Speaker 1: From Marhard where Innovation of Money and Power Collie in
Speaker 1: Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hide
Speaker 1: and Ed Ludlow.
Speaker 2: And Caroline Heide of Bloomberg's Weld headquarters in New.
Speaker 3: York and Amed Ludlow in San Francisco. This is Bloomberg
Speaker 3: Technology coming up.
Speaker 2: ARM kicks off its IPO roadshow seeking nearly five million dollars,
Speaker 2: but will break down why the offering could be significantly
Speaker 2: smaller than previously targeted.
Speaker 3: Plus will take a look inside Huawei's new phone, which
Speaker 3: holds the most advanced chip made in China yet. This
Speaker 3: is the country seats sarras of forty billion dollar fund
Speaker 3: to bankroll investments in domestic chip making and research, and.
Speaker 2: How digital regulation in the EU is impacting America's techture.
Speaker 2: Mid the forthcoming Digital Markets Act or bring you the
Speaker 2: details of what is going to be unveiled in terms
Speaker 2: of those gatekeepers as soon as tomorrow. But first that's
Speaker 2: check in on these markets and some of the big
Speaker 2: US players not managing to lift the Nasdaq all that
Speaker 2: much today. We're actually down, my bad a tenth of
Speaker 2: a percent. Look, it's the back to school feeling but
Speaker 2: we're also getting our reality check on what is a
Speaker 2: macro picture that is pretty ugly over in China is
Speaker 2: pretty ugly over in Europe.
Speaker 4: When you look at the PMI.
Speaker 2: Data, the tenure yield just rising after of course a
Speaker 2: day of rest and play that we had on Monday.
Speaker 2: In the US trading action, we're maybe perhaps you picking
Speaker 2: up a little bit as we see more investment grade
Speaker 2: bonds coming to the market. Of course that back to
Speaker 2: school feeling means we're.
Speaker 4: Going to get a ton of issuance.
Speaker 2: I'm looking at the Bloomberg Dollar Index, so this is
Speaker 2: really the asset class to be watching at the moment.
Speaker 2: Dollar pressured higher at the moment. Is this just trying
Speaker 2: to find some sort of well, more safety in the
Speaker 2: current macro picture. Is this also that the Federal Reserve
Speaker 2: is going to be keeping higher rates for longer visa
Speaker 2: vi the rest of the world when the US economy
Speaker 2: just manages to navigate a downturn for the rest of
Speaker 2: the world. We look at what's happening in terms of bitcoin. Therefore,
Speaker 2: on the lower side, when you see the dollar outperform,
Speaker 2: we just found that about a third of a overall
Speaker 2: twenty five hundred is where we traded.
Speaker 4: But get into minittigritty the individual movers.
Speaker 3: Yeah, you and I were talking this morning about how
Speaker 3: there's not that much action in the technology sector.
Speaker 5: There are a few individual names.
Speaker 3: Airbnb up six point seven percent best performer on the
Speaker 3: Nazda one hundred, hy news that it's going to be
Speaker 3: included in the s and P five hundred. That driving
Speaker 3: that single name. How we tease Huawei, We're going to
Speaker 3: bring you something fascinating, an official tear down of the
Speaker 3: Mate sixty pro. One mover to the downside is the
Speaker 3: ADRs of Jaomi. The theory being that if Huawei gains
Speaker 3: market share in the domestic smartphone market, itlbeit at Shaomi's
Speaker 3: expense in Nvidia a little bit lower. Moving to the downside,
Speaker 3: we're gonna have a really interesting conversation you and I
Speaker 3: Caroline about in Nvidia's valuation and one voice who says
Speaker 3: it's getting a little bit extreme and overdone. The main
Speaker 3: story I would say in Tuesday's morning, remember we're coming
Speaker 3: off long weekend, is arms IPO. We got that F
Speaker 3: one filing, and here are the numbers on the low end,
Speaker 3: forty seven dollars a share. At the high end fifth
Speaker 3: fey one dollars a share, raising four point eight seven
Speaker 3: billion dollars in terms of proceeds from an IPO. This
Speaker 3: is the early stages, but these are much lower numbers
Speaker 3: than have been reported out there. Let's bring in Bloomberg's
Speaker 3: Leanna Baker, who leads our deals coverage out of New York,
Speaker 3: and Leanna walk us through the numbers and what we've
Speaker 3: learned in this kind of opening foray of the road
Speaker 3: show week.
Speaker 6: The numbers, as you mentioned, came in a little below
Speaker 6: what had earlier been reported. ARM had been looking to raise.
Speaker 6: At one point we had reported eight to ten billion.
Speaker 6: That has been scaled back a bit. You mentioned that
Speaker 6: we could still see it go up. The road show
Speaker 6: is just starting. There could be great demand, for all
Speaker 6: we know, for these shares, and we could see them
Speaker 6: raise the range. That's definitely possible. That said, SoftBank has
Speaker 6: kind of scaled back the amount that they want to sell.
Speaker 6: Nasayoshi Sowne, the CEO and founder of SoftBank, is very
Speaker 6: bullish on ARM. He doesn't want to get rid of
Speaker 6: the whole thing. They're only selling ten percent in the IPO,
Speaker 6: so that's one of the reasons why the company is
Speaker 6: not looking to raise as much as they had thought,
Speaker 6: and because they're not looking to raise as much, the
Speaker 6: valuation is a little lower. It's still a behemoth though.
Speaker 6: This is a company according to the filing that'll be
Speaker 6: valued at close to fifty five billion, So it's definitely
Speaker 6: sort of the first big elephant out of the gate
Speaker 6: to get the IPO markets moving again.
Speaker 4: Yeah. Boy, we are excited on it, so to perhaps some.
Speaker 2: Of the m zoned customers that are coming in as
Speaker 2: integraled investors in the IPO. But if there are going
Speaker 2: to be any flies in the ointment, what are they?
Speaker 4: What are all the questions on the road show going
Speaker 4: to be about.
Speaker 6: There's definitely questions about arms path forward. They've changed their
Speaker 6: business model a bit. They're trying to get into the
Speaker 6: more lucrative data center and computing, not a fully away
Speaker 6: from mobile mobiles. Their roots, and they're ubiquitous with all
Speaker 6: their customers, many of whom you mentioned are participating in
Speaker 6: the IPO, like Apple and AMD and others. But will
Speaker 6: the company be able to fully change its business model
Speaker 6: to spark growth. That's the question investors will want to see,
Speaker 6: especially the ones who had invested when I got taken
Speaker 6: private in twenty sixteen, will they be back and what's
Speaker 6: the path forward?
Speaker 2: We got someone to talk about those key questions with
Speaker 2: Leanna Baker. Great setup, She's got some busy weeks coming up. Meanwhile,
Speaker 2: let's extend this conversation. Piever goes with us unless they
Speaker 2: wrote new Street research, and it feels to me, Pierre,
Speaker 2: A key question on everyone's lips is exposure to China,
Speaker 2: particularly when we have the macro data coming in thick
Speaker 2: and fast.
Speaker 4: That's on the weaker side.
Speaker 7: Yes, you know, as a rule of sum, the semiconical
Speaker 7: industries exposed twenty to twenty five percent to domestic China.
Speaker 7: And guess what ARM that is really almost everywhere it's
Speaker 7: only going to judge is exposed about the same to China.
Speaker 1: So twenty twenty five percenter provenues.
Speaker 7: People talk a lot about it because the setup is
Speaker 7: very specific for Armed. They have like a subsidiary in
Speaker 7: China as they've gun control and that's their only Chinese client.
Speaker 7: So all companies in China who want to use ARM
Speaker 7: technology license that technology is their It have a copyright
Speaker 7: license on their on their instructions set have to go
Speaker 7: through this local ARM company. It has created some difficulties
Speaker 7: in the past because there is lack of control, lack
Speaker 7: of you know, auditing of the company, but it's it's
Speaker 7: relatively minor and in my view, at the end of
Speaker 7: the day, as long as China wants to use them
Speaker 7: and needs ARM, ARMS business in China is going to
Speaker 7: do good. But of course, you know, you know what
Speaker 7: the situation is, China wants to grow more independent from
Speaker 7: the West and that's going to be a headwind for
Speaker 7: ARM in my view, very slow, very non very limitted
Speaker 7: impact from how you think about the valuation of the
Speaker 7: business today.
Speaker 2: Okay, so tell us how you're thinking about the valuation.
Speaker 4: What sort of number are you looking at? What vindicates it?
Speaker 7: Yeah, so it is an interesting business, but they span
Speaker 7: out of money on reception and development. They come up
Speaker 7: with great architectures. That's also a standard. The whole industry
Speaker 7: is using it. So that's really the takes everybody wants
Speaker 7: to use and then clients pay a license fee to
Speaker 7: ARM to get the right to start working on their
Speaker 7: IP and then they pay royalties once they produce chips
Speaker 7: that contain ARMS technology, and so this royalty is really
Speaker 7: to me today they are not all profits because ARM
Speaker 7: has been very investing in their operations to build this
Speaker 7: base of IP, but going forward, royalties are pure profits.
Speaker 1: So I like to look up ARM and that's what
Speaker 1: I've been doing.
Speaker 7: You know, when the stock was listed for twenty and
Speaker 7: sixteen as multiple royalties, you see that over time. It's
Speaker 7: a very relevant metric that is stable. It reflects very
Speaker 7: well as the gross outlook of the company, and it
Speaker 7: has historically, like just before the acquisition by Stops Bank,
Speaker 7: it was trading on six terms higher than the SUCKS
Speaker 7: And so that's the kind of valuation I'm looking at today.
Speaker 1: So I'm looking at twenty twenty twenty seven.
Speaker 7: Revenues for ARM as we modeled them, and I look
Speaker 7: at twenty seven times that, So that gives me like
Speaker 7: an eighty two billion dollar valuation in as you enter
Speaker 7: into twenty twenty six.
Speaker 1: So I find the valuation.
Speaker 7: Range today fifty to fifty four billion, very very attractive.
Speaker 7: It gives you like an opportunity to see you know,
Speaker 7: twenty percent pounds of return on up to twenty percent
Speaker 7: pound in return.
Speaker 1: On the name between now and the beginning of twenty twenty.
Speaker 3: Six, twenty twenty six. It's interesting because I'm fascinated by
Speaker 3: the mechanics of this. You write in your notes that
Speaker 3: the range forty seven to fifty one dollars is attractive
Speaker 3: to investors new investors taking advantage of the IPO. But
Speaker 3: all told, soft bank is going to hold on to
Speaker 3: ninety percent of this company.
Speaker 7: Why well, because you know so two reasons. The first one,
Speaker 7: so bank c is in the name, probably even more websites.
Speaker 7: And I see the MASSA is very very goodish on
Speaker 7: Armed future.
Speaker 1: So for soft.
Speaker 7: Burd it's not a matter of getting rid of ARM
Speaker 7: of like making a profit on ARM.
Speaker 1: It's more a matter of, you know, after five years.
Speaker 7: As a private company, the company has tried a lot
Speaker 7: of things, have made a lot of investments, some of
Speaker 7: them have worked well, some of them have worked less well.
Speaker 7: And now Armies at a point in time where becoming
Speaker 7: a listed company again makes a lot of sense of
Speaker 7: the company in terms of, you know, being successful, attracting talent,
Speaker 7: creating the right you know, like government setup and management
Speaker 7: set up. Being a listed company brings a lot of
Speaker 7: advantages to ARM and I think it's a very good
Speaker 7: timing to do that. And then for soft Bang there
Speaker 7: it is not in my understanding to exist, but more
Speaker 7: to have ARM as an additional very liquid asset and
Speaker 7: an asset on which seven can leverage to actually raise
Speaker 7: money for further investments.
Speaker 1: So that's really the way I think about it.
Speaker 7: So I don't expect, yes, you know something, to to
Speaker 7: lower their share, to lower their their stake in ARM
Speaker 7: an soon.
Speaker 1: Yeah.
Speaker 3: The great fun of a traditional I PO is that
Speaker 3: it gives the company an opportunity to tell a story
Speaker 3: about themselves right to the world. And the story that
Speaker 3: ARM wants to tell is that they are relevant for AI.
Speaker 3: They are going to do great with all of the
Speaker 3: R and D and CAPEX going into AI. Do you
Speaker 3: buy that story?
Speaker 7: Yes, yes I do, but you have to be very
Speaker 7: different understand its way. I like to quantify that as
Speaker 7: a very like an AI diversification.
Speaker 1: Yes, almost everything that is going to grow.
Speaker 7: ARMS revenues right into revenues as like fire, is going
Speaker 7: to be related to AI. So from that perspective, I
Speaker 7: do agree with your statements. But interestingly, all the AI
Speaker 7: ARM is going to get exposed to is not like
Speaker 7: the AI clusters that receiving world out today, like the
Speaker 7: NDDR or TPU.
Speaker 1: Based AI clusters.
Speaker 7: In that part of AI ARM as actually very very
Speaker 7: little is any exposure. But in your mobile phone you
Speaker 7: need larger ships, you need ships with better IP so
Speaker 7: that the chip can better deal with AI models and
Speaker 7: with all these services that are built on AI, and
Speaker 7: ARM is actually bringing to the market a lot of
Speaker 7: innovation that is very relevant to that, and in particular,
Speaker 7: the number one driver of pricing power for ARM other
Speaker 7: the next five years is the road out of their
Speaker 7: V nine you take to us, so that's a nice
Speaker 7: iteration of their instruction set. And the number one innovation
Speaker 7: that is v NI brings to the market is actually
Speaker 7: AI specific instructions. So the next generation of ARM ship
Speaker 7: are going to do much better job dealing with AI
Speaker 7: workloads from that aspect.
Speaker 1: To you, it's really it's really an AI.
Speaker 7: List, but totally uncorrelated to what's happening today, like it's
Speaker 7: a crazy and crazy spending on AI glister because in
Speaker 7: the GPU in an AI accelerator is between a minimal
Speaker 7: contributor and another contributor.
Speaker 3: Yes, Pierre feragu Ana list over at New Street Research,
Speaker 3: joining us Caro straight after publishing his reaction note to
Speaker 3: that F one firing.
Speaker 5: Just great timing having you on the show. Thank you
Speaker 5: so much.
Speaker 3: You're looking at Huawei's Mate sixty pro going through a
Speaker 3: tear down by Tech Insights, Bloomberg News ask the research
Speaker 3: firm to lift the lid on China's latest domestic smartphone.
Speaker 3: What we learned that is an advanced seven animeter chip
Speaker 3: was made by China's top chip maker, Smick or Semi
Speaker 3: Manufacturing International Corp. It makes a sign that there's some
Speaker 3: early progress in Beijing's push to beat out US technology
Speaker 3: export curves. Joining me here on set is Bloomberg's Ian King.
Speaker 3: The speculation and the rumor was that it was five nanometer.
Speaker 5: It's not.
Speaker 3: It's seven nanometer SMIC or Smick made. Tell us what
Speaker 3: we know from that teardown.
Speaker 8: Yeah, you've got to remember, like three is better than five,
Speaker 8: which is better than seven. Three would be sort of
Speaker 8: the state of the art in terms of manufacturing capabilities
Speaker 8: that somebody like Apple would try to be accessing it
Speaker 8: at this point. So seven sounds like a long way behind,
Speaker 8: maybe two three years behind, but you can still do
Speaker 8: a lot with that level of manufacturing technology. Underpinning this though,
Speaker 8: is should they actually be doing this? Is this representating
Speaker 8: a circumvention of what the US is trying to do,
Speaker 8: which is to get one way away from access to technology.
Speaker 3: And to that point, Caroline, we should we should say
Speaker 3: that Bloomberg went to the US Commerce Department and asked
Speaker 3: if this seven nanometer tech is caught within the bounds
Speaker 3: of curves and I don't believe the US Commerce Department replied.
Speaker 2: Yeah, thus far it does, shine O. THEO were really
Speaker 2: a question mark. And what has been the US spearheading
Speaker 2: this in of a global clampdown on basically China's access
Speaker 2: to this sort of technology. Do you think it does
Speaker 2: ring question marks?
Speaker 5: Now?
Speaker 8: There are absolutely questions. To be fair to Commerce, though
Speaker 8: they're not going to comment about individual actions that they
Speaker 8: take against a specific company. That's kind of their policy.
Speaker 8: So we tend to sort of find that out when
Speaker 8: it gets announced. And they have actually sort of when
Speaker 8: these stories crop up, they have taken action. So we'll
Speaker 8: see what happens there. There's definitely known as on them
Speaker 8: to take some action, but we wouldn't expect them to
Speaker 8: talk about it right now.
Speaker 3: We did learn about where China's at in its technology competence,
Speaker 3: right you know, there's this idea that it's seven nanometer,
Speaker 3: but they sold out of the handset very quickly, and
Speaker 3: that indicates to us, even though it's two generations removed
Speaker 3: from the cutting edge, that they're not making seven nanimeter
Speaker 3: at volume yet or at scale.
Speaker 8: Yeah, I mean, this is a conversation that we had
Speaker 8: last week. Remember, you can make a few of these
Speaker 8: things on the bench, right, that's great, well done, you're
Speaker 8: good at the technology. But the real art is to
Speaker 8: make millions, tens of millions, hundreds of millions of these things.
Speaker 8: We really need to see whether they can do that
Speaker 8: or not, and do that on an economic basis. If
Speaker 8: they can, then this is definitely you know, a red
Speaker 8: flag warning, symbols, whatever you want to describe it with.
Speaker 8: If they can't, then maybe this is a symbolic thing,
Speaker 8: just to poke. The Secretary of Commerce from the US,
Speaker 8: who was in China last.
Speaker 2: Week in some great reports, for example the Jeffreyes tream
Speaker 2: puning out you know the myths and the facts about
Speaker 2: this particular Mate sixty. I'm interested more broadly on the
Speaker 2: impact on competition though. What has been reality is the
Speaker 2: share price reaction from Shaomi in does this pook war
Speaker 2: We back on the map, even if only in China.
Speaker 8: Well, you have to remember that they basically got out
Speaker 8: of the handset business. They essentially spun it off because
Speaker 8: they were in such a difficult position because of these sanctions.
Speaker 8: This as a symbolic thing, as something to market around.
Speaker 8: It's absolutely sensational. Look at the attention it's getting. We're
Speaker 8: talking about it on the other side of the world, right,
Speaker 8: So yes, of course it really helps. But again we'll
Speaker 8: need to see that volume, as Ed and I just discussed,
Speaker 8: we'll need to see that.
Speaker 2: Volume absolutely brilliant throughout inking. Thank you so much getting
Speaker 2: us up to speed on the tear down. Meanwhile, let's
Speaker 2: get a tear down on what we're likely to be
Speaker 2: hearing from the EU set to unveil it's Gateclimper's list
Speaker 2: tomorrow under the Ease Forthcoming Digital Markets Act. Of course,
Speaker 2: we've been long anticipating which platforms are currently going to
Speaker 2: be at risk too much stricter regulations. Guest likely these
Speaker 2: big players from New York, from San Francisco. This is
Speaker 2: Bluebot technology time now for talking tech. First up advertising
Speaker 2: sales at X of course, formerly known as Twitter, they're
Speaker 2: down from sixty percent. Neil Musk is pointing the blame
Speaker 2: at the Anti Defamation League now Musk is actually accusing
Speaker 2: that they're not for profits is having a personal vendetta
Speaker 2: against him since he purchased the platform. The ADL has
Speaker 2: previously reported that harassment and extremist content on the platform
Speaker 2: has spiked since Musk's takeover. Meanwhile, let's turn our attention
Speaker 2: to Sam Altman, who is now the first person to.
Speaker 4: Get an Indonesian Golden Visa.
Speaker 2: It's the new visa that allows foreigners to make substantial
Speaker 2: investments in the country to remain for between five and
Speaker 2: ten years. It's part of a new initiative to boost
Speaker 2: economic development in the region. And Plus, TikTok is hiring
Speaker 2: UK security firm NCC Group to help audit well it's data.
Speaker 4: It's controls, the protections in Europe in particular. It's all
Speaker 4: part of what is called Project Clover.
Speaker 2: It's similar to a program right here in the US
Speaker 2: to reassure Europeans that the Chinese government can't access their data.
Speaker 2: TikTok currently runs a data center in Dublin and is
Speaker 2: building another one in Ireland and indeed in Norway too.
Speaker 5: Yeah, let's stick in that region.
Speaker 3: Big Tech is bracing for the European Union's biggest ever
Speaker 3: clamped down on anti competitive practices, which may provoke a
Speaker 3: new wave of legal battles between regulators and here in
Speaker 3: Silicon Valley. The announcement on which tech platforms are to
Speaker 3: be targeted under the EUS Digital Markets Act is due tomorrow.
Speaker 3: For more, let's bring in Bloombergs Gillian Deutsch who joins
Speaker 3: us out in Brussels. Caroline and I are so used
Speaker 3: to covering the kind of antitrust case, you know, the
Speaker 3: battle that played out in court. Now the story in
Speaker 3: the EU is moving to legislation and rule making. Explain
Speaker 3: what's about to happen.
Speaker 9: Yeah, So tomorrow is a big day for the European Commission.
Speaker 9: This is when they come out and say which companies,
Speaker 9: major tech companies are considered gatekeepers and those are companies
Speaker 9: that are considered dominant in their space. And then they're
Speaker 9: going to lay out which of those products from those
Speaker 9: companies are considered core platform services and those are the
Speaker 9: products that these companies are going to have to redesign
Speaker 9: to comply with a whole bunch of new rules set
Speaker 9: by the europe Commission. And to your point ed, I mean,
Speaker 9: I want to back up a little bit. We've seen
Speaker 9: lots of these anti trust cases from the European Commission
Speaker 9: for years now, for almost over a decade. And really
Speaker 9: what the EUOPEA Conussion's trying to do is say, okay,
Speaker 9: these cases have often dragged out on the ports for years.
Speaker 9: They have often been unsuccessful as well. So instead of
Speaker 9: dragging companies to port after they've done something they deem
Speaker 9: anti competitive, the Commission saying.
Speaker 1: Let's set out those rules.
Speaker 9: From the get go, and so I'm really going to
Speaker 9: see some of those big rules come to fruition tomorrow.
Speaker 2: Of course, this sort of follows off from the Digital
Speaker 2: Services Act now it's the Digital Markets Acts, and it
Speaker 2: always ends up to be signs that are either instilled
Speaker 2: or indeed warned about.
Speaker 4: Is that really what the stick is here?
Speaker 2: Are there any carrots that persuade the big companies to
Speaker 2: fall in line?
Speaker 9: Well, I do think one carrot as well, do you
Speaker 9: want to operate on one of the biggest markets? And
Speaker 9: so we actually have seen some companies say actually maybe
Speaker 9: not because there's not and how there's too much regulation.
Speaker 9: And one prominent example is that Meta actually has not
Speaker 9: rolled out threads in your Opean Union. We've seen it
Speaker 9: across the channel in the UK and obviously in the
Speaker 9: United States, but we don't have it here because what
Speaker 9: what Meta says is that we don't know how these
Speaker 9: kinds of rules under the Digital Markets Act are actually
Speaker 9: going to be enforced. And one of those rules is
Speaker 9: that companies can't combine personal data across platforms. So Meta saying,
Speaker 9: you know, I'd rather be safe than sorry, So maybe
Speaker 9: we shouldn't even roll out the EU. But we also
Speaker 9: are seeing lots of those threats of fines that companies
Speaker 9: won't be able to operate in the EU if they
Speaker 9: break break these rules repeated b So this kind of
Speaker 9: two tier track of the d m A. And like
Speaker 9: you mentioned, Caroline DSA, there really are are are this
Speaker 9: this new wave of regulation, and so the EU pecushions
Speaker 9: trying to work with companies and say, look, we're trying
Speaker 9: to trying to make this work for you guys too,
Speaker 9: But there are definitely lots of lots of court cases
Speaker 9: and fines on the horizons.
Speaker 3: They don't you know, it is often a two a
Speaker 3: street our reflects on my own time in Brussels, Jada,
Speaker 3: I mean, what did the companies have to say about it?
Speaker 3: Are they trying to meet them halfway?
Speaker 5: Does that makes sense?
Speaker 9: So I covered the DSA, which I mean the DNA
Speaker 9: is more focused on anti trust and competitive behaviors. The
Speaker 9: DSA is focused on you know, harmful illegal content we
Speaker 9: see in digital marketplaces or on social media platforms. And
Speaker 9: with the DSA, we've seen companies like TikTok and Meta
Speaker 9: they've really redesigned some of their products to be more
Speaker 9: transparent to flag all content. So they're definitely laying up
Speaker 9: those things saying, look, we're paying attention, we're caring about
Speaker 9: this regulation. But we also see lots of potential court
Speaker 9: cases on the horizon the DSA. We already saw two companies,
Speaker 9: Amazon and Solando sue over those rules, and we're almost
Speaker 9: certain we're going to see more now that the DMA
Speaker 9: is going to.
Speaker 4: Affect the people who always win.
Speaker 2: So lawyers seeing Bloomberg's Chilian joyed, Great to have you
Speaker 2: on the show.
Speaker 3: Welcome back to Bloomberg Technology. I'm Ed Lovelow in San Francisco.
Speaker 4: And I'm Carroine hid in New York.
Speaker 2: Let's get a quick check on these markets because a
Speaker 2: bit of a lackluster start to this month as we
Speaker 2: currently see then as that one hundred up what about
Speaker 2: ten percent after our Monday rest day. We're just seeing
Speaker 2: a switch into perhaps a buying mode as we carry
Speaker 2: on the day's trade, but ultimately people slow cautious to
Speaker 2: get back to the buying as we see this new
Speaker 2: start of September that usually on US a lot of
Speaker 2: bond selling, particularly an investment grade in the corporate world,
Speaker 2: two year yield.
Speaker 4: Is up some six basis points. This is where some
Speaker 4: of the big.
Speaker 2: Moves are happening, and largely many are thinking because of
Speaker 2: the supply is going to be rich when it comes
Speaker 2: to investment grade bonds coming to the market and putting
Speaker 2: some pressure on the overall US treasuries. We're also they've
Speaker 2: got a myriad of macro data which looks pretty ugly
Speaker 2: over in China, it looks ugly in Europe.
Speaker 4: We're seeing the dollar.
Speaker 2: Therefore outperformers, maybe a place of safety and ultimately where
Speaker 2: rates are likely to have to be higher for longer
Speaker 2: as the US economy outperforms Bitcoin on the downside visa v.
Speaker 4: The US dollar. Let's move it on into individual players.
Speaker 2: Though, because as I mentioned, perhaps some of the China
Speaker 2: macro data not looking so pretty. Some news that came
Speaker 2: out on Monday, while we're all having on Labor Day off.
Speaker 2: Was Tesla up some four percent on perhaps some good
Speaker 2: numbers coming out of China. We understand perhaps sales picking
Speaker 2: up in a month of August as they price cut
Speaker 2: their way. Oracle on the outside up two point seven percent.
Speaker 2: Barclay's out with the notes going overweight, seeing this growth
Speaker 2: trajectory looking good for the next few years for Oracle,
Speaker 2: and I'm looking at a Luminut down some five percent
Speaker 2: if the worst performer on the Nasdaq one hundred in fact, and.
Speaker 4: This is we understand their naming. Of course, a new CEO.
Speaker 2: We knew that Francis d'osusas sort of abruptly left a
Speaker 2: couple of months ago Aggulant Technologies. Jacob Jason's going to
Speaker 2: be taking the reins of the DNA sequencing giant. But boy,
Speaker 2: of they got some issues on their hands. Of course,
Speaker 2: issues about maybe having to cut back on their overall
Speaker 2: growth trajectory that they originally thought. Of course, having those
Speaker 2: proxy battles with billionaire activist Carlikan to.
Speaker 4: Name but a few.
Speaker 2: But a company that is currently looking for a change
Speaker 2: of leadership ed.
Speaker 3: Okay, And let's stick with markets check this one out.
Speaker 3: A note from Goldman Sachs saying AI valuations are not excessive.
Speaker 3: They right, given the valuations of the dominant incumbent companies
Speaker 3: are high, but not excessive. We believe we are still
Speaker 3: generally in the first phase of a typical technology technology weight.
Speaker 3: Now that is not a uniformly held position, Carro, but
Speaker 3: it kind of goes to what Jensen's one was talking
Speaker 3: about on the Nvidia earnings call. They see two trends,
Speaker 3: the move to generative AI and accelerated computing, but he
Speaker 3: thinks they're in the early innings, and Goldman out saying, yeah, yeah,
Speaker 3: we see that too.
Speaker 2: And actually goldm have been together a nice basket of
Speaker 2: some of the smaller stocks that could really benefit in
Speaker 2: terms of profitability stakes from the uplift of AI, from
Speaker 2: the productivity that's likely to be granted. Therefore seeing maybe
Speaker 2: even a seventy percent run rate for some of these
Speaker 2: stocks on the back of that. I'm interested though, on
Speaker 2: who the naysayers have been and ed it has been
Speaker 2: the likes of Bank of America saying this is a
Speaker 2: baby bubble as originally what they seem to be terming it,
Speaker 2: but worries about the valuations and where they've already run
Speaker 2: to and and also August Stanley. I mean we know
Speaker 2: that they're generally a bearish take, often coming from Mike
Speaker 2: Wilson and the team, but they too have been a
Speaker 2: little bit worried about ultimately how far we've already run
Speaker 2: and whether tech ed can withstand higher rates, higher borign costs.
Speaker 5: Yeah.
Speaker 3: I think that there's one or two soft pieces data
Speaker 3: that I'm going to look at, and we've got the
Speaker 3: perfect person to ask next, but how much are people
Speaker 3: spending now on R and D proportionately to their operating
Speaker 3: expenses all their revenue and then the capex commitments from
Speaker 3: those that want to benefit from AI because that investment
Speaker 3: drives later growth. And I think that's a really interesting
Speaker 3: place to focus.
Speaker 2: Yeah, exactly whether or not you have the patience man
Speaker 2: leep seeing always does is here with us some Bloomberg intelligence,
Speaker 2: and these sorts of whether we're too enthusiastic, whether we've
Speaker 2: got a bubble or not, are going to come thick
Speaker 2: and fast to your mind sight the valuations that we're
Speaker 2: already training at.
Speaker 10: Well, So you have to be selective in this environment.
Speaker 10: Given the run up we have seen and the upward
Speaker 10: revisions we have seen for the likes of Nvidia. You
Speaker 10: have to ask for yourself, are there any other companies
Speaker 10: that could see upward revisions like that? And it's too
Speaker 10: early to say that companies are able to, you know,
Speaker 10: unpack new revenue opportunities, especially on the software side or
Speaker 10: on the services side, because right now they're all buying
Speaker 10: these chips, they're investing trying to figure out a new
Speaker 10: product that they can monetize. Co pilots is one way
Speaker 10: that Microsoft has said, Okay, we could monetize this based
Speaker 10: on you know, the enterprise base we have. We can
Speaker 10: sell them an additional product in the form of a copilot.
Speaker 10: For others, it's not so clear whether there are customers
Speaker 10: that are willing to pay for generative AI. And frankly speaking,
Speaker 10: we may not be at a point where the technology
Speaker 10: is there in terms of you know, being product ready, yes,
Speaker 10: and so that's when you generating revenue generating and that
Speaker 10: and that's where it adds to the R and D
Speaker 10: expense because you have to buy these chips, you have
Speaker 10: to invest in hiring engineers to develop a product. But
Speaker 10: when it will be product ready is the question. And
Speaker 10: you could see in fact a margin hit for some
Speaker 10: of the companies that are investing in Generator VII right now.
Speaker 2: And what's so interesting is it's not just cell side
Speaker 2: notes that we're getting. We're getting big takes from buyers,
Speaker 2: admittedly players more in the value space. But I thought
Speaker 2: the rob Are not no in particular, was an interesting thing.
Speaker 3: Yes, yeah, rob Are not the so called bubble hunter
Speaker 3: of research affiliates.
Speaker 5: Man.
Speaker 3: He makes two points and I'll run them past you.
Speaker 3: The first is that he calls it big market delusion,
Speaker 3: the idea that the valuation of video right now reflects
Speaker 3: that they won't be displaced by another player, that they
Speaker 3: basically remain the incumbent. And that, second of all, the
Speaker 3: current market cap of the video, its size makes it
Speaker 3: a really safe bet. What do you make of those
Speaker 3: two points? It's position in the market, but also its
Speaker 3: current size.
Speaker 10: I agree, I think with that comment simply because the
Speaker 10: companies that are investing right nine Generator VII are your
Speaker 10: hyperscale cloud venders, and they are the ones who are
Speaker 10: actually buying these chips involved. That's what drove that one
Speaker 10: hundred percent upside revisions for Nvidia. I mean, had it
Speaker 10: been your fragmented enterprise IT base, they wouldn't be making
Speaker 10: those sort of commitments. Even though everyone agrees with the
Speaker 10: disruptive impact of generative AI, the fact that you're seeing
Speaker 10: that kind of a big lift in hardware and semiconductor
Speaker 10: spending is because of the concentrated nature of the wires,
Speaker 10: which in this case is the Hyperscape cloud players. And
Speaker 10: you have to ask to yourself, if everyone is able
Speaker 10: to develop that technology over time, then it does get commoditized.
Speaker 10: And I go back to the revenue generation aspects of
Speaker 10: you know how you're going to monetize it in software
Speaker 10: or services that you can layer, and it's not very clear.
Speaker 10: We're still at a very early stage in terms of
Speaker 10: unpacking the monetization opportunities on the software side.
Speaker 3: During the earning season, particularly Jensen Huang in Vidia's Earning Cool,
Speaker 3: he talks about the two big trends, accelerated computing and
Speaker 3: then the demands for specific generative AI tools, but also
Speaker 3: capital expenses. He said, look at the commitments on the
Speaker 3: R and D side and the CAPEX side of those
Speaker 3: they care about are those data points that you track
Speaker 3: as well at Bloomberg Intelligence to kind of see how
Speaker 3: far we have left to go on this technology wave.
Speaker 10: I think, look, everyone right now is spending their R
Speaker 10: and D dollars on generative AI. The key question to
Speaker 10: me is, you know the proprietary data that is available
Speaker 10: to be fed into a large languid model at the
Speaker 10: end of the day, the foundational model, the billions of
Speaker 10: parameters in the model it's based on. You know, large
Speaker 10: amounts of data. You can't build a large anguid model
Speaker 10: on a small data set. And where do you get
Speaker 10: that data from? Given every company has become so conscious
Speaker 10: about their data, whether it's Reddit, Twitter, all the open
Speaker 10: Internet data. And that is where I think the heart
Speaker 10: of how this technology will evolve lives is where do
Speaker 10: you have access to data?
Speaker 2: You are singing from a hymnsheet that I've heard Kathy
Speaker 2: would sing from a little bit as well, all about
Speaker 2: the proprietary data. And ultimately Kathy was early in her
Speaker 2: call that in video was just too far, too fast.
Speaker 4: Get into other names that are being overlooked here?
Speaker 2: What are other names that are being overlooked From Bi's perspective.
Speaker 10: Well so from our perspective. Internet companies have an advantage here,
Speaker 10: whether it's so social media companies, search companies, they own
Speaker 10: the proprietary data within their walled gardens. Software companies, on
Speaker 10: the other hand, they don't have their proprietary data, they
Speaker 10: have customer data. They can't build large anguid models on
Speaker 10: top of that. So clearly Internet platforms are the ones
Speaker 10: that are coming up with the large anguid models right now,
Speaker 10: and they have an advantage in terms of, you know,
Speaker 10: redoing their next version because they have access to that data.
Speaker 10: Where software companies like Microsoft partner with open ai and
Speaker 10: open ai actually build the air large angroid model on
Speaker 10: open Internet data from Reddit and Twitter, and they'll have
Speaker 10: a hard time finding the next iteration of it because
Speaker 10: everyone is limiting the user of the open Internet data
Speaker 10: as well. I do think Internet platforms have an advantage
Speaker 10: in the cycle.
Speaker 2: And for a longer term discussion and just how much
Speaker 2: this changes the world of the Internet and how much
Speaker 2: more closed it becomes. Man's saying absolutely, bringing from Boombag Intelligence.
Speaker 2: We always love him on the.
Speaker 3: Show time for VC Roundup and first Up. Phata Ray,
Speaker 3: a startup that uses artificial intelligence to dixect money laundering
Speaker 3: and other financial crimes in international transactions, has raised fifty
Speaker 3: seven million dollars in a recent investment round the investment
Speaker 3: comes is financial institutions record a sharp rising fraud, much
Speaker 3: of it actually boosted by new AI tools, and next
Speaker 3: Gen Healthcare rose thirteen percent after Bloomberg reported that Tomer
Speaker 3: Bravo is in advanced talks to buy the health records
Speaker 3: software company. That's according to sources, who also say that
Speaker 3: the private equity.
Speaker 5: Firm could announce a deal as soon as this week.
Speaker 3: Plus four time NBA champion and perennial All Star Stephen
Speaker 3: Curry is among the new investors in Upwind, in a
Speaker 3: fifty million dollar round which values the Israeli cybersecurity startup
Speaker 3: at three hundred million dollars.
Speaker 2: Caro, He's pretty active in the VC world. That's what
Speaker 2: I was quite the sportsperson. Let's talk about venture more
Speaker 2: broadly right now ed, because I'm pleased to say right
Speaker 2: here in your is Drew Glover visiting. For the time being,
Speaker 2: it's today's VC spotlight. Therefore, partner at FIAT Venture's course
Speaker 2: also fat growth and emerging VC focus in the findex space.
Speaker 4: And what makes you different is not only.
Speaker 2: Well the focus on underrepresented founders, but notably also the
Speaker 2: way in which you advise alongside invest Now at the
Speaker 2: moment is all the advising or the discussion about watching
Speaker 2: these big companies about to come to market and whether
Speaker 2: or not we'll get more exits in the IPO area.
Speaker 11: Well, it's really interesting at theach growth we're able to
Speaker 11: and VR growth is the consultancy of the FIAT ventures
Speaker 11: of the business. So we get to advise a number
Speaker 11: of these companies, but very much stage agnostic, early stage
Speaker 11: all the way to public companies, and then on fiad
Speaker 11: ventures we get to invest in these companies because we
Speaker 11: actually can tractually get.
Speaker 5: The right to invest.
Speaker 11: So in short, yes to your question, we have all
Speaker 11: this incredible data and education that we get by actually
Speaker 11: doing the work on the ground with these companies. And
Speaker 11: one thing that we are seeing is a lot of
Speaker 11: very optimistic things happening in the public market right now.
Speaker 11: But also at the same time, we have to be
Speaker 11: really thoughtful in terms of how we're building products and
Speaker 11: how we're building strategies to bring some of these public
Speaker 11: companies to the public markets. So in terms of the
Speaker 11: trends we're seeing seeing a number of trends. I mean,
Speaker 11: I'm hearing a lot of talk about AI and generative
Speaker 11: AI right now, and one of the biggest things is
Speaker 11: is everyone wants to shift their business to an AI
Speaker 11: first business. Where one thing that we are constantly pushing
Speaker 11: is AI is an incredible tool, is incredible feature, but
Speaker 11: it's not always the right.
Speaker 5: Product to shift to.
Speaker 11: Because whatever all these companies have is an incredible amount
Speaker 11: of data. AI can help empower to create really, really
Speaker 11: valuable features to their core products.
Speaker 2: I mean, we're just talking to Mandy seeing about the
Speaker 2: power of proprietary data. We're also talking about earlier in
Speaker 2: the show the fact that our might not be selling
Speaker 2: as much as its company as well, the amount might
Speaker 2: raise might not be as much, and maybe the valuations.
Speaker 4: Are being questions that it goes on its road show.
Speaker 2: Ultimately, how important is it for Stripe, for example, an
Speaker 2: area that you're going to be very focused on a
Speaker 2: company that is in the world of fintech, but also
Speaker 2: looking at the public markets at some point.
Speaker 5: Well, I think Stripes are in a great position.
Speaker 11: One thing that we've seen over the last call it
Speaker 11: year and a half here is us moving away from
Speaker 11: this application layer to the infrastructure layer of fintech. And
Speaker 11: just to break that down, the application layer is very
Speaker 11: much consumer fintech. You've seen like the crazy growth over
Speaker 11: the last five years of or even ten years of
Speaker 11: neobanks like Chime and other ones like Varril Money. I
Speaker 11: could keep going down the list there, but now we've
Speaker 11: moved into this infrastructure layer, and that's something Stripe was
Speaker 11: ahead of its time on. These are the f tech
Speaker 11: the fintech technologies that run are the entire fintech ecosystem,
Speaker 11: but we can't necessarily see and feel it. Like we
Speaker 11: know that Stripe is powering the back end of Stripe,
Speaker 11: but we don't know its Stripe. I'm sorry, the back
Speaker 11: end of Shopify, but we don't know its Stripe. So
Speaker 11: one thing that we're seeing in the fintech market today
Speaker 11: is this infrastructure opportunity where we're going to see over
Speaker 11: time is every single action we make on every single
Speaker 11: app is going to be run by this fintech infrastructure.
Speaker 11: Every time we purchase, every time we get a loan,
Speaker 11: every time we refinance debt. And so I believe Stripe
Speaker 11: is going to see a big headwind here over the
Speaker 11: next couple of years as they decide what their next
Speaker 11: step is.
Speaker 3: Hey Dre, good morning for San Francisco. It's ed here
Speaker 3: with everything that's happened in general to AI. Has that
Speaker 3: pushed you at FIAT back to more sort of sole
Speaker 3: focus on fintech. And the reason I asked that is
Speaker 3: look at Salesforce or Nvidia, these big incumbents in AI
Speaker 3: who deploy big sums of capital, they've really muscled in
Speaker 3: buying up. I think the page foot data show Salesforce
Speaker 3: was the most active investor in the first half of
Speaker 3: this year. So do you look at that and say,
Speaker 3: you know what, you guys have generative AI, we'll state
Speaker 3: with fintech.
Speaker 11: Well, no, I actually think the generative AI is going
Speaker 11: to be a massive ad to what's happening in fintech.
Speaker 11: All these fintech companies, one thing that they have that
Speaker 11: most other industries don't have in spades is data, and
Speaker 11: that is consumer data. That is call it data across
Speaker 11: the entire customer journey. And when I say the customer journey,
Speaker 11: I mean the moment they download the app to the
Speaker 11: moment that they fund a bank account. And being able
Speaker 11: to take that data and organize it through genera of
Speaker 11: AI will be able to not only enhance the customer's
Speaker 11: experience and the customer journey, but will also make it
Speaker 11: so we can add additional products in the most efficient
Speaker 11: way possible. I mean some things that we always think
Speaker 11: about and you know we have a number of companies
Speaker 11: that do this. Is for example, like the home loan
Speaker 11: process is one that is very much human, human capital intensive,
Speaker 11: and one thing that we've seen AI be able to
Speaker 11: do is actually make it so we can take a
Speaker 11: lot of humans out of that and be able to
Speaker 11: make it so instead of it being a twenty thousand
Speaker 11: dollars process to complete, you can do that now in
Speaker 11: two th that with two thousand dollars or three thousand dollars.
Speaker 11: So not only are we seeing companies becoming more capital
Speaker 11: efficient because of AI, but we're also seeing them be
Speaker 11: able to just become better businesses and more healthy businesses
Speaker 11: over time.
Speaker 2: One area of concern has for example, we mentioned Stripe
Speaker 2: and the fact that it's going to be having a
Speaker 2: lot of tailwinds well at in over in Europe has
Speaker 2: just perhaps made everyone sit up and worry about the
Speaker 2: fact that there aren't enough moats.
Speaker 4: This can be consolidated. How much you're seeing.
Speaker 2: Really motible, blockable areas of fintech that others just can't replicate.
Speaker 1: And that's a really great question.
Speaker 5: I think you know, what we've seen.
Speaker 11: Over the last call It decade is really the fintech
Speaker 11: brand wars, where we've seen a lot of companies really
Speaker 11: try to build their moat around brand. And one thing
Speaker 11: that we have notices that is very capital intensive. You
Speaker 11: need the market to really be humming, and you need
Speaker 11: to be you need to see venture dollars leaving pockets quickly,
Speaker 11: and that is shifted. So what we're seeing now is,
Speaker 11: especially in the private markets, is folks are no longer
Speaker 11: just trying to build brands, but they're trying to build
Speaker 11: sustainable businesses. And that brings me back to this, this
Speaker 11: this transition of moving away from the application layer to
Speaker 11: the infrastructure layer. One thing about the infrastructure layer is
Speaker 11: these are B to B businesses.
Speaker 5: These are B to B two ceeds.
Speaker 4: See them on Instagram exactly.
Speaker 11: You will not see them on Instagram, but you will
Speaker 11: feel them in your life and you might not even
Speaker 11: know that you're engaging with them. And so really these
Speaker 11: API driven types of business models where instead of a
Speaker 11: company or a large company having to go build a
Speaker 11: team of one hundred different engineers, they can just partner
Speaker 11: with a company and help that help that enhance their
Speaker 11: technology firstus having to buy a technology, and that is
Speaker 11: a big shift we're seeing with some of these public
Speaker 11: companies is they're no longer buying businesses and taking that
Speaker 11: money off the balance sheet. They're partnering with businesses and
Speaker 11: embedding them into their current infrastruy ructure.
Speaker 3: Fear Ventures founding partner Drew've love a great to see
Speaker 3: with us out of New York.
Speaker 5: Thank you so much. More to come on the show.
Speaker 3: This is Bloomberg Technology, all right. Apple TV's got a
Speaker 3: big boost from its Major League Soccer streaming service after
Speaker 3: Argentine's superstar Leona Messi joined the league. That according to
Speaker 3: The Wall Street Journal, citing antenna data, let's bring in
Speaker 3: Antennis CEO Jonathan Carson for more. The data that you
Speaker 3: provided is staggering. July twenty first was the first game
Speaker 3: one hundred and ten thousand sign ups for MLS season Pass.
Speaker 3: How does that relate to any other era or period
Speaker 3: of sign up for Apple TV?
Speaker 12: Well, great to be here and fun to talk about
Speaker 12: this story because it is such a unique situation in
Speaker 12: the streaming world. We're two decades into sports leagues rubbing
Speaker 12: their own director consumer video subscription services, and they've become
Speaker 12: quite mainstream, quite successful. But this is the first time
Speaker 12: we've ever seen a mid season pop like this.
Speaker 1: A very unique story.
Speaker 12: Obviously, but a unique business story as well for Apple
Speaker 12: tv Plus and for the MLS seeing a huge surge
Speaker 12: in subscriptions five months into the season.
Speaker 2: To that point, How replicatabile is this? I mean, Jonathan,
Speaker 2: how wrong is the sticking power? How much can they
Speaker 2: depend at Apple on this sort of star path? How
Speaker 2: many other stars could ever be as an equivalent?
Speaker 12: To be clear, there is only one Leo MESSI, so
Speaker 12: I think this is a pretty unique case, but the
Speaker 12: sticking power is quite strong. All of July was very
Speaker 12: good for the service. In fact, it was about half
Speaker 12: the signups according to our data for MLS season pass
Speaker 12: have come of July. It also happened to be Apple
Speaker 12: tv plus biggest month. July was their biggest month for
Speaker 12: sign ups for the year as well.
Speaker 3: Jonathan, what are the data do you have available to antenna?
Speaker 3: Do you have evidence or data that all of those
Speaker 3: sign ups retained their membership and have not canceled, for example,
Speaker 3: by September?
Speaker 12: We absolutely track that and so we'll see what happens
Speaker 12: over the course of the coming months. What I will
Speaker 12: say is that historically sports sign ups actually retained very well.
Speaker 12: You may think people are just signing up for one
Speaker 12: particular game, but people that sign up for sports seasons
Speaker 12: tend to stay through the season, and because they're staying
Speaker 12: on for several months, those services then have the opportunity
Speaker 12: to present other programming that they might be interested in.
Speaker 12: So historically, the churn rates for people that sign up
Speaker 12: around big sports events are lower than churn rates for
Speaker 12: typical members.
Speaker 2: Only one leo MESSI but it is great to geek
Speaker 2: out on some of the data all around it, Jonathan Cass.
Speaker 2: I'm brilliant to have your take on the show. CEO
Speaker 2: of Antenna come back with such rich amount of data
Speaker 2: to the show at some other point. Meanwhile, look that
Speaker 2: does have this edition of Bloomberg Technology ED.
Speaker 5: Yeah, a big show to recap on our podcast.
Speaker 3: You can find it wherever you get your podcasts, on Apple, Spotify, iHeart,
Speaker 3: and of course we publish to all of the Bloomberg
Speaker 3: platforms as well. From San Francisco and over in New
Speaker 3: York City.
Speaker 5: This is Bloomberg Technology