like? These are good bets.
Speaker 13: Well, so what we've done. And I didn't answer your
Speaker 13: question on timing, I don't know, Caroline. I mean it
Speaker 13: could be. The expectation is it could be a decade.
Speaker 14: But we've seen things accelerate so quickly, and the excellent
Speaker 14: CEO at AI World yesterday said we're going to see
Speaker 14: more transformation in the next ten years in the last
Speaker 14: one hundred. But what we've done in constructing the portfolio
Speaker 14: is we've established leaders and they are about forty to
Speaker 14: fifty percent of the portfolio. So thinking quantum IBM, which
Speaker 14: is a pretty low risk business model, and then the enablers,
Speaker 14: which is a coherent and then the speculative names and
Speaker 14: that would be Ion, q Righetti, all of those names.
Speaker 14: So the objective is and that's ten to fifteen to
Speaker 14: twenty percent, and then enablers are twenty to twenty five.
Speaker 14: So we're trying to mitigate risk by existing build positions
Speaker 14: in existing technologies that are already reproducing earnings and then
Speaker 14: couple that with names that are speculative.
Speaker 3: Nan we started this conversation about the news of Meta's
Speaker 3: latest or twenty ninth data center a gig or what
Speaker 3: in Texas. You have the small if my Bloomberg terminal
Speaker 3: data is correct position in Meta, but they are not
Speaker 3: a hyperscaler, right, so how do you view that build
Speaker 3: out that they're doing and the attractiveness in the broader
Speaker 3: thesis you've just outlined to us.
Speaker 14: Well, so we do own a very small bit ed
Speaker 14: but if you recall we've talked about this in the
Speaker 14: past where we sold the majority of our holdings because
Speaker 14: we felt like the business model and we were wrong
Speaker 14: by the way. We felt like the business model of
Speaker 14: advertising was not where we wanted to be, and then
Speaker 14: they pivoted to AI and I think.
Speaker 13: That's what's driving these investments.
Speaker 14: And they've been pretty successful at attracting a number of
Speaker 14: high leveled executives from many companies, but in particular Apple.
Speaker 14: So I think that for us is you know, we
Speaker 14: pivoted to Spotify. I think we actually did better with Spotify,
Speaker 14: But the point is that we've we missed the meta
Speaker 14: run and I think the question now is can they
Speaker 14: convert it to revenues And I.
Speaker 13: Think that's going to be the challenge.
Speaker 14: However, Mark Mahaney just published a piece that shows EBIT
Speaker 14: per employee in revenue per employee at Meta, Amazon, Microsoft,
Speaker 14: and Google is up massively and that goes to the
Speaker 14: bottom line. So I think the jury is still out
Speaker 14: on how they're going to monetize all of this, but
Speaker 14: we'll see. I mean, they're making the investments in people
Speaker 14: and in capex.
Speaker 3: Nancy just very very quick is Elon's pay pack is
Speaker 3: going to get voted through.
Speaker 14: I think so, I hope so. I like to be
Speaker 14: aligned with the CEO as a shareholder.
Speaker 4: Nancy Tegler, we appreciate it so much. Lafa Tengra investments
Speaker 4: great time on the show Coming up, the CEO of
Speaker 4: Startup Upgrade joins us to discuss the company's leasest running
Speaker 4: ground and what changed in the fintech market since his
Speaker 4: day's running Lending Club isys.
Speaker 5: Bluembg tech.
Speaker 3: Fintech Startup Upgrade has just closed a one hundred and
Speaker 3: sixty five million dollar Series G funding round that gives
Speaker 3: the company a seven point three billion dollar pre money valuation. Upgrade,
Speaker 3: which offers mobile banking, credit card and other financial services,
Speaker 3: was founded by former Lending Club CEO and co founder
Speaker 3: Reno Laplanche.
Speaker 2: He joins us now in San Francisco.
Speaker 3: Over the last couple of years, actually, Caroline and I've
Speaker 3: tracked very closely the valuation of private I wouldn't even
Speaker 3: say just fintech, you know, it's more specific modern banking services,
Speaker 3: multi platform offering. But just to start, why raise that money,
Speaker 3: what do you need it for?
Speaker 2: How does it help out with growth?
Speaker 15: Now? So we're in the fortunate situation of being cash
Speaker 15: flow positive, so we didn't need might say that. Yes,
Speaker 15: but as we think about the evolution of the company,
Speaker 15: we're sort of getting closer to taking the company public.
Speaker 15: This is probably our last sort of pre IPO raise,
Speaker 15: so it's a good opportunity to sort of check on
Speaker 15: where we stood in terms of building up Shaoulder value
Speaker 15: and also create an opportunity for liquidity for existing employees
Speaker 15: prior to an IPO.
Speaker 3: It's quite a definitive statement our last pre IPO raise.
Speaker 3: So you have a plan in place in a roadmap
Speaker 3: to do that.
Speaker 15: Yeah, I mean no certainty obviously, it always depends on
Speaker 15: the market and on our own sort of growth in
Speaker 15: the next twelve to eighty a month. But we're yeah,
Speaker 15: we're feeling good about the direction a go, Nald.
Speaker 4: What's so interesting is the way in which Upgrade gets
Speaker 4: new customers. In many ways, you're casually positive because in
Speaker 4: many ways looking for that profitability metric because you don't
Speaker 4: have to spend loads of marketing because you partner with
Speaker 4: big businesses. Just tell us about how the business model
Speaker 4: has help to weather what has been a real downturn
Speaker 4: for other neobanks during the twenty twenty one earlier era
Speaker 4: as well.
Speaker 15: That's right, Caroline. That's really what makes a great unique
Speaker 15: is our mutile product, multi channel strategy. So we're fortunate
Speaker 15: to have six different products, mobile banking, credit cards, personal loans,
Speaker 15: and then sort of indirect products like BNPL, home improvement
Speaker 15: financing and auto loans where we work with partners to
Speaker 15: deliver financing at the point of seal. And increasingly these
Speaker 15: sort of indirect products already of turning into good source
Speaker 15: of customer acquisitions where we can acquire a customer for
Speaker 15: a not a loan at a local dealer, of home
Speaker 15: improvement financing, at a local roofer person who installed new windows,
Speaker 15: and don't become upgreade customers, and we can self intern
Speaker 15: sort of benefit from all of great products, including credit cards,
Speaker 15: including mobile banking. So we really created that sort of
Speaker 15: ecosystem that benefits from multiple products.
Speaker 4: And many know you from Lending Club. Was it those
Speaker 4: relationships that helped you on the other side? Could you
Speaker 4: repackage these loans, perhaps sell them in bulk to well
Speaker 4: a community bank if it's relatively risk free, or onto
Speaker 4: a private equity house if it's relatively risky, And I
Speaker 4: think auto loans come to mind when we're thinking about risk.
Speaker 5: At this moment.
Speaker 15: That's right, right. So we've i think helped sort of
Speaker 15: provide forty five billion in nouns since we started. It's
Speaker 15: not all on our balance sheet. So we are certainly
Speaker 15: sort of setting loans to loan buyers, and that include
Speaker 15: a very broad range of buyers from small banks and
Speaker 15: community banks and credit unions that are going to focus
Speaker 15: on the sort of safest loans to sort of private
Speaker 15: credit funds, securitization structures where you can allocate the risks
Speaker 15: differently and where of investors might might be willing to
Speaker 15: chase a higher yield.
Speaker 3: Reno jurisdictionally, would you just reflect on on the experience
Speaker 3: of leading this company in this startup, What is it
Speaker 3: like being a neo bank under the Trump administration?
Speaker 2: For example?
Speaker 3: Are they friendly and cooperative in the things that you
Speaker 3: want to do versus their governance of traditional banks?
Speaker 9: Right?
Speaker 15: So, yeah, it's certainly a very business friendly environment right now.
Speaker 15: But some of that translates into media a little bit
Speaker 15: less stringent of regulations at the federal level, but lending
Speaker 15: is also regulated at the state level, and I think
Speaker 15: whatever relax relax standards where we're getting on the federal
Speaker 15: h stage, where where we're not getting at a state level.
Speaker 15: So so state regulators I think fielled that vacuum left
Speaker 15: by federal regulators to to to a certain point. So
Speaker 15: I don't think there's a sort of meaningful change in
Speaker 15: how sort died the regulatory environment is.
Speaker 4: No memories are short, but I just want you to
Speaker 4: reflect from an on lending club and what you learn
Speaker 4: that briefly, because there were issues then.
Speaker 5: You did have to step down. I'm interested is to
Speaker 5: what you've learned from it.
Speaker 15: Oh yeah, so much. Yeah, So I think the lending
Speaker 15: club was really the first sort phase of fintech, right,
Speaker 15: it was really sort of building up an entirely new industry.
Speaker 15: We've so very uncertain. Regulatory and compliance framework upgrade ten
Speaker 15: years later has really been part of that sort of
Speaker 15: second phase of the industry, whereas more efforts of established framework,
Speaker 15: established rules of the game, and I think we've we've
Speaker 15: all been benefiting from from that, and the fintech industry
Speaker 15: has been able to grow and and not really be
Speaker 15: a sort of strong challenger.
Speaker 5: Truly.
Speaker 15: Some more traditional banking industry.
Speaker 4: Appreciate the answer, and O Laplanche come back, CEO of Upgrade,
Speaker 4: We thank you now.
Speaker 5: Coming up.
Speaker 4: Anthropic reportedly looks to raise even more money, particularly from
Speaker 4: the Middle East.
Speaker 5: We're on that next. As a Bloomberg Tech.
Speaker 3: Anthropic is reportedly in talks about a Debbi based investment
Speaker 3: firm MGX to raise additional capital, just weeks after completing
Speaker 3: a funding round that valued the AI startup at one
Speaker 3: hundred and eighty three billion dollars all. According to sources,
Speaker 3: CEO Dario m Oday met with MGF executives during a
Speaker 3: recent tour of the Middle East, joining us as Bloomberg
Speaker 3: Shering Gafari. This is something you and I have been
Speaker 3: reporting out together. The way i'd summarize it, you give
Speaker 3: us the details is need money, need compute, make some
Speaker 3: friends across the Middle East.
Speaker 13: That's right.
Speaker 16: It's never too early, I think for these AI companies
Speaker 16: to start thinking about the next funding round, even if
Speaker 16: they're weeks before they've closed the last one, and you know,
Speaker 16: we're talking about you know, the billions at this point.
Speaker 16: Anthropics last round they raised thirteen billion at one hundred
Speaker 16: and eighty three billion valuation. If you're thinking about what
Speaker 16: kinds of pools of capital are out there at that scale.
Speaker 16: The Middle East is increasingly sort of one of the
Speaker 16: only remaining pools that's going to make those kinds of
Speaker 16: investments at that level in the still unprofitable, still somewhat used, risky,
Speaker 16: right AI companies Suan.
Speaker 4: What's interesting, and as you and Ed make clear in
Speaker 4: the story is Katsa had been a pool of capital
Speaker 4: for them previously, but they had to make amends for
Speaker 4: previous choice words when it came to other Middle East
Speaker 4: pools of capital.
Speaker 13: That's right.
Speaker 16: Zoanthropics CEO Dario Amedi has you know, in the past
Speaker 16: made comments There is a memo to his own staff
Speaker 16: saying that acknowledging that sort of fundraising in or that
Speaker 16: they would be taking money in the Middle East and
Speaker 16: there are trade offs there and that the company would
Speaker 16: sort of have to come to terms with the fact
Speaker 16: that not everything that they do will always be helping democracies,
Speaker 16: that it may help dictators, and so of course with
Speaker 16: the Middle East, you know, having a different sort of.
Speaker 13: Set of governments, that is a new reality.
Speaker 16: I think for these CEOs of AI companies that they
Speaker 16: may be making deals with countries that have different and
Speaker 16: maybe more undemocratic systems, right than here in the US.
Speaker 5: And they shrink fari. We thank you very much.
Speaker 4: And let's just say with Anthropic, because the AI startup
Speaker 4: founded by former Open AI executives.
Speaker 5: Of course we just mentioned.
Speaker 4: Daria, there's also Daniella Ramade and a handful of others
Speaker 4: is under a new scrutiny from the White House as
Speaker 4: it doubles down on its mission of building safe, steerable AI.
Speaker 4: White House ais are that David Sachs took to ex
Speaker 4: acusing Anthropic of running a sophisticated regulatory capture strategy based
Speaker 4: on fear mungery and blaming the company for a few
Speaker 4: a state regulatory frenzy that's hurting startups topic of Dave
Speaker 4: Lee's leader's Bloomberg opinion article and he joins US now.
Speaker 4: And David sax was responding to a recent essay written
Speaker 4: by another co founder of Anthropic could come from Open AI,
Speaker 4: and let's just talk about what Jack had been posted.
Speaker 17: Yes, this is Jack Clark, one of the co founders,
Speaker 17: their current head of policy as well.
Speaker 10: And in this essay, you.
Speaker 17: Know, he goes over some of his fears about AI
Speaker 17: and he may sort of metaphors around sort of being
Speaker 17: scared of the of the Dark essentially as a kid
Speaker 17: and sort of comparing the future of AI in some
Speaker 17: ways to the dark and not quite knowing you know,
Speaker 17: what shape it's going to take, what the risks are.
Speaker 17: And it seems, you know, this is this isn't the
Speaker 17: first time David Sachs has kind of spoken badly off
Speaker 17: anthropic and what it's doing is scratching this itch to
Speaker 17: David sax And it seems the White House has the
Speaker 17: anthropic is it's kind of separate from the tech world
Speaker 17: in a lot of this, you know, we're not seeing
Speaker 17: anthropic leadership at many of these White House events. They're
Speaker 17: not going to you know, the been released with Trump
Speaker 17: in the same that as Jensen Huang has. They're certainly
Speaker 17: not handing him a small trophy like Tim Cook did
Speaker 17: in the Over Office recently, and that now has kind
Speaker 17: of put a bit of a target on their back.
Speaker 17: I think is this sort of standalone AI company that
Speaker 17: likes to think it has perhaps stronger principles on safety
Speaker 17: than Open Ai and so many others.
Speaker 3: Dave, this is a story that's in the zeitgeist. To
Speaker 3: borrow Tom keenism. It's playing out on social media. There
Speaker 3: are other people beyond David Sachs weighing in on it again,
Speaker 3: it's a little bit repetitive, but just explain the grievance
Speaker 3: the issue here that these kind of tech figures have
Speaker 3: with Jack and his essay and an Anthropic.
Speaker 17: Well, look, there was for the longest time these sort
Speaker 17: of two camps in AI that one would say, you know,
Speaker 17: slow this down, let's do this deliberately, do bit safely.
Speaker 17: The others say, no, let's be accelerationist. Let's just innovate
Speaker 17: as quickly as we can and treat the problems as
Speaker 17: they come and solve some of so many problems with AI.
Speaker 17: And the way that's going to manifested in a more
Speaker 17: practical sense is that you have states like California that
Speaker 17: have recently made into law several bills related to AI.
Speaker 17: One in particular was Senate Bill fifty three, which is
Speaker 17: about transparency, is about protecting whistleblowers. Anthropic stood alone in
Speaker 17: endorsing that bill. Open a Eye sort of begrudgingly said
Speaker 17: they could live with it after the fact, but Anthropic
Speaker 17: was the only company to say, yes, we think this
Speaker 17: is a good idea. Now, their preference would be for
Speaker 17: a federal law that would stop there being individual laws
Speaker 17: in different states around the country, and that's obviously what
Speaker 17: David sax wants as well. But Anthropic are saying, look,
Speaker 17: if you want to do a federal law, let's see it,
Speaker 17: let's have it in Congress, let's see what that is.
Speaker 17: Until then, we're happy to back what little legislation is
Speaker 17: happening in California, even if that means it might make
Speaker 17: things more complicated for the AI companies.
Speaker 3: Bloomberg Opinion columnist Davely with the latest Thank you very much.
Speaker 3: That does it for this edition of Bloomberg Tech. Carra
Speaker 3: what an addition it was.
Speaker 4: It was, and yet more focus on data centers and
Speaker 4: indeed growth of AI.
Speaker 5: Do not forget to check out our podcast.
Speaker 4: Find it on the terminal as well as online on Apple, Spotify,
Speaker 4: and iHeart from New York.
Speaker 5: For San Francisco. This is Bluemberg Tech