Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast, with Caroline Hyde in New York
Speaker 1: and Va Low in San Francisco.
Speaker 2: This is Bloomberg Tech coming up. Open ai is close
Speaker 2: to finalizing the first phase of a new funding round
Speaker 2: that could bring in more than one hundred billion dollars plus.
Speaker 2: Mark Zuckerberg testified in a landmark social media trial and
Speaker 2: said it is quote very difficult to enforce Instagram's age limits,
Speaker 2: and the DOJ is taking a closer look at the
Speaker 2: potential impact of a sale of Warner Brothers Discovery on
Speaker 2: theater chains. We'll get the reaction from Netflix co CEO
Speaker 2: Ted Sarandos at twelve thirty pm Eastern right here on Bloomberg.
Speaker 3: Okay, let's get to the top story.
Speaker 2: Open ai is close to finalize the first phase of
Speaker 2: new funding that could bring in more than one hundred
Speaker 2: billion dollars, according to sources, that could boost its valuation
Speaker 2: to eight hundred and fifty billion dollars post money. The
Speaker 2: first round of strategic investors include AI heavy hitters Amazon, SoftBank, Nvidia,
Speaker 2: and Microsoft and Overnight. When we broke this story in Japan, trading,
Speaker 2: SoftBank jumps as much as four percent end the up
Speaker 2: closing down up sorry, two point six percent. I think
Speaker 2: the usadrs are actually a little softer team effort that
Speaker 2: led the way by Bloomberg, Surrey and Gafari, who's been
Speaker 2: tracking this story for a little while. Now, I think
Speaker 2: let's get into the details, right. It isn't that straightforward
Speaker 2: to understand, so let's call it phase one, the strategic investors.
Speaker 3: What do we need to know?
Speaker 4: So phase one are the major companies that are going
Speaker 4: to be partners investors in open AI. So names like Amazon,
Speaker 4: which as we've reported, could invest up to fifty billion,
Speaker 4: SoftBank up to thirty You also have Microsoft in Nvidia
Speaker 4: and others. So that is the first kind of part
Speaker 4: of this round, securing those allocations, and that could come
Speaker 4: as soon as the end of this month. Then they'll
Speaker 4: move on to the vcs, sovereign wealth funds and other
Speaker 4: financial investors.
Speaker 2: Yeah, I think you know the sources that I've been
Speaker 2: speaking to in that next bucket, the sovereigns. The bench
Speaker 2: CAFEUS is probably a line around the corner, so to speak,
Speaker 2: of people who want an allocation. Here, there's some interesting
Speaker 2: detail that I want to get to with you. So
Speaker 2: like Amazon, for example, a first time investment at that
Speaker 2: scale super interesting. But also there's some kind of technology
Speaker 2: agreement as part of this, right.
Speaker 3: That's right.
Speaker 4: So part of the deal, as we reported, is that
Speaker 4: this will involve an expansion of Opening Eyes partnership with
Speaker 4: Amazon on using their cloud compute to run Opening Eyes products,
Speaker 4: as well as the chips Amazon Trainingum chips to be
Speaker 4: used in Opening Eyes development.
Speaker 2: I think it's also important to be sort of transparent
Speaker 2: with the audience. These numbers have moved around a little bit, right,
Speaker 2: and so particularly like some of our reporting on what
Speaker 2: the pre money valuation would be, how we're kind of
Speaker 2: getting to that post money valuation of eight hundred and
Speaker 2: fifty billion dollars. Again, just give us the specifics that
Speaker 2: we need to know.
Speaker 4: Sure, there's been a lot of numbers out there, and
Speaker 4: of course with a deal this big that's been in
Speaker 4: talks for months, right, things kind of can shift. But
Speaker 4: you might have heard the seven hundred and thirty billion
Speaker 4: number in terms of open AI's potential valuation in this round,
Speaker 4: that is still the you know, as far as we
Speaker 4: know it today. The pre money valuation being discussed for
Speaker 4: open a eye. But with around this big once you
Speaker 4: add in that money, obviously the post money valuation could
Speaker 4: go up significantly. So what we're hearing is now that
Speaker 4: once you add up all the you know, strategics, which
Speaker 4: could easily top one hundred if things go well, and
Speaker 4: then you have the financial investors, you could get to
Speaker 4: that eight fifty post money valuation.
Speaker 2: I just want to point out to the audience that
Speaker 2: all of the companies we've mentioned either declined to comment
Speaker 2: or didn't respond to our request for comment. And for
Speaker 2: what it's worstren Overnight Bloomberg Seslan that Amin spoke to
Speaker 2: Chris Lahane and put it to him our reporting about
Speaker 2: this round, and he didn't answer the question. Frankly, what
Speaker 2: is consistent is the broader context. Open ai has said
Speaker 2: for a little while it's compute constrained, and in other words,
Speaker 2: you know, if it had more access to compute, we
Speaker 2: know about its ambitions to build more infrastructure, it could
Speaker 2: do more things, It could release more products, it could
Speaker 2: broaden API access, et cetera. Paint a little bit more
Speaker 2: of a picture for us in that respect.
Speaker 4: Yeah, if you think about it, open ai has hardware ambitions.
Speaker 4: They have to build out all these data centers that
Speaker 4: they promised with stargate. They have to go and train
Speaker 4: these models that become bigger and bigger in terms of
Speaker 4: the amount of compute needed to get to what they
Speaker 4: want to you know, call it agi right, So I
Speaker 4: think that there's there's obviously a lot of room for
Speaker 4: them to expand and go beyond just chat GPT into
Speaker 4: other business lines. With this as well as just this,
Speaker 4: there's this fierce horse race to make the next big model.
Speaker 5: They have the anthropic Google Xai.
Speaker 4: Everyone is going after the same price here, so they
Speaker 4: need to be constantly investing in the best development to
Speaker 4: get a had and stay ahead.
Speaker 2: Bloombag Shrien Gafari, thank you very much. Sticking with open ai,
Speaker 2: the Chat GBT maker is partnering with Tata Group and
Speaker 2: its tech services arm Tata Consultancy Services on a massive
Speaker 2: deal that could then could speed up open AI's enterprises option.
Speaker 2: As part of the deal, TCS will develop a one
Speaker 2: hundred megawatt data center that may be expanded to one gigawa.
Speaker 3: Tata would also.
Speaker 2: Infuse Ai throughout its operations, and the pair will work
Speaker 2: together to build agentic solutions for specific industries. The deal
Speaker 2: was announced while Open AI CEO Sam Altman was in
Speaker 2: New Delhi for the India AI Summit, where he told
Speaker 2: the crowd early visions and versions of artificial general intelligence
Speaker 2: may not be far off.
Speaker 6: India's largest democracy is well positioned to lead an AI,
Speaker 6: not just to build it, but to shape it and
Speaker 6: decide what our future is going to look like. And
Speaker 6: it's important to move quickly on our current trajectory. We
Speaker 6: believe we may be only a couple of years away
Speaker 6: from early versions of true superintelligence.
Speaker 2: Altman wasn't the only tech leader making that kind of prediction.
Speaker 2: Demisa Sabis, head of Google Deep Mind, said AGI could
Speaker 2: be five years away. And if having all these AI
Speaker 2: leaders in one place singing the praises of the technology
Speaker 2: was giving you the impression of unity, think again. There
Speaker 2: was this moment when former colleagues turned rivals Sam Altman
Speaker 2: and Anthropic CEO Dario Amoday awkwardly refuse to clasp.
Speaker 3: One another's hands.
Speaker 2: It happened during a photo op orchestrated by India's Prime
Speaker 2: Minister Neurendromodi.
Speaker 3: Okay.
Speaker 2: As trees race to keep pace with the AI boom,
Speaker 2: investors are increasingly turning to energy as the next big opportunity.
Speaker 2: Tortures Capital Senior portfolio manager Rob Dummel joins us now,
Speaker 2: and actually, you know, let's go back to the top story.
Speaker 2: You know, a one hundred billion dollar or more rounds
Speaker 2: from open AI where the lead investors are Amazon, SoftBank,
Speaker 2: Microsoft and Nvidia. You know where that capital is going
Speaker 2: to go, right in terms of infrastructure as somebody that
Speaker 2: is trying to seize the opportunity in the energy sector
Speaker 2: supporting that build out.
Speaker 3: Your reaction to the reporting, Yeah.
Speaker 5: Thanks for having me.
Speaker 7: So when we look at that at Tortoise, and we've
Speaker 7: been focused on infrastructure for a long time, and when
Speaker 7: we see more capital going into AI, you know who
Speaker 7: who's going to win out of that? Well, AI fundamentally
Speaker 7: it's two things. It's data and it's and it's energy.
Speaker 7: And so so we created an AI Infrastructure Fund here
Speaker 7: at Tortoise. It's an active ETF that focus is on
Speaker 7: the data infrastructure. So, so who's going to win from perspective?
Speaker 7: You need more data storage, right, you need you need
Speaker 7: more cabling, you need more liquid cooling. So the companies
Speaker 7: that provide that to the data centers, and you're gonna
Speaker 7: need more data centers as you highlight them, and you're
Speaker 7: gonna build more of those. Those are the companies that
Speaker 7: are gonna going to benefit from from this hundred billion
Speaker 7: dollars of spend. Now, you also need energy, you need electricity, right,
Speaker 7: and so's that's where the electrification infrastructure is going to
Speaker 7: be really important. And so companies that have electric generation
Speaker 7: in the areas where these data centers are going to
Speaker 7: be built are going to win as well.
Speaker 3: Rob.
Speaker 2: Earlier this week, I had an extended conversation with Mary Daily,
Speaker 2: president of the Federal Reserve Bank of San Francisco, very
Speaker 2: focused on I guess the inflationary impact of what's happening
Speaker 2: in the data center build out, the argument that the
Speaker 2: hyperscale is PG and E right. The utility in Northern
Speaker 2: California argue is it will lower electricity prices at the
Speaker 2: wholesale level because those those mega cap tech names take
Speaker 2: on the capital burden of modernizing the grid, but also
Speaker 2: you know, paying up front.
Speaker 3: Could you just weigh in on that.
Speaker 7: Yeah, No, I think it's an absolutely valid point. Is
Speaker 7: something we all need to keep our eye on. And
Speaker 7: Mary has some great points, and you have some great
Speaker 7: points as well. There's some really innovative solutions that are happening.
Speaker 7: And right now, you know, we're investing in a company
Speaker 7: like Williams Companies, who owns the largest natural gas pipeline
Speaker 7: network in the US. They're actually helping to try to
Speaker 7: reduce retail electricity prices by building electric generation to support
Speaker 7: AI data center buildouts. But the contracts that they have
Speaker 7: are between Williams, who's going to build electric generation, and
Speaker 7: the Hyperscalers basically ultimately. And so why does that matter?
Speaker 7: It matters because that from a cost perspective, the cost
Speaker 7: of that electricity generation to develop AI is going to
Speaker 7: be put upon the Hyperscalers, not the retail consumer, not
Speaker 7: the retail electricity provider, whether you're in California or Texas
Speaker 7: or where I am in Kansas City. And so you're
Speaker 7: seeing a lot of those innovative solutions start to happen
Speaker 7: and that but the goal is to not have this
Speaker 7: AI build out and to win the AI race, We're
Speaker 7: going to need a lot of electricity, but not have
Speaker 7: that be paid for by the retail consumer and as
Speaker 7: a result, have inflation rise because of that. The goal
Speaker 7: is to have the Hyperscalers pay for that, and there's
Speaker 7: multiple innovative solutions that are resulting in.
Speaker 2: That Open ai raising more than one hundred billion dollars,
Speaker 2: are going to go back to it with this kind
Speaker 2: of bigger goal of a trillion dollars of commitments. Right,
Speaker 2: you know if you try and top them all up,
Speaker 2: how much of a risk is it that the center
Speaker 2: of what's happening there is just this sort of single entity.
Speaker 2: I'm not necessarily talking about circular financing. I'm talking about
Speaker 2: the build out. The main tenant of that being one
Speaker 2: single company. And of course you know Amthropic and an
Speaker 2: xai and Google will factor into that, but increasingly it's
Speaker 2: open AI and everything.
Speaker 7: Yeah, I think we're going to world at autonomous everything, right,
Speaker 7: and so and and and we'll see where that where
Speaker 7: that ends up. Look, I have a lot of confidence
Speaker 7: and you know, you you give the tech tools to
Speaker 7: to the tech experts and what can they do? And
Speaker 7: we've already seen it's been incredible in terms of the
Speaker 7: opportunities in AI. And we're if you think about it,
Speaker 7: we're just getting started. I mean as far as what
Speaker 7: what opportunities there are for agenic AI and and and
Speaker 7: other ways, Right, whether it's healthcare or or education or
Speaker 7: just every area in our lives is going to be
Speaker 7: impacted over the next several decades. And and so the
Speaker 7: technology is there, we just need to get the energy there,
Speaker 7: and we need to get the electricity consistent.
Speaker 2: So how great is the risk that the supply of
Speaker 2: energy will not catch up with where demand is currently
Speaker 2: and where it will be.
Speaker 7: Well, Look, I've been investing in the energy sector for
Speaker 7: thirty years, and you know, you give these energy sectors,
Speaker 7: this sector a challenge, and it always steps up to
Speaker 7: the to the plate. And and I do think that
Speaker 7: the sector will and and so so there are plans
Speaker 7: in plays to continue to expand the US electricity grid.
Speaker 7: And if you do that you mentioned earlier your discussion yesterday,
Speaker 7: you can you can make the grid more reliable and
Speaker 7: so so we I don't think there's gonna be a
Speaker 7: big risk of that.
Speaker 2: Actually, let me ask you just really quickly, Elon Musk
Speaker 2: has this target of one hundred gig or what's of
Speaker 2: solar capacity in this country?
Speaker 3: Is that achievable?
Speaker 7: Rob Well, I think you're gonna need all of the
Speaker 7: above approach to meet that. So you're gonna need solar,
Speaker 7: You're gonna need win. You're gonna need hydro, we're gonna
Speaker 7: need nuclear. Obviously, we're gonna need more natural gas. And
Speaker 7: so we've got to the US has got an advantage
Speaker 7: and it's gonna win this global AI race because it
Speaker 7: can provide low cost electricity. It's going to do that
Speaker 7: by this all of the above approach that includes solar, wind, nuclear,
Speaker 7: natural gas, and and and frankly, probably a little bit
Speaker 7: of call as well.
Speaker 2: Rob bunld Sours's Capital. Great to have you back on
Speaker 2: the show, Thank you very much. Now coming up, door
Speaker 2: Dash serves up a first quarter growth forecast. We break
Speaker 2: down the food delivery giants latest earnings.
Speaker 3: Next, this is Bloomberg Tech.
Speaker 2: New York Governor Kathi HOCl has pulled a proposal that
Speaker 2: would have allowed for commercial robo taxi services outside New
Speaker 2: York City. This comes as a blow to Alphabet's Weimo,
Speaker 2: which is looking to aggressively expand its driverless fleet this year.
Speaker 2: A Waymos spokesperson said the company will work with the
Speaker 2: state legislature to advance the issue and bring its service
Speaker 2: to New York. That story was broken by our Consumer
Speaker 2: Apps and Gig Economy reporter Natalie Lung, who joins us
Speaker 2: now to break down some of the other earnings on
Speaker 2: her beat, and you've been busy. I'm looking at shares
Speaker 2: with door Dash up around six percent or five percent
Speaker 2: right now. They had been as high as seven percent,
Speaker 2: on track for their best day since April last year.
Speaker 2: Company issuing a first quarter order growth forecast that tops estimates.
Speaker 2: The food delivery platform beat estimates on gross order volume.
Speaker 2: In the fourth quarter, earnings and revenues missed expectations. I
Speaker 2: guess the way look at actually, if you take the
Speaker 2: lid off the food type ofware in the delivery bag,
Speaker 2: what's the story with door Dash here?
Speaker 8: So the demand for on demand delivery is very strong,
Speaker 8: as evidenced by Dordash's strong growth order forecast for the
Speaker 8: first quarter, and then follows sort of the strong demand
Speaker 8: out of that uber head earlier this month. But the
Speaker 8: bigger story here for DoorDash is their investments into some
Speaker 8: of the new products, including the UK business they acquired,
Speaker 8: as well as like a back end system upgrade that
Speaker 8: they're talking about to reconcile all of these new businesses
Speaker 8: they've been building and acquired.
Speaker 2: So the back end system upgrade is really interesting. Whenever
Speaker 2: executives from the company come on the show. They always
Speaker 2: talk about how good they are at software, in particular,
Speaker 2: what is it that they're rebuilding here.
Speaker 8: Yeah, so last year they went on this you know,
Speaker 8: multi billion acquisition spree, including UK's Delivery, and earlier a
Speaker 8: few years ago they acquired the Eastern Eastern European delivery
Speaker 8: business Volte. And so now they have these three different
Speaker 8: apps DoorDash, Volte and Delivery, and they all worked on
Speaker 8: different systems, and so the CEO, Tony su wants all
Speaker 8: these systems to work on the same platform so that
Speaker 8: engineers can work on the same projects and analytics teams
Speaker 8: can look at the same common data sets. And so
Speaker 8: he says this is a painful but necessary exercise to
Speaker 8: conduct this year, and they are having to invest a
Speaker 8: lot into it that could weigh on profits.
Speaker 2: You've also been looking at booking holdings stock down, you know,
Speaker 2: relatively significantly. I don't know if some analysts are saying,
Speaker 2: like global travel seems strong, that's supporting them. Others are
Speaker 2: debating and questioning their growth forecast to interpret that.
Speaker 3: What do you see?
Speaker 8: So it's actually a similar story there in bookings. They
Speaker 8: are it's going to be a big year for reinvestments
Speaker 8: for them. Last year they talked about this transformation program
Speaker 8: where they had to cut a few jobs and reorganize
Speaker 8: some of their businesses, and now they're investing those savings
Speaker 8: back into the company for AI. And they talked about
Speaker 8: how customer service has been improved with AI, and so
Speaker 8: there's always, you know, concerns or skepticism on how that
Speaker 8: would play out for them.
Speaker 2: Bloomberg's Natalie Lung terrific reporting all morning long. Thank you
Speaker 2: very much. I just want to look at shares of Figma.
Speaker 2: The company gave an annual revenue outlook that topped estimates
Speaker 2: and it kind of eased Wall Streets anxiety over AI
Speaker 2: threats to its own business.
Speaker 3: It's up around seven percent, but.
Speaker 2: Also, like I think, showed a lot of what it's
Speaker 2: doing in the field of AI. Bloomberg's brody Ford is
Speaker 2: on the other side of town from me, where it's
Speaker 2: raining heavily. I've learned a lot this morning through your
Speaker 2: reporting about what, on the face of its heres a
Speaker 2: pretty boring term net dollar retention rate, but actually, like
Speaker 2: if you kind of dig into it, it basically shows
Speaker 2: Figma had a lot of existing customers it launched new products,
Speaker 2: those existing customers were willing to pay for those new
Speaker 2: products on top of what they already have.
Speaker 9: That's exactly right, Yeah, and that's true that investors wanted
Speaker 9: to see. I mean, Figma is one of these names
Speaker 9: that's gotten caught up in the SaaS apocalypse, you know,
Speaker 9: the fear that as it gets easier to build software,
Speaker 9: these application leaders aren't going to have the pricing power
Speaker 9: they once did. But Figma showed us they did because
Speaker 9: on average, if I gave them a dollar last year,
Speaker 9: I'm giving them a dollar thirty five this year. And
Speaker 9: so that clearly shows that the amount of products customers
Speaker 9: are buying is expanding.
Speaker 2: We kind of zeroed in on by the way we're
Speaker 2: showing the shares kind of over a longer time period
Speaker 2: since the IPO in July of last year, down twenty
Speaker 2: two percent. Basically, Pigma Make they basically said, like, here's
Speaker 2: an AI tool that we have.
Speaker 3: It is growing. What do we need to know?
Speaker 8: Right?
Speaker 9: Pigma Make is essentially the you type in a prompt
Speaker 9: and it kind of gives you a pretty good app right.
Speaker 9: I mean, it's in the vibe coding realm, and that
Speaker 9: matters because there's a lot of these startups like Bolt
Speaker 9: or Replet that problems to be able to vibe coaps
Speaker 9: pretty well. And so it was really up to fig
Speaker 9: O to show that, no, we are the incumbent here
Speaker 9: and we're going to out innovate our peers. And you know,
Speaker 9: at least last night they took a step towards convincing
Speaker 9: the market of.
Speaker 2: That doing those brody Ford terrific reporting. Thank you, Thank
Speaker 2: you very much. A lot more coming up. Bike Dant
Speaker 2: seems to compete with the world's leading US based AI
Speaker 2: companies literally on their own turf. We have more on
Speaker 2: that next. This is Bloomberg Tech. It's time for Talking
Speaker 2: tech and first Start. The UK has proposed rules requiring
Speaker 2: tech companies to remove abusive images within forty eight hours
Speaker 2: all face fines of up to ten percent of global
Speaker 2: revenue or even a UK service van. The move comes
Speaker 2: amid investigations in Ireland, Spain and other countries over nonconsensual
Speaker 2: undressed images created by Ex's AI Chatbotrock Plus Morgan Stanley's
Speaker 2: cutting fees in half for clients trading private company shares
Speaker 2: on its newly acquired equity Zen platform, charges for buyers
Speaker 2: and sellers will be lowered to two point five percent
Speaker 2: from five percent on most transactions, undercutting competitors as it
Speaker 2: looks to take advantage of an expanding market. And finally,
Speaker 2: Amazon has officially overtaken Walmart as the world's largest company
Speaker 2: by revenue. The online retail giant posted seven hundred and
Speaker 2: seventeen billion dollars in sales for twenty twenty five, edging
Speaker 2: past Walmart's seven hundred and thirteen. A big driver of
Speaker 2: that growth Amazon's cloud computing business AWS, and we.
Speaker 3: Stripped that out. It's not quite apples to apples.
Speaker 2: Another story, Chinese tech giant bike Dance is hiring in
Speaker 2: the US for nearly one hundred open roles within its
Speaker 2: Ai division. The push comes after it announced the deal
Speaker 2: to sell parts of its US TikTok business to non
Speaker 2: Chinese owners to address US national security concerns. Bloomberg's social
Speaker 2: media report Alex Lavine has the story, let's stop cis like,
Speaker 2: what are these roles?
Speaker 3: Where are these roles?
Speaker 10: The roles are mainly in California and Washington. We have
Speaker 10: them across Los Angeles, San Jose, and Seattle, which are
Speaker 10: all cities that TikTok also has offices in and I
Speaker 10: think what's so fascinating about these AI roles is really
Speaker 10: just how much they run the gamut. You've got roles
Speaker 10: that are focused on producing international data to feed to.
Speaker 11: Buy dances llms.
Speaker 10: You've got roles doing research to make AI more human like.
Speaker 10: And you've also got these really interesting roles building science
Speaker 10: science models that are really looking for talent in biology, chemistry,
Speaker 10: and physics. And these are more roles focused on helping
Speaker 10: buy dance pursue drug discovery and development.
Speaker 2: So the reason this is a notable story, right, you
Speaker 2: just said that these roles will be in proximity to
Speaker 2: or in US TikTok's offices, right, But the broader thing is,
Speaker 2: you know, Chinese parent hiring for roles in the field
Speaker 2: of AI in the UNI States national security competition take
Speaker 2: us there.
Speaker 10: To clarify, these not necessarily in the same as the
Speaker 10: TikTok offices, but they are in the same cities where
Speaker 10: TikTok has a large footprint. And as you just mentioned,
Speaker 10: these are also cities where some of the leading American
Speaker 10: AI companies also have a lot of a lot of
Speaker 10: talent and their own footprint. I think what's so interesting
Speaker 10: is that to this point in the US, we've really
Speaker 10: thought about byte Dance as a social media company. It
Speaker 10: is also a dominant AI company, and it really seems
Speaker 10: that that has been a bit lost on the US
Speaker 10: until now. And I think the turning point has really
Speaker 10: been over the last week since by Dance unveiled some
Speaker 10: new AI models for video generation for example, an image
Speaker 10: generation that has really caught on and raised concern especially
Speaker 10: from Hollywood.
Speaker 11: In a very big way.
Speaker 2: All right, Bloomberg z AlCH Slovine, it's a must read
Speaker 2: report on the Bloomberg about byte Dance building out AI
Speaker 2: teams in the US.
Speaker 3: Coming up, we're going.
Speaker 2: To discuss what Mark Zuckerberg had to say about teen
Speaker 2: social media use when the metase A CEO testified in
Speaker 2: a landmark trial. We have those details coming up next.
Speaker 2: This is Bloomberg Tech.
Speaker 3: Welcome back to Bloomberg Tech.
Speaker 2: We're just going to take a quick look at where
Speaker 2: financial markets are right now. We had a lot of
Speaker 2: economic data to pass through the morning. Our market's team
Speaker 2: on the Bloomberg terminal and on dot com are really
Speaker 2: emphasizing the geopolitical risk that's out there, also ongoing concerns
Speaker 2: about inflation then as that one hundred very tech heavy,
Speaker 2: modestly lower down three tenths of a percent, chip stocks
Speaker 2: taking a breather, down eight tenths of a percent, and
Speaker 2: then Bitcoin now further blows sixty seven US thousand dollars
Speaker 2: to can remember it's a shorter week in the United States.
Speaker 2: It was a holiday on Monday, but bitcoin trades twenty
Speaker 2: four to seven, and we came back from that holiday
Speaker 2: weekend with Bitcoin under pressure. One headline, by the way,
Speaker 2: Goldman Sat CEO David Solomon saying he owns a very
Speaker 2: modest amount of bitcoin, but remember he's long been a
Speaker 2: cryptoskeptic and that's not doing much to support the asset
Speaker 2: either way. We'll keep you posted. Another top story today,
Speaker 2: Meta CEO Mark Zuckerberg took to the stand in the
Speaker 2: Landmark social media addiction trial. Bloomberg's Riley Griffin was in
Speaker 2: the courtroom for that testimony. And look, we were building
Speaker 2: up to this on the program throughout the week. Take
Speaker 2: us through the lines of questioning, and I guess the
Speaker 2: top line of what mister Zuckerberg had to say in
Speaker 2: response to those questions.
Speaker 5: Yeah, ed, great question.
Speaker 12: It was an intense day here in Los Angeles, and
Speaker 12: yesterday we saw Mark Zuckerberg testify to a number of things.
Speaker 12: Questions about company documents that showed that Meta had been
Speaker 12: focused on increasing time spent among young users. Questions about
Speaker 12: the under thirteen demographic on the platform. Despite policies that
Speaker 12: suggest they're not allowed to be, there still millions of
Speaker 12: Americans under that age on the platform. Questions about decisions
Speaker 12: he personally made regarding beauty filters. All of this came
Speaker 12: to a head with him on the stand at times
Speaker 12: rather uncomfortable, very subdued. He did score a couple of
Speaker 12: wins here and there, but overall the picture was painted
Speaker 12: of a company that made deliberate.
Speaker 5: Could be user of health the youngest users.
Speaker 3: Right.
Speaker 2: You know, Instagram does have age limits and other tools
Speaker 2: that already exist, and mister Zuckerberg basically splained it was
Speaker 2: very difficult to enforce them. Did he go a step
Speaker 2: for over and explain why it's difficult to enforce them.
Speaker 2: I think he also talked a little bit about other
Speaker 2: tools that they are being let's say proactive on.
Speaker 3: Yeah.
Speaker 12: So one of the cases that mister Zuckerberg made was
Speaker 12: to say that for the youngest users, particularly those without
Speaker 12: driver's license, it's really hard to verify age. He took
Speaker 12: a line that has come up a lot these days,
Speaker 12: particularly in lobbying afforts, which is to say that phonemakers
Speaker 12: like Apple should do a little bit more to help.
Speaker 5: With that age verification process.
Speaker 12: In fact, an email was brought forth by Meta's defense
Speaker 12: to show that he had made efforts to reach out
Speaker 12: to Tim Cook in the past to look for efforts
Speaker 12: that where they could collaborate on improving team safety.
Speaker 5: So he said, it's an open secret.
Speaker 12: They all know that many users are lying about their age.
Speaker 12: The plaintiff's attorneys suggested that that Meta had not done
Speaker 12: enough to enforce that, and there were some documents that
Speaker 12: showed that Nick Klegg, for example, a former policy chief,
Speaker 12: had said these policies were basically unenforceable and showed that
Speaker 12: they weren't doing all that they could. So we saw
Speaker 12: it go back and forth. But Mark Zuckerberg's take here
Speaker 12: was that it's a really difficult challenge even as they
Speaker 12: create proactive tools to remove under thirteen users and NICs.
Speaker 2: Roddy Griffin, who is on the ground and will continue
Speaker 2: to cover the trial, thank you very much. Let's discuss
Speaker 2: the broader legal invocations of the case with Mary Anne Franks.
Speaker 2: She's a professor at George Washington University Law School in
Speaker 2: Intellectual Property, technology and Civil rights. And a moment ago,
Speaker 2: the team was showing the data around what else is
Speaker 2: happening in parallel with this specific trial? Right there are
Speaker 2: three thousand such suits running in parallel. You also have
Speaker 2: states attorneys general forty plus looking at this issue. But
Speaker 2: in the here and now, with this specific legal proceeding,
Speaker 2: could you just help us understand what is it question here?
Speaker 3: Please?
Speaker 13: The primary question that they're trying to address here is
Speaker 13: are the harms that are being experienced by these plaintiffs?
Speaker 13: And those are some really extensive and really serious ones,
Speaker 13: including in some cases suicide, but depression, body anxiety, body dysmorphia.
Speaker 13: Are these things attributable to the design of certain platforms
Speaker 13: in particular things like Instagram and Facebook? And so really
Speaker 13: the question is who is causing this harm? What is responsible?
Speaker 13: Is it the content that these kids are seeking out
Speaker 13: or is it the way that these platforms have designed
Speaker 13: their tools and services to entice really vulnerable users to
Speaker 13: stay on the platform for longer and longer periods of time.
Speaker 2: It was mister Zuckerberg, who was giving testimony, and you know,
Speaker 2: the I suppose top line of that testimony was that
Speaker 2: it is difficult for Meta, in particular through the Instagram app,
Speaker 2: to enforce what are existing rules. You know, how do
Speaker 2: you feel that that argument will carry from him?
Speaker 13: It's not really clear how well that's going to serve
Speaker 13: I think the defense, because really what Zuckerberg seemed to
Speaker 13: be reiterating was, well, we have all of these really
Speaker 13: dangerous tools that we know can cause harm, and you know,
Speaker 13: it's just really hard for us to keep them out
Speaker 13: of the hands of certain individuals.
Speaker 11: But that's just sort of accepting.
Speaker 13: The premise that these kinds of products and services should
Speaker 13: exist at all, and that it's just an intractable problem
Speaker 13: about who's going to access them, when the question really
Speaker 13: should be, you know, why are you creating these types
Speaker 13: of features? What's the actual use of something like a
Speaker 13: beauty filter that you know is going to be really
Speaker 13: attractive to nine and ten year old girls. So I
Speaker 13: think that he's very much trying to say, well, if
Speaker 13: you assume a world where all of these things have
Speaker 13: to exist, then it's really hard for us to control access.
Speaker 13: That's true enough, but why do these things actually have
Speaker 13: to exist.
Speaker 2: We're showing a February eleventh statement from metas specifically tied
Speaker 2: to this trial, and the back half of it says,
Speaker 2: the evidence will show she a plaintiff, faced many significant
Speaker 2: difficult challenges well before she ever used social media. I'm
Speaker 2: just putting that that is Meta's statement. Prior to that
Speaker 2: in November, you know, they had said they strongly disagree
Speaker 2: with these allegations and confident the evidence will show our
Speaker 2: longstanding commitment to supporting young people. I'm going to ask
Speaker 2: the same question again in a slightly different way that
Speaker 2: you have the CEO of the company defending what our
Speaker 2: existing policies and practices, but explaining how difficult it.
Speaker 3: Is to enforce them.
Speaker 2: Would you just help us understand, you know, what pressure
Speaker 2: will be put on him as the CEO of that company,
Speaker 2: or what changes or what outcome the court could affect
Speaker 2: how that company does business.
Speaker 11: Yes, so a lot of things could happen at this point.
Speaker 13: Because this isn't just about whether liability is found in
Speaker 13: these particular cases. This is also the first moment that
Speaker 13: we're really seeing the general public get a look at
Speaker 13: what did Mark Zuckerberg know and when did he know it?
Speaker 13: And so even if an individual cases, it's an uphill
Speaker 13: battle to show absolute causation for these injuries. Now we've
Speaker 13: got information in the hands of the public, in the
Speaker 13: hands of regulators, in the hands of policymakers, and you've
Speaker 13: already seen that this kind of attention is causing these
Speaker 13: companies change some of their practices. So they've been giving
Speaker 13: the kind of pr propaganda about how well we're doing
Speaker 13: our best.
Speaker 11: But it's really challenging.
Speaker 13: But every time there's serious consequences that might loom over
Speaker 13: these platforms, they do start making some changes, although usually
Speaker 13: they're a little too little, too late.
Speaker 2: We put in writing that this trial will run through
Speaker 2: the end of March, and again it's in parallel with
Speaker 2: a number of other legal proceedings that involve other parties.
Speaker 2: How much does one trial influence all the others that
Speaker 2: may happen after very quickly.
Speaker 13: Quite a bit these This is a Bellweather trial, and
Speaker 13: the entire reason why it's been chosen is because it's
Speaker 13: supposed to give both parties a sense of how this
Speaker 13: is going to play out. And so if it looks
Speaker 13: as though things are going badly for the defense, that
Speaker 13: could really have an effect on settlements and possibly agreements
Speaker 13: going forward to have safer products and platforms.
Speaker 2: Mary Anne Franks from George Washington University Law School, thank
Speaker 2: you very much. What about the business impact? MINDA Smiley
Speaker 2: c the analyst that eMarketer has been looking into teen
Speaker 2: social media use and enjoy us now and again, going
Speaker 2: back to mister Zuckerberg's testimony, his argument was that this
Speaker 2: category or demographic is a small part of the Instagram business.
Speaker 3: Does your research support that?
Speaker 14: Yeah, I mean I think the reality is a little
Speaker 14: bit murkier than that, right, I mean, I do think
Speaker 14: he maybe has some points when he says they're not
Speaker 14: a demographic is majorly monetized, and that they maybe don't
Speaker 14: bring in a ton of ad revenue, but that does
Speaker 14: not mean they're not significant.
Speaker 5: I mean, when you look at our a Marketer data, we.
Speaker 14: See that in the US at least about eleven percent
Speaker 14: of Instagram users are under the age of eighteen, and
Speaker 14: so again not a huge majority, but that's a significant percentage.
Speaker 14: And also, I think, you know, the numbers tell one story,
Speaker 14: but the reality is these platforms gain a lot by
Speaker 14: you know, essentially hooking these users young because the younger
Speaker 14: that they get on these platforms, the more likely they
Speaker 14: are to continue using them in the future.
Speaker 5: So again you can look at the numbers.
Speaker 14: You can look at maybe how much they how much
Speaker 14: revenue they're generating from teens per year, but really it's
Speaker 14: about setting these behaviors early and benefiting in the long term.
Speaker 2: Mister Zuckerberg stated that teams equate to one percent of revenue,
Speaker 2: which I thought was an interesting data point. This question
Speaker 2: about the future of Instagram in particular, but you know,
Speaker 2: the other meta family of apps is well, what would
Speaker 2: they change? You know, And part of the discussion in
Speaker 2: the testimony was the tension on the rules they have
Speaker 2: in place and the privacy of the individuals that are
Speaker 2: signing up for them. Does that tension have any pairing
Speaker 2: on how they do business going forward?
Speaker 14: Yeah, I mean I think it's still really early to say,
Speaker 14: but I mean, for sure, I think depending on how
Speaker 14: these lawsuits play out, if they end up having to
Speaker 14: fundamentally change how their platforms work, whether it's whether it's
Speaker 14: the algorithms or AutoPlay and infinite scroll, whatever it might be,
Speaker 14: that will in turn have an impact on how teenagers
Speaker 14: use these platforms. And something we've noticed is that, you know,
Speaker 14: it was interesting to see him really kind of downplay
Speaker 14: to what extent meta is really prioritized time spent as
Speaker 14: a metric when our numbers show and just you know,
Speaker 14: paying attention to the company in general, and we know
Speaker 14: that time spent is definitely a crucial metric for formata
Speaker 14: and all social networks. And we have seen time spent
Speaker 14: among teenagers specifically rise year over year on Instagram, and
Speaker 14: so we do see that, you know, anything that would
Speaker 14: kind of hi away that time spent if they would
Speaker 14: have to make changes to the platform, what would have
Speaker 14: an impact.
Speaker 2: But your research shows that teams are spending significantly more
Speaker 2: time on TikTok than on Instagram. I think I'm correct
Speaker 2: in saying right. I just want to point out that
Speaker 2: with this trial, TikTok and also Snap and not parties
Speaker 2: to the case because they had settlements prior to it.
Speaker 2: But if we look bigger picture at the industry, how
Speaker 2: will these other players be looking at this trial, do
Speaker 2: you think?
Speaker 3: Yeah?
Speaker 14: I mean I think they're all probably looking at it
Speaker 14: through through a similar lens. I know YouTube is trying
Speaker 14: to really make the case that it operates very differently
Speaker 14: than than a meta than a TikTok than a snapchat,
Speaker 14: and so I think, you know, that could potentially see see.
Speaker 5: YouTube play out a little bit differently.
Speaker 14: But I think in general, yes, especially a company like TikTok,
Speaker 14: which is kind of you know, it's really equated with
Speaker 14: teenage use. Right, A large part of why it became
Speaker 14: so popular in the US in the first place was
Speaker 14: because of young people, because of teenagers.
Speaker 5: So and like as you said, yes, our figures do.
Speaker 14: Show that teenagers spend a ton of time on TikTok,
Speaker 14: definitely more than Instagram. Although we are see that seeing
Speaker 14: that time spent you know, come down a little bit
Speaker 14: year every year, which kind of suggests that TikTok isn't
Speaker 14: maybe the shiny new object it was, you know, five
Speaker 14: six years ago.
Speaker 2: The difficult question, I mean, there's is what happens next, right,
Speaker 2: and your your research others point to law makers, you know,
Speaker 2: putting out a new set of rules. Is their momentum
Speaker 2: behind that pathway?
Speaker 14: So yes, and no, I think there is momentum at
Speaker 14: the state and the federal level. We are seeing lawmakers
Speaker 14: and regulators try try to address a lot of these concerns.
Speaker 14: Independent of this lawsuit, These lawsuits. That being said, they're
Speaker 14: running up, running up against a lot of challenges.
Speaker 5: For one is big tech lobbying.
Speaker 14: I mean, these companies are lobbying against a lot of
Speaker 14: these bills and laws.
Speaker 5: There's challenges happening in court, and.
Speaker 14: Then even you know, generally this tends to be a
Speaker 14: bipartisan issue. I mean, we see lawmakers on both sides
Speaker 14: of the aisle want to kind of reign in the
Speaker 14: power of these platforms and reign in what they perceive
Speaker 14: to be harms.
Speaker 5: But the way they want to go about.
Speaker 14: It often differs, and so that's another challenge. Enforcement is
Speaker 14: a challenge. We're seeing that play out in Australia with
Speaker 14: the ban under sixteens. You know, they're having a lot
Speaker 14: of success in some ways, but they are having some
Speaker 14: enforcement challenges and actually getting people under sixteen to completely
Speaker 14: say off these platforms, and so it's a messy area
Speaker 14: to regulate.
Speaker 3: Mind Smiley emocs to senior analysts. Thank you.
Speaker 2: Now, coming up, we're going to hear from Microsoft president
Speaker 2: Brad Smith on the company's relationship with open AI.
Speaker 3: That's next. This is Bloomberg Tech.
Speaker 2: Microsoft president Brad Smith says the company is on track
Speaker 2: to spend fifty billion dollars by twenty thirty to expand
Speaker 2: AI infrastructure to the global South. He sat down with
Speaker 2: Bloomberg's has Linda Ahmin on the sidelines of India's AI
Speaker 2: Impact Summit. He also weighed in on the state of
Speaker 2: Microsoft's partnership with open ai Take a listen.
Speaker 15: I think it remains a critically important partnership for Microsoft.
Speaker 15: We bet on each other, but it's not as exclusive
Speaker 15: as it was, say a few years ago. OpenAI uses
Speaker 15: our compute, they train models in our data centers, but
Speaker 15: they work with other companies as well. We critically rely
Speaker 15: on open AI's frontier models. They are among the best,
Speaker 15: and many days they are the best in the world.
Speaker 15: But we have a relationship with him thropic. We use
Speaker 15: open source models, We're developing our own models, so on
Speaker 15: both sides we work with more partners. But I think
Speaker 15: the partnership between the two of us remains an imperative.
Speaker 15: It's a huge priority for us at Microsoft.
Speaker 16: The question is why is it a hedge, is it
Speaker 16: a strategic pivot? How would you describe that move looking
Speaker 16: at alternative partners.
Speaker 15: Well, look, if you want to think about the partnership
Speaker 15: between open AI and Microsoft. All you have to do
Speaker 15: is ask one question, would any of this generative AI
Speaker 15: sector even exist if the two of us had not
Speaker 15: come together. Open Ai created something that no one else
Speaker 15: even understood was possible when they launched chat GPT, and
Speaker 15: open Ai could never have created that without Microsoft's compute
Speaker 15: and really frontier data centers on which to train that.
Speaker 15: We built something special. We'll each do special things on
Speaker 15: our own. Will each do special things with other companies?
Speaker 15: Will each do I think, very special things with each other.
Speaker 16: Just one funnel question, because we're running out of time, apparently,
Speaker 16: copilot is it losing traction?
Speaker 15: I don't think so. It's gaining ground. It's getting better
Speaker 15: every week, it's getting better every month. I say this
Speaker 15: as a user, not just a M three sixty five copilot,
Speaker 15: but our consumer copilot, our researcher agent, our other agents.
Speaker 15: We're seeing usage grow. We will continue to add features
Speaker 15: and functionality. I personally think it is an important part
Speaker 15: not just a Microsoft's past and present. It is a
Speaker 15: key part of our future. It is a key part
Speaker 15: of I think making everyone more creative, more productive. I
Speaker 15: certainly find that in my own work each and every
Speaker 15: day that.
Speaker 2: Was Microsoft fvicechair and President Brad Smith, along with Bloomberg's
Speaker 2: has end Amen. In other news out of the Summitcrosoft
Speaker 2: co founder Bill Gates backed out of a keynote address
Speaker 2: just hours before he was due to speak, replaced instead
Speaker 2: by the president of the Gates Foundations Africa and India offices.
Speaker 2: The Foundation explained the decision as an effort to ensure
Speaker 2: the focus remains on the conference, without elaborating. The withdrawal
Speaker 2: follows criticism of gates relationship with convicted sex offender Jeffrey
Speaker 2: Epstein and speculation about whether that link could overshadow the
Speaker 2: Foundation's broader mission. Coming up, there is more drama around
Speaker 2: the sale of Warner Brothers Discovery. We'll discover that next.
Speaker 2: This is Bloomberg Tech. Hollywood is no stranger to a
Speaker 2: plot twist. Take the latest development in the saga to
Speaker 2: purchase Warner Brothers Discovery. According to sources, the Justice Department
Speaker 2: has summoned some of the country's largest theater chains to
Speaker 2: discuss the potential impact active a sale to either Netflix
Speaker 2: or Paramount Skuydance. This coming on the heels of Warner
Speaker 2: Brothers reopening deal talks with Paramount. Now all this drama
Speaker 2: should be seen as one twist too many for Netflix,
Speaker 2: according to Bloomberg Intelligence, Let's bring in the aufer of
Speaker 2: that research b I.
Speaker 3: Seen around this. KEITHA. Angerath and.
Speaker 2: Investors have voiced this, right there is this idea that
Speaker 2: now might be the time for Netflix to walk away
Speaker 2: from some corners of the market. I think last weekend
Speaker 2: Korra came out in favor of that. But you at
Speaker 2: BI have some pretty clear reasons why you think Netflix
Speaker 2: should walk away.
Speaker 3: Just outline them for us.
Speaker 11: Yeah, absolutely.
Speaker 17: I mean this has been a major distraction ed now
Speaker 17: for you know, over a couple of months right now,
Speaker 17: and we've seen that even you know, as a reflection
Speaker 17: in the stock price. But they're really you know, it
Speaker 17: just kind of really muddies a really clean narrative for
Speaker 17: the company. And I think from our perspective, yes, we
Speaker 17: do see that. You know, Netflix obviously has a lot
Speaker 17: of financial firepower. They are an absolute cash flow machine.
Speaker 17: They're probably going to generate about eleven billion in free
Speaker 17: cash flow this year, there's.
Speaker 11: No doubt about that.
Speaker 17: But there is going to be the question of leverage.
Speaker 17: So if they do take up their offer, it's currently
Speaker 17: about twenty seven dollars and seventy five cents their risk,
Speaker 17: pushing close to almost four times leverage. As they go
Speaker 17: up to maybe thirty dollars thirty two dollars, we don't
Speaker 17: know what that final number is going to be. And
Speaker 17: then you know you're going to deal with how do
Speaker 17: you reduce debt, So it just becomes a big problem there.
Speaker 17: And then of course you just have the general concerns
Speaker 17: with integration risk, execution risk. And remember with this, you know,
Speaker 17: Netflix is really acquiring a business that they always wanted
Speaker 17: to stay away from. They're acquiring a traditional Yes, they
Speaker 17: do get the library, the fantastic IP, the HBO library,
Speaker 17: which is one of a kind when it comes to
Speaker 17: scripted you know, dramas, But then you also really are
Speaker 17: increasing your dependence on Hollywood. And the whole reason that
Speaker 17: Netflix has done so well ed is because they have
Speaker 17: been a global powerhouse. They have not just depended on
Speaker 17: Hollywood for content. They have gone to so many different
Speaker 17: local markets. International has been such a big deal for them.
Speaker 17: But you know, as we kind of see the union
Speaker 17: contracts kind of coming up, you know, we think that
Speaker 17: increasing the dependence on Hollywood is actually more of a
Speaker 17: negative than a positive for Netflix and.
Speaker 2: Just very quickly getha the stocks down more than thirty
Speaker 2: percent since this started. Is that a signal or is
Speaker 2: it real pressure on management?
Speaker 17: So a couple of different things. I think a lot
Speaker 17: of it hinges on what the outcome of this whole
Speaker 17: Warner Brothers Discovery deal is going to be. But then
Speaker 17: Netflix also has some problems. They have shown that they
Speaker 17: haven't really been able to grow engagement and a lot
Speaker 17: of people have argued that maybe that is why that
Speaker 17: they're pursuing Warner Brothers Discovery in the first place. So,
Speaker 17: you know, they have a couple of things to do
Speaker 17: in terms of increasing their operating margin in terms of
Speaker 17: boosting engagement, and if they do that, then I think
Speaker 17: management has a pretty good story why they don't need
Speaker 17: Warner Brothers Discovery.
Speaker 2: Keither rang enough from Bloomberg Intelligence. Thank you very much,
Speaker 2: and we will be speaking with Netflix coc Ted Surundos
Speaker 2: is in about thirty minutes time, so stick around. That
Speaker 2: does it for this edition of Bloomberg Tech Recap. What
Speaker 2: was an incredible news show on the podcast you know
Speaker 2: where to find it. This is Bloomberg Tech