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Speaker 1: with Carol Masser and Tim Stenebek on Bloomberg Radio and
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Speaker 2: Co host of Bloomberg Tech.
Speaker 3: Joining us now from San Francisco where he is at
Speaker 3: open AI's developer Day. Hey, Ed, Huh, feels like we
Speaker 3: keep getting these big announcements. We're all getting a bit
Speaker 3: wary of them. What feels like this circular finance that
Speaker 3: we've talked with you about. Among those involved in the
Speaker 3: AI spend and build out, I heard Lisa sussay a
Speaker 3: win for AMD.
Speaker 2: A win for open Ai, feels like a win for everybody.
Speaker 2: Is it really? Do we know for certain?
Speaker 4: Well?
Speaker 5: She also said that she has confidence in open Ai,
Speaker 5: and the reason she said that is I had made
Speaker 5: the point to her that open ai still has to
Speaker 5: come up with the money for this. The difference between
Speaker 5: the open ai and AMD deal compared with the open
Speaker 5: Ai and Video deal as the structure, so it's almost
Speaker 5: the reverse. AMD will sign over stock to open Ai
Speaker 5: only when they've met specific milestones, both operational and financial.
Speaker 5: So in the first instance, open a has to fund,
Speaker 5: finance and build one gig awad of capacity. If they
Speaker 5: do that, AMD will give open Ai some stock, or
Speaker 5: rather technically, open ai has the right to buy a
Speaker 5: trantras shares at a penny apiece, but the burden is
Speaker 5: still on them. And so the point I was making
Speaker 5: with Lisa is have you seen into their books? Where
Speaker 5: are they going to get the money from to fund
Speaker 5: this to bring it online?
Speaker 6: Is it?
Speaker 7: Could this be weird on the circular financing thing that
Speaker 7: you know, in Vidia couldn't have this deal that could
Speaker 7: be worth up to one hundred billion dollars with open
Speaker 7: Ai in videos investment five billion dollars or will invest
Speaker 7: five billion dollars in Intel, And now you have what
Speaker 7: does that mean that in Vidia, if they have open
Speaker 7: Ai equity, then they're kind of an owner or could
Speaker 7: be an owner of AMD. Exactly.
Speaker 5: Yeah, it's much more fair to say that the Nvidia
Speaker 5: open Ai circumstance is circular financing because in Vidia commits
Speaker 5: to making a one hundred billion dollar investment into open Ai.
Speaker 5: We actually don't know if that's in the form of
Speaker 5: cash or if it would be like chips in lieu
Speaker 5: of cash, but they do take open Ai equity. In
Speaker 5: this case, AMD passes its own shares to open Ai,
Speaker 5: but not capital. And so if you're going to build
Speaker 5: six gigawats of capacity over many years, you know that
Speaker 5: is like the peak energy demand of like a major
Speaker 5: US city. We're talking lots of money up front in
Speaker 5: cap to expenditure, and open ay has got to do that. Now,
Speaker 5: we pose many questions to both Lisa sou and Open
Speaker 5: Eye present Greg Brockman, who was sat next to her,
Speaker 5: Will it be debt, will you issue more equity? Will
Speaker 5: you do something else? And he basically Greg Brockman said,
Speaker 5: we'll look at all those mechanisms and so there are
Speaker 5: many more questions still that we don't have answers to.
Speaker 2: Well, that's I guess. My thing is like, why don't
Speaker 2: these companies just do deals.
Speaker 3: I'll buy you chips, I'll do my bild, I'll do
Speaker 3: this thing the way we do it normally, rather than
Speaker 3: all of these big announcements with a lot of questions
Speaker 3: that feel like We don't really know that there's anything
Speaker 3: there there.
Speaker 5: The market is simply focused, irrespective of the mechanism for financing,
Speaker 5: on the revenue growth that comes out the other side,
Speaker 5: particularly like software names. And so that was the justification
Speaker 5: that Greg Brockman made. He said, the revenue will come.
Speaker 5: As you know, we've been writing a lot about the
Speaker 5: debt markets underpinning this, and debt investors feel the same way.
Speaker 5: All I say is there is also a technology story.
Speaker 5: You know, if you're going to build a data center
Speaker 5: and one of these providing the chips and the others
Speaker 5: is going to use the capacity for software, it does
Speaker 5: make sense to partner and work together to make the
Speaker 5: engineering make sense.
Speaker 7: If you're watching on Bloomberg TV or on youtubeer Bloomberg
Speaker 7: Originals got this great graphic up that kind of helps
Speaker 7: us keep up. This is by no means exhaustive, but
Speaker 7: shows where some of the money has gone in recent months.
Speaker 7: When it comes to the space, again, by no means exhaustive.
Speaker 7: There it's kind of like Carol, we're connecting. We're like
Speaker 7: out a whiteboard and we're kind of connecting pieces because
Speaker 7: to keep these things straight is pretty difficult.
Speaker 3: Well yeah, I mean that's the thing, ed. You know,
Speaker 3: we need to all be smart. We are smart, and
Speaker 3: you know we keep seeing these deals coming at us.
Speaker 3: We hear people saying, well when like a Meta Reports
Speaker 3: and some other you know, the big hyperscalers. We do
Speaker 3: see the impact of the AI spend, but I do
Speaker 3: wonder if it's going to carry through our economy like
Speaker 3: everyone expects.
Speaker 4: Well.
Speaker 5: Metas for example, they have a core legacy business that
Speaker 5: is advertising, and in most of the most recent quarters
Speaker 5: they've demonstrated significant top line growth and to a certain extent,
Speaker 5: bottom line growth, which is them saying we invested in AI.
Speaker 5: AI made our ads better and more valuable, we're making
Speaker 5: more money from it. With chat GPT, it's a lot
Speaker 5: harder to see that. But that's why here at develop
Speaker 5: a Day, it's really important. So the piece of news
Speaker 5: that came out from the keynote was they now have
Speaker 5: eight hundred million weekly users active users of chat GPT.
Speaker 5: The data point that market participants keep hitting me over
Speaker 5: the head with is how many of those free users
Speaker 5: are converted to being paid subscribers. Because unless you have
Speaker 5: that data, we can't know what the top line growth
Speaker 5: for open AI looks like. But look in the markets
Speaker 5: right now. I mean, you guys will have to tell me.
Speaker 5: I don't have a Bloomberg in front of me, but
Speaker 5: I saw a pool of about a dozen stocks that
Speaker 5: jumped in the last hour just because they got name
Speaker 5: checked by open ai here today. And it's by association.
Speaker 5: The idea that if using chat GPT you can access
Speaker 5: third party apps or third party company offerings, everyone's going
Speaker 5: to make money.
Speaker 3: You know.
Speaker 5: The market has a pretty simple logic in that respect.
Speaker 7: Yeah, for those who do have Bloombergs in front of them,
Speaker 7: just type in NI movers into the Bloomberg terminal. Cisco
Speaker 7: system shares up to session high during Open Air event.
Speaker 7: Figma shares Extend gained to sixteen percent after being mentioned
Speaker 7: at Open Ai event. Salesforce shares also jump up two
Speaker 7: point six percent during the Open Ai event. HubSpot, Zillo,
Speaker 7: Trip Advisor, Carol all moving higher as a result of
Speaker 7: what was talked about at the open ai event.
Speaker 3: And this goes back to ed. You know, you were
Speaker 3: trying to press we Sue, and you know in your
Speaker 3: conversation and I just right, and I just think about, like,
Speaker 3: what are the big questions that still remain for you? You
Speaker 3: want your you know, you're reporting on these ins and outs.
Speaker 3: You're there at this event. We think about open ai
Speaker 3: a lot. We talk about chat, GPT a lot. Who's
Speaker 3: to say that there isn't some other s, you know,
Speaker 3: chat that comes in and takes So I don't know
Speaker 3: if there's just a lot going on. What are the
Speaker 3: big questions that remain in a day when we get
Speaker 3: this big announcement.
Speaker 2: What wasn't answered for you? Still?
Speaker 5: Yeah, I think the financing, you know, I think in
Speaker 5: any corner of the Bloomberg newsroom, you've got to understand
Speaker 5: the debt markets because look at the role that debt
Speaker 5: played in previous financial crisis, the dot com bubble, what
Speaker 5: happened with Silicon Valley Bank, what happened in Asia earlier
Speaker 5: in the two thousands. I wasn't around then, but debt
Speaker 5: is a big underpinning here. And I think the signal
Speaker 5: that Greg Brockman gave us was they'll look at all mechanisms,
Speaker 5: including debt. So that's one part of it. On the
Speaker 5: other hand, this is I'm a technology journalist and technology matters.
Speaker 5: Open ai is going to use in AMD chips for inference.
Speaker 5: Inference is where you run the model not training, you
Speaker 5: are actually running people's queries and workloads. And if you
Speaker 5: look at all the movers that Timless did today, what
Speaker 5: open ai was basically saying is chat GPT is becoming
Speaker 5: an operating system. You use it for a number of functions,
Speaker 5: but you can also integrate it with all the other
Speaker 5: software you're using. And actually that's a pretty clear answer
Speaker 5: to some of the questions about will revenue be generated
Speaker 5: from this. People use all of these platforms for hours
Speaker 5: each day, and you know, the market seems to buy
Speaker 5: that if they can build the capacity of AMD in
Speaker 5: the timeline that they've said they will, they can actually
Speaker 5: start doing things of use.
Speaker 2: Isn't it wild?
Speaker 6: Though?
Speaker 3: Ryan Blestelica has this great story and the headline on
Speaker 3: it is open ai is fast becoming a whale in
Speaker 3: the stock market that it is shunned. I mean, open
Speaker 3: ai is not a publicly traded company, and yet Tim
Speaker 3: put down a bunch of names that are moving as
Speaker 3: a result of this this deal. Last week we saw
Speaker 3: open ai sending shares of e commerce companies like Shopify
Speaker 3: Etsy soaring after unveiling an instant by.
Speaker 2: Option in chat GPT. I mean, it is remarkable.
Speaker 3: Then the market moves that are are evolving around open ai,
Speaker 3: which again makes me say, what are we One of
Speaker 3: the things.
Speaker 7: That I do each day.
Speaker 5: Yeah, one of the things I do each day, and
Speaker 5: I know you guys do it as well. When I
Speaker 5: first long onto my Bloomberg, I do NI Globe rap
Speaker 5: and I look at the market's wrap because they always
Speaker 5: have a pretty good handle on the sentiment of the morning.
Speaker 5: And last Wednesday or Thursday, it was equity markets push
Speaker 5: higher on open ai enthusiasm. It was the confirmation of
Speaker 5: open AI's five hundred billion dollar valuation in the private
Speaker 5: markets that was driving sentiment in the public equity markets,
Speaker 5: and that was well sourced. It's based on lots of
Speaker 5: conversations with market participants. That is again a reflection of
Speaker 5: the names that Tim read out today. Open Ai, a
Speaker 5: private company, is driving all kinds of markets at the
Speaker 5: moment with what it is saying and to an equal extent,
Speaker 5: the activity it is doing in both hardware and software.
Speaker 7: Well, there's a lot of activity happening behind you. Ed
Speaker 7: at the op ai Developer Day conference. In just about
Speaker 7: an hour, we're going to hear from you again. You're
Speaker 7: going to be speaking with open Ai COO Brad Lightcap.
Speaker 7: You're going to have a conversation with him that I'm
Speaker 7: sure is going to touch on a lot of these themes.
Speaker 7: Before then, though, the reason all of these companies are moving,
Speaker 7: can you talk a little bit about this idea of
Speaker 7: open Ai, or rather chat GPT becoming an operating system
Speaker 7: and how these publicly traded third party companies are starting
Speaker 7: to use the technology to make their software to make
Speaker 7: whatever they're offering the services better.
Speaker 5: Yeah, for those listening on radio and watching on TV
Speaker 5: that are familiar with software, what OpenAI announced was very
Speaker 5: simple API access for several third parties to chat GPT,
Speaker 5: and they demonstrated it on stage. So you know, I
Speaker 5: use chat GPT for hours each day. But the idea
Speaker 5: is you link it to say, your Figma platform or
Speaker 5: your Spotify account even and you can use some of
Speaker 5: the features of those platforms within chat GPT. That was
Speaker 5: a sort of direct catalyst to moving. But what they
Speaker 5: also spoke about on stage, and Sam Altman did pretty
Speaker 5: good job of kind of explaining it, is that chat
Speaker 5: GPT is going to basically act much like the App
Speaker 5: Store does on OS. Right with Apple, you have a
Speaker 5: community of developers, those are all the people that are
Speaker 5: here today, the thousands of them that are building applications,
Speaker 5: and where will they publish those applications where they'll be
Speaker 5: reviewed by open ai and they will be integrated either
Speaker 5: as APIs or standalone applications within chat gpt. That is
Speaker 5: how the economy around the Android play Store, the Apple
Speaker 5: iOS store works. You have people build software, and then
Speaker 5: you have a place a library catalog where all of
Speaker 5: those things list. In some cases you charge an ad
Speaker 5: hoc subscription to use those applications. And that's kind of
Speaker 5: what open ai is saying here that chat GPT can
Speaker 5: be very interesting, although it's also contingent on the developer
Speaker 5: community stepping up and doing it.
Speaker 2: Who needs to be worried? Alphabet? Like, who needs to
Speaker 2: be work worried?
Speaker 3: As we watch this unfold and everything seemed to kind
Speaker 3: of revolve around chatchypt, open ai and as you said, like,
Speaker 3: if this is one of the new big search engines
Speaker 3: going forward, I mean Alphabet with its own search engines
Speaker 3: and making its own pivot, do they need to be worried?
Speaker 6: Though?
Speaker 5: Right?
Speaker 4: Yeah?
Speaker 5: I mean you guys, I actually should have checked, and
Speaker 5: I just didn't, But I don't know what Apple, Microsoft
Speaker 5: or Alphabet did during that keynote. I mean, did they
Speaker 5: get down or up?
Speaker 3: Alphabets right now up about two percent, so it's near
Speaker 3: its highs of the session, and.
Speaker 7: For your Microsoft's up two point four percent. Yeah, so
Speaker 7: I had a high of the session.
Speaker 5: All in right, Yeah, yeah, yeah, you know, I don't
Speaker 5: know the answer to that about whether they'd be worried.
Speaker 5: I mean, we've done a lot of reporting on open
Speaker 5: ai going its own way and having more independence from Microsoft.
Speaker 5: The original idea was that Microsoft would use open AI's
Speaker 5: underlying work in models to improve their own software capabilities.
Speaker 5: Of course, one of the recent elements is Microsoft is
Speaker 5: using Anthropic for its own in house software applications and
Speaker 5: has looked at one of open AI's rivals. But you
Speaker 5: are right, it's about open ai wanting to do more
Speaker 5: across software.
Speaker 4: You know.
Speaker 5: One of the other beneficiaries in the keynote was I
Speaker 5: think Salesforce. You can correct me to him if I'm wrong.
Speaker 5: I saw Salesforce as one of the movers service now
Speaker 5: as well, you know, it's just another sales channel in
Speaker 5: some sense. You can access another person software through chat, GPT,
Speaker 5: and you know, the market again its logic is very
Speaker 5: simple that it drives use and that's good. You know,
Speaker 5: when you have a partnership with open.
Speaker 7: Ai, salesforce shares up three percent right now, up as
Speaker 7: much as four point two percent during that keynote, Ed Ludlow,
Speaker 7: he's at open AI's Developer Day.
Speaker 2: Stay with us. More from Bloomberg Business Weekdaily coming up
Speaker 2: after this.
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Speaker 7: Let's bring in Mandy Singh, global head of Tech research
Speaker 7: at Bloomberg Intelligency, joins us here in the Bloomberg Interactive
Speaker 7: Brokers studio. So I just want to start with the
Speaker 7: validation or.
Speaker 4: Not of AMD's technology here.
Speaker 7: Ed reminded us that this is an inference deal, not
Speaker 7: a training deal. But how should we look at this
Speaker 7: in the context of Nvidia being the standout leader when
Speaker 7: it comes to this.
Speaker 6: Tech Look, I mean for AMD, there weren't many options
Speaker 6: when you look at you know, Nvidia and Broadcom partnering
Speaker 6: with all the hyperscalers. AMD clearly has just two percent
Speaker 6: market share right now. And what do you do when
Speaker 6: Nvidia announces a big investment in open ai to the
Speaker 6: two zero hundred billion or multi years. And in this case,
Speaker 6: i think AMD had to do some thing. So I'm
Speaker 6: sure they gave a very sweet deal to open Ai
Speaker 6: in terms of, you know, the margins they're going to
Speaker 6: charge open Ai, the level of custom silicon work that
Speaker 6: they are willing to do for open Ai. And open
Speaker 6: ai has a great advantage that it can, you know,
Speaker 6: bargain and really get these sweet deals right now with everyone.
Speaker 7: A sweet deal meaning here's one hundred and sixty million
Speaker 7: shares of our company at a penny apiece.
Speaker 6: Maybe, And I look, I mean, I don't know. I
Speaker 6: mean this is nobody can look that far out. But
Speaker 6: the fact that Nvidia is willing to spend ten billion
Speaker 6: dollars you know in open Ai, and AMD gave them
Speaker 6: this option that they could buy the shares, you know,
Speaker 6: if it hits a certain level, that just goes to
Speaker 6: show that open ai wants to show that it has
Speaker 6: the power, not the chip makers. And so over time,
Speaker 6: if you look at you know, software cycles, the application
Speaker 6: is the sticky part. It's never the chips or the architecture,
Speaker 6: and that's what open the Eye is saying, look, guys,
Speaker 6: we have the best models, right, we have chat cept
Speaker 6: the application, so that's the end product, and they want
Speaker 6: diversification in terms of the inference capacity.
Speaker 3: Listen, we have this chart and for those who are
Speaker 3: on radio, it's just showing all of the deals that
Speaker 3: open ai is doing or some different companies are some
Speaker 3: of the deal them, whether it's Microsoft, although they've been
Speaker 3: pulling back and like lining up other deals. You know,
Speaker 3: I want We're trying to so hard be smart about
Speaker 3: this because it's easy to get caught up in it,
Speaker 3: and it does feel like.
Speaker 2: This has become increasingly a momentum trait.
Speaker 3: I'm not saying people aren't making money out of it,
Speaker 3: but how do we make sense because is there a
Speaker 3: chance that open ai and chatchept is not ultimately the
Speaker 3: big model or the big next generation search engine for everybody?
Speaker 2: Like, how do we be.
Speaker 3: Smart about this spend because some of it potentially a
Speaker 3: fluffy fluffy and not going to go anywhere.
Speaker 6: I know there are our references to circular financing and
Speaker 6: all that, but the best way to think about this
Speaker 6: is the concentration that you see among the players, whether
Speaker 6: it's you know, Nvidia being exposed to the hyperscalers, and
Speaker 6: now the number of hyperscalers are growing because open ai
Speaker 6: was dependent on Microsoft, like you said, now it's trying
Speaker 6: to become an independent hyperscale vendor. In fact, they said
Speaker 6: they may open their own data centers. They have a
Speaker 6: three hundred billion dollar deal with Oracle now, so they
Speaker 6: want to be a hyperscaler who does end to end
Speaker 6: work like Google does. It had its own chip, right
Speaker 6: it processes nine hundred and eighty trillion tokens per month,
Speaker 6: and that's what you know. Open ai wants to get
Speaker 6: to that they have their own chip. They use chips
Speaker 6: from AMD and Nvidia and not just rely on one provider.
Speaker 3: But they are still a private company. What are things
Speaker 3: that we might not know in their financials right now.
Speaker 6: That they have negative gross martins and so one of
Speaker 6: the way is that they are trying to fix that
Speaker 6: is by arbitraging against the semiconductor chip makers who are
Speaker 6: giving them the compute capacity. And we know that this stuff,
Speaker 6: like one of the things with Generative AI, it's very
Speaker 6: compute intensive, right, and it's not changing even though we
Speaker 6: have GPT five, Like, there's nothing that has changed in
Speaker 6: terms of compute efficiency. It still requires ten times more
Speaker 6: compute than your CPUs that were used for you know,
Speaker 6: traditional software. So it is an expensive technology.
Speaker 7: Okay, hold on, though, you said, you know, I don't Yeah,
Speaker 7: I don't want to push aside the circular financing thing
Speaker 7: because this is kind of blowing my mind here. Yeah,
Speaker 7: if in Vidia has a deal with or with open Ai,
Speaker 7: that's up to one hundred billion dollars. So let's say
Speaker 7: in Vidia gets equity in open Ai as a result
Speaker 7: of that. Yeah, then open Ai then gets equity in
Speaker 7: AMD as a result of this deal. Would that essentially
Speaker 7: mean that in Vidia is an owner of AMD?
Speaker 6: No, I think that's too far fair. I mean, think
Speaker 6: of companies having minority stakes. So there are instances where
Speaker 6: Google has a minority stake in Lift. You know, there's
Speaker 6: so many instances because.
Speaker 7: Google Ventures was an investor in it early on. In
Speaker 7: that's Google's venture capital army. You can see that within
Speaker 7: and in the past, within Google's maps application. It used
Speaker 7: to suggest, if it still does, it would suggest Lift rides.
Speaker 7: It made sense. Yeah, and so look in these competitors though.
Speaker 6: Because the numbers are getting so big, I mean you
Speaker 6: need financing from somewhere right now. It was the Hyperscalers,
Speaker 6: the four Hyperscalers were the biggest buyers of AI data
Speaker 6: center infrastructure capacity. They were the ones who were building it.
Speaker 6: And now it's like Opening Eyes saying we want to
Speaker 6: be in the business of building AI data centers because
Speaker 6: they look at Google and say they're running their data
Speaker 6: centers a lot more efficiently than we are, even though
Speaker 6: we haven't an signs with Microsoft. So Opening Eyes big
Speaker 6: bet is if I have more compute capacity, one, I
Speaker 6: can undercut everyone else in terms of offering my model,
Speaker 6: and I'll be more aggressive with pricing, and once I
Speaker 6: have the customer on board, I can sell them more services.
Speaker 6: But just being a model provider is not a good business.
Speaker 6: That's what open ai is suggesting that having the best
Speaker 6: model is not a good mode. Ultimately, everyone will catch
Speaker 6: up in terms of their model capacity, and then they
Speaker 6: will go across different models.
Speaker 2: So they're evolving very quickly.
Speaker 4: They are.
Speaker 6: That's the big bet that they're making is if I
Speaker 6: have my own infrastructure and I have my own application,
Speaker 6: I'll be aggressive with pricing.
Speaker 3: So who needs to be worried then to the hyperscalers
Speaker 3: and their big data center built, Like who needs to
Speaker 3: be worried here?
Speaker 2: And Vidia and Vidia, I.
Speaker 6: Mean clearly in Vidia having seventy five percent gross margin,
Speaker 6: they really have the best chip out there, they have
Speaker 6: the best system. But now that opening eyes saying I
Speaker 6: am going to use AMD and I have incentive that
Speaker 6: AMD does well, who does it hurt? Ultimately Nvidia has
Speaker 6: to lower its pricing. In fact, the ten million dollar
Speaker 6: investment is a way for Nvidia to lower its prices
Speaker 6: for open AI. They're not doing it directly, but they're
Speaker 6: giving a ten billion dollar debate saying, okay, you buy
Speaker 6: a certain capacity for one gigabyte data center, will give
Speaker 6: you ten billion dollar debate. That's lowering your growth market.
Speaker 7: And video shares down about one percent right now, still
Speaker 7: though a four point five trillion dollar company.
Speaker 3: But doesn't that Nvidia open AI feel a little weird
Speaker 3: that deal?
Speaker 4: Why what do you mean? What do you mean?
Speaker 3: Well, because it's like they're fueling, right, like the selling
Speaker 3: of n video chips and then getting what.
Speaker 7: Ya feels, here's money, here's money that you are then
Speaker 7: going to pay back to it.
Speaker 6: And look the biggest constraint right now is powerating.
Speaker 2: Almost false dem which makes me a little nervous.
Speaker 6: No, so I want to concede. Nvidia has by far
Speaker 6: the best chip when it comes to power constraints. That
Speaker 6: are I think the biggest limiting factor when it comes
Speaker 6: to build out. You like we talk about lead times.
Speaker 6: Power has the longest lead time out there out of
Speaker 6: all the supply chains that we have seen, it's just
Speaker 6: not fathomable to add more gigabytt capacity takes time. It's
Speaker 6: very long lead time. And so from that perspective, and
Speaker 6: Vidia chips are the most performant when it comes to
Speaker 6: the power that's available. That's why everyone buys Nvidia, and
Speaker 6: that is a mode. But now what Opening Eye is
Speaker 6: saying is we will help AMD customize their chip to
Speaker 6: the extent that they can offer us a viable alternative
Speaker 6: for inferencing. Not for training, We'll still train our models
Speaker 6: using Nvidia because it's the best chip, but for inferencing,
Speaker 6: we will help handhold AMD and customize their silicon so
Speaker 6: that we can use it for inferencing.
Speaker 4: Are you done?
Speaker 7: Because I want to change the subject, but I want
Speaker 7: to make sure you're But it's just satisfied.
Speaker 2: It's just I am.
Speaker 3: Satisfied, but it just makes I think this market is evolving.
Speaker 7: So Carol asked man Deep, like you should be worried
Speaker 7: it's yours, And I thought Man Deep was going to
Speaker 7: say all of us, all of you, everybody, because I've
Speaker 7: been seeing what open Ai is doing with Sora over
Speaker 7: the last few days. Have you guys seen these videos?
Speaker 7: So in some cases you have people who are able
Speaker 7: to use this making videos of Sam Altman going on
Speaker 7: ice raids or Sam Altman stealing GPUs from somewhere, or
Speaker 7: you have somebody in Hollywood showing the effect that it
Speaker 7: could have on Hollywood. And he put like a main
Speaker 7: character from a Netflix show copyrighted certainly in a video.
Speaker 4: I think maybe it was with Shrek. I don't even remember.
Speaker 7: Like the stuff looks not quite it's not quite there.
Speaker 7: It's not quite there, but it does look like a
Speaker 7: friend of mine can jump off a building like Superman
Speaker 7: or Stephen Hawking in a famous case now the last
Speaker 7: few days is in a half halfpipe at the X Games.
Speaker 7: I mean this stuff is pretty incredible.
Speaker 6: Yeah, I mean the number of creators I think will grow.
Speaker 6: You can become a creator. You don't need a camera
Speaker 6: or you know, a professional setup to do that.
Speaker 4: Scary.
Speaker 6: It is scary. But with that being said, everyone out
Speaker 6: there is competing for engagement time. That's what all of
Speaker 6: these companies are doing, whether it's meta or alphabet with
Speaker 6: YouTube and look for Meta or TikTok, it's all about
Speaker 6: keeping people on their platform. Now, if Sora is able
Speaker 6: to generate good content that people are engaging with, suddenly
Speaker 6: that attention time span shifts from Meta to Zora.
Speaker 7: Okay, I want to paint a bleak future for us
Speaker 7: because this.
Speaker 2: Is what's going through my head.
Speaker 3: Because are we engaging with stuff that we should be
Speaker 3: engaging with is kind of my thing.
Speaker 7: Let's say it gets the point where the people are
Speaker 7: getting so good at creating this stuff without actually doing
Speaker 7: it with skills. Okay, so we're already in a low higher,
Speaker 7: low fire environment right now. The concern is that AI
Speaker 7: is just going to decimate some white collar jobs. Wh
Speaker 7: meta platforms, advertisers going to be if none of us
Speaker 7: have jobs and can afford to spend any money on
Speaker 7: anything because AI has just displaced us.
Speaker 6: Well, I mean, look, I think, like anything else right now,
Speaker 6: the biggest use case out there for generative AI is
Speaker 6: coding agent.
Speaker 7: I mean imagine the developer.
Speaker 6: Community has always been highly sought after and they will
Speaker 6: have to you know, transform in terms of their jobs
Speaker 6: changing and how they use these tools. So to my mind,
Speaker 6: you know, customer service coding agent, these are the type
Speaker 6: of profiles that are illustrative of the power of you know,
Speaker 6: generative AI in terms of bringing productivity around what is
Speaker 6: the current workflow and everyone seems to be adjusting and evolving,
Speaker 6: and I mean everyone talks about how productive the developers are.
Speaker 6: There every hyperscaler has said their developers are thirty to
Speaker 6: thirty five percent more productive because of generative AI.
Speaker 7: I mean, so that's one side of it. He's the optimist, he's.
Speaker 2: Always the optimis space here.
Speaker 7: You and I are just thinking, okay, well, no one's
Speaker 7: going to be working and everyone's going to be convinced
Speaker 7: by deep fakes. I know you're concerned about the political
Speaker 7: implications of something. I'm just concerned about You've seen these videos.
Speaker 7: They're insane.
Speaker 3: Yeah, I'm not happy about the political videos, and I
Speaker 3: am concerned about a society where we're just glued to
Speaker 3: our phones watching stupid stuff. And I forgive me, Yeah,
Speaker 3: I don't know if I can say this, but I'm
Speaker 3: going to go there, and I just I wonder at
Speaker 3: what point is it just too much or is that
Speaker 3: just a small percentage.
Speaker 2: Of where all of this is going?
Speaker 3: And I mean Tim and I have used chacchipeet for
Speaker 3: work and we see the productive element of it. So
Speaker 3: I just I wonder is all the silly videos just
Speaker 3: a small portion?
Speaker 6: So I want to go back to the cost comment
Speaker 6: that I made earlier. This technology is expensive to generate
Speaker 6: that type of video. You are spending a pretty decent
Speaker 6: chunk of compute and it's costing you a lot. So
Speaker 6: now I think at some point who.
Speaker 2: Who's paying exactly.
Speaker 6: Right subsidize electric electric Bell, Yes, you are paying true power,
Speaker 6: They're absolutely right.
Speaker 7: And also open AI is subsidizing.
Speaker 6: There will be a point when they will be under
Speaker 6: pressure to show profitability. And then you have to figure
Speaker 6: out what are the solid use cases that you want
Speaker 6: to continue with, right and what are the ones where
Speaker 6: you're spending compute for an output that is not even
Speaker 6: as good as you know, an average human produce output.
Speaker 6: And so that's where the cost benefit analysis, I think
Speaker 6: will weed out a lot of the use cases where
Speaker 6: you're just throwing compute and the output may not improve,
Speaker 6: or the curve is just too steep, right, and you
Speaker 6: just can't keep spending more compute and consuming more power.
Speaker 6: That is inflating a lot of things that you don't
Speaker 6: want to see.
Speaker 2: No, you're absolutely right. That makes a lot of sense.
Speaker 3: I've already said to my husband, you know why our
Speaker 3: power bills are high.
Speaker 2: Blame AI. It's not my.
Speaker 7: Fault because I love turn the light off, which.
Speaker 2: He does say man deep, saying oh, thank you.
Speaker 4: We go everywhere with them, I know what. We go
Speaker 4: everywhere with that.
Speaker 2: I know, I know. I mean, you're just the best.
Speaker 2: Thank you.
Speaker 1: As always, you're listening to the Bloomberg Business Week Daily Podcast.
Speaker 1: Catch us live weekday afternoons from two to five eas
Speaker 1: during Listen on Applecarplay and Android Otto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 3: All right, as you know, obviously talking a lot about finance,
Speaker 3: as we do here regularly at Bloomberg, which also means
Speaker 3: the intersection of finance.
Speaker 2: Investors and sports in a big way.
Speaker 3: Rick Welts has been in the job as chief executive
Speaker 3: officer of the Dallas Mavericks for a little more than
Speaker 3: nine months. Took over as CEO of the NBA franchise
Speaker 3: that was on January first of this year, calling sint
Speaker 3: Marshall's nearly seven year tenure, his career spans nearly fifty.
Speaker 2: Years in sports and entertainment.
Speaker 3: He has held roles as president and CEO of the
Speaker 3: Golden State Warriors, president of the NBA's Phoenix Suns, the
Speaker 3: WNBA's Phoenix Mercury, and the NBA's Senior Vice president, Chief
Speaker 3: Marketing Officer, and also president of NBA Properties. To say
Speaker 3: he has seen a lot is not even fair. Let's
Speaker 3: head to the Bloomberg News bureau in Dallas with us
Speaker 3: is Rick Welds, CEO of the Dallas Mavericks and Bloomberg
Speaker 3: News Texas buer chief Julie Fine, who watches and reports
Speaker 3: and talks about this base so much. Rick is great
Speaker 3: to have you there in Dallas with Julie. I just
Speaker 3: want to start with that intersection of business and sports
Speaker 3: investors in sports. Twenty minutes ago, we were talking with
Speaker 3: Jim Esposito, president of Citadel Securities. Every day, it seems
Speaker 3: ore every week we have a story about Apollo Ares,
Speaker 3: different investment.
Speaker 2: Firms, the money in sports.
Speaker 3: You've been in the world for a long time, seen
Speaker 3: the rise of money in sports and the rise of
Speaker 3: financial firms in sports.
Speaker 2: Is this a good thing in your view?
Speaker 8: Well, it's not only a good thing. I think it's
Speaker 8: an essential thing.
Speaker 7: Really.
Speaker 8: When you look at the valuations of franchises today, there's
Speaker 8: really a smaller and smaller universe of individuals who would
Speaker 8: either choose to or have the ability to purchase a
Speaker 8: major league sports franchise today.
Speaker 2: So private equities.
Speaker 8: Involvement is going to be something that's going to be
Speaker 8: absolutely essential going forward.
Speaker 9: You know, Rick, when you talk about the future of sports,
Speaker 9: I do want to get in with you the streaming rights.
Speaker 9: You know, Dallas Mavericks, they have MAVs Television and you
Speaker 9: actually are one of the few that also have a
Speaker 9: local deals.
Speaker 2: You can see all the games here as well.
Speaker 9: But what do you see as the future of how
Speaker 9: we watch sports?
Speaker 2: Well, it's unfolding right now.
Speaker 5: The NBA's.
Speaker 8: Entering into a brand new set of broadcast agreements for
Speaker 8: this season. So we're adding Peacock and NBC, We're adding
Speaker 8: Amazon Prime, and we have to go where our viewers
Speaker 8: are watching us, right and especially our younger viewers today
Speaker 8: who are just accustomed to using streaming as their primary
Speaker 8: platform and consuming sports.
Speaker 9: You know, let's talk a little bit about your viewers
Speaker 9: and your fans. They had quite a shock last year
Speaker 9: with the trade of Luka Danchik. You start tonight, you
Speaker 9: kick off your preseason. Do you feel that you really
Speaker 9: managed to bridge that gap with them?
Speaker 8: Well, you know, this is my favorite time of year,
Speaker 8: right because there's optimism. As I checked the standings this morning,
Speaker 8: we're undefeated. We haven't played a game, and every team,
Speaker 8: every every team feels the same way. Right. But we had,
Speaker 8: you know, that trade on February first, and then this
Speaker 8: is such a crazy industry, right, one hundred days later,
Speaker 8: on May twelfth, with a one point eight percent chance
Speaker 8: of winning the NBA Draft lottery, somehow we came away
Speaker 8: with the number one pick and with that Cooper flag.
Speaker 8: And that's that's what's starting tonight, a new era of
Speaker 8: Dallas Mavericks basketball.
Speaker 9: Will you talk about the finances of sports last year,
Speaker 9: you did lose some sponsors and there were some season
Speaker 9: ticket holders that were very upset about this trade.
Speaker 2: But where did you land now?
Speaker 8: You know, sports is such a wondering because it can
Speaker 8: change on a dime. And it did on May twelfth
Speaker 8: with the drafting of Cooper Flag, you know, the most
Speaker 8: decorated eighteen year old player in the history of basketball,
Speaker 8: who plays his first game for the Mavericks tonight, and
Speaker 8: really everything changes. The optimism going into this season changed
Speaker 8: the business environment completely. We're third in the league and
Speaker 8: new season ticket sales will finish this year ahead in
Speaker 8: revenue and season ticket sales, which you know, I wasn't
Speaker 8: quite sure was going to happen on February first.
Speaker 7: So ahead of the year with season ticket sales now.
Speaker 7: But on the business question and on the sponsors returning
Speaker 7: to the organization, can you give us some numbers behind
Speaker 7: sponsorships or how Flag has affected the way that companies
Speaker 7: are interested in partnering with the mass.
Speaker 8: Well, your second point is really spot on, because the
Speaker 8: interest around Cooper Flag and his potential All Star career
Speaker 8: in the NBA, but here in Dallas, it's combined with
Speaker 8: the optimism and energy around building a new arena and
Speaker 8: entertainment district to replace American Airlines Center, where we've played
Speaker 8: for the past twenty five years. So it's a wonderful
Speaker 8: combination from a business standpoint because we have the optimism
Speaker 8: of the team, but also a really exciting prospect about
Speaker 8: what we're going to be building in Dallas, which will
Speaker 8: be the future of our franchise.
Speaker 2: Well, that's where we want to go to. In terms
Speaker 2: of what you are building.
Speaker 3: In terms of a new arena, mads Lise is up
Speaker 3: in twenty thirty thirty one. Rick, you share an arena
Speaker 3: with the Dallas Stars, but you've made it clear that
Speaker 3: the next arena that you have will be a basketball venue.
Speaker 2: I think the last time that we all caught.
Speaker 3: Up with you at Bloomberg, you said you had narrawed
Speaker 3: it down to several sites. So what can you tell
Speaker 3: us our feel free to announce where you guys are going.
Speaker 7: To do it, and we love to know.
Speaker 8: I really really wish I could do that. We're hoping
Speaker 8: by the end of the first quarter of twenty six
Speaker 8: that we're going to have identified a site. Listen our commitment.
Speaker 2: We've been very clear we want.
Speaker 8: To be in the city of Dallas, and the city
Speaker 8: has been a great wardner to this point and helping
Speaker 8: us identify sites. Not easy to do because we're looking
Speaker 8: for a minimum of fifty acres to build the arena
Speaker 8: and an entertainment district. So not a lot of fifty
Speaker 8: acre parcels that you can even consider in Dallas. But
Speaker 8: we have narrowed down and we're doing our due diligence
Speaker 8: on those very complicated project. These are very complicated things
Speaker 8: to get done. But again we're hoping by the end
Speaker 8: of the first quarter the next year to be able
Speaker 8: to announce where we're going to be.
Speaker 9: Of course, the team owners, the Adolson family, they've made
Speaker 9: no secret they would like to see casino gambling in Texas.
Speaker 9: You follow the Texas legislature. I followed Texas legislature that
Speaker 9: did not get anywhere this year. Does that affect really
Speaker 9: the plans and what's going to be next for the stadium.
Speaker 8: No, as we look forward, we don't think the prospects
Speaker 8: for that happening in Texas anytime soon or very likely.
Speaker 8: So the project that we're going to build has no
Speaker 8: casino component to it. We're talking about hotels, we're talking
Speaker 8: about retail, we're talking about restaurants, we're talking about big
Speaker 8: gathering places in an arena. So there's no casino component.
Speaker 9: Something you don't see that often as a team opening
Speaker 9: their preseason, not in their arena. You will be playing
Speaker 9: tonight in Dickey's in Fort Worth, a much smaller arena,
Speaker 9: and that's really where people will get their first vision
Speaker 9: of Cooper flag. You know, can you talk about that
Speaker 9: decision and what you're hoping comes out of the evening?
Speaker 8: Yeah, well, it was really in COVID when the commitment
Speaker 8: was made to play this game. The fact that it's
Speaker 8: going to be Cooper's first game in a Mavericks uniform
Speaker 8: in our home market, and we think of Dallas Fort
Speaker 8: Worth as our home market. I think Fort Worth looks
Speaker 8: at the Mavericks as their NBA team. So I think
Speaker 8: it's going to be a super exciting night. It's gonna
Speaker 8: be the first time we'll get to see Cooper, and
Speaker 8: I think there's a big, big, big buzz about that.
Speaker 9: I think there's people that are interested in seeing Cooper. Globally,
Speaker 9: speaking of global sports, the World Cup will be holding
Speaker 9: nine matches in Dallas. That's the most in any city
Speaker 9: in North America. You know, what does that do for
Speaker 9: this city in terms, this whole area, in terms of
Speaker 9: being and really a sports town.
Speaker 8: I don't think people yet realize the impact this is
Speaker 8: going to have. This is the whole world is going
Speaker 8: to be focused on this, and I'm I'm a huge
Speaker 8: soccer fan, you know, maybe this far behind India basketball.
Speaker 8: I own an ownership interest in a couple soccer clubs,
Speaker 8: So I think what's going to unfold here is really
Speaker 8: going to put Dallas on the map as a soccer mecha.
Speaker 7: Hey, I want to ask a little bit of Julie
Speaker 7: asked about gambling on site and the potential for that.
Speaker 7: Obviously that's not going to happen anytime soon. What about
Speaker 7: those sports gaming and the way that gaming and the
Speaker 7: ability for people to actually wager on these games has
Speaker 7: attracted or increased viewership, has attracted or increased engagement? How
Speaker 7: do you measure that at the MAPS organization?
Speaker 8: Well, you know, I think we're all tracking it and
Speaker 8: watching this unfold in real time because you know the argument.
Speaker 8: You know, Adam Silver was really the first of the
Speaker 8: commissioners to come out in favor of it and really
Speaker 8: talking about the level of engagement that it does provide
Speaker 8: and how how people want to consume our games now.
Speaker 8: So I think it's been nothing but positive at this point. Listen,
Speaker 8: it's not the story hasn't been written yet on how
Speaker 8: this will completely play out. But I think it's been
Speaker 8: nothing but additive in terms of people's interest in watching
Speaker 8: games and staying and watching more than they have historically
Speaker 8: in the past.
Speaker 3: You mentioned Adam Silver CBS News reporting last week. As
Speaker 3: the NBA continues to grow its presence, over sees rich
Speaker 3: Silver outlining a vision aboud vision for the future that
Speaker 3: could see teams from other continents playing US based franchises
Speaker 3: in the regular season or postseason.
Speaker 2: What do you think of that.
Speaker 8: I think it's the most exciting time in NBA history,
Speaker 8: and I think the prospect of that for me, I
Speaker 8: was hired in nineteen eighty two by David Stern, who
Speaker 8: was commissioner for the NBA for thirty years. There's a
Speaker 8: thirty fifth employee of the NBA League Office and he's
Speaker 8: not with us anymore. But this would really be the
Speaker 8: culmination of that dream, the path that we went on
Speaker 8: to really understand basketball is the only other sport played
Speaker 8: worldwide other than soccer, and the NBA is a very
Speaker 8: unique league where all the best basketball players in the
Speaker 8: world play in one league. The idea that we could
Speaker 8: have another league in Europe. What we're doing in Africa
Speaker 8: today with our league in Africa I think it's really
Speaker 8: the most exciting time ever for the globalization of our sport.
Speaker 3: Ricky seconds, are you having more fun today or are
Speaker 3: back in nineteen sixty nine when you began as a
Speaker 3: ball ball ball boy with the SuperSonics.
Speaker 8: I think I have the same level of excitement going
Speaker 8: into tonight's game as I probably did that first day
Speaker 8: I walked into a cl SuperSonics locker room.
Speaker 2: That's a good place to be.
Speaker 3: Thank you so much, Really appreciate your time always that
Speaker 3: you give to Bloomberg. Then, of course was Rick Wald,
Speaker 3: CEO of the Dallas Mavericks, and of course our thanks
Speaker 3: as well to Julie finci Is, Texas bure chief for
Speaker 3: Bloomberg News.
Speaker 7: Stay with us more from Bloomberg Business Week Daily coming
Speaker 7: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five eastering. Listen
Speaker 1: on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 7: Right now, we want to bring in Leslie Marx. She's
Speaker 7: joining us this afternoon. Really appreciate her taking the time.
Speaker 7: She's CIO for Equities at Mackenzie investments. The firm has
Speaker 7: two hundred twenty eight billion dollars in assets under management.
Speaker 7: She joins us from Toronto. Leslie, good to have you
Speaker 7: with us on the program. Thanks for your patients for
Speaker 7: juggling a lot of live interviews all over the country
Speaker 7: right now, so appreciate it. Look, the story that we've
Speaker 7: been covering today has to do with everything with regard
Speaker 7: to AMD open AI OEMD shares up twenty five percent
Speaker 7: right now, the environment with regard to the investments that
Speaker 7: are being made in private companies and public companies.
Speaker 4: How are you looking at it with AI?
Speaker 10: Well, exactly, I mean, AI is definitely the dominant thematic
Speaker 10: is driving public equity markets today. And I think that
Speaker 10: people are looking at equities and you're hearing people talk
Speaker 10: about you know, and I heard you and Carol both
Speaker 10: talking about the comparisons between today and the nineteen ninety
Speaker 10: nine two thousand era, as well as people inferring that,
Speaker 10: you know, are we in bubble conditions here based on
Speaker 10: some of the deals.
Speaker 2: I don't think so.
Speaker 10: I mean, I think that the people that talk about
Speaker 10: us being in a bubble right now are those that
Speaker 10: maybe aren't long equities or you know, or underweight equities,
Speaker 10: and so there's some you know, speaking their own book.
Speaker 10: You know, I just go back to, as an equity person,
Speaker 10: fundamentals and the two primary fundamentals that an equity investor
Speaker 10: needs to focus on our earnings and what do we
Speaker 10: pay for those earnings. And that really comes a lot
Speaker 10: of which comes from of course sentiment, which is extremely
Speaker 10: bullish right now, but also the outlook for interest rates.
Speaker 10: And I think your listeners have a very good understanding
Speaker 10: that a lower interest rate environment is generally good for multiples.
Speaker 10: So let's spend a minute here just to talk about earnings,
Speaker 10: because earnings has been the big surprise or upside surprise
Speaker 10: in twenty twenty five. When you look at the factors
Speaker 10: that are driving equities, it's been primarily, of course, price momentum.
Speaker 10: The things that are going higher are what people want,
Speaker 10: of course, but also earnings momentum has been a top factor.
Speaker 10: And earnings momentum is a very strong fundamental that we
Speaker 10: can really anchor ourselves on and say that actually, with
Speaker 10: these companies reporting strong earnings, we can feel comfortable with
Speaker 10: the higher valuations that they're trading at today.
Speaker 2: All right, So is that you saying you are comfortable
Speaker 2: with the valuations that we're seeing today.
Speaker 10: Yes, And I think when you look at valuations, what
Speaker 10: people point to mostly when they say that valuations are
Speaker 10: stretched is evaluations today versus historical. But what you have
Speaker 10: to think about is today the margin profile of the
Speaker 10: S and P five hundred is much higher than it
Speaker 10: has been historically. Ten years ago, the net margin for
Speaker 10: the S and P five hundred was about ten percent.
Speaker 10: Today it's thirteen to fourteen percent. So you actually should
Speaker 10: be paying more for equities today than you have historically.
Speaker 7: That's so interesting to hear because I think there's a
Speaker 7: lot of people who are looking around right now saying
Speaker 7: this doesn't necessarily feel like a comfortable environment to buy.
Speaker 7: And you said that, Okay, Well, people who might feel
Speaker 7: that way maybe aren't long equities. But what would you
Speaker 7: say to somebody who does have cash deployed in markets
Speaker 7: right now? How do you do it with valuations like this?
Speaker 10: Well, I would say the most important thing for someone looking,
Speaker 10: you know, to get into the market where you know,
Speaker 10: I totally understand the bias and the anchoring. If you're
Speaker 10: not there right now, why you would feel uncomfortable investing
Speaker 10: at these levels? But there are lots of opportunities and
Speaker 10: you have to be thinking about diversification. You know, when
Speaker 10: you look at what happened in Japan overnight, to see
Speaker 10: that market up over four and a half percent overnight,
Speaker 10: that's incredible and it just highlights that there are opportunities
Speaker 10: that go beyond the top ten names in the S
Speaker 10: and P five hundred, and that's where investors should be looking.
Speaker 10: They should be looking to diversify their holdings. You mentioned
Speaker 10: that I'm sitting here in Toronto right now. In Canada,
Speaker 10: the SMPTSX it's been an outperformer when compared with the
Speaker 10: S and P five hundred. That might surprise people, but
Speaker 10: gold has been a big driver of that market. When
Speaker 10: you think about gold being at record highs, it's been
Speaker 10: a big driver of the S and P TSX, both
Speaker 10: on a price basis and earnings growth. So when investors
Speaker 10: are looking at, you know, where should I invest or
Speaker 10: should I invest today, we would say to them look
Speaker 10: at diversifying your opportunities, because there are opportunities globally. I mean,
Speaker 10: China is going through a very exciting time here around
Speaker 10: their technology, electric vehicles, robotics. You're seeing a lot of
Speaker 10: interest building in China, So I think that.
Speaker 3: Yeah, forgive, forgive, but we've got a Ryan, We've got
Speaker 3: a closing belt just coming at us. But we really
Speaker 3: appreciate your input. Leslie Marx over at Mackenzie Investment.
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