Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live
Speaker 1: from the heart of Silicon Valley with ed la Though
Speaker 1: in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: SpaceX is selling investment grade bonds for the first time
Speaker 3: following its record breaking IPO.
Speaker 2: We'll have the details.
Speaker 3: Plus Micron strikes an AI infrastructure agreement with Anthropics to
Speaker 3: drive enterprise AI adoption and a lot more. And Chevron
Speaker 3: signs a twenty year deal with Microsoft to power a
Speaker 3: West Texas data center could be one of the biggest
Speaker 3: in US.
Speaker 2: Good Morning, Monday.
Speaker 3: June twenty second, twenty twenty six, SpaceX's inaugural bond sale.
Speaker 3: This is about repaying their existing debt funding corporate needs,
Speaker 3: and Bloomberg's reporting has been spot on. What we understand
Speaker 3: is that right now you have the same banks they've
Speaker 3: been working with on their existing financing going out, holding
Speaker 3: investor meetings, gauging appetite. But we believe that they'll look
Speaker 3: at maybe raising around twenty billion dollars through this mechanism.
Speaker 3: By the way, the stock is down for a third
Speaker 3: straight session, down ten percent this Monday, trading below one
Speaker 3: hundred and seventy dollars a share. Remember this is an
Speaker 3: IPO that priced on June twelfth, June eleventh Trader June twelve,
Speaker 3: one hundred and thirty five dollars a share. Now, why
Speaker 3: would a company sitting on one hundred billion dollars and
Speaker 3: more of cash need to tap the corporate debt market?
Speaker 3: Bloomberg Intelligence writing that quote, despite operational questions and considerable
Speaker 3: key man risk, they expect SpaceX's debt issue to be
Speaker 3: very warmly received.
Speaker 2: There's only one man for the job.
Speaker 3: Bloomberg Intelligence senior credit analyst, Robert Schiffman. That's the story, right,
Speaker 3: Why would a company that has one hundred billion dollars
Speaker 3: of cash on hand and do this?
Speaker 2: Explain?
Speaker 4: Well, I didn't think I could be more bullish, but
Speaker 4: every day I wake up and show up at Bloomberg,
Speaker 4: I'm more and more bullish on AI, and I think
Speaker 4: this deal is just going to support that. You know,
Speaker 4: why do they need to raise more money. It's because
Speaker 4: over the next handful of years they're probably going to
Speaker 4: spend a lot more than one hundred billion dollars. In fact,
Speaker 4: the free cash flow is probably going to be a
Speaker 4: lot more than one hundred billion dollars. On the negative side.
Speaker 4: So they're going to need money because they're building the
Speaker 4: next hyperscaler business in space.
Speaker 3: Let's go to the investor demand or appetite for this.
Speaker 3: We had reported even prior to the IPO that SpaceX
Speaker 3: had managed to get investment grade ratings from the three
Speaker 3: main agencies, and in your react you basically say, this
Speaker 3: is how we think they'll stack up relative to their
Speaker 3: hyperscale piers. You have a greater rating. Still, why does
Speaker 3: all of that matter?
Speaker 4: Well, I think listen, nobody owns SpaceX right now from
Speaker 4: the bond side, so there's going to be enormous demand
Speaker 4: when you have an inaugural offering like this, it's going
Speaker 4: to be a feeding frenzy. And quite frankly, I think
Speaker 4: three quarters of the people that are going to buy
Speaker 4: the bonds aren't even going to know what this company does.
Speaker 4: It's going to be very much of a buy now,
Speaker 4: ask questions later. But what do they have supporting them?
Speaker 4: They've got very strong, stable investment grade ratings. You do
Speaker 4: not have to worry about this name going to jump.
Speaker 4: You've got perhaps the greatest investor of our generation, Elon Musk,
Speaker 4: who I think has replaced Warren Buffett, and you have
Speaker 4: one hundred billion dollars of cash sitting on the books,
Speaker 4: plus tremendous upside across a diversity of businesses. My sense is,
Speaker 4: if they raise twenty odd billion dollars, you're going to
Speaker 4: have a book size that's well north of one hundred
Speaker 4: billion dollars.
Speaker 3: You mean the demand, the one hundred billion dollars demand
Speaker 3: for twenty billion dollars of supply, just real quick like,
Speaker 3: trying to compare and contrast.
Speaker 2: The equity story.
Speaker 3: This stocks down nine percent one hundred and sixty seven
Speaker 3: dollars a share for the equity investor. They read the prospectives,
Speaker 3: they listen to Elon Musk, and everything that's being pitched
Speaker 3: is very far into the future, but is the kind
Speaker 3: of common denominator between the equity investors' approach and the
Speaker 3: credit investors approach to SpaceX. Trying to understand the path
Speaker 3: of CAPEX. Does it work the same way?
Speaker 4: Listen? Equity and credit are different. Equity is based on
Speaker 4: hope and future cash flows. Credit generally is based upon
Speaker 4: present cash flows and what leverage looks like right now.
Speaker 4: I actually do think that those are going to somewhat
Speaker 4: come together over time. This company is committed to reasonably
Speaker 4: low leverage below three times. They're committing to having twenty
Speaker 4: five billion dollars of cash on the books for the
Speaker 4: foreseeable future, and there's a hope of just absolute tremendous growth.
Speaker 4: Quite frankly, it's not so different than what Microsoft or
Speaker 4: Alphabet or Amazon is doing. And just remember in the
Speaker 4: early days of names like Amazon, they lost a lot
Speaker 4: of money too. You have to spend money to make money.
Speaker 4: This is what this company is doing. I think the
Speaker 4: bond market's going to be there to fund it, and
Speaker 4: I think the equity market when you start thinking about valuations,
Speaker 4: all these AI revenues in particular come in. Remember this
Speaker 4: company is going to transition from what is a satellite
Speaker 4: data business and aerospace and defense business to what's going
Speaker 4: to be a hyperscaler in the sky. I think there's
Speaker 4: nothing but upside when it comes to revenues and casualows
Speaker 4: for this business. So bondholders and credit holders will sort
Speaker 4: of all be looking at the same thing a few
Speaker 4: years from now.
Speaker 2: Doing both.
Speaker 3: Robert Schiffman, senior credit analysts of Bloomberg Intelligence, thank you
Speaker 3: very much. We talked a lot about SpaceX so far,
Speaker 3: this morning, But the bigger market story is this return
Speaker 3: of tech leadership. Right, chip stocks outperforming and leading again.
Speaker 3: Software continues to lag. There's a lot of focus on
Speaker 3: lower energy prices, what's happening in the golf, and that's
Speaker 3: supporting the growth trade.
Speaker 2: Joining US senior.
Speaker 3: Portfolio manager Tiffany Wade at Columbia Frednedle, there's a lot
Speaker 3: to kind of put together in this morning session. But
Speaker 3: again technology continues to be the story in this market.
Speaker 2: Is that true for you?
Speaker 5: Yes, that's absolutely true. We did see tech stocks take
Speaker 5: a bit of a breather, including semi stocks last week,
Speaker 5: but they're after the races again this week and that
Speaker 5: continuously the market higher.
Speaker 3: Of course, for investors of all types, the outlook for
Speaker 3: monetary policy and rates is important. It was really interesting
Speaker 3: Noria Rabini on Bloomberg Television earlier basically saying, nah, it's
Speaker 3: still tech.
Speaker 2: Just listen to this real quick. People obsessed with the FED.
Speaker 2: Whether there's fifty businesspose higher, where's al right? Now, what's
Speaker 2: the difference. The key story is tech boom and that's
Speaker 2: going to be the most important first order I feel
Speaker 2: anything else.
Speaker 3: You know, Tiffany, I grew up in the Bloomberg Newsroom
Speaker 3: school of Well, you got to understand the rate environment
Speaker 3: because higher rates discount the present value of future cash flows,
Speaker 3: and future cash flows are one way that we measure
Speaker 3: the health and valuation of technology companies big and small.
Speaker 2: Does the FED really matter at all?
Speaker 5: I think the FED still matters a lot, and it
Speaker 5: matters a lot for tech stocks as well. It matters
Speaker 5: a lot for high growth stocks. We did see a
Speaker 5: slightly more hawkish FED meeting last week, Kevin Worsh's first
Speaker 5: FED meeting. However, you know, quite a bit has changed
Speaker 5: since the data they were looking at last week, including
Speaker 5: the MoU between the US and Iran. So I think
Speaker 5: we might see, you know, potentially some different news coming
Speaker 5: out of the next FED meeting. Off oil prices continue
Speaker 5: to normalize, and.
Speaker 3: In the background, of course, for the Bloomberg Tech audience,
Speaker 3: you know that there are headlines coming from the Vice
Speaker 3: President and his participation in the talks between the United
Speaker 3: States in Iran. We're very soon going to start talking
Speaker 3: about earnings again, and I just wondered Tipany from Columbia
Speaker 3: thread Neils perspective, how important earning's momentum is going to
Speaker 3: be for a market where technology continues to dominate.
Speaker 5: We're going to get a first read on that from
Speaker 5: Micron this Wednesday. I think that's going to be very
Speaker 5: important to see if the momentum from these stocks can continue.
Speaker 5: We're going to want to see continued revenue upside from
Speaker 5: a lot of the semiconductor stocks, and we're also probably
Speaker 5: going to want to see continued CAEPEX positive capex comments
Speaker 5: from all of the hyperscalers. That will help keep the
Speaker 5: spending party going. For all of the ass cated infrastructure
Speaker 5: names related to AI build out.
Speaker 3: It's really hard in aggregate to kind of say where's
Speaker 3: the beginning, middle, and end here? You know, I think
Speaker 3: you'd note right, tiffanyed it last week some of the
Speaker 3: chip stocks, the picks and shovels, took a bit of
Speaker 3: a breather, and off we are again today with the
Speaker 3: Philadelphia Semiconductor Index outperforming and engauge that's up ninety percent
Speaker 3: year to date.
Speaker 2: How long can that carry on for?
Speaker 5: I think we're going to see this continue for another
Speaker 5: couple of quarters. The outlook for these stocks related to
Speaker 5: AI infrastructure spending is tremendous, and the revenue and earning
Speaker 5: estimates continue to be revised higher, and I think as
Speaker 5: long as that continues, you'll continue to see these stocks working.
Speaker 5: And some of the announcement we've seen, you know, with
Speaker 5: Micronanthropic and then also around you know, Microsoft and you
Speaker 5: know more data center spending in Texas continues to reinforce
Speaker 5: the story that this spending is going to continue for
Speaker 5: another couple of years and probably continue at a faster
Speaker 5: pace than it has been for the last one or
Speaker 5: two years. So I think we'll cantinue to see those
Speaker 5: positive earnings revisions that will continue to push the stockshire.
Speaker 3: We started the program today talking about SpaceX's inaugural bond sale,
Speaker 3: but I just use that as a case study that
Speaker 3: with Capex, both in equity, the market's being flooded, right,
Speaker 3: Alphabet doing its offering, the use of corporate credit to
Speaker 3: fund what's going on. How closely are you tracking these
Speaker 3: companies going to market to get the capital.
Speaker 2: They need to fund these big commitments.
Speaker 5: We're certainly focused on the outcome of these bond sales
Speaker 5: because I think it's an indicator of the appetite for
Speaker 5: the market for the amount of Capex spending that the
Speaker 5: companies are doing.
Speaker 2: It's also non.
Speaker 5: Indicator of future capex expectations. So as those bond sales
Speaker 5: continue to increase in size, it can you know, it
Speaker 5: means that capex spending intentions continue to rise. So it's
Speaker 5: certainly something that we're watching to indicate the health of
Speaker 5: the capex spending cycle and also the intention of a
Speaker 5: lot of the large companies around additional spending for AI infrastructure.
Speaker 3: Tiffany, real quick, what's the next thing you're watching for
Speaker 3: on your calendar?
Speaker 5: I think it's probably earnings Micron this Wednesday is certainly
Speaker 5: a big one that we'll be keeping an eye out for.
Speaker 3: And there's been some news this morning about Micron and
Speaker 3: a deal with Anthropic, which we'll get to you later
Speaker 3: in the program. Tiffany Wade of Columbia, Fred needle Back on.
Speaker 2: Bloomberg Tech, thank you very much.
Speaker 3: Now coming up, Meta invests nine hundred million dollars into
Speaker 3: an Indian fintech startup called Cred, with plans to appoint
Speaker 3: its founder as the new leader of WhatsApp. We've got
Speaker 3: more on that story next, and sticking with big tech names,
Speaker 3: also taking a look at shares of Alphabet, parent of Google,
Speaker 3: down six percent in the session, biggest drop since February,
Speaker 3: as it stands, a lot in the newsflow has been
Speaker 3: about the departures from various parts of Google's AI initiatives,
Speaker 3: the latest being a prominent AI research or Google DeepMind.
Speaker 3: Vice president John Jumper said Friday he was leaving for Anthropic.
Speaker 3: That seems to be weighing on this stock. Keep tracking it.
Speaker 3: This is Bloomberg Tech, all right. Some headlines have just
Speaker 3: crossed the Bloomberg terminal. SpaceX appears to have signed a
Speaker 3: deal with Reflection AI worth about six point three billion dollars.
Speaker 2: That's according to some reports out there.
Speaker 3: I think the company is also just put headlines out
Speaker 3: of its own. SpaceX can end the deal after three months,
Speaker 3: and Reflection is set to pay SpaceX one hundred and
Speaker 3: fifty million dollars per month for that compute as part
Speaker 3: of the deal. It didn't really do much to ease
Speaker 3: the pressure on the stock, which is again down for
Speaker 3: a third straight day, but still above its IPO price
Speaker 3: one hundred and thirty five dollars a share. Big Tech
Speaker 3: is turning to big oil to meet the electricity demand
Speaker 3: of the AI boom. Microsoft has signed a twenty year
Speaker 3: deal with Chevron to build a massive natural gas fire
Speaker 3: generating station for a proposed data center in West Texas,
Speaker 3: dubbed Project Kilby. The power once expected to power up
Speaker 3: by twenty twenty eight. Bloomers Kevin Crowley joins US for
Speaker 3: more from Houston. The scale of this is on paper
Speaker 3: pretty big, right, So they're talking about ramping up to
Speaker 3: about two point six two point seven gigawatts.
Speaker 2: What do we need to know about this?
Speaker 3: And like the natural gas part of it, the Permian
Speaker 3: West Texas very interesting.
Speaker 2: Yes, exactly. Well, that's the key part of this.
Speaker 6: It's a huge power power plant to fund an enormous
Speaker 6: data center. But the really important part is it's right
Speaker 6: in the middle of the Permian Basin, which which many
Speaker 6: people know is the.
Speaker 2: Biggest oil field here in the US.
Speaker 6: But with all the oil that comes up, there's an
Speaker 6: enormous amount of natural gas that also comes and there's
Speaker 6: so much natural gas within the basin that it actually
Speaker 6: often overwhelms pipeline capacity and has to be either burned
Speaker 6: off or companies have to pay people to take it away.
Speaker 6: So there is abundance of natural gas and that is
Speaker 6: what Chevron and Microsoft and they're partner Engine Number one,
Speaker 6: are looking to take advantage of here got incredibly cheap
Speaker 6: natural gas that can that can fuel the power station
Speaker 6: that will then power this this big data center that
Speaker 6: Microsoft plans to build.
Speaker 3: Discuss in your report the bigger picture of what Microsoft's
Speaker 3: trying to do right. Microsoft has said it wants to
Speaker 3: double data center capacity of its own over the next
Speaker 3: two years, and in aggregate, that's the direction that the
Speaker 3: United States is going in over the next decade. But
Speaker 3: they'd also had these like prior commitments to match the
Speaker 3: sourcing of their power in terms of their commitments from
Speaker 3: renewable sources, this is natural gas. So how are they
Speaker 3: managing all of that?
Speaker 6: Microsoft have said that they're they're pursuing kind of a
Speaker 6: diversification strategy, So they want they want diversification both in
Speaker 6: terms of geography but also in terms of fuel sources
Speaker 6: to renewables and natural gas. And I think they're pursuing
Speaker 6: nuclear as well. I mean, obviously the natural gas as
Speaker 6: is on is on the fossil fuel side, so it
Speaker 6: does does create a lot more a lot more emissions.
Speaker 6: We are seeing some of these big tech companies UH
Speaker 6: sort of diluting or walking away some of these prior
Speaker 6: commitments to two one hundred percent renewable energy, just because
Speaker 6: of the sheer scale of the of the demand and
Speaker 6: the ambitions that AI in AI that they have.
Speaker 2: There is in this project.
Speaker 6: There are there are guardrails to mitigate the emissions, and
Speaker 6: they do have plans to to maybe build in some
Speaker 6: build in some solar, maybe some batteries at some point
Speaker 6: in the in the future. But but the end of
Speaker 6: the day, it's an enormous natural gas plants, so the
Speaker 6: emissions are going to are going to be sizable associated
Speaker 6: with that.
Speaker 3: Chevron's shares modestly higher. Microsoft shares modestly lower after still
Speaker 3: was announced. Bloombers Kevin Crowley in Houston, thank you well.
Speaker 2: Modestly so.
Speaker 3: Misoft down two percent, turning out to news in big tech,
Speaker 3: Meta is shaking up the executive suite at WhatsApp and
Speaker 3: is in part a massive nine hundred million dollar investment
Speaker 3: into an Indian fintech startup, Cred. So Meta is tapping
Speaker 3: Cred's founder Canal Shah to step in is the new
Speaker 3: global chief of WhatsApp to build out new revenue streams
Speaker 3: for the mesaging platform. Ms Kat Wagner joins us with
Speaker 3: the story, it's not straightforward, this okay, so basically the
Speaker 3: news is there's a new head of WhatsApp. But the
Speaker 3: mechanism that Metas used to get there is also interesting.
Speaker 7: It is and you're right, there's two parts of this,
Speaker 7: the investment part in credit. There's the new executive for
Speaker 7: WhatsApp in Kunal Shah. And this is a strategy that
Speaker 7: you may be somewhat familiar with from Meta. With this
Speaker 7: sort of like invest in recruit at the same time.
Speaker 7: This is how they got Alexander Wang from Scaleai.
Speaker 2: Last summer.
Speaker 7: They invested heavily in Scale and recruited alex Wang at
Speaker 7: the same time. This is a very similar approach smaller scale.
Speaker 7: This is a smaller investment than last summers, but this
Speaker 7: is sort of their way of bringing entrepreneurs who have
Speaker 7: their own businesses, who have you know, a financial stake
Speaker 7: in a startup and enticing them to come work at
Speaker 7: a more established company like Meta.
Speaker 2: How's Meta sort of explaining this.
Speaker 3: You know, we put a lot of emphasis on the
Speaker 3: idea that WhatsApp can monetize in different ways future revenue streams.
Speaker 2: Is there any kind of hint of what that looks like.
Speaker 7: Well, they're doing a handful of things right now, including ads, subscriptions,
Speaker 7: and business messaging. Those are sort of the three things
Speaker 7: that are going for revenue. What I think is important
Speaker 7: here is that Khunaalshab being from India and having an
Speaker 7: Indian startup is not a coincidence.
Speaker 2: WhatsApp is huge in India.
Speaker 7: They see a ton of potential there from a business standpoint,
Speaker 7: and I think they thought that it was important to,
Speaker 7: you know, have someone very familiar with market and very
Speaker 7: familiar with how WhatsApp is used in that region coming
Speaker 7: in and taking over. And so the hope is certainly
Speaker 7: that he can take those revenue streams that are sort
Speaker 7: of already in place but grow them considerably in India,
Speaker 7: but also in other markets outside of North America.
Speaker 3: Bloomberg text cut Wagner with the meadow WhatsApp story, thank
Speaker 3: you very much. I want to go to China's battery
Speaker 3: metals market. Chinese lithium futures have plunged nearly nine percent
Speaker 3: over the last two days over speculation that caatl could
Speaker 3: soon restart, one of the world's largest lithium mines. A
Speaker 3: preliminary provincial land notice has some investors' bedding that the
Speaker 3: site may reopen in the second half of twenty twenty six.
Speaker 2: Now that supply.
Speaker 3: Volatility comes as Beijing tries to sharpen its geopolitical leverage
Speaker 3: over other critical minerals integral to making everything from iPhones
Speaker 3: to missiles. China has imposed new export controls on major
Speaker 3: US rare earth producers, MPEd Materials and USA rare Earth.
Speaker 3: The retaliatory move comes off to the Pentagon blacklisted some
Speaker 3: of China's biggest firms earlier this month. Okay, coming up,
Speaker 3: Apple's design revival incoming, CEO John Turnas looks to restore
Speaker 3: the creative edge that defined the iPhone era.
Speaker 2: That's sex, this is Bloomberg tech.
Speaker 8: I mean hara anod, and it's time now for talking tech.
Speaker 8: First up, ten Cents is giving we Chat an AI upgrade.
Speaker 8: The company is testing a new assistant called Shaowei with
Speaker 8: a small group of users, allowing them to complete tasks
Speaker 8: through text or voice. The move could bring AI to
Speaker 8: weed Chat more than one billion users and help ten
Speaker 8: cents compete with rivals like Ali Baba and byte Edance
Speaker 8: in China's AI race.
Speaker 2: Plus.
Speaker 8: Robinhood is looking to raise two billion dollars through a
Speaker 8: convertible bond off, tapping into a booming market for corporate fundraising.
Speaker 8: The company says about three hundred million dollars of the
Speaker 8: proceeds will go towards share buybacks, with additional funds earmarks
Speaker 8: for hedging transactions tied to the deal end. Climb is
Speaker 8: gearing up for its Wall Street debut. The electric bike
Speaker 8: and scooter rental company is looking to raise up to
Speaker 8: one hundred and eighty one million dollars in its USIPO,
Speaker 8: offering six point seven million shares at between twenty four
Speaker 8: and twenty six dollars a piece. At the top end
Speaker 8: of that range, that uberbacked company would be valued at
Speaker 8: about one point seven billion dollars ed.
Speaker 2: Thank you very much, you hire right now.
Speaker 3: Apple built its reputation on iconic product design, but the
Speaker 3: influence of the team behind the iPhone and iPad has
Speaker 3: faded over the past decade. Bloombo's Mark German writes in
Speaker 3: this week's power On newsletter that the incoming CEO knows
Speaker 3: a major design shakeup is needed and is getting ready
Speaker 3: to put his firm imprint on the tea. Mark joins us, now,
Speaker 3: and this is about the industrial design studio that in
Speaker 3: the era of first Steve Jobs and then Johnny Ive
Speaker 3: for a very long time held a lot of power
Speaker 3: within the organization at Apple. What are you writing about
Speaker 3: empower on that's changed and why do you think that
Speaker 3: the incoming CEO takes us back to that place of power.
Speaker 2: Yeah.
Speaker 9: Over the past decade or so, you've seen the industrial
Speaker 9: design studio go from where exactly the future products are
Speaker 9: is dreamed up, where the whole company would come in
Speaker 9: to rally around the next big thing, leading to products
Speaker 9: like the iPhone, the iPad, the iMac, the iPod, the
Speaker 9: Apple Watch, you name it. And it's now more of
Speaker 9: a service organization where different teams, operations, engineering, they come in,
Speaker 9: they get what they need, and they get out. It's
Speaker 9: no longer the central hub, the influential center of innovation
Speaker 9: for the company, and John Turnus knows that things need
Speaker 9: to be shaken up there. The head of the industrial
Speaker 9: design team Molly Anderson. She's known as a great individual designer.
Speaker 9: She's known as someone who's beloved by her team. But
Speaker 9: it's not like Apple went out to look for the
Speaker 9: best industrial design leader in the world to take that position.
Speaker 9: They made that choice from a place of defense, not
Speaker 9: wanting more people to leave the team. Versus the perspective
Speaker 9: of a company that's worth three trillion dollars plus that
Speaker 9: could go out and get anyone they want to lead
Speaker 9: design in this post Johnny ive era that's already been
Speaker 9: going on for nearly a decade.
Speaker 3: Mark you've detailed recently the kind of roadmap on the
Speaker 3: hardware side for not just the rest of this year,
Speaker 3: but beyond that. Is there a case study of where
Speaker 3: this kind of return to design focus plays out.
Speaker 2: We just have about thirty seconds.
Speaker 9: Yeah, I mean we would like to see bigger design changes,
Speaker 9: right for the first time in twenty years. You're going
Speaker 9: to have a meaningful shakeup to the iPhone over the
Speaker 9: next few months with the fold wall phone, which I'm
Speaker 9: calling the iPhone Ultra. But there's a lot more to
Speaker 9: be done. There's more product categories. Major changes are necessary
Speaker 9: to freshen up the AirPods and the album watch. Those
Speaker 9: are categories that have essentially looked the same since twenty sixteen.
Speaker 3: Right, Blue Moos Mark German who puts power on out
Speaker 3: on Sunday mornings and then comes on Bloomberg Tech Monday
Speaker 3: to go through it.
Speaker 2: Thank you so much.
Speaker 3: Now, coming up, Micron lands a key deal with anthropic
Speaker 3: as AI demand keeps surging. It's so interesting to see
Speaker 3: Micron and Memory name go direct to a frontier lab.
Speaker 2: We're going to go through that. This is what your
Speaker 2: markets look like.
Speaker 3: Kind of muted, but outperformance in chips, which has been
Speaker 3: the story of the year.
Speaker 2: Welcome back to Bloomberg Tech.
Speaker 3: Our top stories today, SpaceX's bond sale and Micron striking
Speaker 3: a partnership with Anthropic. Bloomberg executive reporter Kim Ragki here
Speaker 3: with details.
Speaker 2: On both coming.
Speaker 10: Yeah, thanks, Ed. So we're seeing a lot of red
Speaker 10: on the screen today here with SpaceX share the are
Speaker 10: down about eight percent off the lows of the day.
Speaker 10: But if this continues, this will notch a third straight
Speaker 10: day of selling and the name after its record breaking IPO.
Speaker 10: So what we're seeing here this morning is that investors
Speaker 10: might be reacting to a few different things. One is
Speaker 10: this investment grade bond sale the company looking to raise
Speaker 10: even more money to spend on AI funded sort of
Speaker 10: future growth after raising a record seventy five billion in
Speaker 10: an IPO. The other thing we're seeing here is, you know,
Speaker 10: classic volatility that we see from IPOs, especially ones that
Speaker 10: have low float, like we know is the case here
Speaker 10: for SpaceX. We also are looking today at shares of Micron,
Speaker 10: so this stock is looking a little bit better today,
Speaker 10: up about four point four percent. It's bucking the broader
Speaker 10: trend down in the market today. What's happening this morning
Speaker 10: is that the company said that it has a strategic
Speaker 10: agreement with Anthropic, so it's going to work together on
Speaker 10: things like memory and storage architecture for AI, and also
Speaker 10: gave some money to to one of the Anthropics funding rounds.
Speaker 10: This company has been on an absolutely massive stock rally.
Speaker 10: The shares are up more than two hundred and sixty
Speaker 10: percent from a March thirtieth trough here, and we're going
Speaker 10: to be watching this one really closely because it reports
Speaker 10: earnings on Wednesday after market.
Speaker 3: Clothes the most common rhinicky, Thank you very much, Let's
Speaker 3: stay with Micron. Jake Silverman of Bloomberg Intelligence says Micron's
Speaker 3: new supply deal with Anthropic highlights just how tight memory
Speaker 3: chip capacity has become. He says major AI data center
Speaker 3: customers are increasingly locking in long term agreements to secure
Speaker 3: that supply, and Jake joins us, now, this is the thing, though,
Speaker 3: it's a deal between Micron and a frontier lab direct right,
Speaker 3: not not the middleman that we call hyperscale. How unusual
Speaker 3: is that? How surprised were you to see it?
Speaker 11: It's definitely not typical for memory makers themselves to sign
Speaker 11: these kind of deals, but it's not necessarily uncommon for
Speaker 11: big customers to look for supply assurances. Hyperscalers themselves have
Speaker 11: often done this in terms of how you think about
Speaker 11: wayfer allocation from someone like TSMC, for.
Speaker 3: Example, in your react, you're talking about it being reflective
Speaker 3: of the situation, the state of play, and how tight
Speaker 3: supply is. But this is good news for Micron, right
Speaker 3: if you just go on the sheer reaction alone.
Speaker 11: Yeah, this is good for Micron in the sense that
Speaker 11: it gives them a little bit more visibility into the
Speaker 11: actual downstream demand, at least theoretically based on what we're
Speaker 11: seeing from the agreement that they actually put out in
Speaker 11: their press release. So you know, Micron needs to build
Speaker 11: out capacity, right, The entire industry is supply constrained, and
Speaker 11: this allows them to potentially build it out in a
Speaker 11: responsible way so that when Anthropic is serving their customers,
Speaker 11: increasing their capacity not specifically of memory, but the chips
Speaker 11: to allow people to use their models. So now theoretically
Speaker 11: Micron can get an idea of exactly how much chip
Speaker 11: demand there actually is.
Speaker 3: You write in the react note that this sets them
Speaker 3: up well for the next down cycle situation. You know,
Speaker 3: historically memory markets have been cyclical, right, boom and bust.
Speaker 3: We talk about that a lot on the show, But
Speaker 3: there are loads of people that don't think there'll be
Speaker 3: a downcycle, you know, in the traditional sense, because of
Speaker 3: the trajectory of data center building an investment. Just explain
Speaker 3: your point of view on that.
Speaker 11: Yeah, I think just if you look at historical trends,
Speaker 11: Having covered memory for a while, we've always seen up
Speaker 11: cycles and down cycles, and I don't think that just
Speaker 11: because we're seeing very robust demand right now, it doesn't
Speaker 11: mean that we won't see price declines on say a
Speaker 11: sequential or you're over your basis in the future. What
Speaker 11: these agreements might do, though, on the other hand, is
Speaker 11: it might reduce some of the volatility. We've seen massive
Speaker 11: price decreases in the past during down cycles, such as
Speaker 11: you know, fifty percent or so quarter over quarter, So
Speaker 11: we might see a reduction in some of that volatility.
Speaker 11: And at the same time, if you look at past
Speaker 11: cloud cycles, there are periods where capex if flattens or
Speaker 11: declined slightly, and so that might be an opportunity for
Speaker 11: hyperscalers to get slightly better deals on the actual memory
Speaker 11: that they're purchasing. So we don't necessarily think that the
Speaker 11: cycle is not going to happen again or downcycle, but
Speaker 11: we do think that we might see less volatility, more
Speaker 11: of a straightforward idea of what the demand levels will
Speaker 11: be over the next say five years.
Speaker 3: Jacob, As you know, Micro reports fiscal third quarter earnings
Speaker 3: after market closed Wednesday.
Speaker 2: What are your expectations got.
Speaker 11: Yeah, yeah, yeah, we think they're definitely going to offer
Speaker 11: guidance results that are above consensus right now.
Speaker 2: We do think that.
Speaker 11: They'll talk a little bit about some of their contracts.
Speaker 11: But I think one of the reasons that they make
Speaker 11: this announcement today with Anthropic is it's something that they
Speaker 11: can highlight to investors to give everyone idea of what
Speaker 11: types of customers that they're signing to these agreements. But
Speaker 11: we don't necessarily think that they're going to give a
Speaker 11: lot of details in terms of you know, we don't
Speaker 11: think they're going to give anything in terms of pricing.
Speaker 11: They might not say anything in terms of the length
Speaker 11: of these contracts or a lot of the very intricate details.
Speaker 11: But that said, I think they'll probably give a longer
Speaker 11: term view of how they see the market, given the
Speaker 11: fact that there are more of these contracts being signed
Speaker 11: and memory prices continue to be very strong, and the
Speaker 11: environment is very favorable for them at least through this year,
Speaker 11: and we think at least into next year as well.
Speaker 3: And to recap micro on not four percent on this
Speaker 3: supply agreement with Anthropic, but up more than three hundred percent.
Speaker 3: Here today Jake Silverman of Bloomberg Intelligence, with the analysis
Speaker 3: now coming up. The CEO of Base ten and one
Speaker 3: of its lead investors, is coming on the show to
Speaker 3: talk about the inference startup's latest one point five billion
Speaker 3: dollar fundraise. But this is really a conversation about the
Speaker 3: economics of AI, and particularly as we transition increasingly to inference,
Speaker 3: the use of open source and getting the best cost
Speaker 3: dollar per token.
Speaker 2: Really really looking forward to this one. It's next. Swim
Speaker 2: Bog Tech.
Speaker 3: In Video is developing chips and software that will make
Speaker 3: humanoid robots safer around people. Humanoid robotics are expected to
Speaker 3: generate two hundred billion dollars in revenues by twenty thirty five,
Speaker 3: according to Barkley's estimates, but current safety systems can make
Speaker 3: the machines less productive. In Vidia's Halo software will give
Speaker 3: robots a much better sense of their surroundings so they
Speaker 3: can interact and even make contact with people.
Speaker 2: We're going to talk with a little bit more about
Speaker 2: that later in the week.
Speaker 3: Aim ferance startup Base ten has raised one point five
Speaker 3: billion dollars across two tranchers, one an eleven billion dollar valuation,
Speaker 3: the other at thirteen billion dollars. Base ten specializes in
Speaker 3: delivering software and computing capacity to companies tapping open source,
Speaker 3: typically lower cost AI models. The firm's co founder and
Speaker 3: CEO two instead of US that joins along with one
Speaker 3: of its investors, Ultimated Capital partner Paul of Agrowaile, who's
Speaker 3: firm co led the round and actually was really interesting
Speaker 3: the list of participants that back to you. Let's start
Speaker 3: with the basic questions that the audience always has, which is, wow,
Speaker 3: you know, one point five billions doll a round to
Speaker 3: a lot of funds, but the stories seem to not
Speaker 3: change right. Compute as a constraint talent is a competitive
Speaker 3: marketplace and assuming that's where those those proceeds go.
Speaker 12: Yeah, absolutely, Look we're with inference right now. What we
Speaker 12: are seeing is there's a lot of demand for inserting
Speaker 12: intelligence everywhere we possibly can, because open source models are
Speaker 12: getting very good, right and post training techniques to specialize
Speaker 12: those models for specific tasks are getting very good. And
Speaker 12: as the app player comes online, you know, there's an
Speaker 12: enormous surge of demand for us. What that means is, look,
Speaker 12: when you're procure a lot of compute to be able
Speaker 12: to fulfill that demand and also hire amazing infrastructure engineers
Speaker 12: and research engineers to be able to build the software
Speaker 12: later on top of that too.
Speaker 3: Just real quick, what's that like trying to acquire that
Speaker 3: the compute? Like, do you have any leverage in that market?
Speaker 3: If everyone is supply constrained? How is the experience of
Speaker 3: being a company of base tends, age and size going
Speaker 3: to in video as an example, saying we kind of
Speaker 3: need this.
Speaker 12: Yeah, Look, we have a very strong relationship with the
Speaker 12: Video and you know, they've been very supportive of us
Speaker 12: over the years. Look, we one thing that we realize
Speaker 12: is that you cannot be reliant on one compute lost.
Speaker 12: You have to, you know, work to diversify, not necessarily
Speaker 12: from a chip perspective, from a cloud perspective. So you know,
Speaker 12: we acquire compute from eighteen different clouds. Now we sit
Speaker 12: in around nineteen different clusters, and that's the flexibility we
Speaker 12: need to be able to acquire compute and fulfill the demand.
Speaker 3: I posted on x that you're both coming on the
Speaker 3: show and poor I kind of put this quession out
Speaker 3: there that if you could only invest in one part
Speaker 3: of the five layer cake, as Jensen calls it, what
Speaker 3: would it be? But Altimus has been so busy, you know,
Speaker 3: with the frontier labs at one end and other parts
Speaker 3: of the five layer cake at the other end. What
Speaker 3: was the thesis around base ten and why you wanted
Speaker 3: to get in here to co lead the.
Speaker 2: Round ed It's good to be here.
Speaker 13: Some troops cannot be said enough times, and one of
Speaker 13: those is that Inference is going to be one of
Speaker 13: the largest, if not the largest markets not an AI
Speaker 13: in the world. And why is that the case? You know,
Speaker 13: the early innings of AI were Q and A tell
Speaker 13: me about my trip. We've come a long way since then.
Speaker 13: You know, it's multi agent they've gotten longer context. You
Speaker 13: go retrieve, analyze, synthesize, verifying, then you go again, and
Speaker 13: each request is kicking off hundreds, if not thousands of
Speaker 13: inference requests. The second thing is, you know I might
Speaker 13: correct something you said ed. It's not just it's capability
Speaker 13: control and cost frontier models. The open s post train
Speaker 13: open source model comes very close to frontier model performance,
Speaker 13: sometimes even better for specific workflows control. As satan Adilla
Speaker 13: said last weekend, you know, you've got to compound your
Speaker 13: unique advantages as an enterprise, your data, your knowledge or
Speaker 13: know how in a way that you're not giving away
Speaker 13: your intelligence to on rent. And that's what BASM allows.
Speaker 13: And so to your question from this morning is like
Speaker 13: where does value your crew? Is it at the app layer?
Speaker 13: Is it at the model air? You know, the way
Speaker 13: I like to frame it is, Look, the model air
Speaker 13: is a phenomenal business for very few people. It's a
Speaker 13: game of emperors. You've got to be at the frontier
Speaker 13: to accrue a lot of value. And it's it's a
Speaker 13: knife fight. As you know, I've started joking, there's four
Speaker 13: seasons to the year. It's anthropic open EI SpaceX Google
Speaker 13: with an evergreen of open source, and.
Speaker 3: So that's that part's so fascinating, right, if we could
Speaker 3: just go to open source. When this story started for us,
Speaker 3: let's say twenty two, but for you guys probably before that,
Speaker 3: it was this idea that it was only the model,
Speaker 3: the largest models with the hundreds of billions of parameters
Speaker 3: that mattered, and in the world of open source that
Speaker 3: the issue was that that just didn't work. People couldn't
Speaker 3: make any real use of them. I go back to
Speaker 3: what Paul just said. You know, you are making utility
Speaker 3: out of open source models, but probably also a slightly
Speaker 3: smaller scale of model.
Speaker 2: Is that fair? Yes?
Speaker 12: Look, I think if you look at you know, when
Speaker 12: you think about open source has kind of gone through
Speaker 12: a bit of a journey. You know, there's LAMA three,
Speaker 12: maybe two two and a half years ago, and then
Speaker 12: there was a bit of a winter, and then I
Speaker 12: think the deep Seek moment last year really put it
Speaker 12: back on the map, and there was definitely the capability
Speaker 12: gap shrunk. I think this is happening again just over
Speaker 12: the last couple of weeks with GLM five Print two,
Speaker 12: which is i'd say a frontier level model that is
Speaker 12: actually usable and it isn't just doing well on the benchmarks.
Speaker 12: When people we're using it, they are feeling that, you know,
Speaker 12: at the frontier capability. For us, it's just like, how
Speaker 12: do we make these models very very easy to use it?
Speaker 12: And it doesn't really matter what size they are that
Speaker 12: we work with small models, big models, massive models. What
Speaker 12: we are trying to give our customers the ability to
Speaker 12: run these models when they don't necessarily have access to
Speaker 12: the infrastructured teams of the frontier labs.
Speaker 2: Doing it for them.
Speaker 3: So let's go back to what we were talking about cost,
Speaker 3: but also giveability and capability. You know, the other case
Speaker 3: study in this open source debate was Meta kind of
Speaker 3: changing its narrative saying, well, actually, we are committed to
Speaker 3: open source, but we you know, at some point we
Speaker 3: need to be realistic about about the benefit of closed models.
Speaker 3: Is what is the point on the capability part and
Speaker 3: actually take a moment explain what base ten does, why
Speaker 3: it's why it is such an important player in that respect.
Speaker 13: Sure, look at yesterday it was Deepseek, today it's GLM.
Speaker 2: It'll be something tomorrow.
Speaker 13: And as I said, it's seasonal, and that battle at
Speaker 13: the model here is not we're nowhere near the endgame.
Speaker 13: What base tend does is it helps customers like cursor,
Speaker 13: like a bridge, like open evidence, harness the power of
Speaker 13: the model underneath, combine that with your unique advantage as
Speaker 13: an enterprise, your workflow, and deliver something that is best
Speaker 13: for that specific workflow.
Speaker 2: Now it's not just one model.
Speaker 13: It's typically a collection of portfolio of models that are
Speaker 13: fine tuned to deliver that and that compounds over time,
Speaker 13: and so based in is successful. As these models get better,
Speaker 13: it benefits us and ultimately in the service of the
Speaker 13: app layer, which is you know, the customers that we discussed,
Speaker 13: who are delivering AI to the customer.
Speaker 3: Jensen's been repeating a lot recently, just among the CEO
Speaker 3: of Nvidia. Sometimes you have to remind the audience testing case.
Speaker 3: You know, he wants to see his teams burning tokens.
Speaker 3: How does that apply to your custom is right? So
Speaker 3: pouls just explain really clearly the value that you're adding.
Speaker 3: But the economics are really really important to some of
Speaker 3: these companies.
Speaker 2: Yeah, Look, I think.
Speaker 12: Using tokens is obviously just what's synonymous with, Hey, I
Speaker 12: want us to be using AI everywhere.
Speaker 2: It's in their interest for that to be the story
Speaker 2: right now.
Speaker 12: And I think for us, you know, what we see
Speaker 12: is that customers kind of go through the same curve
Speaker 12: over and over again. Is that, you know, they go
Speaker 12: very aggressively, they start using AI everywhere, they start to
Speaker 12: see gains, but they don't necessarily do it profitably, and
Speaker 12: then they need to figure out how to do it profitably,
Speaker 12: and that's when they come to open source models. That's
Speaker 12: when they come to Base ten. That's when they come
Speaker 12: to you know, post train models on Base ten to
Speaker 12: be able to do it better, faster and cheaper. And
Speaker 12: that's when you decide to get both you know, intelligence everywhere,
Speaker 12: but also unit economics that makes sense for your business.
Speaker 2: What I've been trying to reconcile is.
Speaker 3: Ultimita is invested in in the big frontier labs as well,
Speaker 3: and those big frontier labs plus S FACEX, depending on
Speaker 3: how you define what they are.
Speaker 2: Would also say that they have a role to play
Speaker 2: in that market.
Speaker 3: Where are we in this cycle of where they're just
Speaker 3: in the NBA, very big players.
Speaker 2: Where does Space ten fit in that? Look?
Speaker 13: A lot of ink has been spilled on this debate
Speaker 13: of open versus closed.
Speaker 2: Let me just take that head on.
Speaker 13: The closed models of Frontier models are very very good,
Speaker 13: and they're very good for the use case that require
Speaker 13: highest intelligenced, highest reasoning, new use case discovery. If you
Speaker 13: didn't want to think about just one model as a service,
Speaker 13: they're very good and they will always be very good.
Speaker 2: For that for a class of customers. That's not a
Speaker 2: long list.
Speaker 13: You know, as Jonathan Ross said, there's about thirty five
Speaker 13: companies that drive ninety nine percent of all inference. The
Speaker 13: top five are the labs that you just listed, top four, top.
Speaker 2: Five, the next thirty.
Speaker 13: You know, that's people like Cursor, like open Evidence, like
Speaker 13: a bridge, like Harvey, and for them, if you if
Speaker 13: you're not playing the game of the Emperors and you're
Speaker 13: you know, you're thinking about how do I deliver something
Speaker 13: that is not rented from somebody else but mine that
Speaker 13: I can compound with. That's where that's where post trained,
Speaker 13: open source can help. And so you know, we posted
Speaker 13: this start this morning about how you know, Harvey, for example,
Speaker 13: delivery achieved Frontier capabilities post training and open source model,
Speaker 13: but obviously with a much better cost and control. Frontier
Speaker 13: as an example of what the next thirty are thinking about.
Speaker 13: And then the next thousand were thinking.
Speaker 3: About two hinges for Vestava back on Bloomberg Tech, found
Speaker 3: a CEO based ten and Paul Varruaal of Ultimata. Back
Speaker 3: again on Bloomberg Tech. It's really great to have you
Speaker 3: here in person. Thank you very much. Indeed, coming up
Speaker 3: on the show, Amazon is pairing Prime Day with pizza delivery.
Speaker 3: We're going to talk about what's behind the e commerce giants,
Speaker 3: fast food pivot.
Speaker 2: Next, this is Bloomberg Tech.
Speaker 3: Today's big number, twenty six point three billion dollars. That's
Speaker 3: how much US consumers are expected to spend on Amazon
Speaker 3: and other retailers during the four day sale that we
Speaker 3: all know as Prime Day. That figure comes from Adobe.
Speaker 3: Amazon's facing headwinds though consumer confidence to competition for the
Speaker 3: e commence giant has a few tricks up its sleeve
Speaker 3: to encourage shoppers to spend, including pizza delivery, Bluebog'spenser Sofa
Speaker 3: here with the latest. Okay, we're getting ready for Prime Day.
Speaker 3: Adobe Analytics always puts out numbers like this. Put that
Speaker 3: twenty six point three billion into context for us. That's big,
Speaker 3: it's small, it's growth, it's not.
Speaker 2: It's big.
Speaker 14: I mean Adobe's predicting nine percent growth from the four
Speaker 14: day Prime Day period last year, which was July. You know,
Speaker 14: it's always tricky to compare Prime Day to the year
Speaker 14: earlier because the date moves around, and this is going
Speaker 14: to be the second year that they do a four
Speaker 14: day sale. But Adobe is predicting a nine percent lift,
Speaker 14: which is pretty size bull and a lot of that
Speaker 14: can be not you know, it's counterintuitive. Even though there's
Speaker 14: a lot of things weighing on consumers, sometimes that compels
Speaker 14: them to kind of save up money and hold off
Speaker 14: a big ticket purchase for a big deal, big deal period,
Speaker 14: which can which can raise spending.
Speaker 2: And Walmart and.
Speaker 14: Target both have overlapping sales, so there's going to be
Speaker 14: just a lot of a lot of deals going on
Speaker 14: those four days.
Speaker 3: Okay, the latest tech in depth, Amazon offers.
Speaker 2: Pizza in Prime Day experiment. Explain So this is the
Speaker 2: first year I've seen this.
Speaker 14: The Amazon's offering five dollars pizza from Little Caesars. So basically,
Speaker 14: if you go to the site, you'll see this pretty
Speaker 14: prominently a Little Caesar's emblem on the site. You can
Speaker 14: click over there to get to redeem a five five
Speaker 14: dollars pizza. And they're running that every day of Prime Day,
Speaker 14: even a couple of days before it, and it seems
Speaker 14: to be something to you know, get people to come
Speaker 14: to the site, you know, just another another sweetener to
Speaker 14: get people that come to the site and check out
Speaker 14: the deals. Because Amazon really doesn't have anything in hot
Speaker 14: food delivery. You know, they had an Amazon Restaurants thing
Speaker 14: years ago that they shuddered. They now have kind of
Speaker 14: a tie in with grub Hub. But you know, when
Speaker 14: you think about grocery and Amazon really is its eye
Speaker 14: on the grocery business. A lot of people couple grocery
Speaker 14: and dinner, you know, especially when it's hot in the summer,
Speaker 14: you don't get the kitchen hot. So this might be
Speaker 14: a way to just you know, get people to check
Speaker 14: out their deals and also cross something off the list
Speaker 14: that they got to get done done that night.
Speaker 3: Bloomberg'spenser Sopa with a look ahead to Prime Day. But
Speaker 3: go and read the Tech in depth that went out
Speaker 3: this morning as well, Thank you very much, before you go.
Speaker 3: Disney's Toy Story five has gone to infinity and beyond.
Speaker 3: On its opening weekend, Woody Buzz and their friends brought
Speaker 3: in one hundred and sixty million dollars in US box
Speaker 3: office sales, marking the best launch in that franchise's history,
Speaker 3: and lastly, the title of best twenty twenty six debut
Speaker 3: from the Super Mario Galaxy movie The Whole Was It.
Speaker 3: The low end of Bloomberg Intelligence is lofty expectations for
Speaker 3: the film and enthusiasm for blockbusters including Toy Story Spider
Speaker 3: Man The Odyssey is anticipated if you're a ten percent
Speaker 3: year over year growth rate and the best summer for
Speaker 3: cinemas since the pandemic. All right, that does it for
Speaker 3: this addition of Bloomberg Tech. From here in San Francisco,
Speaker 3: this is what markets look like. A little soft on
Speaker 3: than has that one hundred down a percentage point, half
Speaker 3: a percentage point, but still outperformance in semiconductors that socks
Speaker 3: up almost percent, a lot of that being the newsflow
Speaker 3: around micron and Anthropics deal. SpaceX down for a third
Speaker 3: straight session, but well above it's IPO price as it
Speaker 3: goes to the bomb market for the first time. Check
Speaker 3: out the pod. You know where to find it. This
Speaker 3: is Bloomberg Tech.