WEBVTT - Amazon Looks to Raise At Least $37 Billion with Bond Sale 0:00:02.520 --> 0:00:13.560 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.560 --> 0:00:17.400 from coast to coast with Caroline Hide in New York 0:00:17.680 --> 0:00:19.680 and ev Loow in San Francisco. 0:00:23.040 --> 0:00:24.640 This is Bloomberg Tech coming up. 0:00:24.680 --> 0:00:26.920 Amazon kicks off what is likely to be one of 0:00:26.920 --> 0:00:29.000 the biggest corporate bond offerings ever. 0:00:29.320 --> 0:00:31.760 In a bid to pay for the AI boom. 0:00:31.640 --> 0:00:36.080 Plus, Google introduces AI agents across the Pentagon's workforce to 0:00:36.120 --> 0:00:39.239 automate routine jobs. This is the Defense Department's fight with 0:00:39.280 --> 0:00:40.879 anthropics drags. 0:00:40.560 --> 0:00:45.360 On, and Hewlett Packard Enterprise projects sales topping estimates on 0:00:45.479 --> 0:00:48.760 AI hardware demand. We'll break it all down with the CEO, 0:00:49.159 --> 0:00:50.120 but now we break. 0:00:49.920 --> 0:00:51.400 Down volatility in the market. 0:00:51.600 --> 0:00:53.920 We once more focus in on the Middle East, the 0:00:53.960 --> 0:00:56.120 conflict with Iran and the fact that it has been 0:00:56.280 --> 0:00:58.920 upped in terms of aggressive force coming from the US 0:00:59.080 --> 0:01:02.880 to Iran today, but also aggressive moves in oil markets. 0:01:03.000 --> 0:01:05.240 Just drag down Brent. 0:01:05.160 --> 0:01:08.360 Down ten percent, significant volatility in the oil contract, but 0:01:08.440 --> 0:01:10.800 it means we're actually seeing some push higher in the 0:01:10.840 --> 0:01:13.360 stock market, a regain on the NASAQ one hundred. In fact, 0:01:13.360 --> 0:01:15.680 that a second straight day of games ed all of 0:01:15.680 --> 0:01:18.440 this as we think about really the end goal and 0:01:18.480 --> 0:01:21.520 whether this will be a short term or long term conflict. 0:01:22.480 --> 0:01:24.800 I'm looking at the latest and what's been a wave 0:01:24.920 --> 0:01:27.760 of AI related bond sales and it's Amazon. So this 0:01:27.800 --> 0:01:31.959 is what Bloomberg's reporting, both US dollars denominated and Euro 0:01:32.080 --> 0:01:36.360 denominated bonds in US eleven tranches of high grade the 0:01:36.400 --> 0:01:40.679 longest duration I think twenty fifty six with a one 0:01:40.680 --> 0:01:43.959 point five to five percent yield over treasuries. 0:01:44.080 --> 0:01:45.880 But the goal is to raise up to forty. 0:01:45.640 --> 0:01:48.160 Two billion dollars, maybe up to ten billion euros. And 0:01:48.200 --> 0:01:51.560 we know the story, right, capital expenditures this year six 0:01:51.720 --> 0:01:54.560 hundred and fifty billion dollars or so across the hyperscalers, 0:01:54.920 --> 0:01:58.080 and many of them have looked to debt markets, looked 0:01:58.200 --> 0:02:01.800 to raise money through bond saleales to finance that capex. 0:02:01.880 --> 0:02:03.800 There's a lot to dig into here, there is, and. 0:02:03.840 --> 0:02:06.520 We're going to continue the conversation. Therefore, Edward Robert Schiffman 0:02:06.680 --> 0:02:08.800 and bretting Bag Intelligence, he's out with the reaction to 0:02:08.840 --> 0:02:11.280 this morning, saying that the bond cell is quote likely 0:02:11.280 --> 0:02:14.720 to draw a considerable demand despite a growing absolute debt 0:02:14.720 --> 0:02:18.400 load that's poised to increase again next year as spending rises. 0:02:18.720 --> 0:02:21.360 That the stock had been punished when they told us 0:02:21.360 --> 0:02:22.840 that they were going to be spending up to two 0:02:22.919 --> 0:02:25.320 hundred billion on capital expenditures. 0:02:25.720 --> 0:02:27.400 But the bond market is going to lap this up. 0:02:27.440 --> 0:02:31.000 It feels like, yeah, you know, My first thought was, Wow, 0:02:31.080 --> 0:02:32.040 they must be sewing. 0:02:31.840 --> 0:02:32.440 A lot of books. 0:02:33.120 --> 0:02:37.160 My second thought is, this is so wildly bullish for 0:02:37.240 --> 0:02:41.079 the credit markets and in particular for tech, impossibly the 0:02:41.080 --> 0:02:46.520 worst potential macro environment. Bondholders are coming in saying we 0:02:46.600 --> 0:02:49.320 want to own you. We want to own you in size, 0:02:49.480 --> 0:02:52.720 and we're confident that your future growth plans are going 0:02:52.760 --> 0:02:53.400 to play out. 0:02:53.520 --> 0:02:54.239 And even though. 0:02:54.080 --> 0:02:56.600 There's so much spending and we know more bonds are 0:02:56.680 --> 0:02:59.440 likely to becoming, people are going to be lining up 0:02:59.440 --> 0:02:59.920 for this deal. 0:03:00.720 --> 0:03:04.040 I actually just misspoke at the board. I said twenty 0:03:04.720 --> 0:03:07.760 fifty six, Actually twenty seventy six, the longest maturity that 0:03:07.760 --> 0:03:11.080 Bloomberg's reporting Amazon's thinking about, the one that would yield 0:03:11.120 --> 0:03:14.080 one point five five percent over treasuries. How does this 0:03:14.160 --> 0:03:17.480 kind of stack up in the history of corporate debt markets, 0:03:17.480 --> 0:03:20.480 recent and historic? Right, we talked a little bit about 0:03:20.560 --> 0:03:24.239 what Alphabet's done most recently. Oracle is a slightly different 0:03:24.240 --> 0:03:26.440 credit profile, but like a lot of focus on that too. 0:03:26.960 --> 0:03:28.760 Well, this is going to be the biggest bond deal 0:03:28.800 --> 0:03:31.160 of the year, it looks like by far, and I'll 0:03:31.200 --> 0:03:33.000 tell you, I think people just need to get used 0:03:33.040 --> 0:03:37.840 to this. These hyperscalers are effectively becoming serial issuers. The 0:03:37.880 --> 0:03:41.720 one hundred billion dollar plus debt club is growing. So 0:03:41.880 --> 0:03:45.240 not only do we have new current larger needs, but 0:03:45.480 --> 0:03:47.480 just think about it, over the next handful of years, 0:03:47.520 --> 0:03:50.520 as bonds mature, there's always going to be a constant 0:03:50.560 --> 0:03:54.520 need to refinance and push out the curve. Amazon itself 0:03:54.600 --> 0:03:57.200 is twenty billion dollars in debt maturing over the next 0:03:57.280 --> 0:03:59.320 three years, so this is going to be a constant 0:03:59.400 --> 0:04:01.760 and look for more of this action. Again, I think 0:04:01.800 --> 0:04:04.320 bondholders can take huge advantage of this. The type of 0:04:04.320 --> 0:04:08.040 concessions that are being offered here seem wildly wide to me. 0:04:08.200 --> 0:04:10.000 I actually think the demand is going to be so 0:04:10.040 --> 0:04:12.400 strong that they're going to come in dramatically, maybe twenty 0:04:12.480 --> 0:04:14.120 thirty plus basis points, and. 0:04:14.080 --> 0:04:17.120 They're tapping just every type of part of the market. 0:04:17.240 --> 0:04:18.600 You've got like nineteen. 0:04:18.240 --> 0:04:23.160 Different tranches, so different inspiration dates. Ultimately of when the 0:04:23.160 --> 0:04:26.680 debt is going to becoming jew but also different currencies 0:04:26.680 --> 0:04:29.599 as well. How are they managing to satiate all the 0:04:29.600 --> 0:04:30.680 type of investor out there? 0:04:30.839 --> 0:04:33.120 You know, we talked about this when Alphabet came that 0:04:33.160 --> 0:04:36.800 they were doing a small tranches of Swiss francs and 0:04:36.880 --> 0:04:39.680 British pounds and why they weren't tapping the Euro market. 0:04:39.960 --> 0:04:44.279 You know, the r market is widely I think underinvested 0:04:44.440 --> 0:04:48.320 in technology, and they're somewhat probably price agnostic. They're willing 0:04:48.360 --> 0:04:51.680 to take down any Amazon bonds across the curve almost 0:04:51.680 --> 0:04:54.440 at any price because they're so underweighted. So I think 0:04:54.440 --> 0:04:56.599 there's a huge on tap market there that we're going 0:04:56.640 --> 0:04:59.919 to see other companies come and grab as well. 0:05:00.360 --> 0:05:03.120 That's the Bloomberg Intelligence react from Robert Schiffman. I would 0:05:03.120 --> 0:05:05.960 say the details of Amazon's bond sale are according to 0:05:05.960 --> 0:05:08.719 Bloomberg sources, and Bloomberg saying that the US side at 0:05:08.800 --> 0:05:12.279 least mike price. Today a separate story, a court ruled 0:05:12.279 --> 0:05:16.440 that Perplexity must stop using its Comet web browser agent 0:05:16.800 --> 0:05:22.120 to make purchases on Amazon's marketplace. Amazon sued, accusing Perplexity 0:05:22.120 --> 0:05:25.599 of computer fraud for not disclosing when Comet was shopping 0:05:25.839 --> 0:05:28.520 for a user and refusing to stop when asked. The 0:05:28.600 --> 0:05:31.839 order also bars access to password protected parts of Amazon 0:05:31.880 --> 0:05:36.160 systems and requires destruction of Amazon data, with enforcement pause 0:05:36.240 --> 0:05:38.440 for a week to allow for an appeal. Perplexity has 0:05:38.520 --> 0:05:41.400 yet to respond to a messages seeking comment. 0:05:41.120 --> 0:05:44.240 Cara, it's avas company. Then, of course it's about e 0:05:44.279 --> 0:05:47.560 commerce and about cloud. Let's talk about Oracle now, because 0:05:47.560 --> 0:05:49.520 it's about cloud and software and its earnings are after 0:05:49.560 --> 0:05:52.680 the bell. It comes after recent Bloomberg reporting that Oracle 0:05:52.720 --> 0:05:57.120 and OpenAI have ended plans to expand that flagship data 0:05:57.120 --> 0:06:00.120 center project in Texas. While will investors be looking for 0:06:00.160 --> 0:06:02.120 in the company's results, We want to talk it all 0:06:02.160 --> 0:06:06.239 through with Gabrielle Borge's software sector analysts at Goldman Sachs Research. 0:06:06.320 --> 0:06:09.080 How much of this is a test of Oracles all 0:06:09.200 --> 0:06:11.840 bread and butter software or a test of how much 0:06:11.920 --> 0:06:15.400 investors are willing to well stom at the capex of 0:06:15.440 --> 0:06:18.640 getting into the cloud and furthering the AI focus. 0:06:19.520 --> 0:06:21.839 Yeah, Hi, it's great to be back. Good morning. I 0:06:21.839 --> 0:06:25.200 think you touched on it perfectly there where the capex 0:06:25.440 --> 0:06:29.320 makes sense if you can justify the unit economics that 0:06:29.400 --> 0:06:33.080 are attached to the AI infrastructure projects, and so Oracle's 0:06:33.080 --> 0:06:35.400 given us a couple of nuggets in this regard. They've 0:06:35.440 --> 0:06:37.799 taught us that they expect to be able to spend 0:06:38.120 --> 0:06:40.960 less than one hundred billion in debt raised in order 0:06:41.040 --> 0:06:43.600 to be able to fulfill north of five hundred billion 0:06:43.720 --> 0:06:46.440 in cloud backlog that's now on their balance sheet. Those 0:06:46.440 --> 0:06:49.400 are commitments from costomers for the next five six years. 0:06:49.760 --> 0:06:52.040 They've also taught us that the gross margin on these 0:06:52.080 --> 0:06:55.039 projects is thirty to forty percent over the lifetime of 0:06:55.040 --> 0:06:57.520 a contract, so that's typically five to six years. And 0:06:57.560 --> 0:07:00.560 so if you put those two data points together, whatever 0:07:00.680 --> 0:07:03.760 incremental information we can get from the management team tonight 0:07:03.920 --> 0:07:06.320 that helps make this less of a black box, I 0:07:06.360 --> 0:07:07.279 think we'll go along way. 0:07:07.640 --> 0:07:11.240 Because we are worried about turning cash flow negative, We 0:07:11.320 --> 0:07:15.280 are worried about maybe some of the ability to drive 0:07:15.360 --> 0:07:18.880 revenue growth to substantiate the capital expenditure spend. What do 0:07:18.880 --> 0:07:20.680 you need to see in terms of growth and pointing 0:07:20.680 --> 0:07:22.960 to growth because the stock is actually pretty cheap now. 0:07:24.080 --> 0:07:27.520 Yeah, So when you actually break down the phases of 0:07:27.560 --> 0:07:31.320 the different facilities coming online, so Abilene, for example in Texas, 0:07:31.360 --> 0:07:35.600 that's a one point to big our capacity facility where 0:07:35.680 --> 0:07:39.160 Oracle has already said that the four point five gigawats 0:07:39.160 --> 0:07:42.120 that will be coming online to fulfill their existing commitments. 0:07:42.360 --> 0:07:45.520 They already have all the leasing agreements for that already 0:07:45.560 --> 0:07:48.640 signed and ready to go. What happens next is as 0:07:48.680 --> 0:07:51.360 the revenue comes online, we expect to see is really 0:07:51.480 --> 0:07:55.320 nice gross profit acceleration in Oracle's four co business that 0:07:55.440 --> 0:07:57.800 includes the big part of OCI that's tied to some 0:07:57.840 --> 0:08:00.920 of these contracts, that's Oracle Cloud. We've spect to see 0:08:00.920 --> 0:08:03.640 that as we go through the year. And so what 0:08:03.720 --> 0:08:06.040 we've noticed over the last three or four quarters with 0:08:06.120 --> 0:08:09.600 our core is that it's less about the specific numbers 0:08:09.600 --> 0:08:11.600 and some of the short term dynamics in the given 0:08:11.640 --> 0:08:13.920 quarter and more about what they say about their ability 0:08:13.920 --> 0:08:16.480 to fulfill some of these contracts over a longer time frame, 0:08:17.040 --> 0:08:19.240 which is why just taking a step back, I do 0:08:19.320 --> 0:08:21.760 think you'll see BREST profit acceleration and US as we'll 0:08:21.760 --> 0:08:23.560 be looking for that as we go towards the end 0:08:23.560 --> 0:08:24.000 of this year. 0:08:24.240 --> 0:08:26.760 Gabriella, I hear you on that, but you know, the 0:08:26.800 --> 0:08:30.400 streets expecting the infrastructure unit to grow almost eighty percent 0:08:30.480 --> 0:08:33.679 in the quarter, you know what if they're off by 0:08:33.720 --> 0:08:37.120 a few percentage points, because you know, in general that's 0:08:37.160 --> 0:08:40.959 been the formula, right, a very high bar for tangible 0:08:41.000 --> 0:08:44.240 AI related growth in those infrastructure divisions. 0:08:45.520 --> 0:08:47.680 Yeah, I think you're making a really good point here, 0:08:47.720 --> 0:08:50.560 because we have seen for a couple of quarters now 0:08:50.600 --> 0:08:53.880 that the OCI estimate intra quarter can move around, and 0:08:53.920 --> 0:08:55.960 part of that is the timing of any one piece 0:08:55.960 --> 0:08:59.360 of facility coming online. I do think though, what we're 0:08:59.360 --> 0:09:02.160 seeing from a land signal standpoint is still very strong. 0:09:02.240 --> 0:09:04.560 And coming back to Abiline, Abiline has been rapping really 0:09:04.720 --> 0:09:06.760 nice over the last three months. The one other thing 0:09:06.800 --> 0:09:10.480 I'll say is ourcle stock does react to apros our 0:09:10.559 --> 0:09:14.360 potential delays for example, so as we've gotten more headlines 0:09:14.520 --> 0:09:17.360 out out of the new flow over the last two 0:09:17.440 --> 0:09:20.839 three months now, I think expectations do move around. All 0:09:20.880 --> 0:09:22.960 of which is to say what we've seen during software 0:09:22.960 --> 0:09:25.320 earning season has got to have a clean print for 0:09:25.320 --> 0:09:27.680 the stuff to work on the print, and so and 0:09:27.800 --> 0:09:29.360 I hear you there, it's got to be a clean 0:09:29.640 --> 0:09:31.000 print for the stock to work on the print. 0:09:32.040 --> 0:09:34.280 What I reported with the team in the case of 0:09:34.320 --> 0:09:38.480 Abilene was that simply Oracle and Crusoe decided not to 0:09:38.559 --> 0:09:41.280 proceed from with an expansion from one point two gig 0:09:41.320 --> 0:09:44.760 watts to two Google watts, and that Crusoe was negotiating 0:09:44.800 --> 0:09:47.800 with Meta to come in and take that additional capacity, 0:09:47.800 --> 0:09:50.360 which many of your colleagues on the cell side pointed 0:09:50.360 --> 0:09:53.280 out might not have been reflected in RPO anyway. But 0:09:53.360 --> 0:09:55.640 what the story does highlight, and you made the point 0:09:55.679 --> 0:09:58.160 a moment ago on the four point five gigawatts agreed, 0:09:58.600 --> 0:10:02.079 is concentration risk one customer, which is open AI. 0:10:02.640 --> 0:10:05.600 Is that something you model for, Yeah, we. 0:10:05.600 --> 0:10:07.679 Do actually in a couple of different ways. So we 0:10:07.720 --> 0:10:10.760 take a discount to our open AI forecast and to 0:10:10.800 --> 0:10:13.160 what ourcle has said their open AI backlog is to 0:10:13.240 --> 0:10:15.600 account for dynamics like the one you're talking about, the 0:10:15.640 --> 0:10:19.120 extreme customer concentration risk. The other thing I'll mention here though, 0:10:19.200 --> 0:10:22.960 is Oracle will tell you that they can have fungibility 0:10:22.960 --> 0:10:25.440 of CAPEX. What does that mean? That means you can 0:10:25.480 --> 0:10:29.360 actually reconfigure a training cluster to be able to serve 0:10:29.440 --> 0:10:32.480 inference use cases. It means you can reconfigure for one 0:10:32.520 --> 0:10:35.720 customer to serve another customer, so there is some fungibility there. 0:10:36.000 --> 0:10:38.960 What that means is that if AI demand remains strong 0:10:39.040 --> 0:10:41.960 and that internalizes on enterprise AI option, which we've spoken 0:10:41.960 --> 0:10:45.280 about before. Then someone should be able to come in 0:10:45.320 --> 0:10:48.080 and pick up that capex in the event that it 0:10:48.120 --> 0:10:49.760 needs to be moved around and it comes back to 0:10:49.760 --> 0:10:50.960 the same air of fungibility. 0:10:52.760 --> 0:10:55.800 Gary Ellavorg is Golm and Zach's research analyst looking ahead 0:10:55.800 --> 0:10:57.120 to Oracle, which is after the bell. 0:10:57.160 --> 0:10:57.880 Thank you very much. 0:10:57.920 --> 0:10:59.679 Like coming up, we can to have the latest on 0:10:59.800 --> 0:11:02.719 each expanding use of AI by the Pentagon. 0:11:02.800 --> 0:11:04.840 That's next. This is Bloomberg Tech. 0:11:14.920 --> 0:11:19.280 As President Trump declared yesterday, we're crushing the enemy in 0:11:19.320 --> 0:11:24.600 an overwhelming display of technical skill and military force. We 0:11:24.679 --> 0:11:29.360 will not relent until the enemy is totally and decisively defeated. 0:11:31.520 --> 0:11:34.280 That was US Defense Secretary Pete Hegseef weighing in on 0:11:34.280 --> 0:11:36.960 the war in Iran during a briefing. The Pentagon says 0:11:37.000 --> 0:11:40.080 it's conducting the most intense day of attacks yet. This 0:11:40.160 --> 0:11:43.880 is the Islamic Republic has been firing drones and missiles 0:11:44.000 --> 0:11:46.600 at targets across the Middle East. In return, let's bring 0:11:46.679 --> 0:11:49.040 in Bloomberg's Washington correspondent, Tyler kendo I saw a lot 0:11:49.080 --> 0:11:51.560 of the headlines on the terminal this morning, for example, 0:11:51.600 --> 0:11:56.280 around drone activity in the Gulf the UAE. We continue 0:11:56.320 --> 0:11:59.240 to hear from this administration on or at least field 0:11:59.320 --> 0:12:01.240 questions on the timeline for this war. 0:12:01.320 --> 0:12:02.440 What's the latest we need to know? 0:12:03.960 --> 0:12:05.079 Yeah, hey, and good morning. 0:12:05.120 --> 0:12:07.480 Well, as you heard, their secretary Hexcess said that the 0:12:07.600 --> 0:12:11.040 US will quote not relent until all of its objectives 0:12:11.080 --> 0:12:14.480 are achieved. After yesterday, President Trump appeared to suggest that 0:12:14.520 --> 0:12:17.840 the US was ahead of schedule when it comes to 0:12:18.440 --> 0:12:21.400 maintaining its goals in the region. But then we heard 0:12:21.440 --> 0:12:23.920 from Iran this morning and a new statement from the 0:12:23.920 --> 0:12:28.120 country's parliament speaker saying that Iran is quote not at 0:12:28.160 --> 0:12:32.240 all interested in a potential ceasefire deal, and the IRGC 0:12:32.559 --> 0:12:37.239 released a statement overnight vowing to continue to block oil exports. 0:12:37.280 --> 0:12:37.400 Now. 0:12:37.400 --> 0:12:40.480 President Trump yesterday had threatened to widen the list of 0:12:40.679 --> 0:12:45.199 US targets to electricity infrastructure if attacks in the Strait 0:12:45.240 --> 0:12:48.720 of her moves and disruptions do continue. I will point 0:12:48.720 --> 0:12:51.520 out that the President reiterated that he is prepared to 0:12:51.559 --> 0:12:54.880 send a naval escort into the Strait to help those 0:12:54.920 --> 0:12:57.760 tankers through. But when the Joint chiefs of Staffed Chair 0:12:57.880 --> 0:13:00.520 Dan Kane was asked about this earlier this morning. It 0:13:00.559 --> 0:13:02.959 does not appear that any of those plans have been 0:13:02.960 --> 0:13:06.640 put into motion. Bloomberg News is also reporting that electronic 0:13:06.679 --> 0:13:10.000 warfare is now jamming signals in the Critical Waterway, which 0:13:10.040 --> 0:13:13.439 at this point really does remain effectively closed, and in Caroline. 0:13:13.440 --> 0:13:15.200 Within the last hour, we got the headline that G 0:13:15.320 --> 0:13:18.760 seven nations are now asking the International Energy Agency to 0:13:18.800 --> 0:13:22.679 prepare scenarios for the potential release of emergency stockpiles as 0:13:22.720 --> 0:13:25.679 these oil flows continue to be impacted in the region. 0:13:25.720 --> 0:13:29.640 And the oil market certainly moves and despite the newsflow, 0:13:29.720 --> 0:13:33.160 Tyler Kendall, we so appreciate it. Let's stick with Defense 0:13:33.280 --> 0:13:35.960 News because Bloomberg has learned that the Pentagon plans to 0:13:36.040 --> 0:13:39.600 add Google's AI agents to handle unclassified work and as 0:13:39.600 --> 0:13:42.079 in talks to bring those tools to the classified and 0:13:42.200 --> 0:13:45.720 top secret cloud. Bloomber's Katrina Manson has been importing on 0:13:45.760 --> 0:13:47.839 this and in fact continues to report at the very 0:13:47.920 --> 0:13:51.920 edge of AI adoption within the Pentagon. Look, what is 0:13:52.000 --> 0:13:54.040 Emil Michael talking about in terms of Google. 0:13:54.120 --> 0:13:55.199 Is this because they're having to. 0:13:55.120 --> 0:13:58.360 Force out anthropic This I think is fair to see 0:13:58.360 --> 0:14:02.480 as separate where Emil Michael came in in this senior 0:14:02.559 --> 0:14:05.400 role very focused on AI. Back in August, he told 0:14:05.440 --> 0:14:07.800 me he was shocked that the Pentagon had adopted so 0:14:07.920 --> 0:14:12.120 few AI tools. It's brought in chatbots, that's thanks to Gemini. 0:14:12.200 --> 0:14:14.520 It's had those for the last three months. One point 0:14:14.520 --> 0:14:17.400 two million people in the Pentagon have used those or 0:14:17.400 --> 0:14:21.160 in the Defense Department writ large. Now they're adding agents, 0:14:21.200 --> 0:14:24.160 so that's going to automate some tasks that corporations, of 0:14:24.160 --> 0:14:25.960 course across the country are already trying. 0:14:26.880 --> 0:14:27.600 But it is. 0:14:27.520 --> 0:14:31.200 Interesting timing because at this very moment they're bringing Gemini 0:14:31.360 --> 0:14:35.880 agents onto unclassified networks and really quite pleased that they 0:14:35.920 --> 0:14:37.840 have this partner in Google at a time that clearly 0:14:37.920 --> 0:14:39.400 Anthropic has been cut. 0:14:40.640 --> 0:14:42.880 Twenty four hours ago on this program, we broke the 0:14:42.920 --> 0:14:47.960 news of Anthropic suit against the Defense Department. Late yesterday 0:14:48.000 --> 0:14:52.160 evening we got more of a detailed response. What is 0:14:52.200 --> 0:14:56.280 the Pentagon's official position and what does it see in 0:14:56.320 --> 0:14:57.880 this suit from Anthropic against it. 0:14:58.480 --> 0:15:03.160 Emil Michael told me that he was expecting this. He 0:15:03.240 --> 0:15:05.800 doesn't think that bringing this to the courts is a 0:15:05.800 --> 0:15:08.920 way to resolve this problem, and he said, call me 0:15:09.120 --> 0:15:09.720 quite simply. 0:15:10.080 --> 0:15:10.760 We're moving on. 0:15:11.120 --> 0:15:13.720 So I do think that in this news today the 0:15:13.760 --> 0:15:17.040 focus on Google. Of course, they've recently struck deals with 0:15:17.480 --> 0:15:20.680 Xai and Open Ai to start operating on the classified cloud. 0:15:20.920 --> 0:15:24.000 The Pentagon is really saying, we have three partners now 0:15:24.240 --> 0:15:26.600 that we feel comfortable with and we are not expecting 0:15:26.800 --> 0:15:28.160 to go back to anthropic. 0:15:28.360 --> 0:15:30.000 Can you give us the context of just how much 0:15:30.040 --> 0:15:32.400 AI is playing a role within the very here and 0:15:32.480 --> 0:15:35.440 now geopolitical issue of Iran and the conflict there. 0:15:36.160 --> 0:15:39.520 From our reporting, we understand the scent the central US 0:15:39.520 --> 0:15:45.520 central commander conducting the operations in Iran is relying on 0:15:45.560 --> 0:15:48.800 a variety of AI tools, and from separate reporting we 0:15:48.880 --> 0:15:51.360 understand that means mayben smart system. This comes out of 0:15:51.440 --> 0:15:54.520 Project Maven, an AI effort started in twenty seventeen. 0:15:54.720 --> 0:15:56.760 You have a book coming out on I Do Yes, 0:15:56.800 --> 0:15:57.560 I Do Yeah. 0:15:57.360 --> 0:16:02.240 Thanks, and that helps narrow down time targets. Of course, 0:16:02.240 --> 0:16:05.040 SKom is hitting I think they've hit five thousand targets 0:16:05.080 --> 0:16:08.120 in ten days now, so an extraordinary number for the 0:16:08.200 --> 0:16:10.680 US to be churning through. And at the same time 0:16:11.000 --> 0:16:15.120 AI is helping with processors that enable fast movement. 0:16:17.120 --> 0:16:20.080 Bloomers Katrina Manson with the latest reporting deep on what 0:16:20.360 --> 0:16:21.760 the Pentagon is doing with AI. 0:16:21.840 --> 0:16:22.680 Thank you very much. 0:16:22.720 --> 0:16:26.320 Now coming up, AI start up Legora raises five hundred 0:16:26.360 --> 0:16:30.160 and fifty million dollars, boosting its valuation to five point 0:16:30.200 --> 0:16:34.040 five to five billion. We speak with the CEO, Max Unistrand. Next, 0:16:34.280 --> 0:16:35.280 this is Bloomberg tech. 0:16:43.240 --> 0:16:46.320 Logora, an AI platform built for lawyers, has just raised 0:16:46.360 --> 0:16:48.200 a massive five hundred and fifty million dollars in a 0:16:48.240 --> 0:16:51.480 series defunding round, pushing its valuation to an excess of 0:16:51.480 --> 0:16:53.520 five and a half billion. Joining us now to talk 0:16:53.560 --> 0:16:55.440 about the raise, the company's growth in the future of 0:16:55.480 --> 0:16:59.200 AI and laws Lagora CEO Max Unistrand, Max, this is 0:16:59.240 --> 0:17:02.160 only a few months after you just raised your previous series. 0:17:02.240 --> 0:17:03.560 I mean, what are you going to be doing this 0:17:03.720 --> 0:17:04.399 using this money for? 0:17:04.800 --> 0:17:08.119 We are investing in the United States. We landed in 0:17:08.160 --> 0:17:10.560 New York a year ago. This was the first week 0:17:10.600 --> 0:17:12.960 in twenty twenty five New York Legal Week when Lagoire 0:17:13.080 --> 0:17:15.680 launched in the United States. Now we've opened in New York, 0:17:15.720 --> 0:17:19.199 We've opened in Denver, Chicago, Houston. We're investing in the 0:17:19.280 --> 0:17:24.040 product and infrastructure, in customer support teams to support the 0:17:24.840 --> 0:17:28.399 astronomic demand that we're seeing from the US, and that is. 0:17:28.400 --> 0:17:30.359 What the vcs are responding to here, the fact that 0:17:30.359 --> 0:17:33.640 you are signing more and more legal professionals to come 0:17:33.640 --> 0:17:36.840 and join your platform. But yesterday we just had Harvey 0:17:36.880 --> 0:17:40.159 AI on and what has it that they're a competitive 0:17:40.880 --> 0:17:43.840 force out there? How are you seeing your space in 0:17:43.880 --> 0:17:46.720 the world? How are you unique versus a Harvey for example. 0:17:46.920 --> 0:17:49.080 So I think legal tech has for a long time 0:17:49.200 --> 0:17:51.920 been sort of stuck in the pre digital era. 0:17:52.400 --> 0:17:54.920 With llms. We're seeing a wave of. 0:17:54.920 --> 0:17:59.360 Companies come and automated tasks, build new systems, and it's 0:17:59.359 --> 0:18:02.159 a Renner songs for the industry. So there's lots of 0:18:02.160 --> 0:18:05.200 companies going very quickly. There's a lot of green field opportunity. 0:18:05.520 --> 0:18:09.040 We started in Stockholm, Sweden, just three years ago, and 0:18:09.119 --> 0:18:12.040 now we've landed here. We're expanding with big law firms, 0:18:12.080 --> 0:18:14.960 with big enterprises, and I think the reality is that 0:18:15.000 --> 0:18:18.240 this market has only done zero to one. Now we 0:18:18.280 --> 0:18:20.480 are on the journey of one to ten and ten 0:18:20.560 --> 0:18:23.080 to one hundred, and there's so much left to build 0:18:23.280 --> 0:18:26.280 and that's our opportunity and our challenge. 0:18:26.800 --> 0:18:27.040 Max. 0:18:27.080 --> 0:18:31.160 What's interesting about what you just outlined is different jurisdictions. Right, 0:18:31.200 --> 0:18:35.080 You're talking about American law, Nordic law, European law. 0:18:35.600 --> 0:18:37.480 Take us inside building. 0:18:38.600 --> 0:18:42.480 Legora and the necessary data sets to be able to 0:18:42.640 --> 0:18:46.240 service the legal profession in those different markets where laws 0:18:47.520 --> 0:18:49.040 and fightings are completely different. 0:18:49.359 --> 0:18:52.200 So in order to build systems and agents that perform 0:18:52.359 --> 0:18:54.919 real work, there's really two different types of data that 0:18:55.000 --> 0:18:56.439 you need to work with. As you said, it's the 0:18:56.520 --> 0:19:00.280 local jurisdictional data, the case law, the legislation, and then 0:19:00.280 --> 0:19:03.360 it's the firms and the enterprises own data. And it's 0:19:03.400 --> 0:19:06.040 the combination of the two within a platform like Ligora 0:19:06.240 --> 0:19:09.880 that becomes incredibly valuable because I think these systems used 0:19:09.880 --> 0:19:12.080 to kind of feel like co pilots. You were working 0:19:12.119 --> 0:19:15.119 together with them on small tasks, but now you're actually 0:19:15.160 --> 0:19:19.840 able to offload entire end to end I mean agentic workflows, 0:19:19.880 --> 0:19:22.280 and the systems are performing and to end work for you. 0:19:22.680 --> 0:19:24.040 So when we started. 0:19:23.760 --> 0:19:26.680 Out in Stockholm, Sweden, I mean that market is smaller 0:19:26.720 --> 0:19:28.680 than one of the big law firms here in New York. 0:19:28.840 --> 0:19:32.359 So we really practice that muscle. And now that we're here, 0:19:32.600 --> 0:19:35.760 I'm an engineer, we really lid with a product. 0:19:36.480 --> 0:19:39.160 Max I suffered through law school and I'm the son 0:19:39.200 --> 0:19:41.679 of two lawyers, and I brought that up yesterday, so 0:19:41.680 --> 0:19:45.399 I'll be consistent. And I know from that context the 0:19:45.560 --> 0:19:50.040 lawyers build by the minute, sometimes scanning barcodes for five 0:19:50.040 --> 0:19:52.879 minutes of work fifteen minutes work. How do you charge 0:19:53.240 --> 0:19:56.840 and structure your revenues for the platform? 0:19:56.960 --> 0:19:59.159 So which charge on a set basis? Today? 0:19:59.480 --> 0:20:01.639 I think that that is the easiest way for some 0:20:01.680 --> 0:20:04.800 of these customers to buy. But as we move towards 0:20:04.840 --> 0:20:08.040 this world where leguore is performing more end to end work, 0:20:08.359 --> 0:20:11.480 I think both consumption and outcome based pricing models will 0:20:11.480 --> 0:20:13.920 make a lot of sense for our clients and also 0:20:14.160 --> 0:20:16.720 in turn their clients. Right the way that law firms 0:20:16.720 --> 0:20:20.639 are charging for tasks that AI can perform together with 0:20:20.720 --> 0:20:24.159 them will have to move from a buildable hour model 0:20:24.440 --> 0:20:26.720 to more of a fix thier outcome based system. 0:20:27.160 --> 0:20:30.359