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Speaker 2: Radio shows a Broadcom did give some juice to the trade,
Speaker 2: and it continues to soar. It's pretty much saying at
Speaker 2: its best levels of the session of twenty two percent,
Speaker 2: the stock hitting a one trillion dollar valuation for the
Speaker 2: first time after predicting a boom in demand for its
Speaker 2: artificial intelligence chips. So with what you need to know,
Speaker 2: we've got an incredible duo. We lean on them so much.
Speaker 3: Really, the most popular guys today.
Speaker 2: I don't even know if they got any sleep.
Speaker 4: Man.
Speaker 2: I've just seen every time I look up at Bloomberg
Speaker 2: TV or I look at the radio studio, they are
Speaker 2: talking to folks. Kun John Sabani, senior semi Coonductor alys
Speaker 2: at Bloomberg Intelligence and also with us is Ian King,
Speaker 2: US Semiconductor and Networking reporter at Bloomberg is. We are
Speaker 2: so lucky to call them hours. So we get to
Speaker 2: lean on them both. Joining us from our San Francisco bureau. Ian,
Speaker 2: I do want to start with you Broadcoms quarter. What
Speaker 2: is the nut that investors are so excited about? Is
Speaker 2: it the outlook? Is it the AI? What is it?
Speaker 5: Well, I mean, I'm suretent will give you better analysis
Speaker 5: than I could, but really the report was kind of okay,
Speaker 5: the forecast was okay. But what happened on the call
Speaker 5: was that the CEO gave a long term projection for
Speaker 5: its kind of most important AI product that is kind
Speaker 5: of off the charts, and that really got everybody very
Speaker 5: excited about the future of this company and kind of
Speaker 5: pointed to it as a whole different company in terms
Speaker 5: of the scale that it can achieve.
Speaker 6: Cujohn, come on in here, because we spoke to you
Speaker 6: yesterday after the numbers came out. Chairs we're kind of
Speaker 6: all over the place. Actually fell for a second, but
Speaker 6: about up about two percent, nothing like what we're seeing
Speaker 6: this morning.
Speaker 3: Certainly, there were.
Speaker 6: Some price targets that were raised, but it was all
Speaker 6: about what was said on the call, right.
Speaker 7: Yeah, it was all about AI.
Speaker 8: I mean, just to put things in perspective, they did
Speaker 8: twelve billion in AI revenues, I mean beyond Nvidia. When
Speaker 8: we look at the size of AI chip revenues, there's
Speaker 8: nobody else. Even AMD is lagging if you just look
Speaker 8: at pure AI numbers. Right, and we've been talking about
Speaker 8: A and D for a while as the number two
Speaker 8: GPU provider when they gave all this guide. Now estimates
Speaker 8: are going somewhere between twenty five to thirty billions in
Speaker 8: three years. Again, that size of that growth for a
Speaker 8: company like this, that's something we have only seen happen
Speaker 8: just with one name so far.
Speaker 2: So Coon John, you know, and I know we talked
Speaker 2: about this with you and Ian I believe yesterday, but
Speaker 2: I want you to put it out for the Bloomberg
Speaker 2: audience again. Where is Broadcom in the AI chip puzzle?
Speaker 7: Yeah, so they have two big AI businesses.
Speaker 8: One is called the custom asex or the custom silicon,
Speaker 8: where they helped these large cloud and hyperscale customers like Google, Meta, Amazon,
Speaker 8: Microsoft designed their own chips, which we have seen a
Speaker 8: trend that everyone is adopting. And the second piece is
Speaker 8: the AI networking and connectivity. So think of the iOS,
Speaker 8: the basically highways and the pipeline that connects all of
Speaker 8: these GPU and CPUs together. In the data center.
Speaker 6: Hey, Ian, come on in here, because, as you point
Speaker 6: out in your story, Broadcom got to where it is
Speaker 6: today by making a series of acquisitions.
Speaker 3: Over the last few years.
Speaker 6: More acquisitions in the future now that we're seeing the
Speaker 6: value of Broadcom continue to surge, give us a brief
Speaker 6: history of how it got to where it is today,
Speaker 6: and then what you think could come next when it
Speaker 6: comes to acquisitions.
Speaker 5: Yeah, I mean Hogtan started off this company by basically
Speaker 5: with the small division of what was spun off from
Speaker 5: originally HP years ago and sort of made this kind
Speaker 5: of sequence of deals where he got bigger and bigger
Speaker 5: and bigger, and that eventually even branched out into software.
Speaker 5: And now we've got one of the world's largest chip
Speaker 5: companies on it's pretty high ranks of software makers as well.
Speaker 5: And as we learn yesterday, he's not finished.
Speaker 4: You know.
Speaker 2: It makes me think about you know, and I know,
Speaker 2: and we've talked about this with you a lot, Kunjan Tuo,
Speaker 2: just like what's going on with Intel, and then you
Speaker 2: look at some of these other chip companies. Having said that,
Speaker 2: I feel like we've started to talk about Nvidiom people
Speaker 2: going after that. Who does Kunjohn let me bring you
Speaker 2: back in here. Who does Broadcom have to be worried
Speaker 2: about or do they not have to be worried about?
Speaker 2: Is their position in a pretty good place ahead of
Speaker 2: maybe their competition at this point.
Speaker 8: Yeah, so specific to AI, I mean it has been
Speaker 8: usually a diopoly in this market between Broadcom and Marvel.
Speaker 8: Broadcom has usually held somewhere between say sixty to eighty
Speaker 8: percent market share. We think that's going to stay in
Speaker 8: the same rage in the future. Again, Marvel is another
Speaker 8: up and comer here who is making strides with the
Speaker 8: same customers that Broadcom is announcing, or the same set
Speaker 8: of customers, I should say. So we expect these two
Speaker 8: to continue dominating the AI customs and the AI networking
Speaker 8: space going forward.
Speaker 2: And yeah, go ahead, Well I come on in on
Speaker 2: that too, like how you see it in terms of
Speaker 2: you know what I asked Kunjan as well, if you
Speaker 2: have anything to kind of add to that.
Speaker 5: Yeah, no, there was a it was a that was
Speaker 5: a key part of the call yesterday. I mean, they
Speaker 5: gave this market size as well, maybe as much as
Speaker 5: ninety billion, And people are like, okay, so you've got
Speaker 5: these two new customers that you're not telling us who
Speaker 5: they are, How does this all fit factor together? Is
Speaker 5: this happening on your existing customers, You've got two new customers.
Speaker 5: Are you going to have one hundred percent of this?
Speaker 5: And all of these kind of flurry of questions, and
Speaker 5: hot Tan was basically that the CEO is basically smiling
Speaker 5: and saying, well, there's a room for everybody, but we
Speaker 5: think we're going to do quite well within that. And
Speaker 5: he's right. I mean, as Kunjin said, they are the
Speaker 5: best game in town, the kind of default choice. If
Speaker 5: you want a custom chip for your own data centers,
Speaker 5: you're going to go and ask them to help you
Speaker 5: to do it right now.
Speaker 6: Yeah, we should not Marvel Technology upright now by nine
Speaker 6: point three percent in sympathy with Broadcast results, but Marvell
Speaker 6: only about a one hundred billion dollar company, still about
Speaker 6: neck and neck when it comes to performance this year.
Speaker 6: Both companies up about one hundred percent so far this year.
Speaker 6: Kon John Wighan on the idea of acquisitions moving forward
Speaker 6: for broadcom Ian mentioned that, and he mentioned in the
Speaker 6: story too that this is a company that got where
Speaker 6: it is today as a result of making acquisitions.
Speaker 3: At Bloomberg Intelligence, are.
Speaker 6: There any names that are on your radar about companies
Speaker 6: that could be acquired by Broadcom in the future.
Speaker 8: Not at this moment. I mean, look, Ian answered it
Speaker 8: spot on. I also come originally from Broadcom. I was
Speaker 8: part of the acquisition mahan Hawk acquired Broadcom. So I
Speaker 8: mean we do expect him to continue staying acquisitive. That's
Speaker 8: how he's really made his name. But when you look
Speaker 8: at the size of the past acquisition, each larger than
Speaker 8: the previous one, they don't tend to go and do
Speaker 8: small tuckins, right, so they I think at this moment,
Speaker 8: like Ian said, they are going to focus on paying
Speaker 8: down debt first and then start collecting a bigger pile
Speaker 8: of cash, which which they can then go out and
Speaker 8: do a bigger deal. Now, when you think about candidates
Speaker 8: with that size, there's not a loft left in the
Speaker 8: semi space, and regulation, at least in the semi so far,
Speaker 8: has not been as generous.
Speaker 2: Hey, So Kunjan, wait a minute, did you just drop
Speaker 2: a ball on us? Like, did you work for Broadcom?
Speaker 2: How did we not know this?
Speaker 7: I did in my past life.
Speaker 8: I was an engineer and I used to work for
Speaker 8: broad Com.
Speaker 2: So what do we need to know? Any inside stories?
Speaker 7: Here not anymore fair enough?
Speaker 2: Fair enough, Hey guys, what are the things I thought
Speaker 2: about after this quarter? And this is what we do, right,
Speaker 2: We get one earnings that we get an outlook, we
Speaker 2: get a call and they were like, okay, next quarter.
Speaker 2: So Ian, does what we got from this company make
Speaker 2: the next quarter or next couple of quarters even tougher
Speaker 2: in terms of expectations.
Speaker 5: He was very careful to set expectations appropriately and said, look,
Speaker 5: these are just big customers, and these big projects take
Speaker 5: time and they are frankly lumpy. So that's why they
Speaker 5: gave this twenty twenty seven target. And then he kind
Speaker 5: of gave us sort of a soft target for the
Speaker 5: whole of next year, which wasn't a massive increase from
Speaker 5: you know, sort of fifteen to twenty in terms of
Speaker 5: the available market. It was very vague, but there was
Speaker 5: some very careful signaling there to sort of say, hey, look,
Speaker 5: you need to keep your eyes on the long term
Speaker 5: gross potential here, not get sort of too tied up
Speaker 5: in the quarterly sort of machinations that we're going to
Speaker 5: see going forward.
Speaker 2: We never do that. We never do that, Kunjan, just
Speaker 2: saving you twenty seconds here, how are you thinking about
Speaker 2: what's going to be on your radar when it comes
Speaker 2: to this company in particular.
Speaker 8: I mean, like Ian said, I don't think investors should
Speaker 8: look at this quarter to quarter. I think we've just
Speaker 8: gotten a bad habit of what Nvidia has said a precedent.
Speaker 8: I mean, these these are again handful of customers, like
Speaker 8: you can count on your one hand, right, their buying
Speaker 8: patterns will go through, which is very normal, through some
Speaker 8: kind of timing and digestion. So we should look at
Speaker 8: it again from a year to year milestone.
Speaker 2: All right, some good advice, because it's true we get
Speaker 2: kind of caught up in day to day stuff and
Speaker 2: sometimes you have to do the longer term perspective. Guys,
Speaker 2: thank you so much. Have a wonderful weekend. Kun John Sabani,
Speaker 2: senior Semiconductor analyst at Bloomberg Intelligence, along with Ian King,
Speaker 2: US semiconductor and networking reporter at Bloomberg News. Incredible on
Speaker 2: the space, both of them and joining us there from
Speaker 2: our San Francisco bureau.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: All right, we do want to get to today's Bloomberg
Speaker 2: Big Take. It's a story that is part of several
Speaker 2: on the global fertility industry that our Bloomberg News team
Speaker 2: has been looking into. To tell it, it took an
Speaker 2: editorial village of Bloomberg reporters. The tale. The reality included
Speaker 2: following a teenage girl in India lord into selling her eggs,
Speaker 2: a model in Argentina whose genetic makeup is prized, a
Speaker 2: mother in Greece told by police that our eggs were stolen,
Speaker 2: and two girls from Taiwan who have put themselves at
Speaker 2: risk to earn money in the United States. We had
Speaker 2: a lot of questions, and I bet so do.
Speaker 6: You Yeah, so stop what you're doing because you know
Speaker 6: you want to know more. The entire read it is
Speaker 6: a long one, It is worth it, and it is
Speaker 6: with good reason. It can be found on the Bloomberg
Speaker 6: terminal and at Bloomberg dot com slash BusinessWeek. Here with
Speaker 6: us is Bloomberg BusinessWeek Senior investigative reporter, Susan Burfield in
Speaker 6: our Los Angeles bureau. Susan, We're living in really interesting
Speaker 6: times because the whole idea that this medical process can
Speaker 6: be undertaken is actually relatively new. Here, let's take a
Speaker 6: step back and just give us an idea of the
Speaker 6: fertility industry here in the US globally and what it is,
Speaker 6: how big it is, and then we'll get into some
Speaker 6: of the details in the story.
Speaker 9: Yeah, thanks so much. So the fertility industry globally is
Speaker 9: worth about thirty five billion dollars and it's growing. And
Speaker 9: you know that's in part because there is new technology
Speaker 9: that allows eggs, in particular, to be frozen, to be stored,
Speaker 9: to be transplanted, to be transported, and to be transplanted.
Speaker 9: And at the same time, as you know, probably a
Speaker 9: lot of people know, women are delaying having kids and
Speaker 9: that makes it harder to get pregnant. And that's because
Speaker 9: human eggs decline in number and quality in a woman
Speaker 9: as she ages, and so that is one reason that
Speaker 9: the demand for eggs from younger fertile women has been growing.
Speaker 9: And that's what we set out to try to capture.
Speaker 9: Who's you know, who's providing those eggs, who's buying those eggs,
Speaker 9: and how the flows work transnationally.
Speaker 2: All right, So I am curious about how you guys
Speaker 2: went about finding these individuals and when you talk about
Speaker 2: you know, eggs, when you're younger, you know, being much
Speaker 2: more productive. Right. This story gets into though, tapping into
Speaker 2: or accessing very young women girls right to get access
Speaker 2: to their eggs. I mean this has become a commodity,
Speaker 2: and as you guys say, a premium commodity.
Speaker 9: Yeah, I think you know, one way to think about this,
Speaker 9: and it probably you know, makes some people uncomfortable, and
Speaker 9: I think that's fair because this is a really emotional
Speaker 9: issue where people, especially you know, those trying to get pregnant,
Speaker 9: are at their most vulnerable. These aren't easy decisions to
Speaker 9: make for anybody involved. But you know, what we found
Speaker 9: is that because there is an increasing demand for eggs,
Speaker 9: you could consider them a very precious and scarce resource.
Speaker 9: And as with any resource, that presents opportunities for both
Speaker 9: people to benefit, you know, and by that I mean
Speaker 9: both the women who voluntarily sell their eggs to make
Speaker 9: money to help people. Obviously they would be parents who
Speaker 9: are getting the eggs and the chance to have a bite,
Speaker 9: but it also presents opportunity for exploitation and that's also
Speaker 9: what we documented well. And when you're talking about young girls.
Speaker 9: That's what you're talking.
Speaker 2: About exactly, and I want to get into and to
Speaker 2: be fair, I think we've all been on a subway
Speaker 2: and seen the posters that said, you know, you can
Speaker 2: sell your eggs essentially, and we were actually having a
Speaker 2: conversation in the newsroom around your story. So to be fair,
Speaker 2: there's a legal you know, everything's on the up and up,
Speaker 2: and then there's some that you get a little bit questionable.
Speaker 2: Let's go into because it does seem like often when
Speaker 2: we're looking at i don't know, tapping a precious resource,
Speaker 2: it often leads us to emerging markets. And that's one
Speaker 2: of the things that struck me about this story because
Speaker 2: this does as well.
Speaker 9: That's right. So you know, what we found is that
Speaker 9: for some clinics, for some parents, for some agents, you know,
Speaker 9: the people who are connecting these donors, we call them donors,
Speaker 9: though you know most of them are getting paid, but
Speaker 9: the term the industry prefers is donors.
Speaker 2: And you know, because people can.
Speaker 9: Make money selling their eggs in the US and elsewhere,
Speaker 9: you know, it opens up the possibilities for what you
Speaker 9: could say is like economic coercion. And I think what
Speaker 9: we were trying to look at is you know, how
Speaker 9: does that play out in countries where you know, the
Speaker 9: both the chance or the necessity to sell your eggs
Speaker 9: can bring more money than women might be able to
Speaker 9: make in lots of other ways, and that brings a
Speaker 9: pressure that you know, we wanted to explore.
Speaker 6: Can you talk a little bit about how the story
Speaker 6: opens and the one of the first chapters about a
Speaker 6: young girl in India and her story, and then we
Speaker 6: can talk a little bit about how this story totally
Speaker 6: spans the globe and the Bloomberg newsroom and how a
Speaker 6: global newsroom is able to capture stories.
Speaker 4: Such as this.
Speaker 9: Sure, so you know, the the young really teen, the
Speaker 9: teen in India who we write about, agreed to sell
Speaker 9: her eggs but really was too young to understand what
Speaker 9: she was doing even still doesn't quite you know, understand
Speaker 9: that there, you know, could be children out there who
Speaker 9: were born from her eggs.
Speaker 2: She h you know herself says that.
Speaker 9: You know, she wanted a mobile phone and was offered
Speaker 9: a way to make the money by other women who
Speaker 9: were agents and who were recruiting women or young women
Speaker 9: like her to sell their eggs. And you know, this
Speaker 9: is I think a pretty egregious case. You know, teenagers
Speaker 9: are not supposed to be donating eggs in India or
Speaker 9: where she lives. You know, the law requires women to
Speaker 9: be twenty three. But she was kind of recruited into
Speaker 9: a network of women mostly who had set up an
Speaker 9: entire way to almost fool the clinics. It was probably
Speaker 9: also incumbent upon the clinics to ask more questions than
Speaker 9: they might have or to probe the answers a little
Speaker 9: bit more than they were getting from the young woman.
Speaker 9: But you know, you know, she didn't do this.
Speaker 2: On her own. She was recruited into a network.
Speaker 4: You know.
Speaker 2: One of the other stories that you get to is
Speaker 2: and I feel like this is where Bloomberg and BusinessWeek
Speaker 2: does so well, is that you get very specific and
Speaker 2: you tell what has happened to these individuals. You talk
Speaker 2: about a woman in Greece, Maria, she goes by a pseudonym,
Speaker 2: but again was harvesting eggs for herself, right right, And
Speaker 2: then it turned out she found out that wasn't just
Speaker 2: the case.
Speaker 9: Yeah, this was you know, Maria, as you said, was
Speaker 9: seeking IVF treatment for herself. You know that included, as
Speaker 9: it often does, the kind of stimulation process that egg
Speaker 9: donors go through, which is, you know, about ten twelve
Speaker 9: days of regular hormonal shots to increase the number of
Speaker 9: eggs that a woman can produce, called superovulation. So Maria
Speaker 9: went through that, went through the retrieval process which you
Speaker 9: requires going under Anesesia and her eggs were extracted. She
Speaker 9: was told that she produced a certain number of eggs,
Speaker 9: and ultimately she did give birth as a result of
Speaker 9: this extraction and the retrieval and the IVF. But later
Speaker 9: she was told by the police that some of her
Speaker 9: eggs were given to another woman, and the clinic at
Speaker 9: the center of this is under an investigation. So Maria
Speaker 9: doesn't know and doesn't know who the woman is, doesn't
Speaker 9: know the result of it, but she knows that some
Speaker 9: of her eggs were given to another woman without her consent.
Speaker 6: You know, when I was reading this story, Susan, I
Speaker 6: was thinking about the different regulations in different parts of
Speaker 6: the world when it comes to this medical procedure. I mean,
Speaker 6: at the end of the day, we're talking about medical procedures. Here,
Speaker 6: we're talking about drugs, and the way that the industry
Speaker 6: is regulated is different in many parts of the world.
Speaker 6: Here in the US, what do we look at with
Speaker 6: the regulatory environment and what should people think about here
Speaker 6: in the US who are listening to this, watching this
Speaker 6: have read this story when they learn about procedures such
Speaker 6: as these.
Speaker 2: Yeah, like how do you trust your doctor who is
Speaker 2: doing the extraction he or she to trust that they're
Speaker 2: just taking eggs for yourself?
Speaker 9: Well, so, you know, as you said, different countries do
Speaker 9: have different regulations both about what's allowed overall and you know,
Speaker 9: how donors are treated. You know, in some places, in
Speaker 9: some countries, donors must remain anonymous. In other places donors
Speaker 9: must be identified. In the US, you know, the f
Speaker 9: d AH does have some restrictions and on who can
Speaker 9: donate and requirements for them. There is an industry trade
Speaker 9: group that puts forth guidelines for how, you know, for
Speaker 9: how care overall is supposed to be provided, how egg
Speaker 9: donors and sperm donors are supposed to be treated. You know,
Speaker 9: what we found is that you know, those are guidelines.
Speaker 9: They are widely accepted, but there isn't really a way
Speaker 9: to enforce those guidelines.
Speaker 2: So we don't want to suggest that.
Speaker 9: You know, the industry in the US is is dangerous
Speaker 9: in any way. What you know, what we were looking
Speaker 9: at is you know, cases where there had been problems abroad,
Speaker 9: and and just we want people to think about how
Speaker 9: this is all happening. Sometimes it's happening quickly. Sometimes you know,
Speaker 9: as rules or circumstances change in one country, you know,
Speaker 9: the entire market might shift to another country. And so
Speaker 9: I think probably we're all familiar with people who might
Speaker 9: travel elsewhere more fertility services. You know, in part maybe
Speaker 9: it's cheaper, you know, in part because maybe they do
Speaker 9: have more access to eggs or to surrogates.
Speaker 2: And so, you know, our our aim.
Speaker 9: Is to kind of reveal this global network that exists
Speaker 9: and to how people think about you know, where you know,
Speaker 9: where this most precious resource comes from and.
Speaker 2: Goes to an incredible read. You and the Gang Bloomberg
Speaker 2: BusinessWeek Senior investigative Reporter Susan Burfield. Check it out Bloomberg
Speaker 2: BusinessWeek dot com and on the Bloomberg terminal.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Listen live
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Speaker 2: So we've been talking a lot about big tech this week.
Speaker 2: We did see quite a rally as a result of
Speaker 2: the big megacap tech names tech. Also, we've been talking
Speaker 2: a lot about AI. Cisco is also an important company
Speaker 2: that we keep checking in with. It's the biggest maker
Speaker 2: of computer networking equipment of Bellweather for corporate tech spending.
Speaker 2: Last month, when it reported earnings, the company CFO saying
Speaker 2: that the company is seeing a strong rebound and spending
Speaker 2: by corporations across all sectors and geographies. It's also benefiting
Speaker 2: from spending on the machinery needed to support AI computing.
Speaker 2: And then earlier this week we cut up with one
Speaker 2: of the senior members of the Cisco executive team, Francus Suitis.
Speaker 2: Today we have another member of that team joining us
Speaker 2: from San Jose, California, where the company is based, is
Speaker 2: Lilis san Toni, executive EVP and Chief Customer Experience Officer
Speaker 2: at Cisco Systems. Liz, good to have you back with us.
Speaker 2: How are you.
Speaker 10: I'm doing great. Carol, good to be back as well.
Speaker 10: How are you.
Speaker 2: I'm doing well. Trying to keep up with the news flow.
Speaker 2: There's a lot of AI stuff this week, which we're
Speaker 2: going to talk about with you in a moment. You
Speaker 2: do have a job change. You recently served as executive
Speaker 2: EP Chief Strategy Officer. You also GM of Applications at Cisco.
Speaker 2: You've been at the company a long time. You've got
Speaker 2: a new job. Tell us about it and what kind
Speaker 2: of vantage point this job now gives you and kind
Speaker 2: of builds on your other experiences.
Speaker 10: Yeah, I almost twenty five years at Cisco and always
Speaker 10: in product of So this is absolutely new in terms
Speaker 10: of going into customer experience where it's not just developing
Speaker 10: a product, but it's also around how do we take
Speaker 10: the customer through their entire journey from how they use
Speaker 10: our product or how we support them. Customer experience is
Speaker 10: about a third of Cisco's revenue. Probably not as well known,
Speaker 10: but we are involved in every stage of the customer journey,
Speaker 10: right right from when they purchase it to adopt it,
Speaker 10: to the renewal life cycle to supporting it as well.
Speaker 10: So I am, I would say, is bringing in the
Speaker 10: product of opmini expertise, the relationship from product, bringing that
Speaker 10: into this phase of customer experience and going back as
Speaker 10: a full loop in terms of it gives me an
Speaker 10: opportunity to bring that experience but also be an advocate
Speaker 10: for the customer as they use our product and through
Speaker 10: you know, kind of the full life cycle, something usually
Speaker 10: I didn't get to see as much when I was
Speaker 10: in productive oppment.
Speaker 2: I have to say, I remember when I first met you.
Speaker 2: What I loved about you is that you were in
Speaker 2: product development too, that you understood the product right, what
Speaker 2: goes into it, what's needed, you understand the core business,
Speaker 2: and then being able to now talk with you know,
Speaker 2: customers about what they need. What I want to ask
Speaker 2: you is how often when you have a conversation with
Speaker 2: customers does something AI related come up?
Speaker 10: Pretty much all the time, because I was just I
Speaker 10: just got back from New York late last night and
Speaker 10: spend a week with customers, mostly in the financial sector,
Speaker 10: and it really was, you know, every conversation is around
Speaker 10: AI because what they want is they want us to
Speaker 10: know them better than they know themselves, right, So what
Speaker 10: does that mean? It's almost like, hey, Cisco, you've got
Speaker 10: all of my data. We trust you with our data.
Speaker 10: You've got this massive amount of data and you know
Speaker 10: I'm paraphrasing them, Carol, But they're looking for us to
Speaker 10: deliver like meaningful, curated and personal kind of purposeful experience
Speaker 10: that accelerate the value of the technology that they purchased
Speaker 10: from us. Right, So they're looking at us and going, yes,
Speaker 10: you've got chatbots, you've got AI assistance, but now with
Speaker 10: jen Ai, those can get a lot more sophisticated. And
Speaker 10: they how do we enable them to get immediate and
Speaker 10: maximize the value from the technology, but also how we
Speaker 10: use this data that they have to keep their environments
Speaker 10: highly resilient and secure as well. So they're looking for, Hey,
Speaker 10: take the data, analyze in real time, contextualize it, give
Speaker 10: me a personalized, tailored experience just for me. Now, think
Speaker 10: about doing that across hundreds of thousands of customers, right, So,
Speaker 10: a personalized experience, and that's what I hear from. You know,
Speaker 10: go beyond transactional, be more proactive, get ahead of my issues.
Speaker 10: You know, make the promise of predictive insights and recommendations work.
Speaker 10: Those are all the things you know, when we talk
Speaker 10: about the AI party. There's some real ROI driven both
Speaker 10: for customers and us well in terms of real use
Speaker 10: cases in AI.
Speaker 2: Let me ask you what the financial folks that you
Speaker 2: are talking to certainly are bread and butter here at Bloomberg,
Speaker 2: and we think about the financial community so much. But
Speaker 2: having said that, are they starting to see return on
Speaker 2: investment in AI related purchases? Are they seeing it already?
Speaker 2: It depends.
Speaker 10: It depends on the on the technology, on the use cases.
Speaker 10: And I would say it's a it's a mix, Carol,
Speaker 10: because you know, we did this. We did an AI
Speaker 10: readiness index last year. We just release or we will
Speaker 10: release the new one a year later. And what we're
Speaker 10: seeing is that in the six areas of strategy infrastructure,
Speaker 10: whether it's data, governance, talent, and culture, only thirteen percent
Speaker 10: of companies are really were really prepared for AI in
Speaker 10: twenty twenty four, and that was a decrease from you
Speaker 10: can say, you know, it's a little bit of a
Speaker 10: decrease from twenty twenty three. So there is a gap
Speaker 10: between the needs and the expectations. And it's not just
Speaker 10: about the use cases. The networks are not equipped to
Speaker 10: meet the AI workloads, so you've got to upgrade. Only
Speaker 10: twenty one percent of organizations say they have the necessary
Speaker 10: GPUs to meet the current and future AI demand, So
Speaker 10: it feels like there's intent there, but it's taking a
Speaker 10: lot longer to be able to implement it.
Speaker 3: Hey Liz, good to see you again.
Speaker 4: Tim.
Speaker 6: Here I say, Tim, I'm curious about where you think
Speaker 6: we are in this tech cycle. Given your more than
Speaker 6: two decades of experience at Cisco. You weren't necessarily there,
Speaker 6: you know, in the in the bulk of the nineties
Speaker 6: when we saw the run up, but you were there
Speaker 6: during part of when the bubble popped.
Speaker 3: And I'm wondering if you can see any.
Speaker 6: Parallels to right now with AI or if you think
Speaker 6: this is something completely different.
Speaker 10: I feel like this is quite different in terms of
Speaker 10: the pace at which the technology is being developed and
Speaker 10: being put out there. I haven't seen anything move at
Speaker 10: this level of speed. You know. I'm constantly experimenting with
Speaker 10: different kind of tools and capabilities, and I still feel
Speaker 10: I'm far behind and I'm in the in the depth
Speaker 10: of it it. But what I've seen is like with
Speaker 10: the vast majority of our customers, there is a gap
Speaker 10: between the technology that's available and going from experimenting with
Speaker 10: something to real use cases. And I think that for
Speaker 10: the vast majority of our customers, they're still in that
Speaker 10: early part of the real use cases and does go on.
Speaker 4: For a while.
Speaker 2: List do you think there's this kind of experimental phase
Speaker 2: goes on for a while.
Speaker 10: I would say twenty twenty five we should see some
Speaker 10: a little bit more of a you know, where there's
Speaker 10: a curated set of use cases, whether that's revenue generation,
Speaker 10: whether that's automation or efficient and see I would expect
Speaker 10: that to pick up Carol in twenty twenty five. Will
Speaker 10: it reach like a big hockey stick? I don't think so.
Speaker 10: I think it's now where we need to show kind
Speaker 10: of how do we how we actually measured this? And
Speaker 10: not everything is quantifiable, but you need to have some
Speaker 10: quantifiable use cases along with the others.
Speaker 2: And it's also the pressure from.
Speaker 10: C suite and our boards as well, right they expect
Speaker 10: a lot of this to happen immediately, and some of
Speaker 10: this is long term, you know, return on investment?
Speaker 3: How long?
Speaker 6: Like are we talking years here? We talk a lot
Speaker 6: about CAPEX, especially with the hyperscalers, but when you think
Speaker 6: about other infrastructure investments, like you know, making an investment
Speaker 6: with a company like Cisco, how long does it take
Speaker 6: for something like that to pay off for your clients?
Speaker 10: I would say in the areas of what we're talking
Speaker 10: about around customer support, for example, and how we're able
Speaker 10: to help keep their environments much more resilient. I see
Speaker 10: that in more for twelve to twenty four months, if
Speaker 10: you're looking at revenue generation and you know kind of
Speaker 10: how do you get more competitive for their end customers.
Speaker 10: I think that's a little bit longer. That's more in
Speaker 10: like two plus years out.
Speaker 2: Hey, can I.
Speaker 10: Ask you automation and efficiency? Yeah, I would say twelve
Speaker 10: to twenty four months for sure.
Speaker 2: You know, Tim and I were recently at the Schwab
Speaker 2: Impact Massive financial conference out in San Francisco, and it
Speaker 2: was all with registered investment advisors and all of the
Speaker 2: companies that service them, and I was involved in a
Speaker 2: panel that was all on AI and one of the
Speaker 2: things that came up was autonomous agents, which is something
Speaker 2: I haven't heard about, and I feel like this is
Speaker 2: going to be something that's going to be a big
Speaker 2: part of our conversation in twenty twenty five. We've got
Speaker 2: about a minute or so a minute and a half
Speaker 2: left here. What do we need to know about what
Speaker 2: that is in terms of AI and how that kind
Speaker 2: of fits it?
Speaker 10: So think about use cases like summarizations very easy, right,
Speaker 10: Those are AI assisted. Think about like checkbots for example,
Speaker 10: those are augmented AI. Think about in the future where
Speaker 10: some of not just some of the tasks, but some
Speaker 10: of the jobs that are being done can be where
Speaker 10: you can where an agent can think, reason and make
Speaker 10: independent decisions, not doesn't need to necessarily say that you've
Speaker 10: trained it to make that it's almost human like and
Speaker 10: could take actions. So I think that's an example would
Speaker 10: be is you know, we've talked about self heeling networks
Speaker 10: for a long time. You can identify potential issues and
Speaker 10: resolve them autonomously without any human intervention. We're experimenting with
Speaker 10: that right now.
Speaker 2: How's it going?
Speaker 10: I would say, is accuracy ethical AI? All of those
Speaker 10: become a much bigger deal when you're talking about autonomous
Speaker 10: agent without any human intervention. So I think that would
Speaker 10: take a little bit longer because we want to make
Speaker 10: sure that ethical AI plays a big part of it
Speaker 10: so that we can continue to keep what customers you know,
Speaker 10: to do. We want to hold their trust in us.
Speaker 2: Yeah, listen, I just got chills up my spine. But
Speaker 2: I think about we had a conversation with our Linda
Speaker 2: Wanner earlier about the importance of an abundance of the
Speaker 2: right data to keep AI development moving forward, and especially
Speaker 2: when we talk about agents and AI. I think that's
Speaker 2: going to be super important. I know we'll be coming
Speaker 2: back to you. Congratulations on the new job, and look
Speaker 2: forward to next time. Listen, Tony executivice President, chief Customer
Speaker 2: Experience Officer at Cisco Systems. Tim, we're driving towards the clothes.
Speaker 6: I want a little chatbot that can kind of automatically
Speaker 6: do our script that we do every day.
Speaker 2: I want that one. I'm hoping that I don't want
Speaker 2: one that can be oh, breaking news. Let me break
Speaker 2: it for you.
Speaker 3: Exactly read us. We got to break the news.
Speaker 2: Stick around everybody. You're watching Bloomberg Business Week. This is Bloomberg.
Speaker 8: Mack journal about you.
Speaker 10: Let me drive none please, I.
Speaker 2: Don't want to drive.
Speaker 4: It's a good question, a good time.
Speaker 7: This is the drive to the Globe. Well on Bloomberg Radio.
Speaker 2: All right, everybody, we are just under all about eighteen
Speaker 2: eighteen and a half minutes left in today's trading, So
Speaker 2: she's getting ready to wrap up the trade and the week. Yeah,
Speaker 2: we are, as Denise just mentioned, well, off our highs
Speaker 2: of the session. Still the Nasdaq one hundred the standout,
Speaker 2: thank you very much, Broadcom really giving the juice to
Speaker 2: certainly that name.
Speaker 3: Marvel too.
Speaker 2: Yeah, well everybody, right, the peers.
Speaker 6: Well they're peers, yes, But as I will say in
Speaker 6: my decliners today, not everybody in this space is having
Speaker 6: a good day.
Speaker 2: And some of the popped initially and then kind.
Speaker 6: Of yeah, and media popped initially, but now it's down
Speaker 6: more than two percent. Marvel is up ten point six percent.
Speaker 6: This is a one hundred billion dollar company that has
Speaker 6: basically performed the same as a Broadcom this year.
Speaker 3: Marvel interesting, right, Yeah, it's.
Speaker 2: Really I feel like all of a sudden, there's like
Speaker 2: Chip related, AAR related company we haven't in the show,
Speaker 2: but that we haven't talked about a lot, and then
Speaker 2: all of a sudden, the Shepley front and center. Hey,
Speaker 2: another thing that's been front and center is private markets.
Speaker 6: Yeah, kind of understanding what's happening with the private markets
Speaker 6: as we get into a new year, a new regime.
Speaker 6: Understanding interest rates next year, because that certainly has a
Speaker 6: big effect. Let's get to Eric Hirsh, co CEO at
Speaker 6: the investment management firm Hamilton Lane. It specializes in private markets.
Speaker 6: Eric joins us from Pennsylvania. Eric, good to have you
Speaker 6: with us this afternoon.
Speaker 3: How are you great?
Speaker 4: Tim Carrol, Nice to be with you.
Speaker 2: Nice to see you and hear you again.
Speaker 6: Hey, Eric, how are you thinking about what was the
Speaker 6: year before we get to twenty twenty five? What was
Speaker 6: the year that was twenty twenty four when it came
Speaker 6: to the alternative investments the private markets, Given that we
Speaker 6: didn't get as many interest rate cuts as many investors
Speaker 6: a year.
Speaker 11: Ago thought we would, I think it was a mixed year.
Speaker 11: So I think if you look across the asset class,
Speaker 11: the private credit sector had a very strong year, a
Speaker 11: lot of capital raise, a lot of capital deployed.
Speaker 4: Very very strong performance.
Speaker 11: The equity side of the business has sort of lagged
Speaker 11: sort of the public markets. When the public markets are
Speaker 11: kind of on fire, as they've really been for the
Speaker 11: most of this year, private equity, again, longer asset class,
Speaker 11: longer duration, kind of struggles to keep pace. And you
Speaker 11: certainly saw that. So performance on a year to year
Speaker 11: basis relative to the public markets, I think was a
Speaker 11: little bit disappointing. Infrastructure posted some good results, and so
Speaker 11: again if you look across the totality a little bit
Speaker 11: of a mixed situation.
Speaker 2: Hey, you know, I think about this column especially when
Speaker 2: it comes to private equity, which has been under some
Speaker 2: pressure over the last couple of years because it hasn't
Speaker 2: been able to exit right. The exit strategy and the
Speaker 2: ability to return you know, money and returns to investors.
Speaker 2: Our Allison Schreeger wrote a Bloomberg column over the summer,
Speaker 2: the private equity Bubble us about to deflate again, an
Speaker 2: opinion column, but she talked about, you know, whether valuations
Speaker 2: fall suddenly or gradually the industries do for a rect
Speaker 2: and the consequences for the economy or dire I mean,
Speaker 2: when you can't really price something in a market, that's
Speaker 2: a problem.
Speaker 11: So let's break it down. I think the exit piece
Speaker 11: has been a little bit misunderstood. So why haven't we
Speaker 11: seen a lot of assets trading? The reality is is
Speaker 11: that because most of the assets are still relatively young.
Speaker 11: If you think back when we saw a huge surge
Speaker 11: in deal volume, it was right in the middle of
Speaker 11: COVID and pricing wasn't cheap then, So you had a
Speaker 11: lot of assets that were acquired at fairly full valuations
Speaker 11: and if you think about our industry over a long
Speaker 11: time period, it's averaging about five year duration from time
Speaker 11: to buy to time to sell. So we really are
Speaker 11: now just kind of coming into that window. And if
Speaker 11: you think about how private equity is actually generating returns
Speaker 11: right now, it's not that they're buying super cheap and
Speaker 11: it's definitely not that they're super leveraging these assets. They
Speaker 11: have to fundamentally grow earnings and that takes some time.
Speaker 11: So that, to me is really the biggest issue of
Speaker 11: why haven't we seen a lot of liquidity. It's because
Speaker 11: the assets just simply haven't fully ripened yet. I think
Speaker 11: we will start to see more of that next year. Now,
Speaker 11: the second part I would say is you want more stability.
Speaker 11: This year has not been a particularly stable year. So
Speaker 11: let's leave aside where the public equity markets have performed strong.
Speaker 11: We've had tremendous amount of geopolitical uncertainty. We've had a
Speaker 11: whole uncertainty in this country around the election. What was
Speaker 11: going to happen with that, and so buyers and sellers
Speaker 11: we're kind of having a bit of a standoff on
Speaker 11: is today today the pulled trigger and what you saw
Speaker 11: was no it's not. I think now that we at
Speaker 11: least know the election outcome, now that you see some
Speaker 11: real signs that are encouraging on potentially ending some of
Speaker 11: the geopolitical instability, I think you're gonna see buyers and
Speaker 11: sellers get more aligned, and so I think you kind
Speaker 11: of combine all that together, coupling with the aging of
Speaker 11: the assets, and I think you're going to see a
Speaker 11: lot more exit activity next year.
Speaker 2: All right. Interesting, you know we have heard about maybe
Speaker 2: an opticket M and a overall and getting out. Having
Speaker 2: said that, I mean we've had a you know, you
Speaker 2: look at the gains that we've seen in the major
Speaker 2: equity averages. I mean, it's been a really strong year.
Speaker 2: If that doesn't happen, and that's two strong years for
Speaker 2: the S and P five hundred and that doesn't continue
Speaker 2: in twenty twenty five, is that problematic for the exit.
Speaker 11: I think one of the things we hear from investors
Speaker 11: is that everyone's getting a little bit more sophisticated, and
Speaker 11: so they're saying, well, the S and P five hundred, Yes,
Speaker 11: is an index, had an amazing run, but it's really
Speaker 11: driven by still a small number of businesses.
Speaker 4: And I think when you look at kind of this.
Speaker 11: Over reliance on index passive sort of cheap public equity strategies.
Speaker 11: I think a lot of investors are getting a little
Speaker 11: bit more sober on how concentrated their portfolios are on
Speaker 11: an underlying basis, and so I think the driving of
Speaker 11: the performance notwithstanding, I think there's some real hesitancy about
Speaker 11: the concentration.
Speaker 4: That is.
Speaker 11: One of the things we're seeing is a real drive
Speaker 11: into the private markets is that they're simply looking for diversity.
Speaker 11: It's not even so much that they believe that they're
Speaker 11: going to make way better returns. It's just simply they
Speaker 11: don't want all their eggs in one basket.
Speaker 2: I will point out about three hundred and sixty two
Speaker 2: names in the S and P five hundred though or
Speaker 2: higher this year, and it's pretty broad. You know, we
Speaker 2: did see some broadening out of the market.
Speaker 3: Yeah, we did. I wonder what things look like.
Speaker 6: You already mentioned a new administration and some potential effects
Speaker 6: of that starting January twentieth. What about on the regulatory
Speaker 6: front and on the interest rate front? How does that
Speaker 6: look for your world in the privates.
Speaker 4: So let's take those pieces.
Speaker 11: I think on the interest rate side, I'm not expecting
Speaker 11: to see a ton of movement either way. I think
Speaker 11: you still are seeing some inflationary signs. Yes, it's cooling,
Speaker 11: but I don't think any of us would argue that
Speaker 11: the world has gotten cheap today, and so I'm not
Speaker 11: sure that we're going to see enormous pressure to kind
Speaker 11: of further cut rates or.
Speaker 4: Cut them dramatically.
Speaker 11: So I think that feels like we're in a bit
Speaker 11: of a status quo situation. On the regulatory side, I
Speaker 11: think where you could see some potential easing up, yes,
Speaker 11: around the M and a market. Yes, potentially around sort
Speaker 11: of a less onerous sort of merger doctrine that could
Speaker 11: certainly do a little bit around the edges. I think
Speaker 11: the space to watch is really what the administration does,
Speaker 11: if anything, as it relates to sort of opening up
Speaker 11: access to the asset class even more to the individual investor.
Speaker 4: So I'm not even talking sort of.
Speaker 11: A four to h one k access side, but even
Speaker 11: think about lightening up a little bit so that you
Speaker 11: could see a much more easy inclusion of private markets
Speaker 11: and things like target date funds.
Speaker 2: Yeah, now, listen, you know people are constantly seeking for
Speaker 2: some outperformance. I think many would argue we a little
Speaker 2: bit more oversight too though, in transparency within the private markets,
Speaker 2: to make sure that you know everything is is clear,
Speaker 2: especially when you're talking about retirement.
Speaker 6: Yeah, and I don't know if there's necessary you know,
Speaker 6: who is it. Warren Buffett always says, only invest in
Speaker 6: what you can understand. Yeah, and I think there are
Speaker 6: some concerns, Sir Peter want you to.
Speaker 2: Say that, like a right fidelity too right? Yeah, interesting
Speaker 2: stuff that always appreciate his perspective. Eric Kirsh, co Chief
Speaker 2: executive Officer at Hamilton Lane.
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