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 ev Loow in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: Amazon kicks off what is likely to be one of
Speaker 3: the biggest corporate bond offerings ever.
Speaker 2: In a bid to pay for the AI boom.
Speaker 4: Plus, Google introduces AI agents across the Pentagon's workforce to
Speaker 4: automate routine jobs. This is the Defense Department's fight with
Speaker 4: anthropics drags.
Speaker 3: On, and Hewlett Packard Enterprise projects sales topping estimates on
Speaker 3: AI hardware demand. We'll break it all down with the CEO,
Speaker 3: but now we break.
Speaker 5: Down volatility in the market.
Speaker 4: We once more focus in on the Middle East, the
Speaker 4: conflict with Iran and the fact that it has been
Speaker 4: upped in terms of aggressive force coming from the US
Speaker 4: to Iran today, but also aggressive moves in oil markets.
Speaker 5: Just drag down Brent.
Speaker 4: Down ten percent, significant volatility in the oil contract, but
Speaker 4: it means we're actually seeing some push higher in the
Speaker 4: stock market, a regain on the NASAQ one hundred. In fact,
Speaker 4: that a second straight day of games ed all of
Speaker 4: this as we think about really the end goal and
Speaker 4: whether this will be a short term or long term conflict.
Speaker 3: I'm looking at the latest and what's been a wave
Speaker 3: of AI related bond sales and it's Amazon. So this
Speaker 3: is what Bloomberg's reporting, both US dollars denominated and Euro
Speaker 3: denominated bonds in US eleven tranches of high grade the
Speaker 3: longest duration I think twenty fifty six with a one
Speaker 3: point five to five percent yield over treasuries.
Speaker 2: But the goal is to raise up to forty.
Speaker 3: Two billion dollars, maybe up to ten billion euros. And
Speaker 3: we know the story, right, capital expenditures this year six
Speaker 3: hundred and fifty billion dollars or so across the hyperscalers,
Speaker 3: and many of them have looked to debt markets, looked
Speaker 3: to raise money through bond saleales to finance that capex.
Speaker 2: There's a lot to dig into here, there is, and.
Speaker 4: We're going to continue the conversation. Therefore, Edward Robert Schiffman
Speaker 4: and bretting Bag Intelligence, he's out with the reaction to
Speaker 4: this morning, saying that the bond cell is quote likely
Speaker 4: to draw a considerable demand despite a growing absolute debt
Speaker 4: load that's poised to increase again next year as spending rises.
Speaker 4: That the stock had been punished when they told us
Speaker 4: that they were going to be spending up to two
Speaker 4: hundred billion on capital expenditures.
Speaker 5: But the bond market is going to lap this up.
Speaker 6: It feels like, yeah, you know, My first thought was, Wow,
Speaker 6: they must be sewing.
Speaker 7: A lot of books.
Speaker 6: My second thought is, this is so wildly bullish for
Speaker 6: the credit markets and in particular for tech, impossibly the
Speaker 6: worst potential macro environment. Bondholders are coming in saying we
Speaker 6: want to own you. We want to own you in size,
Speaker 6: and we're confident that your future growth plans are going
Speaker 6: to play out.
Speaker 5: And even though.
Speaker 6: There's so much spending and we know more bonds are
Speaker 6: likely to becoming, people are going to be lining up
Speaker 6: for this deal.
Speaker 3: I actually just misspoke at the board. I said twenty
Speaker 3: fifty six, Actually twenty seventy six, the longest maturity that
Speaker 3: Bloomberg's reporting Amazon's thinking about, the one that would yield
Speaker 3: one point five five percent over treasuries. How does this
Speaker 3: kind of stack up in the history of corporate debt markets,
Speaker 3: recent and historic? Right, we talked a little bit about
Speaker 3: what Alphabet's done most recently. Oracle is a slightly different
Speaker 3: credit profile, but like a lot of focus on that too.
Speaker 6: Well, this is going to be the biggest bond deal
Speaker 6: of the year, it looks like by far, and I'll
Speaker 6: tell you, I think people just need to get used
Speaker 6: to this. These hyperscalers are effectively becoming serial issuers. The
Speaker 6: one hundred billion dollar plus debt club is growing. So
Speaker 6: not only do we have new current larger needs, but
Speaker 6: just think about it, over the next handful of years,
Speaker 6: as bonds mature, there's always going to be a constant
Speaker 6: need to refinance and push out the curve. Amazon itself
Speaker 6: is twenty billion dollars in debt maturing over the next
Speaker 6: three years, so this is going to be a constant
Speaker 6: and look for more of this action. Again, I think
Speaker 6: bondholders can take huge advantage of this. The type of
Speaker 6: concessions that are being offered here seem wildly wide to me.
Speaker 6: I actually think the demand is going to be so
Speaker 6: strong that they're going to come in dramatically, maybe twenty
Speaker 6: thirty plus basis points, and.
Speaker 5: They're tapping just every type of part of the market.
Speaker 5: You've got like nineteen.
Speaker 4: Different tranches, so different inspiration dates. Ultimately of when the
Speaker 4: debt is going to becoming jew but also different currencies
Speaker 4: as well. How are they managing to satiate all the
Speaker 4: type of investor out there?
Speaker 6: You know, we talked about this when Alphabet came that
Speaker 6: they were doing a small tranches of Swiss francs and
Speaker 6: British pounds and why they weren't tapping the Euro market.
Speaker 6: You know, the r market is widely I think underinvested
Speaker 6: in technology, and they're somewhat probably price agnostic. They're willing
Speaker 6: to take down any Amazon bonds across the curve almost
Speaker 6: at any price because they're so underweighted. So I think
Speaker 6: there's a huge on tap market there that we're going
Speaker 6: to see other companies come and grab as well.
Speaker 3: That's the Bloomberg Intelligence react from Robert Schiffman. I would
Speaker 3: say the details of Amazon's bond sale are according to
Speaker 3: Bloomberg sources, and Bloomberg saying that the US side at
Speaker 3: least mike price. Today a separate story, a court ruled
Speaker 3: that Perplexity must stop using its Comet web browser agent
Speaker 3: to make purchases on Amazon's marketplace. Amazon sued, accusing Perplexity
Speaker 3: of computer fraud for not disclosing when Comet was shopping
Speaker 3: for a user and refusing to stop when asked. The
Speaker 3: order also bars access to password protected parts of Amazon
Speaker 3: systems and requires destruction of Amazon data, with enforcement pause
Speaker 3: for a week to allow for an appeal. Perplexity has
Speaker 3: yet to respond to a messages seeking comment.
Speaker 4: Cara, it's avas company. Then, of course it's about e
Speaker 4: commerce and about cloud. Let's talk about Oracle now, because
Speaker 4: it's about cloud and software and its earnings are after
Speaker 4: the bell. It comes after recent Bloomberg reporting that Oracle
Speaker 4: and OpenAI have ended plans to expand that flagship data
Speaker 4: center project in Texas. While will investors be looking for
Speaker 4: in the company's results, We want to talk it all
Speaker 4: through with Gabrielle Borge's software sector analysts at Goldman Sachs Research.
Speaker 4: How much of this is a test of Oracles all
Speaker 4: bread and butter software or a test of how much
Speaker 4: investors are willing to well stom at the capex of
Speaker 4: getting into the cloud and furthering the AI focus.
Speaker 8: Yeah, Hi, it's great to be back. Good morning. I
Speaker 8: think you touched on it perfectly there where the capex
Speaker 8: makes sense if you can justify the unit economics that
Speaker 8: are attached to the AI infrastructure projects, and so Oracle's
Speaker 8: given us a couple of nuggets in this regard. They've
Speaker 8: taught us that they expect to be able to spend
Speaker 8: less than one hundred billion in debt raised in order
Speaker 8: to be able to fulfill north of five hundred billion
Speaker 8: in cloud backlog that's now on their balance sheet. Those
Speaker 8: are commitments from costomers for the next five six years.
Speaker 8: They've also taught us that the gross margin on these
Speaker 8: projects is thirty to forty percent over the lifetime of
Speaker 8: a contract, so that's typically five to six years. And
Speaker 8: so if you put those two data points together, whatever
Speaker 8: incremental information we can get from the management team tonight
Speaker 8: that helps make this less of a black box, I
Speaker 8: think we'll go along way.
Speaker 4: Because we are worried about turning cash flow negative, We
Speaker 4: are worried about maybe some of the ability to drive
Speaker 4: revenue growth to substantiate the capital expenditure spend. What do
Speaker 4: you need to see in terms of growth and pointing
Speaker 4: to growth because the stock is actually pretty cheap now.
Speaker 8: Yeah, So when you actually break down the phases of
Speaker 8: the different facilities coming online, so Abilene, for example in Texas,
Speaker 8: that's a one point to big our capacity facility where
Speaker 8: Oracle has already said that the four point five gigawats
Speaker 8: that will be coming online to fulfill their existing commitments.
Speaker 8: They already have all the leasing agreements for that already
Speaker 8: signed and ready to go. What happens next is as
Speaker 8: the revenue comes online, we expect to see is really
Speaker 8: nice gross profit acceleration in Oracle's four co business that
Speaker 8: includes the big part of OCI that's tied to some
Speaker 8: of these contracts, that's Oracle Cloud. We've spect to see
Speaker 8: that as we go through the year. And so what
Speaker 8: we've noticed over the last three or four quarters with
Speaker 8: our core is that it's less about the specific numbers
Speaker 8: and some of the short term dynamics in the given
Speaker 8: quarter and more about what they say about their ability
Speaker 8: to fulfill some of these contracts over a longer time frame,
Speaker 8: which is why just taking a step back, I do
Speaker 8: think you'll see BREST profit acceleration and US as we'll
Speaker 8: be looking for that as we go towards the end
Speaker 8: of this year.
Speaker 3: Gabriella, I hear you on that, but you know, the
Speaker 3: streets expecting the infrastructure unit to grow almost eighty percent
Speaker 3: in the quarter, you know what if they're off by
Speaker 3: a few percentage points, because you know, in general that's
Speaker 3: been the formula, right, a very high bar for tangible
Speaker 3: AI related growth in those infrastructure divisions.
Speaker 8: Yeah, I think you're making a really good point here,
Speaker 8: because we have seen for a couple of quarters now
Speaker 8: that the OCI estimate intra quarter can move around, and
Speaker 8: part of that is the timing of any one piece
Speaker 8: of facility coming online. I do think though, what we're
Speaker 8: seeing from a land signal standpoint is still very strong.
Speaker 8: And coming back to Abiline, Abiline has been rapping really
Speaker 8: nice over the last three months. The one other thing
Speaker 8: I'll say is ourcle stock does react to apros our
Speaker 8: potential delays for example, so as we've gotten more headlines
Speaker 8: out out of the new flow over the last two
Speaker 8: three months now, I think expectations do move around. All
Speaker 8: of which is to say what we've seen during software
Speaker 8: earning season has got to have a clean print for
Speaker 8: the stuff to work on the print, and so and
Speaker 8: I hear you there, it's got to be a clean
Speaker 8: print for the stock to work on the print.
Speaker 3: What I reported with the team in the case of
Speaker 3: Abilene was that simply Oracle and Crusoe decided not to
Speaker 3: proceed from with an expansion from one point two gig
Speaker 3: watts to two Google watts, and that Crusoe was negotiating
Speaker 3: with Meta to come in and take that additional capacity,
Speaker 3: which many of your colleagues on the cell side pointed
Speaker 3: out might not have been reflected in RPO anyway. But
Speaker 3: what the story does highlight, and you made the point
Speaker 3: a moment ago on the four point five gigawatts agreed,
Speaker 3: is concentration risk one customer, which is open AI.
Speaker 2: Is that something you model for, Yeah, we.
Speaker 8: Do actually in a couple of different ways. So we
Speaker 8: take a discount to our open AI forecast and to
Speaker 8: what ourcle has said their open AI backlog is to
Speaker 8: account for dynamics like the one you're talking about, the
Speaker 8: extreme customer concentration risk. The other thing I'll mention here though,
Speaker 8: is Oracle will tell you that they can have fungibility
Speaker 8: of CAPEX. What does that mean? That means you can
Speaker 8: actually reconfigure a training cluster to be able to serve
Speaker 8: inference use cases. It means you can reconfigure for one
Speaker 8: customer to serve another customer, so there is some fungibility there.
Speaker 8: What that means is that if AI demand remains strong
Speaker 8: and that internalizes on enterprise AI option, which we've spoken
Speaker 8: about before. Then someone should be able to come in
Speaker 8: and pick up that capex in the event that it
Speaker 8: needs to be moved around and it comes back to
Speaker 8: the same air of fungibility.
Speaker 3: Gary Ellavorg is Golm and Zach's research analyst looking ahead
Speaker 3: to Oracle, which is after the bell.
Speaker 2: Thank you very much.
Speaker 3: Like coming up, we can to have the latest on
Speaker 3: each expanding use of AI by the Pentagon.
Speaker 2: That's next. This is Bloomberg Tech.
Speaker 9: As President Trump declared yesterday, we're crushing the enemy in
Speaker 9: an overwhelming display of technical skill and military force. We
Speaker 9: will not relent until the enemy is totally and decisively defeated.
Speaker 3: That was US Defense Secretary Pete Hegseef weighing in on
Speaker 3: the war in Iran during a briefing. The Pentagon says
Speaker 3: it's conducting the most intense day of attacks yet. This
Speaker 3: is the Islamic Republic has been firing drones and missiles
Speaker 3: at targets across the Middle East. In return, let's bring
Speaker 3: in Bloomberg's Washington correspondent, Tyler kendo I saw a lot
Speaker 3: of the headlines on the terminal this morning, for example,
Speaker 3: around drone activity in the Gulf the UAE. We continue
Speaker 3: to hear from this administration on or at least field
Speaker 3: questions on the timeline for this war.
Speaker 2: What's the latest we need to know?
Speaker 8: Yeah, hey, and good morning.
Speaker 10: Well, as you heard, their secretary Hexcess said that the
Speaker 10: US will quote not relent until all of its objectives
Speaker 10: are achieved. After yesterday, President Trump appeared to suggest that
Speaker 10: the US was ahead of schedule when it comes to
Speaker 10: maintaining its goals in the region. But then we heard
Speaker 10: from Iran this morning and a new statement from the
Speaker 10: country's parliament speaker saying that Iran is quote not at
Speaker 10: all interested in a potential ceasefire deal, and the IRGC
Speaker 10: released a statement overnight vowing to continue to block oil exports.
Speaker 3: Now.
Speaker 10: President Trump yesterday had threatened to widen the list of
Speaker 10: US targets to electricity infrastructure if attacks in the Strait
Speaker 10: of her moves and disruptions do continue. I will point
Speaker 10: out that the President reiterated that he is prepared to
Speaker 10: send a naval escort into the Strait to help those
Speaker 10: tankers through. But when the Joint chiefs of Staffed Chair
Speaker 10: Dan Kane was asked about this earlier this morning. It
Speaker 10: does not appear that any of those plans have been
Speaker 10: put into motion. Bloomberg News is also reporting that electronic
Speaker 10: warfare is now jamming signals in the Critical Waterway, which
Speaker 10: at this point really does remain effectively closed, and in Caroline.
Speaker 10: Within the last hour, we got the headline that G
Speaker 10: seven nations are now asking the International Energy Agency to
Speaker 10: prepare scenarios for the potential release of emergency stockpiles as
Speaker 10: these oil flows continue to be impacted in the region.
Speaker 4: And the oil market certainly moves and despite the newsflow,
Speaker 4: Tyler Kendall, we so appreciate it. Let's stick with Defense
Speaker 4: News because Bloomberg has learned that the Pentagon plans to
Speaker 4: add Google's AI agents to handle unclassified work and as
Speaker 4: in talks to bring those tools to the classified and
Speaker 4: top secret cloud. Bloomber's Katrina Manson has been importing on
Speaker 4: this and in fact continues to report at the very
Speaker 4: edge of AI adoption within the Pentagon. Look, what is
Speaker 4: Emil Michael talking about in terms of Google.
Speaker 5: Is this because they're having to.
Speaker 11: Force out anthropic This I think is fair to see
Speaker 11: as separate where Emil Michael came in in this senior
Speaker 11: role very focused on AI. Back in August, he told
Speaker 11: me he was shocked that the Pentagon had adopted so
Speaker 11: few AI tools. It's brought in chatbots, that's thanks to Gemini.
Speaker 11: It's had those for the last three months. One point
Speaker 11: two million people in the Pentagon have used those or
Speaker 11: in the Defense Department writ large. Now they're adding agents,
Speaker 11: so that's going to automate some tasks that corporations, of
Speaker 11: course across the country are already trying.
Speaker 2: But it is.
Speaker 11: Interesting timing because at this very moment they're bringing Gemini
Speaker 11: agents onto unclassified networks and really quite pleased that they
Speaker 11: have this partner in Google at a time that clearly
Speaker 11: Anthropic has been cut.
Speaker 3: Twenty four hours ago on this program, we broke the
Speaker 3: news of Anthropic suit against the Defense Department. Late yesterday
Speaker 3: evening we got more of a detailed response. What is
Speaker 3: the Pentagon's official position and what does it see in
Speaker 3: this suit from Anthropic against it.
Speaker 11: Emil Michael told me that he was expecting this. He
Speaker 11: doesn't think that bringing this to the courts is a
Speaker 11: way to resolve this problem, and he said, call me
Speaker 11: quite simply.
Speaker 5: We're moving on.
Speaker 11: So I do think that in this news today the
Speaker 11: focus on Google. Of course, they've recently struck deals with
Speaker 11: Xai and Open Ai to start operating on the classified cloud.
Speaker 11: The Pentagon is really saying, we have three partners now
Speaker 11: that we feel comfortable with and we are not expecting
Speaker 11: to go back to anthropic.
Speaker 4: Can you give us the context of just how much
Speaker 4: AI is playing a role within the very here and
Speaker 4: now geopolitical issue of Iran and the conflict there.
Speaker 11: From our reporting, we understand the scent the central US
Speaker 11: central commander conducting the operations in Iran is relying on
Speaker 11: a variety of AI tools, and from separate reporting we
Speaker 11: understand that means mayben smart system. This comes out of
Speaker 11: Project Maven, an AI effort started in twenty seventeen.
Speaker 5: You have a book coming out on I Do Yes,
Speaker 5: I Do Yeah.
Speaker 11: Thanks, and that helps narrow down time targets. Of course,
Speaker 11: SKom is hitting I think they've hit five thousand targets
Speaker 11: in ten days now, so an extraordinary number for the
Speaker 11: US to be churning through. And at the same time
Speaker 11: AI is helping with processors that enable fast movement.
Speaker 3: Bloomers Katrina Manson with the latest reporting deep on what
Speaker 3: the Pentagon is doing with AI.
Speaker 2: Thank you very much.
Speaker 3: Now coming up, AI start up Legora raises five hundred
Speaker 3: and fifty million dollars, boosting its valuation to five point
Speaker 3: five to five billion. We speak with the CEO, Max Unistrand. Next,
Speaker 3: this is Bloomberg tech.
Speaker 4: Logora, an AI platform built for lawyers, has just raised
Speaker 4: a massive five hundred and fifty million dollars in a
Speaker 4: series defunding round, pushing its valuation to an excess of
Speaker 4: five and a half billion. Joining us now to talk
Speaker 4: about the raise, the company's growth in the future of
Speaker 4: AI and laws Lagora CEO Max Unistrand, Max, this is
Speaker 4: only a few months after you just raised your previous series.
Speaker 4: I mean, what are you going to be doing this
Speaker 4: using this money for?
Speaker 12: We are investing in the United States. We landed in
Speaker 12: New York a year ago. This was the first week
Speaker 12: in twenty twenty five New York Legal Week when Lagoire
Speaker 12: launched in the United States. Now we've opened in New York,
Speaker 12: We've opened in Denver, Chicago, Houston. We're investing in the
Speaker 12: product and infrastructure, in customer support teams to support the
Speaker 12: astronomic demand that we're seeing from the US, and that is.
Speaker 4: What the vcs are responding to here, the fact that
Speaker 4: you are signing more and more legal professionals to come
Speaker 4: and join your platform. But yesterday we just had Harvey
Speaker 4: AI on and what has it that they're a competitive
Speaker 4: force out there? How are you seeing your space in
Speaker 4: the world? How are you unique versus a Harvey for example.
Speaker 12: So I think legal tech has for a long time
Speaker 12: been sort of stuck in the pre digital era.
Speaker 2: With llms. We're seeing a wave of.
Speaker 12: Companies come and automated tasks, build new systems, and it's
Speaker 12: a Renner songs for the industry. So there's lots of
Speaker 12: companies going very quickly. There's a lot of green field opportunity.
Speaker 12: We started in Stockholm, Sweden, just three years ago, and
Speaker 12: now we've landed here. We're expanding with big law firms,
Speaker 12: with big enterprises, and I think the reality is that
Speaker 12: this market has only done zero to one. Now we
Speaker 12: are on the journey of one to ten and ten
Speaker 12: to one hundred, and there's so much left to build
Speaker 12: and that's our opportunity and our challenge.
Speaker 2: Max.
Speaker 3: What's interesting about what you just outlined is different jurisdictions. Right,
Speaker 3: You're talking about American law, Nordic law, European law.
Speaker 2: Take us inside building.
Speaker 3: Legora and the necessary data sets to be able to
Speaker 3: service the legal profession in those different markets where laws
Speaker 3: and fightings are completely different.
Speaker 12: So in order to build systems and agents that perform
Speaker 12: real work, there's really two different types of data that
Speaker 12: you need to work with. As you said, it's the
Speaker 12: local jurisdictional data, the case law, the legislation, and then
Speaker 12: it's the firms and the enterprises own data. And it's
Speaker 12: the combination of the two within a platform like Ligora
Speaker 12: that becomes incredibly valuable because I think these systems used
Speaker 12: to kind of feel like co pilots. You were working
Speaker 12: together with them on small tasks, but now you're actually
Speaker 12: able to offload entire end to end I mean agentic workflows,
Speaker 12: and the systems are performing and to end work for you.
Speaker 2: So when we started.
Speaker 12: Out in Stockholm, Sweden, I mean that market is smaller
Speaker 12: than one of the big law firms here in New York.
Speaker 12: So we really practice that muscle. And now that we're here,
Speaker 12: I'm an engineer, we really lid with a product.
Speaker 3: Max I suffered through law school and I'm the son
Speaker 3: of two lawyers, and I brought that up yesterday, so
Speaker 3: I'll be consistent. And I know from that context the
Speaker 3: lawyers build by the minute, sometimes scanning barcodes for five
Speaker 3: minutes of work fifteen minutes work. How do you charge
Speaker 3: and structure your revenues for the platform?
Speaker 2: So which charge on a set basis? Today?
Speaker 12: I think that that is the easiest way for some
Speaker 12: of these customers to buy. But as we move towards
Speaker 12: this world where leguore is performing more end to end work,
Speaker 12: I think both consumption and outcome based pricing models will
Speaker 12: make a lot of sense for our clients and also
Speaker 12: in turn their clients. Right the way that law firms
Speaker 12: are charging for tasks that AI can perform together with
Speaker 12: them will have to move from a buildable hour model
Speaker 12: to more of a fix thier outcome based system.
Speaker 4: Can you just set the scene here, because you're building
Speaker 4: upon in many ways the innovations of Anthropic, but Anthropic
Speaker 4: is also doing its own claw plug in for law.
Speaker 4: How does this competitive environment unfold for the future businesses
Speaker 4: you want to sign on? How do they decide between
Speaker 4: you and Thropic harvey what they already have as point solutions?
Speaker 7: Yeah?
Speaker 12: So I mean Legorre wouldn't exist without the llms. We
Speaker 12: were founded in late spring of twenty twenty three off
Speaker 12: the back of the release of GPT three point five.
Speaker 12: That was the first time the models became good enough
Speaker 12: to build any real software. In the beginning, there were
Speaker 12: so many issues around the models. You had to reduce
Speaker 12: the hallucinations, you had to guardrail them, We had to
Speaker 12: build a lot of systems around them. Today we are
Speaker 12: very focused on bringing the capabilities of those models into
Speaker 12: an enterprise legal setting. So when we work with the
Speaker 12: law firm like White and Case or Clearly Gottlib, they
Speaker 12: are deploying Laguera and they're turning over, you know, billions
Speaker 12: of dollars using our system. And the interesting thing for
Speaker 12: us is every quarter the ground shakes a little bit.
Speaker 12: The new models are capable of doing new things, which
Speaker 12: needs to be reflected in our product roadmap. We cannot
Speaker 12: plan for a year ahead because three months, in six
Speaker 12: months the capabilities might have changed, so our product has
Speaker 12: to change.
Speaker 2: Max.
Speaker 3: We just had twenty seconds. But I think what Caroline's
Speaker 3: question is, what is your modes? Do you have a mote?
Speaker 2: I think we have a real mold.
Speaker 12: Of course, I mean the way that we're deployed within
Speaker 12: this enterprise is connected to their data, the way we've
Speaker 12: set up the permissions, whether we work with delivering work.
Speaker 12: For instance, Deba Boys just launched their client portal on
Speaker 12: the World where they are connecting their work to their
Speaker 12: external clients. So there's a real network effect rates in
Speaker 12: our product tool.
Speaker 3: Max and Strand of Legora. Thank you very much for
Speaker 3: your time here on Bloomberg Tech. Now coming up, Apple's
Speaker 3: latest product is delayed because it waits the debut of
Speaker 3: its new AI seri. We have more on that Bloomberg
Speaker 3: reporting and some supply chain coverage as well with what's
Speaker 3: going on with Apple. It's halftime. Don't go anywhere, We'll
Speaker 3: be right back.
Speaker 13: This is Bloomberg Tech. Welcome back to Bloomberg Tech.
Speaker 3: Technology stocks actually in particular now pushing higher having seen
Speaker 3: then as that one hundred lower earlier in the session.
Speaker 3: Actually that chart tells the story pretty well, but a
Speaker 3: lot of the story is still what's happening with the
Speaker 3: war in Iran, the movement in oil, general risk sentiment
Speaker 3: around geo politics. After the bell we get Oracle earnings,
Speaker 3: and so once again we kind of focused on the
Speaker 3: AI story. And capital expenditures. Amazon is up by almost
Speaker 3: half percentage point. The big story of the day that
Speaker 3: we hit earlier in the program is them looking at
Speaker 3: a bond sale US dollar denominated and Euro denominated of
Speaker 3: up to forty two billion dollars. And we had the
Speaker 3: details on the program earlier. Oracles treading water of course
Speaker 3: ahead of its print later today. But that is the
Speaker 3: AI story once again, the credit conditions, the capital expenditures,
Speaker 3: and whether this build out is intact Carrott.
Speaker 4: We've got plenty more on the AI story and supply
Speaker 4: chain stories now because Apple's manufacturing pivot to India and
Speaker 4: away from China is picking up momentum. I've phoned production
Speaker 4: in the country SAG fifty twenty five and now accounts
Speaker 4: roughly a quarter of all.
Speaker 5: iPhones made globally. For more.
Speaker 4: Blomberg's Consumer Tech and Apple Managing editor Mark German joins
Speaker 4: us now, and Mark, let's start with the supply chain
Speaker 4: element of things. They've done this swiftly and effectively.
Speaker 14: Yeah, our colleagues in India reporting that now about one
Speaker 14: in four iPhones are produced in India. This is a
Speaker 14: bit of an acceleration. About a year ago it was
Speaker 14: one in five iPhones and a lot of the phone
Speaker 14: production in India. That pivot happened because of tariffs about
Speaker 14: a year ago. Apple looking for ways to produce the
Speaker 14: phones without that potential tariff hit for devices built in
Speaker 14: China and then imported.
Speaker 2: Into the United States.
Speaker 14: And they're going to continue doing more in India. They've
Speaker 14: got AirPod development happening there at some point, more accessory
Speaker 14: development happening there, more underline component development happening there. So
Speaker 14: India not only big for Apple in terms of growth
Speaker 14: in retail, but also for underlying manufacturing, not only in
Speaker 14: India but in other parts of the world as well.
Speaker 3: The other piece of reporting you have out this morning,
Speaker 3: Mark is about the Apple Smart Home Display. Now in
Speaker 3: my house, I right now have a lot of Amazon
Speaker 3: ex devices, and so my understanding is that the Apples
Speaker 3: Smart Home Display is like most akin to Amazon's Echo Show.
Speaker 3: What are you learning? Why delayed? What's behind it?
Speaker 14: Yeah, this device very much based on the new SERI
Speaker 14: and the new AI features Apple has been working on.
Speaker 14: Those features have yet to come to market, those continue
Speaker 14: to be delayed, and as those features get delayed, the
Speaker 14: hardware gets delayed. Because, as you know, Apple's very much
Speaker 14: a hardware and software and services integrated company. It's all
Speaker 14: one kit. It all comes together, so if one piece
Speaker 14: is not working, you can't release the entire thing. It's
Speaker 14: a pretty nifty device. You can walk up to it
Speaker 14: and it can know who you are and give you
Speaker 14: personalized content. And that very much relies on those new
Speaker 14: serie features that the company announced a couple of years ago.
Speaker 14: They're now aiming to roll them out before the end
Speaker 14: of the year. And so this device, instead of launching
Speaker 14: this month, likely to launch around September.
Speaker 3: The famous Mark German and all things Apple, the Apple summary,
Speaker 3: Thank you very much. There's a lot more news out there, Carrot.
Speaker 4: There is ed and it's time now for talking tech
Speaker 4: and first st up by d is exploring options to
Speaker 4: enter the world of F one racing. According to sources,
Speaker 4: it's a bid to boost the ev makers global appeal.
Speaker 4: Now the move would mark a rare attempt by a
Speaker 4: Chinese manufacturer to take on a sport dominated by European
Speaker 4: and US teams.
Speaker 5: Plus China's enthusiasm.
Speaker 4: For all things open, Claw is igniting a stock rally
Speaker 4: among local tech firms moving swiftly to embrace the open
Speaker 4: source AI program, and I remember Openklaw is an agent
Speaker 4: that leverages llms including anthropics Claude to perform daily functions
Speaker 4: and the tool has garnered a cult like status in China.
Speaker 4: And Polymarket is enlisting firms including Pan Andeer to help
Speaker 4: police its force contracts. This is a prediction market faces
Speaker 4: really intense scrutiny over inside of training. It's all according
Speaker 4: to the sources, who say that the firms will prevent
Speaker 4: and report suspicious activity with a monitoring system. The Polymarket
Speaker 4: is building.
Speaker 3: Out ed Okay, coming up, a three month old startup
Speaker 3: founded by AI pioneer Yan Lacoon has raised over a
Speaker 3: billion dollars in seed funding. I'll tell you about the
Speaker 3: company called Advanced Machine Intelligence as next. This is Bloomberg Tech,
Speaker 3: a startup founded by French AI pioneer Yan Lacun has
Speaker 3: raised over a billion dollars in its initial funding round.
Speaker 3: Advanced Machine Intelligence or AMI, is focused on building world
Speaker 3: models that use visual and spatial data. Bloomberg's venture reporter
Speaker 3: Natasha Mascarinus broke the story and joins us, Now the
Speaker 3: Internet is kind of reacted by another one and what
Speaker 3: is it that they do? But you know, there's a
Speaker 3: history with Yandlercun and his work with Meta in particular.
Speaker 3: Let's start with the vision for AMI. What is it
Speaker 3: they're seeking to break through on?
Speaker 15: Sure? I mean Yan Lacoon has been a long critic
Speaker 15: of LM's being the best way to advance AI. So
Speaker 15: a ME is a new company that'socused on world models.
Speaker 15: The idea is that they are going to be able
Speaker 15: to integrate with enterprises like robotics companies or car manufacturers
Speaker 15: and help build AI that can operate in the real
Speaker 15: world versus being something that consumers everyday. Consumers interact with
Speaker 15: via chatbots, and so let's focus on text and think
Speaker 15: more around spatial data, visual data and trying to operate
Speaker 15: again in real world and real industries.
Speaker 4: And maybe even the future of defense. There were so
Speaker 4: many interesting parts to this story, Natasha that I want
Speaker 4: to dig in on, but won't call my eye as
Speaker 4: someone who sat in New York, they're not going to
Speaker 4: Silicon Valley. This is because they really feel that there's
Speaker 4: what did he call it, that they've been LLLM pilled there.
Speaker 4: This is a European story at it's hot, but it's
Speaker 4: also a non Silicon Valley one.
Speaker 5: You're exactly right.
Speaker 15: I mean, this is one of the largest venture rounds
Speaker 15: raised ever in Europe and it is actively one that
Speaker 15: has not included a lot of the traditional Silicon Valley investors.
Speaker 15: When I asked you about that decision, he said that
Speaker 15: Silicon Valley investors were looking for really high ownership in
Speaker 15: the business, and he believed that it was important to
Speaker 15: try and to check talent that wasn't just focused on
Speaker 15: building within the large language models, which means not going
Speaker 15: to where people are working for Anthropic Open AI, even
Speaker 15: his former employer Meta, and trying to go to different geographies. Now,
Speaker 15: I did ask if he will have to raise from
Speaker 15: Silicon Valley eventually, and he said he's definitely open to
Speaker 15: that for his next round.
Speaker 3: Lakuma is at Meta for almost fifteen years, more than
Speaker 3: ten years at least. Is there any evidence of reporting
Speaker 3: that that that's the way they go, some kind of
Speaker 3: relationship with Meta, some collaborative work something like that.
Speaker 2: Yeah.
Speaker 15: So at this point, Meta was not listed as an
Speaker 15: investor in the new business, but we did ask him
Speaker 15: about possible partnerships, which he did confirm. So while the
Speaker 15: average consumer may not interact with his new company through
Speaker 15: a chatbot, there's not a too far of a world
Speaker 15: where we could see it showing up in the meta
Speaker 15: ray bands or other AI ware of all the meta's
Speaker 15: working on. So we're definitely tracking the possible partnership and
Speaker 15: you can birm that there are ongoing discussions there.
Speaker 4: Natasha Mascarinis just scoop off to scoot. We so appreciate
Speaker 4: coming on without reporting. Let's not talk about another funding
Speaker 4: or indeed relationship.
Speaker 5: In Video is investing in Thinking Machines Lab.
Speaker 4: It's an AI startup founded by opening Ey executive mirror
Speaker 4: Marati now and Video is set to provide it's Vera
Speaker 4: Ruben systems to power Thinking Machines AI models as part
Speaker 4: of a multi year agreement. Blomberg AI reporter Rachel Metz
Speaker 4: joins us some more so, what is Thinking Machines Lab doing?
Speaker 16: Yeah, so this company, they are building their own AI
Speaker 16: models and they have a deal that they just announced
Speaker 16: with in Video. They're getting investment from the Video and
Speaker 16: they are also going to be using quite a lot
Speaker 16: of in Vidia's chip power to train and run their
Speaker 16: AI models.
Speaker 3: I posted your story on X and you know noting
Speaker 3: that up to a gig or what ver Rubin or
Speaker 3: a minimum of a giga what sorry, ver Rubin systems like,
Speaker 3: that's a lot of compute.
Speaker 2: But the unknowns are.
Speaker 3: Is in video making this investment in cash or chips
Speaker 3: in lieu of cash.
Speaker 2: We just don't know.
Speaker 3: And the response that everyone gets back is, so, what
Speaker 3: does thinking Machines do? What is thinking machines other than AI?
Speaker 16: Okay, so so far, Thinking Machines has released one product,
Speaker 16: and it is called Tinker, and it came out last year,
Speaker 16: and that is a software that companies can use to
Speaker 16: fine tune AI models. What they're working on as well
Speaker 16: is some AI models. It's not quite known yet what
Speaker 16: the details of those are. It sounds like they will
Speaker 16: be things that will be useful to a range of enterprises,
Speaker 16: but it's not entirely clear yet if they're going to
Speaker 16: be focused on specific uses or if it's going to
Speaker 16: be a more general kind of thing like the models
Speaker 16: that underpin say chat GPT or.
Speaker 4: To have just issued or developed a model called Tinker
Speaker 4: and already the talked of as in the realm of
Speaker 4: a fifty billion dollar market capitalization, it's on us to
Speaker 4: remind ourselves why Mira Marati is taken so seriously by
Speaker 4: this market for a hot second, she led open Ai,
Speaker 4: but really she was the CTO, right, Yes, she was.
Speaker 16: The CTO Opening Eye. She's worked add a number of
Speaker 16: tech companies over the years, so she's been in the
Speaker 16: industry for quite a long time. I think the challenge
Speaker 16: that she's facing here with this company is can she
Speaker 16: build large language models? Not just can she build them?
Speaker 16: A handful of companies can build them. They require obviously
Speaker 16: a lot of money, a lot of expertise, and a
Speaker 16: lot of data, but also can she then convince companies
Speaker 16: or some other form of customer to pay for them.
Speaker 16: Tinker is an effort to help people fine tune models,
Speaker 16: so it's not quite up to having It's not the
Speaker 16: same as having a model and then having people use it.
Speaker 16: But that was sort of their first step into business,
Speaker 16: and they do have customers for that, so it'll be
Speaker 16: interesting to see over the next year or so what
Speaker 16: happens with their business.
Speaker 3: We'd reported at the end of last year the Thinking
Speaker 3: Machines was going out doing an early round at like
Speaker 3: a fifty billion dollar valuation when it was basically a
Speaker 3: handful of people, and then what followed was all kinds
Speaker 3: of media reports about internally things not being well right,
Speaker 3: people leaving. We never really got to the bottom of it.
Speaker 3: I mean, this is a big piece of news for them,
Speaker 3: but we have a sense of how it's going otherwise
Speaker 3: beyond getting the backing of Nvidia.
Speaker 16: Yeah, that is a bit of a question mark. We
Speaker 16: know that the company has about one hundred employees and
Speaker 16: it has, as you mentioned, it recently lost some employees
Speaker 16: who went back to Opening I. Initially, when Mira Murradi
Speaker 16: started this company, she started it with a quite a
Speaker 16: number of people that came from Opening I, so that
Speaker 16: it was certainly a signal if people were going back
Speaker 16: to that company that they had come from. But I mean,
Speaker 16: I think this is still a very new company, and
Speaker 16: sometimes these things take time to get going, get off
Speaker 16: the ground, and we'll see what happens throughout the rest
Speaker 16: of this year.
Speaker 2: Bloomberg's Retro mets top Reporting. Thank you very much.
Speaker 3: Coming up on the show, HPE exceeds expectations on its
Speaker 3: forecast for the current quarter. It's all about AI demand
Speaker 3: and all about AI hardware demand. We can discuss what's
Speaker 3: driving that outlet next with HPE CEO Antonio Neeri.
Speaker 2: This is Blomberg Tech.
Speaker 3: Shares of HPE modestly higher, up about six tens of
Speaker 3: one percent. Been chopping around in the session, but the
Speaker 3: company gave a strong sales and revenue projection for the
Speaker 3: current quarter.
Speaker 2: What's driving it?
Speaker 3: Demand demand for AI hardware in particular, has discussed with
Speaker 3: HPE CEO Antonio Nery, and let's start with that. You know,
Speaker 3: clearly there is some staying power in that demand at
Speaker 3: rack scale, you know, crystallize it for us.
Speaker 2: What are you seeing in real time?
Speaker 7: Yeah, good morning, Ed, and thanks for having me. We
Speaker 7: saw a tremendous demand throughout the quarter. I think the
Speaker 7: momentum in I continues in the build out of the
Speaker 7: data center. But what I'm really pleased is the momentum
Speaker 7: we see an enterprise. In fact, most of our revenue
Speaker 7: in AI that we're recognize in Q one came from
Speaker 7: the enterprise segment, which shows you two key elements. One
Speaker 7: is the adoption of agentic AI into the company's workflow,
Speaker 7: and second is the growing of influencing. A lot of
Speaker 7: focuses always around the training and training these new models,
Speaker 7: but for us, our focus being both the sovereign space
Speaker 7: and the influencing and enterprise space. But in our portfolio,
Speaker 7: we saw tremendous momentum networking. Our strategy where journeys has
Speaker 7: paid off, and that's why we see double digits year
Speaker 7: over your growth in the order intake.
Speaker 3: You know post Juniper networking is is upside for you, right.
Speaker 3: I think you have a lot of confidence that growth
Speaker 3: will come in networking. For the audience that doesn't understand
Speaker 3: what it is you do in that space. Why is
Speaker 3: networking on the rise in parallel with just kind of
Speaker 3: the broader AI hardware demand that you're seeing.
Speaker 7: Well, I do believe ed and this was the coresis
Speaker 7: of the Juniper acquisation that the next inflection point in
Speaker 7: terms of disruption will come from the networking connectivity layer.
Speaker 7: Think about when you build a data center, you have
Speaker 7: to connect this data center to other data centers through
Speaker 7: the Internet, and that's what we call data center interconnect.
Speaker 7: Juniper has one of the most innovative products in the
Speaker 7: route in space, by the way, this passport that we
Speaker 7: grew mid twenty percent in the order intake. And then
Speaker 7: once you are inside the data center, you need to
Speaker 7: be able to connect large amount of GPU use and
Speaker 7: CPUs together and that's why you need a data't set.
Speaker 7: Data doesn't resewarching portfolio in addition to some of the
Speaker 7: other core tenants of the technology and there you know,
Speaker 7: the Juniper portfolio group mid forty percent in the order intake.
Speaker 7: So I will say for us, that has been a
Speaker 7: core tenant. That's why you know now they represent almost
Speaker 7: thirty percent of the company revenues but more than half
Speaker 7: of the profit. And for us, that's also an ability
Speaker 7: to raise the outlook for the remainder of the year.
Speaker 7: And also they're outlooking free cash flow because the structural
Speaker 7: margins of that business and the working capital efficiency are very,
Speaker 7: very different than the rest of the portfolio.
Speaker 4: I mean you actually said, look, you're not done raising prices.
Speaker 4: You talk about discipline and what is a very dynamic environment,
Speaker 4: Antonio talk.
Speaker 5: To us about well, how you're weathering.
Speaker 4: The supply chain issue, in particularly the cost the memory
Speaker 4: costs at the moment.
Speaker 5: How do you navigate that?
Speaker 7: Yeah, Carol, I mean, obviously the demand and supply has
Speaker 7: a huge mismatch, and you actually need to go back
Speaker 7: all the twenty two to twenty three timeframe to understand
Speaker 7: how we got here. Accelerated by the hypercycle we see
Speaker 7: in the AI space, but fundamentally in our guidance, the
Speaker 7: new guidance, the new outlook that we raise for twenty
Speaker 7: twenty six. We included our ability to see the supply
Speaker 7: that we need to convert that into a revenue profit.
Speaker 7: But the reality is that we do not have enough
Speaker 7: supply against the order intake and the backlog, because otherwise
Speaker 7: we'll have even a higher outlook. So what we're doing
Speaker 7: we have taken three very unique steps. Number one is
Speaker 7: securing as much supply as we can, but again we
Speaker 7: don't have all the supply that we would like to have.
Speaker 7: Number two is taking a very agile posture when it
Speaker 7: comes down to pricing, and as I said yesterday, we
Speaker 7: are not done raising pricing. I think that the cycle
Speaker 7: will continue well into twenty twenty seven, although we will
Speaker 7: hope that we will reach some sort of elevated price
Speaker 7: in stability in twenty twenty six. And number three, you know,
Speaker 7: my experience has thought me that ultimately you need to
Speaker 7: have direct, transparent conversation both with customers and our partners.
Speaker 7: Last week I was in Europe. I met more than
Speaker 7: twenty customers the Mobile Congress in London, and they appreciate
Speaker 7: that level of transparency, understanding the environment we're in.
Speaker 4: I mean, you're actually forgoing supplying some equipment to mobile
Speaker 4: service providers, So you're being choosy with who you work
Speaker 4: with at this time of geopolitical angst and when we
Speaker 4: question how much the Middle East is going to be
Speaker 4: able to build out the data center capacity as once thought.
Speaker 4: Has the Iran conflict impacted your view on the world
Speaker 4: or indeed the supply of the world and chips.
Speaker 7: Not on the supply side, Carol, And obviously our first
Speaker 7: priority because we have businesses in that region, whether ue Qatar,
Speaker 7: bar In, sauda Arabia, Israel, right is the well being
Speaker 7: the safety of our employees. We have approximately one thousand
Speaker 7: employees in that region and the good news all are
Speaker 7: doing well at this point in time. But from a
Speaker 7: supply perspective, no, But obviously as the conflict may gets elongated,
Speaker 7: they may have other implications, particularly on the logistics side
Speaker 7: of the equation. You know, look, air freight routes are
Speaker 7: a little bit more complicated. We don't use boats of
Speaker 7: ships for transporting our equipments. But over time we have
Speaker 7: to assess if there is a revenue impact. What I
Speaker 7: can tell you right now there is even more demand
Speaker 7: then we saw particularly you know, three four months ago,
Speaker 7: so we have to navigate that together. We have to
Speaker 7: be smart about it.
Speaker 2: Antonio.
Speaker 3: You have never let me tear apart an HPE server,
Speaker 3: and that's okay. But if I got my hands in
Speaker 3: the compute trade, you'd have the high bandwidth memory around
Speaker 3: the GPU wherever it comes from. You'd have the ddrs
Speaker 3: around the CPU, and somewhere you'd have the SSDs.
Speaker 2: And flash memory. Be very very specific.
Speaker 3: Of those three, what's the biggest impact to you right
Speaker 3: now in constraining your sales and your outlook, very simple.
Speaker 7: Is DDR and nand or the SSDs. Hbm's less constrained,
Speaker 7: but obviously a lot of the allocation on the capacity
Speaker 7: has moved there. And as you know, there is also
Speaker 7: a transition from the prior generation of hbms to the
Speaker 7: new generation of HBM because you need more membody channels.
Speaker 7: But it's really the DDR four and five which now
Speaker 7: nobody almost use it, but DDR five and the nand
Speaker 7: part which is the SSDs.
Speaker 5: You said just earlier.
Speaker 4: Look, one of your the three key steps you took
Speaker 4: was to get as much supply as you could and
Speaker 4: to ensure that that was locked in. You wish you
Speaker 4: could have more Who is it that you need to
Speaker 4: push more? Who is it do you need to have
Speaker 4: more security for? How can you perhaps get hands on
Speaker 4: further supply going forward.
Speaker 7: Look, we have a long standard relationship with the three
Speaker 7: core suppliers that provide DDR memory and hpms, and there
Speaker 7: is a little bit a larger ecosystem for the land space,
Speaker 7: but we're having weekly engagements with them. We are looking
Speaker 7: to swap components driving different configurations, but the reality all
Speaker 7: of them are significantly constrained.
Speaker 3: Karl Antonio just twenty seconds, what's the dollar figure dollar terms,
Speaker 3: and of what was left on the table, how much
Speaker 3: better the outlook could have been.
Speaker 7: Yeah, it's pretty sizable. I will say, you know, we
Speaker 7: guided five pennies on the midpoint of the range and
Speaker 7: then we raise our outlook for free cash flow by
Speaker 7: almost two hundred million at the midpoint. But the backlog
Speaker 7: is very very large at this point in time. If
Speaker 7: you think about the AI system backlog is over five billion.
Speaker 7: We raise again the networking for networks for AI goal
Speaker 7: for the end of the year. So it's a very
Speaker 7: sizeable backlog. So we hope we make progress as we
Speaker 7: go along, but we categorize, we leveled it as a
Speaker 7: proved guidance at this point in time.
Speaker 4: Anthony Nari, CEO of HPE, thanks for the candid conversation.
Speaker 5: We appreciate it. Now that does it with this addition
Speaker 5: of Bloomberg
Speaker 3: Tech ed, great interviews, great Bloomberg reporting, recap it on
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