Speaker 1: From the Heart where Innovation, money and power Collie in
Speaker 1: Silicon Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: I'm Caroline Heider Bloomberg's Worlday quarters in New York, and
Speaker 3: I'm Ed Ludlow in San Francisco.
Speaker 4: In this is Bloomberg Technology.
Speaker 3: Coming up, we'll talk all things chips as Intel wins
Speaker 3: nearly twenty million dollars of incentives from the US government.
Speaker 5: Plus the Biden administration weighs sanctions on Huawei's secretive chip
Speaker 5: network as the US seeks to curtail China's tech ambitions.
Speaker 3: And look, we've got to talk IPOs Reddit tomorrow. The
Speaker 3: company and shareholders guiding that they could price the offering
Speaker 3: at the top of its marketed ranger, above Astera Labs.
Speaker 3: The CEO joins US later as we expect to pop
Speaker 3: in those shares.
Speaker 6: Exclusive report at from Bloombog.
Speaker 3: The US is considering blacklisting a number of Chinese semiconductor
Speaker 3: firms linked to Huawei. That's after the telecom giant, of course,
Speaker 3: made that significant technological breakthrough.
Speaker 6: It seemed like last year.
Speaker 3: According to sources, We've got to get into it with
Speaker 3: Bloomberg's executive editor for US Government, Michael Shephard.
Speaker 6: Michael, it's great to have you on the show. And
Speaker 6: perhaps we've.
Speaker 3: Seen the reading of the tea leies anticipating yet further
Speaker 3: action on Chinese names.
Speaker 7: Well, I think you're right. What we're seeing is an
Speaker 7: extension of the Biden administration's push to keep China's chip
Speaker 7: making and technological pursuit in check. We have already seen
Speaker 7: them negotiating with the Netherlands, with Japan, with South Korea,
Speaker 7: and other countries to try to prevent China from acquiring
Speaker 7: the gear needed to make those advanced chips like the
Speaker 7: one that we saw Huawei deploy in that phone last summer.
Speaker 7: What was interesting is that the US was caught by
Speaker 7: surprise back then with that particular model of phone, which
Speaker 7: had a seven nanometer chip that was a semiconductor that
Speaker 7: the US had previously thought was out of China's reach.
Speaker 7: And Huawei, remember, has also been in the US cross
Speaker 7: heres for quite some time, for nearly a decade.
Speaker 4: Michael.
Speaker 5: We're just showing the list of Chinese domestic chip names
Speaker 5: that the US, according to our sources, is considering sanctioning.
Speaker 5: Swayshore pst CXMT, the d ram maker. What they all
Speaker 5: have in common, based on my understanding of the reporting,
Speaker 5: is existing ties to Huawei, either they're an affiliate of
Speaker 5: Huawei or Huawei has basically been using those companies to
Speaker 5: try and get access to chip making equipment to which
Speaker 5: Huawei is banned or sanctioned from accessing.
Speaker 7: Well, you're right, Huawei has been on the so called
Speaker 7: entity list, this blacklist since twenty nineteen, and that prohibits
Speaker 7: any US company from selling technology to Huawei unless it
Speaker 7: could spell permission from the Commerce Department. And the concern
Speaker 7: is that while we may have been able to develop
Speaker 7: this advanced chip that I just mentioned by using some
Speaker 7: of these companies as proxies to help get some of
Speaker 7: the technology it needed to make that leap. And so
Speaker 7: now what the US is trying to do, and Commerce
Speaker 7: Secretorary Gina Raymondo has been very clear about trying to
Speaker 7: plug any gaps in access that Huawei may have to
Speaker 7: advance technology. And likewise, the Commerce Department has also been pushing,
Speaker 7: as I mentioned, efforts to try to restrict China's access
Speaker 7: to chip making equipment in other areas as well.
Speaker 5: Okay, and it's important to note that the White House
Speaker 5: National Security Council, the Commerce Department did not comment on
Speaker 5: our story. Representatives all those Chinese domestic names that we
Speaker 5: show didn't respond to comment, but the Ministry of Foreign
Speaker 5: Affairs in China reiterated to us that it resolutely opposes
Speaker 5: US actions that disrupt market order and harm Chinese Enterprises's
Speaker 5: Michael Sheppard out of DC on an incredibly important Bloomberg
Speaker 5: piece of reporting.
Speaker 4: Thank you the other chip News. Let's get back to it.
Speaker 5: US will award Intel eight point five billion dollars in
Speaker 5: grants and as much as eleven billion dollars in loans
Speaker 5: to help the company fund and expansion of its semiconductive factories.
Speaker 5: That's the largest award from a program designed to reinvigorate
Speaker 5: the domestic chip industry. Here with me and San Francisco,
Speaker 5: Bloomberzie and King, we've gone the phone last night with
Speaker 5: Pat Gelsinger. It's a big chunk of money. He told
Speaker 5: us he would have liked more, but he's pretty happy
Speaker 5: with it. The main point is to onshore or re
Speaker 5: onshore the semiconductor industry in this country.
Speaker 8: Yeah, I mean there are two things that play here. Obviously,
Speaker 8: the concentration of advanced manufacturing who's currently in East Asia,
Speaker 8: predominantly Taiwan, but also South Korea. That, as we saw
Speaker 8: during the pandemic and this ongoing dispute with China, is
Speaker 8: a security risk, it's a stability risk. The Biden administration
Speaker 8: wants contingencies, it wants manufacturing in this country. It's backing
Speaker 8: Intel as the best chance of getting that. For Intel,
Speaker 8: they're on the comeback trail. They need money, all right,
Speaker 8: and this is a big chunk of that.
Speaker 3: Let's also think about some of the other names that
Speaker 3: are likely to be incentivized to build here in the
Speaker 3: United States, because it's notable. The US name gets the
Speaker 3: big chunk of change and the announcement, but others are
Speaker 3: going to be receiving it from the likes of Samsung
Speaker 3: for example.
Speaker 8: Yeah, I mean, you can't just back Intel. Intel, you know,
Speaker 8: let's be honest, has kind of fallen behind over the
Speaker 8: last five years. They say they're making a good shake
Speaker 8: of a comeback and that they're close to being back
Speaker 8: where they should be. But if you're looking at it
Speaker 8: from a purely objective point of view, then you have
Speaker 8: to back the winners as well, and that would be Samsung,
Speaker 8: and that would be Taiwan semi conductor Manufacturing, and both
Speaker 8: of those companies are building new facilities in the US.
Speaker 5: I think Pat Gelsinger was honest with us last night
Speaker 5: that the semiconductory industry in this country over a thirty
Speaker 5: year period, went elsewhere. Therefore, it's not going to happen
Speaker 5: overnight bringing it back. But walk our audience through the
Speaker 5: footprint of what they're trying to do. Arizona and Ohio
Speaker 5: are the focus. They also have plans for New Mexico.
Speaker 5: The twenty billion actually goes quite a long way towards
Speaker 5: getting things built.
Speaker 8: It doesn't, It doesn't. I mean, you've got to bear
Speaker 8: in mind one of these plants, twenty billion is just
Speaker 8: about going to cover.
Speaker 4: Its soutariety of that one fab.
Speaker 8: Right, So, I mean, and it's not actually building the factory,
Speaker 8: it's the equipment. It's what the money you give to
Speaker 8: apply materials and everything like that. So it's a massive
Speaker 8: amount of public money. But as you said, as you
Speaker 8: reminded us, he said, it's not as much as I want.
Speaker 7: Right.
Speaker 8: This helps this balances the economics. This makes investing in
Speaker 8: a US facility sort of equivalent to doing it in
Speaker 8: Taiwan or doing it in South Korea. But this is
Speaker 8: not a free pass. This is not a ten year
Speaker 8: kind of extension of Intel's life to do what they
Speaker 8: want for free for free. It's considerable help, but we're
Speaker 8: going to need more money if we want to create
Speaker 8: that basis.
Speaker 3: While the real gem of the chip ecosystem in the
Speaker 3: US and video has still been going out there discussing
Speaker 3: its future plans. It's vision for an AI focused reality
Speaker 3: in what are we learning more from in video? And
Speaker 3: also who they're bathing in their own glory?
Speaker 8: Are they anybody that Jensen Wang mentioned during his massive keynote,
Speaker 8: they start got a bump, and you know, my colleagues
Speaker 8: on the market team wrote a good story about that,
Speaker 8: So have a look at that one. And that's exactly
Speaker 8: what's going on here. They are absolutely central to what's
Speaker 8: going on. The big message was, hey, here's a great
Speaker 8: new tip. Of course it's twice as good as the
Speaker 8: previous one, but don't worry too much about that. There's servers,
Speaker 8: there's networking, there's you name it, and we're going to
Speaker 8: bring this technology to everybody. It's not just going to
Speaker 8: be for Amazon. It's not just going to be for Microsoft.
Speaker 8: We're going to put it out there for corporations yunday.
Speaker 8: Shipbuilding is going to be using AI to make better ships.
Speaker 4: It's everything.
Speaker 8: That was the big message that they kind of rammed
Speaker 8: down our throats over the last couple of days.
Speaker 3: It's Sam sang up the most of six months to
Speaker 3: getting Jensen Lang's blessing a little bit earlier, inking across
Speaker 3: it all in the world of chips, We've got more
Speaker 3: to come. We thank you so much. I mean, while
Speaker 3: coming up, Look, let's just check in on the implication
Speaker 3: of the chip market on the rest of the markets.
Speaker 3: Remember Magnificent seven still driving us to New hus yesterday.
Speaker 6: Where is it going in the future?
Speaker 3: Principal Asset Management chief Global strategist Semashal joins us ed,
Speaker 3: what are you looking at?
Speaker 5: Well, I'm looking at shares of Micron because we're at
Speaker 5: the tail end of earning season. But Micron memory chip maker,
Speaker 5: incredibly important, DRAM highly commoditized, and we've seen recovery in
Speaker 5: d RAM prices and the streets. Expectation is that that
Speaker 5: will result in some feel good for Micron. Where do
Speaker 5: the memory chip makers sit in this AI story? We
Speaker 5: still kind of want to learn that if they're building
Speaker 5: all these data centers, surely they need the memory to
Speaker 5: go in there alongside the GPUs and CPUs. Micro run
Speaker 5: up nine ten to percent, and it's a big earnings
Speaker 5: print after the bell. This is Bloomberg technology.
Speaker 3: Go ahead of the FED decision today, This so called
Speaker 3: Magnificent Seven, a few of them taking a breather, having
Speaker 3: powered benchmarks to new records yesterday. I made all this
Speaker 3: AI hype and indeed the reality being served to us
Speaker 3: from in video for example, the Laters unveilings. They've made
Speaker 3: some of these Magnificent seven names the most crowded trade
Speaker 3: according to Bank of America.
Speaker 6: So is this rarely going to be sustained? Let's get
Speaker 6: into it.
Speaker 3: Principal Asset Management chief Global strategist Seemacha is here with
Speaker 3: us and to talk us through the macro and the
Speaker 3: micro and just tell us how much you think, with
Speaker 3: the macro policy as it is, with the fared as
Speaker 3: it is, whether or not the Magnificent Seven can continue
Speaker 3: to just own this rally.
Speaker 9: Yeah, well, thanks for having me on. It's an interesting
Speaker 9: question right now because coming to this year, there was
Speaker 9: a perspective that actually there was going to be a
Speaker 9: ship away from the MAG seven into other parts of
Speaker 9: the market. But actually what we've seen is because there
Speaker 9: has been in so much macro volatility, so much debates
Speaker 9: still going on about what the FED is going to do,
Speaker 9: that you're still seeing that uncertainty. Mean that investors are
Speaker 9: looking for where they have safety, where they know what
Speaker 9: they can expect, and so that means that actually people's
Speaker 9: interest in MAG seven has been maintained. And of course
Speaker 9: there's always going to be questions about the froppiness evaluations.
Speaker 9: But actually the clients that we're speaking to, they're telling
Speaker 9: us that they really do have belief in the expectations,
Speaker 9: the earnings expectations, so they're not too concerned about the
Speaker 9: froth but they would like to find other parts of
Speaker 9: the market to also increase exposure to.
Speaker 6: And let's talk about other parts of the market.
Speaker 3: Is it therefore a broader part of the AI ecosystem
Speaker 3: we look at other names? Are the global names in particular,
Speaker 3: I think of ASML's done really well over there in Europe,
Speaker 3: We've done some other Asian names doing incredibly well.
Speaker 6: Or is it just getting into other industry groups.
Speaker 9: So there's a bit of both. I mean typically looking
Speaker 9: across TU Asia for the parts of that tech space
Speaker 9: which can do well, but it is also about looking
Speaker 9: at just other parts of the market, other sectors and
Speaker 9: the regions which haven't performed as well, particularly in twenty
Speaker 9: twenty three. So that has been some interest in small
Speaker 9: cap space, but really quite hesitant, but hopefully looking to
Speaker 9: see that once they know what the FED is going
Speaker 9: to do, that they can start dipping their toes more
Speaker 9: deeply into that area. And then other parts of the
Speaker 9: market which you really are not tech focused, places like
Speaker 9: Latin America, where evaluations are really interesting when the macro
Speaker 9: stories are quite compelling as well. So it is a
Speaker 9: bit of variation, but certainly what we're seeing throughout all
Speaker 9: of this is even as interested outside of the US
Speaker 9: tech space is growing, that still doesn't mean that then
Speaker 9: taking it away from US tech either.
Speaker 5: I've been thinking a lot sooner about what's supporting the
Speaker 5: sort of large or megacap tech space in the United
Speaker 5: States right. Earnings are really strong, and even if you
Speaker 5: debate the timing of rate cuts, I think most people
Speaker 5: still think some rate cuts are coming this year. But
Speaker 5: the thing supporting all of it is like this investment
Speaker 5: cycle driven by AI. How much carry does that give
Speaker 5: us through the end of the year. If you call
Speaker 5: it a tailwind, for how long does the tail wind flow?
Speaker 9: It's interesting because actually I would say that that narrative
Speaker 9: for a lot of people is not just the interest
Speaker 9: for the rest of the year, and it really takes
Speaker 9: up a very significant part of the strategic gap allocation,
Speaker 9: not necessarily the tactical ass allocation. The valuations mean that
Speaker 9: from a tactical side, this probably isn't going to be
Speaker 9: the time that you want to be adding your exposure.
Speaker 9: But most people are looking at this megacap space and saying, okay,
Speaker 9: this is something which is going to deliver for the
Speaker 9: next three, five to ten years from beyond because of
Speaker 9: the AI. So actually, I think that tailwind probably maintains
Speaker 9: and carries the space through to the end of the year.
Speaker 9: And obviously, look, the macrospace is going to be important,
Speaker 9: but as you said right now, the narrative is more
Speaker 9: about when is the bed going to cup? Not necessarily
Speaker 9: is the bed gonna cup? So certainly that does help
Speaker 9: the situation too.
Speaker 5: I want to go back to the example of Intel,
Speaker 5: because we were talking about it earlier in the show.
Speaker 5: You know, if you just as a comparison, put Intel
Speaker 5: side by side with the MAG seven, I think it's
Speaker 5: down sixteen seventeen percent so far this year, just got
Speaker 5: twenty billion dollars of awards from the US government, and
Speaker 5: it's another example of something supporting that sector, at least
Speaker 5: the CHIPSAC support. Do you expect investors to kind of
Speaker 5: pay that more credence in the back half of twenty
Speaker 5: twenty four.
Speaker 9: So we are, and I think that is actually a
Speaker 9: really important story is we're trying to see, you know,
Speaker 9: we know how the MAG seven is done, but it's
Speaker 9: now about thinking about whate of the second round effects,
Speaker 9: which are the other parts of the universe which are
Speaker 9: really going to benefit And as you said, Intel is
Speaker 9: one perfect example, but also if you just look outsidely
Speaker 9: in the tech sector, looking to maybe towards agribusiness, healthcare,
Speaker 9: data centers, these are all areas that will benefit as
Speaker 9: a second round from technology. And that's actually where we're
Speaker 9: getting particular client interest of where can they benefit maybe
Speaker 9: where the valuations haven't really moved up as much, but
Speaker 9: they do know that those segments of the market are
Speaker 9: really standing to have some serious gains over the coming
Speaker 9: years from all of the technology moves we've already seen.
Speaker 3: See, man, you are a global strategist, and you are
Speaker 3: a cross asset strategist. I would like to do credit,
Speaker 3: but instead I go to crypto and more broadly, is
Speaker 3: that something you're getting some clients more questions as to
Speaker 3: whether that rallies run out a little?
Speaker 10: Of course.
Speaker 9: I mean when you see the moves that we've had
Speaker 9: in the crypto in flu that you're going to get
Speaker 9: a lot of questions. And you know the questions are,
Speaker 9: of course, is can it continue? But also what we're
Speaker 9: seeing is that investors are looking and saying, well, look,
Speaker 9: this has been legitimized now and there is a real runway.
Speaker 9: They accept that there's a ton of volatility associated with this,
Speaker 9: they have to have a fairly strong stomach, but again
Speaker 9: they're looking at this is a long term and a
Speaker 9: long term perspective, not something that you can maybe trade
Speaker 9: in and out of. So certainly investors are trying to
Speaker 9: find like, where are we going to get the significant
Speaker 9: returns that maybe we've enjoyed in previous years but are
Speaker 9: looking a little bit more like a little less likely
Speaker 9: over the coming years. And that is certainly where crypto
Speaker 9: is coming in more.
Speaker 7: And more.
Speaker 5: Principal asset management chief global strategies seem as are great.
Speaker 5: To catch up with you here on invo technology. Steri
Speaker 5: Labs indicated to open at fifty two dollars fifty six
Speaker 5: cents a share. That's pretty significantly above its IPO price
Speaker 5: of thirty six dollars a share. Shares indicated to open
Speaker 5: at fifty three dollars as of around fifteen minutes past
Speaker 5: eleven Eastern time fifteen minutes past eight am Pacific time.
Speaker 5: It's a forty six percent premium on where they priced.
Speaker 5: Let's get straight to Bloomberg Deal's reporter, Katie Ruth.
Speaker 11: Your reaction, Well, this is the excitement that IPO market
Speaker 11: is needed. There've only been three venture backed IPOs since
Speaker 11: twenty twenty one. Is Sarah Labs popping significantly, which you
Speaker 11: know this is after already pricing above their revised range.
Speaker 11: They kept revising it higher because there was so much
Speaker 11: demand from institutional investors and so the fact that Sarah
Speaker 11: Lab's roadshow went really well shows it proves that there
Speaker 11: is an US through demand for the right companies for
Speaker 11: tech IPOs right now.
Speaker 6: And the reason that it's so well liked is well.
Speaker 3: It developed semiconductor based connectivity solutions. Basically, this is about AI, Katie,
Speaker 3: And do you think therefore we are needing to have
Speaker 3: this element of AI to get investors really excited at
Speaker 3: the moment.
Speaker 11: Yes, that's what it seems like. This is definitely an
Speaker 11: AI related company. They're in chips and you know that's
Speaker 11: been something that's drawn more excite and back to tech again.
Speaker 11: Obviously twenty twenty two was rough, and then twenty twenty
Speaker 11: three people started to get more excited about AI. And
Speaker 11: now in twenty twenty four we're seeing this make it
Speaker 11: to Wall Street in IPOs and there's a lot of
Speaker 11: excitement there.
Speaker 5: Let's get to the other technology IPO due in the
Speaker 5: next twenty four hours. Reddit sources are telling us that
Speaker 5: we're looking at the top end of the range. The
Speaker 5: range was thirty one to thirty four dollars a share,
Speaker 5: which on a diluted basis values.
Speaker 4: Reddit six point four billion. What do we know?
Speaker 11: So, you know, technically hasn't priced yet, but we're already
Speaker 11: hearing positive indications about where it will price. You know,
Speaker 11: they're writing off of the excitement from Astra, which helps,
Speaker 11: you know, excited investors for tech generally, and you know,
Speaker 11: they saw how the market was trading today and they're
Speaker 11: thinking already that this could go well. Technically, it doesn't
Speaker 11: get priced until after the bell, but you know already
Speaker 11: it's looking positive for Reddit.
Speaker 4: Yeah.
Speaker 3: I mean it's going to be music to some of
Speaker 3: the banks. Is when we're at record highs and in
Speaker 3: the days before the IPO being led by Monges Standing, Goldman,
Speaker 3: sax Shaping, Morgan, Bank of America, Katie. This is a
Speaker 3: name that people have anticipated coming to the market for
Speaker 3: so long. How is some of the allocation going to
Speaker 3: the regets themselves? Because they want to ensure that their
Speaker 3: community is supportive of them going public.
Speaker 11: That's right. They're allocating shares to some of their top
Speaker 11: Breddit users. And you know the way this works is
Speaker 11: normally it's a wall street that gets access at the
Speaker 11: IPO price. Normally, an average retail investor can only buy
Speaker 11: after it begins trade on the first day, and they
Speaker 11: don't have access to that much of that pop that
Speaker 11: we see, and so this is a way to kind
Speaker 11: of gift that to some of their top users. We
Speaker 11: have seen this with a couple of other consumer facing
Speaker 11: IPOs now but this is part of that trend.
Speaker 5: I think what's interesting about Reddit is relatively complicated history.
Speaker 5: Founded two thousand and five, had a y combinator as well,
Speaker 5: then bought by Conde Nas very quickly spun out twenty eleven,
Speaker 5: and as carry pointed out, we've been waiting.
Speaker 4: A long time.
Speaker 5: There is also how this IPA is going to work.
Speaker 5: So some of the sheds to insiders and staff, some
Speaker 5: of them to redditors themselves. How does that impact the mechanics?
Speaker 4: Sure?
Speaker 11: So, you know, what we saw on this is that
Speaker 11: we had smaller than usual stakes for some of the
Speaker 11: institutional shareholders like venture capitalists, and that's part of that,
Speaker 11: you know, because they were spun out of Advanced the
Speaker 11: Conde Nas parent, the founders had really small stakes, you know,
Speaker 11: less than five percent for them, and that's not something
Speaker 11: we typically see at the time of an IPL. But
Speaker 11: you know, this is a company that's going public after
Speaker 11: being around for nineteen years. That's really really long for
Speaker 11: a startup to IPL. But again, this is technically the
Speaker 11: second exit for Reddit because they were sold in the
Speaker 11: early days and then now spun out.
Speaker 3: Question is profitability from these companies as of when it's
Speaker 3: hit Katie Woof, We thank you so much for breaking
Speaker 3: it down. It feels like a bit of an IPO
Speaker 3: Mini Frenzy. Welcome back to Bloomberg Technology and carolinehid in New.
Speaker 5: York and I'm Med Lodlo in San Francisco. The Buying
Speaker 5: Administration is toughening auto emission mandates in order to boost
Speaker 5: EV sales. In the near term, there's actually some easing
Speaker 5: in tail pipe requirements, but in the long term it's
Speaker 5: going to be an EPA cat for car and truck
Speaker 5: tailpipe emissions through the model years twenty thirty two. The
Speaker 5: idea is that it will push the automakers, particularly the
Speaker 5: legacy auto makers, to move more quickly in boosting their
Speaker 5: sales of battery electric vehicles. You look at some of
Speaker 5: the names on the board. We have both pure play
Speaker 5: and legacy OEMs on there that are making both combustion
Speaker 5: engine and EV powertrain. Right now, you'd expect that GM
Speaker 5: and Ford, as an example, will now get going more quickly. Caro,
Speaker 5: as I say, biden tailpipe rule coming into a force
Speaker 5: and pushing those EV makers to accelerate their EV timelines.
Speaker 6: This is an interesting that Semashah.
Speaker 3: We just had that conversation about how much regulation and
Speaker 3: US incentives are going to be changing some of the investors'
Speaker 3: mindsets so across chips and cars. Meanwhile, let's just go
Speaker 3: to Microsoft for a moment.
Speaker 6: Get this.
Speaker 3: It's tapped DeepMind co founder and the stuff are Cinnemon
Speaker 3: to head up its consumer artificial intelligence business, basically hiring
Speaker 3: most of the stuff from his Inflection AI startup. As
Speaker 3: a software giant, it's trying to be fending off Google
Speaker 3: in the highly competitive market for AI products, really targeting consumers.
Speaker 3: Joining us now from more bloom Moost Jackie Deavlos, And
Speaker 3: this is so interesting because once again Microsoft getting in
Speaker 3: net with a really fan favorite startup. This one an
Speaker 3: empathetic one when it comes to Chapel, but they're licensing
Speaker 3: the tech of Inflection and taking both well two of
Speaker 3: the three co founders right they already have Reidofman on
Speaker 3: the board.
Speaker 2: It's a really interesting agreement between one of the biggest
Speaker 2: players in AI right now, Microsoft and what was seen
Speaker 2: to be is a really promising AIS startup. Now, both
Speaker 2: companies were pretty careful not to call this an acquisition,
Speaker 2: but nonetheless the agreement effectively has Microsoft absorbing this team
Speaker 2: for them, it means they get to acquire this massive talent.
Speaker 2: Mustafa Suliman, as you mentioned Caroline, comes from Google and
Speaker 2: before that he co founded Deepmine along with Demisisabus. This
Speaker 2: is kind of really pitting these two prominent figures and
Speaker 2: artificial intelligence in these competing roles. Now, for Microsoft, this
Speaker 2: is not just about the talent, but it's also about
Speaker 2: expanding into consumer where you know, they haven't traditionally been
Speaker 2: able to do as well as their enterprise business. So
Speaker 2: this is a fairly large advantage for them for inflection.
Speaker 2: On the other hand, there's still a few questions there
Speaker 2: as to what this means for the company. While yes,
Speaker 2: they get to run their technology on Microsoft's Azure infrastructure,
Speaker 2: what does this mean for investors? The company said yesterday
Speaker 2: that investors will be made whole. Even read Hoffman himself
Speaker 2: posted on LinkedIn saying that it would be a good
Speaker 2: outcome for investors. How and when this will happen is
Speaker 2: still yet to be seen.
Speaker 4: I think there's more than a few questions with this.
Speaker 5: So when we put the story out on social media,
Speaker 5: people start calling in Aqui higher and then this is
Speaker 5: the most bizarre thing about the whole thing. Open Ai
Speaker 5: felt compelled to issue a statement congratulating the stuff on
Speaker 5: his new role, and I think that we spoke to
Speaker 5: in Thedella as well, right Jackie, and he reiterated Microsoft's
Speaker 5: commitment to open up. It's a very complicated situation.
Speaker 2: It really is, because at the end of the day,
Speaker 2: open Ai is a competitor to Inflection in many ways.
Speaker 2: Inflection runs its own chat pot pie, which it said
Speaker 2: it will continue to keep running for how long That's unclear,
Speaker 2: but for what we do know is that Inflection plans
Speaker 2: to focus more on enterprise business. Of course, that's right
Speaker 2: up Microsoft's alley. But at the end of the day,
Speaker 2: you have to kind of wonder how this is also
Speaker 2: going to play out within Microsoft, who's already under some
Speaker 2: pretty intense scrutiny by the FTC here in the US
Speaker 2: about its agreement with open Ai. This might potentially draw
Speaker 2: some more scrutiny, but again, I think we're still waiting
Speaker 2: on some of the details around what this means for
Speaker 2: the rest of the Inflection team. The company didn't say
Speaker 2: exactly how many of inflection seventy employees will be joining over,
Speaker 2: although we do know that another co founder will lead
Speaker 2: It will become chief scientific Officer under this new Microsoft
Speaker 2: AI group.
Speaker 5: Public companies private companies making moves. Another example of a
Speaker 5: public and private company getting closer aligned Blue Most Jack Davolos,
Speaker 5: Trivic Reporting, Thank you AI, Let's stick with it and
Speaker 5: let's stick with private markets is also on ivp's mind.
Speaker 4: The forty four year.
Speaker 5: Old Silicon Valley venture firm wanting to take advantage of
Speaker 5: the great opportunities it sees with this technological shift, and
Speaker 5: it's launching it's eighteenth fund with a one point six
Speaker 5: billion dollar raise. Springing IVP partner Caac Wilhelm for more
Speaker 5: in today's VC Spotlight. Welcome to the studio in San Francisco.
Speaker 5: Let's start with the fund one point six billion.
Speaker 4: Explain it to me.
Speaker 5: What is it going to be used for, what is
Speaker 5: the thematic focus, and how did it come together?
Speaker 6: Absolutely?
Speaker 10: Yeah, So you mentioned one point six billion and eighteenth fund.
Speaker 10: That means, you know, Fund one was back in nineteen
Speaker 10: eighty Fund one was a grand total of twenty two
Speaker 10: million dollars.
Speaker 6: So as you can see, we've come a long way.
Speaker 6: We've invested through.
Speaker 10: Cycles, and I think the key cycle right now is AI.
Speaker 5: But it's a crowded space, a crowded cycle because you
Speaker 5: not only have the like, well one point thing's been
Speaker 5: in early stage or so it's a good question.
Speaker 10: You know, venture means many things, so many people ventures
Speaker 10: everything from you know pre.
Speaker 6: Seed and seed all the way to pre IPO.
Speaker 10: We are squarely in the sort of super growth phase.
Speaker 10: So you're raising a Series B in a Series C,
Speaker 10: you have early data. We believe in you, your team
Speaker 10: and your market, and that's where we're trying to hone
Speaker 10: in interesting in venture. You know, lots of people have
Speaker 10: moved to a platform model, so everything to everyone. We
Speaker 10: have consistently over eighteen funds, we've been really focused on
Speaker 10: doing this one stage in this one stage way.
Speaker 5: How I didn't mean to lose my train of thought there,
Speaker 5: but I was just reflecting, having been at GtC, that
Speaker 5: this is a space where it's not just venture firms
Speaker 5: jumping in. You have strategic investors like in video as well.
Speaker 5: There's a lot of people putting capital to play.
Speaker 6: Yeah, it's super competitive.
Speaker 3: And for that instance, when you're trying to therefore woo
Speaker 3: in this new era of founders and ensure that you're
Speaker 3: managing to write the write checks rather than well, the
Speaker 3: corporate vcs at the same time, CAAC, I'm assuming some
Speaker 3: of the past precedents really win out. I think of
Speaker 3: some of the exits that you've had Data Dog here
Speaker 3: in New York. I think of Klana coming up. I mean,
Speaker 3: how much does that track record help show that you
Speaker 3: should be as part of that winning team for them?
Speaker 10: Yeah, exactly. I mean I think longevity really helps. I
Speaker 10: think brand matters and venture capital. So I think the
Speaker 10: brand of IVP means something we wanted to mean, substance
Speaker 10: and soul. We wanted to mean that warrior partner. We're
Speaker 10: going to lead the round and we're going to be
Speaker 10: with you for a long time. Take for example, Perplexity,
Speaker 10: which is sort of akin to you know, Consumer AI
Speaker 10: at the moment, and then Zekeeist and that's one where
Speaker 10: we you know, hard fought battle for the Series B
Speaker 10: and we were competitive and we won.
Speaker 3: What do you make there for of inflection going with
Speaker 3: Microsoft and a future of Perplexity. I mean, it feels
Speaker 3: as though the big tech companies are not only writing
Speaker 3: with their vcs, but they're also making these very extraordinary
Speaker 3: partnerships that end up feeling.
Speaker 6: Like M and A.
Speaker 10: Yeah, I mean on this one you guys were discussing earlier.
Speaker 10: I would like this inflection deal does sort of like
Speaker 10: smells like an acquisition, looks like an acquisition. I think
Speaker 10: everyone's focused on the CEO and his his move and
Speaker 10: his role and Microsoft. But I think this does sound
Speaker 10: and smell more like an acquisition than it does anything
Speaker 10: else to me.
Speaker 6: I mean, I think what it does is, you.
Speaker 10: Know, from the perspective of a perplexity for example, very
Speaker 10: focused on Google and their positioning visa be Google. I
Speaker 10: think Microsoft historically conventionally has been very much an enterprise business.
Speaker 10: So I think what this does is this puts Microsoft
Speaker 10: consumer on the map in a way that maybe people
Speaker 10: hadn't appreciated more recently.
Speaker 3: Thinking of consumer, I'm thinking of you know, Klana for example,
Speaker 3: as one of those companies that is very consumer facing,
Speaker 3: is looking at tapping the markets itself. We today are
Speaker 3: anticipating a non consumer business a Steri Labs coming to
Speaker 3: the market. It looks as though it's going to price well,
Speaker 3: it's going to start trading well above where at priced
Speaker 3: we got Reddit tomorrow. How do you feel about the
Speaker 3: exits at the moment, not only just big joint ventures,
Speaker 3: but the public markets.
Speaker 10: I'd say we're cautiously optimistic. I mean, if you think
Speaker 10: look back on history, look at twenty twenty one for IVP,
Speaker 10: we had fifteen IPOs in that single year. That's of
Speaker 10: one hundred and thirty total over we discussed since nineteen eighty.
Speaker 10: So those heyday you know, that heyday we all lived at.
Speaker 10: You know, maybe we want to go back, but those
Speaker 10: days are probably over for the next you know, ensuing years.
Speaker 10: I think again, we're cautiously optimistic for this year. We
Speaker 10: don't think it's going to be more like twenty twenty one.
Speaker 10: But you know, Reddit and these others suggest that there
Speaker 10: are companies in the wings that want to get out.
Speaker 5: I'm interested in where the one point six billion is
Speaker 5: coming from in the context of exits, but also the competition.
Speaker 5: We are obsessed with the FED because we're Bloomberg and
Speaker 5: that's all we talk about. But who would be an
Speaker 5: LP right now in a venture firm like like yours.
Speaker 5: Are they kicking down your door and saying I want
Speaker 5: on that fund or was it difficult to bring the
Speaker 5: fund together?
Speaker 6: Yeah, a little bit of both.
Speaker 10: I mean, we started in nineteen eighty and so we
Speaker 10: have an investor base money of whom we've been with
Speaker 10: us since nineteen eighty. You know that is a makeup
Speaker 10: of a lot of US in Europe sort of mainstream LPs.
Speaker 10: That being said, if you had taken a pulse check
Speaker 10: with me six months ago, five months ago, four months ago,
Speaker 10: I would have had different answers for you. It wasn't straightforward.
Speaker 10: I think you guys know as well as we do.
Speaker 10: Like it's been a tumultuous several years and the liquidity constraints,
Speaker 10: the optimism of our investor base has really varied over time.
Speaker 3: One of seven GPS over their IVP of course oldest
Speaker 3: one on the black block when it comes to Slickon
Speaker 3: Valley and cac. But you need to get into your
Speaker 3: running prowess and how that's all going. IVP partner CAQ Wilhelm,
Speaker 3: We thank you so much for coming on and talk
Speaker 3: about the new fun. Meanwhile, coming up, we've got to
Speaker 3: get into the IPO. We're just mentioning Asta Labs. It's
Speaker 3: about to go start moving on the Nasdak it priced
Speaker 3: now we're going to see where it starts to trade.
Speaker 6: CEO Ja Tendra Mohun's joining us.
Speaker 5: Ed what if you got I want to go back
Speaker 5: to those kind of legacy automaker and EV names we
Speaker 5: were watching.
Speaker 4: The Biden administration is bringing in.
Speaker 5: Tougher tailpipe rules effective or caps through model year twenty
Speaker 5: thirty two. The we ease the short term requirements, but
Speaker 5: the idea is make long term tail pipe emissions regulations tougher.
Speaker 5: Now to get some of those names like GM and
Speaker 5: Ford to move more quickly on transitioning to battery electric.
Speaker 5: There wasn't really a knee joke reaction in the moves
Speaker 5: of these names. We do see some of them higher
Speaker 5: Rivian soft to one point three percent, but Rivian has
Speaker 5: got all kinds of problems right now, which we will
Speaker 5: continue to report on.
Speaker 4: This is Bloomberg technology.
Speaker 3: We've got to talk IPOs, We've got to talk the
Speaker 3: listing day over stra Labs, which provides purpose built connectivity
Speaker 3: solutions basically for artificial intelligence and for cloud infrastructure.
Speaker 6: Company will soon be busy trading on the.
Speaker 12: Nasdack and of the ticket symbol alab A Lab here
Speaker 12: for more as the Estera Lab CEO Tendra Mahanjatendra, you
Speaker 12: own what about six percent of a company that's going
Speaker 12: to rock it to more than about a ten million
Speaker 12: dollar valuation.
Speaker 6: How do you feel?
Speaker 13: Feels great, feels awesome. It's not about me, though, it's
Speaker 13: if you think about Esthera, It's really all about the
Speaker 13: people who have helped us get to this valuation, and
Speaker 13: it's the people who are going to push us to
Speaker 13: new heights. So very excited.
Speaker 5: About today to Tendrey, Good morning from San Francisco, and
Speaker 5: sorry to interrupts you. Just a few minutes before you
Speaker 5: joined us on the program, Bloomberg reported that your stock
Speaker 5: is indicated to open at fifty two dollars fifty six
Speaker 5: cents a share. That's a forty six percent premium on where.
Speaker 4: The IPO price. What's your reaction to that?
Speaker 13: Thanks, stock market prices are something that we should be
Speaker 13: aware of, but not let them drive us. It's my philosophy.
Speaker 13: I think it's an indication of the confidence that our
Speaker 13: investors are placing in us. So we are very, very glad.
Speaker 13: We have a lot of gratitude for them. But we'll
Speaker 13: keep our heads down, continue executing, continue building products.
Speaker 3: And let's talk about that execution that's driven your revenue
Speaker 3: to last year one hundred and sixteen million dollars, almost
Speaker 3: doubling but you're still got a net loss of twenty
Speaker 3: six million dollars when you think you will be able
Speaker 3: to provide that profitability that so many investors want to see.
Speaker 13: So we declared that the last quarter we were indeed profitable.
Speaker 13: A focus for ester Labs from the inception has been
Speaker 13: to build a strong business, one that can stand on
Speaker 13: its own to feet without external support, and that's what
Speaker 13: we've been doing for the last six years. We turned
Speaker 13: in a profitable quarter last quarter, and we will continue
Speaker 13: to drive our business forward in the coming quarters and
Speaker 13: years to come.
Speaker 5: Jitendra, there were no fewer than two hundred and seventy
Speaker 5: one mentions of the word AI in your most recent
Speaker 5: SEC filing before this morning, and I think it's worth
Speaker 5: discussing what a stera actually does. Right, You make the
Speaker 5: hardware or the chip that allows for the high speed
Speaker 5: connection between different parts of the server rack war as
Speaker 5: is now more commonplace to call it the computer the
Speaker 5: compute plant form. How are you actually benefiting in the
Speaker 5: real world from this AI infrastructure build out that we're
Speaker 5: seeing before our eyes.
Speaker 13: Yeah, that's a great question, and let me give you
Speaker 13: a little background. So whenever you enter a querry into
Speaker 13: a chat GPT or you look for a recommendation coming
Speaker 13: from Netflix or Amazon. What happens in the back is
Speaker 13: in a data center, thousands, hundreds of thousands of computers
Speaker 13: you know, many times based on GPUs come into action
Speaker 13: and they talk to each other very very rapidly, at
Speaker 13: very very high rates. And in fact, the rates are
Speaker 13: so much that they are not able to talk very
Speaker 13: well together. And that's where our products come in. We
Speaker 13: enable the CPUs and GPUs to talk to each other.
Speaker 13: A great analogy might be one of running a race.
Speaker 13: If you want to run really fast, you will get tired,
Speaker 13: and so you run a really race. You start from
Speaker 13: one point, you run very fast, passy button onto the
Speaker 13: next guy, and continue forward. That's what our products do.
Speaker 13: They enable all of these brains that are behind AI
Speaker 13: to talk to each other very fast and reliably.
Speaker 3: Briefly, you've raised seven hundred and thirty million dollars. What
Speaker 3: are you doing with it?
Speaker 6: Chatandra?
Speaker 13: We have so much opportunity in front of us. We
Speaker 13: are in a very unique position where our customers are
Speaker 13: coming to us and telling us, build me this, build
Speaker 13: me this. You guys are good at semiconductors. You can
Speaker 13: build hardware you can do software. We've earned a trusted
Speaker 13: advisors status with our customers and so much opportunity in
Speaker 13: front of us, so we will use this money to
Speaker 13: really accelerate the product development that we've done, hire more people.
Speaker 13: If you're watching this and you're looking for a job
Speaker 13: at Estera Labs, please.
Speaker 5: Apply Sarah Labs CEO to Bendromo and great to have
Speaker 5: you on the program. After Hollywood filmmaker George Lucas showed
Speaker 5: support for Disney CEO Bob iger in his proxy battle
Speaker 5: of activist investors, let's get the take of Gerber Kawasaki
Speaker 5: CEO and President Ros Gerber, who's point posting on x
Speaker 5: that Nelson Peltz quote does not know his way around
Speaker 5: Hollywood or anything related to the entertainment industry.
Speaker 4: Ross is here with us on the program.
Speaker 5: So I guess the latest piece of news is what
Speaker 5: we reported on Tuesday that George Lucas, who sold his
Speaker 5: production house to Disney for stock, is coming out and
Speaker 5: saying Bob's the man.
Speaker 4: Does that carry weight for you?
Speaker 1: I mean, George Lucas is like one of the geniuses
Speaker 1: of Hollywood, and Bob Igrew, who you know, I've met
Speaker 1: and talked to many times, is like one of the
Speaker 1: best CEOs in like America or maybe the world, but
Speaker 1: also one of the best CEOs in Hollywood. And like
Speaker 1: getting this deal yesterday with ESPN in college sports, getting
Speaker 1: Taylor Swift on the platform. You know, these are the
Speaker 1: Bob Iger effect that people like Nelson Peltz who just
Speaker 1: like do financials he should worry about Ben and Jerry's
Speaker 1: and New Believer versus getting involved with companies like Disney
Speaker 1: and Hollywood, which are really really hard to understand how
Speaker 1: to make money in Hollywood, very very few people ever
Speaker 1: have and Bob Iver is one of them. So so
Speaker 1: we support him one hundred percent. He's a great person,
Speaker 1: a great leader, and George Lucas as well, one of
Speaker 1: the great creators of our time. Basically everybody supports Eiger
Speaker 1: except Pelts.
Speaker 3: And his former CFO, who would have known how to
Speaker 3: make money in Hollywood before.
Speaker 1: And I'm actually okay with replacing one of the board
Speaker 1: members with Joe Rossulo, especially somebody like Mary Barrow who
Speaker 1: has no reason to be on the board of directors
Speaker 1: at Tesla. So like, I don't think it's a horrible
Speaker 1: thing to have one board member switched for one of
Speaker 1: their picks, especially Joe. But like in general, Disney's doing
Speaker 1: well right now and they're doing everything they need to
Speaker 1: do to fix the business.
Speaker 5: Because real quick, I think you said Tesla, but did
Speaker 5: you mean you meant Disney Disney. Yeah, I'm sorry, Elon's
Speaker 5: on your mind a lot at the moment.
Speaker 4: I get it.
Speaker 5: Yeah, let's let's not go there, us.
Speaker 4: Let let's let's not go there. Let's stick with Disney.
Speaker 5: We're speaking so much about a proxy fight and an
Speaker 5: activist investor battle that actually, I don't think we've got
Speaker 5: any real good sense on how things are going at Disney.
Speaker 5: Because the accusation from those that want change, like Nelson Peltz,
Speaker 5: is it's not going very well, right, That's why they
Speaker 5: want change. But what do you feel about the performance
Speaker 5: of disney streaming business. It's studios and it's parks.
Speaker 1: Well, that's not the vibe I'm getting. You know, I
Speaker 1: live here in Hollywood, and you know I have deep
Speaker 1: connections through the entertainment industry. You know, Disney and Hollywood
Speaker 1: is going through a major retrenchment now on what they're
Speaker 1: spending on streaming and what they're spending on shows and
Speaker 1: what content's being made, and it's not just Disney, It's
Speaker 1: it's Netflix and many of the other players are really
Speaker 1: looking at profitability now and with the ad support and
Speaker 1: streaming services. But but Disney streaming services do we just fine?
Speaker 5: You know?
Speaker 1: Showgun is a great show, so the number one show
Speaker 1: out there if you haven't seen it, amazing show. They've
Speaker 1: got Taylor Swift on the platform, you know. So Disney
Speaker 1: Plus is doing well. ESPN is making all the right
Speaker 1: moves they need to make to move into the next
Speaker 1: stage for its growth, and parks and resorts is great
Speaker 1: as well. They just need to make some good movies.
Speaker 1: That's the only thing. And the best person to make
Speaker 1: good movies is Iiger and his team. There's nobody else
Speaker 1: that I would trust doing that.
Speaker 3: Well, they can just license Area's Tour, which got four
Speaker 3: point six million views on Disney Plus apparently in its
Speaker 3: first weekend.
Speaker 6: So go with the hits.
Speaker 3: But Ross, I am interested in the successor eventually. As
Speaker 3: much as you love Bob Iger, he's got to go
Speaker 3: in twenty twenty six.
Speaker 6: Who do you like?
Speaker 1: Well, you know, the truth of the matter is, I've
Speaker 1: been around since the Eisner era, so until he's actually gone.
Speaker 1: I don't know. I don't know if I believe somebody's
Speaker 1: replacing him, because you know, Bob Iger's in phenomenal shape,
Speaker 1: and you know, if Joe Biden's running for president, certainly
Speaker 1: Bob Iger can run Disney for another ten years. But
Speaker 1: that said, you know, I'm really really partial to you know,
Speaker 1: some of the teams that have worked with them in
Speaker 1: the past, and and you know, especially people who've worked
Speaker 1: on Disney Plus and some of the other things. So
Speaker 1: there are many executives that they're talking to, you know
Speaker 1: that I have a lot of faith in that could
Speaker 1: replace them, But I still think it's really up for grabs,
Speaker 1: and right now I'm happy i Iber is still there,
Speaker 1: you know.
Speaker 3: Goba Kawasaki, CEO, President ros Gerber always great to catch
Speaker 3: up with you. Thank you so much for Meanwhile, Well
Speaker 3: that does it for this edition of Bloomberg Technology.
Speaker 6: Boy, what a busy show.
Speaker 7: Ed.
Speaker 5: Yeah, it's interesting how there is this kind of little
Speaker 5: IPO euphoria window of the next twenty four hours recap
Speaker 5: the ASTERA conversation in particular on the pod Apple Spotify.
Speaker 4: iHeart the Bloomberg platforms.
Speaker 5: So many of you are checking out the pod on
Speaker 5: your way to work, or when you're on the treadmill,
Speaker 5: whatever it is. Tune in daily from New York and SF.
Speaker 5: This is Bloomberg Technology.
Speaker 4: James wol