Speaker 1: Bloomberg Audio Studios, podcasts, radio news from.
Speaker 2: The Heart where Innovation, money and power. Collie in Silicon.
Speaker 3: Valley, NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
Speaker 4: I'm Carolin Hyde at Bloomberg's world headquarters in New York
Speaker 4: and I'm Ed Lovelow in San Francisco.
Speaker 5: This is Bloomberg Technology.
Speaker 4: Coming up in the next hour, unpacking those earnings.
Speaker 3: Door Dash delivering the.
Speaker 4: Goods, but while the stock pulls back, while DraftKings is
Speaker 4: betting big on the lottery. Conversations with both companies this hour.
Speaker 6: Plus super Micro drops ending a sizzling rally that put
Speaker 6: the server company on a record breaking week. We have
Speaker 6: an exclusive conversation with the company CEO.
Speaker 4: Coming up, and AIICEO Sam Altman is looking to get
Speaker 4: the green light from the US government Tori's billions for
Speaker 4: a massive venure to boost global manufacturing of those AI chips.
Speaker 4: Will bring you the story.
Speaker 6: There's the hearing now with door Dash. I find DoorDash
Speaker 6: really interesting because it has performed really well. The technology
Speaker 6: story in the quarter was new product lines doing more
Speaker 6: stuff on the platform, but it was a high bar
Speaker 6: quarters when you look at their guidance for the full
Speaker 6: year in terms of gross bookings or orders. It seems strong,
Speaker 6: but clearly the stock is down ten percent.
Speaker 5: So what is it that the street's not liking.
Speaker 4: It's hard to tell, and perhaps it's that abit DAR
Speaker 4: guidance not surpassing it for once. We're staying with Doordat
Speaker 4: stick in with a CFO Ravi in Ukonda joining us
Speaker 4: for those fourth quarter numbers, and I start with, well,
Speaker 4: the tough one, Ravi. The takeaway is not quite good enough.
Speaker 4: Can you talk us through perhaps the adjusted a bit
Speaker 4: DAR number, the concerns creeping in or is it just
Speaker 4: that your stocks performed too well?
Speaker 3: Of late?
Speaker 7: Twenty twenty three was Tulie transformative year for us. It
Speaker 7: was an inflection here for us, both from a growth
Speaker 7: as well as a profitability perspective.
Speaker 8: We've truly become a daily habit, more users.
Speaker 7: Than ever before or ordering from more categories than ever before.
Speaker 8: And at the same.
Speaker 7: Time, the business is doing really well where ibiddies three
Speaker 7: times more in twenty three compared to twenty twenty two levels.
Speaker 7: And what we are trying to do is continue to
Speaker 7: drive innovation on the product front, Introduce more products, introduce
Speaker 7: more features where we have users ordered from more categories
Speaker 7: across thirty different countries around the goal.
Speaker 4: You've helped that net loss particularly driven down by efficiencies,
Speaker 4: particularly on the logistics side, Ravi. But what therefore for
Speaker 4: the bottom line to meet your guidance, your own given
Speaker 4: guidance for ABITTA adjusted EBITDA going forward, what do you
Speaker 4: need to do?
Speaker 3: Do you think.
Speaker 7: Our goal is always to drive more users to the platform, continue.
Speaker 8: To order more.
Speaker 7: Profitability in our business is driven by growth. We saw
Speaker 7: that in twenty three.
Speaker 8: Our goal is to continue to do the same in
Speaker 8: twenty twenty four.
Speaker 7: And at the same time, if you look at our
Speaker 7: operating expenses, they've been relatively flat for the last six
Speaker 7: quarters while we continued to drive revenue growth north of
Speaker 7: thirty percent.
Speaker 8: When I look at twenty twenty four, our goal is.
Speaker 7: Going to be the same, which is we're going to
Speaker 7: drive users, We're going to drive order frequency, We're going
Speaker 7: to continue to drive leverage from an overall operating expense
Speaker 7: perspective as.
Speaker 6: Well, Rabbi, there are loads of names on the street
Speaker 6: that are saying there's nothing wrong with the report, nothing
Speaker 6: bad in it. Maybe they look at the four year
Speaker 6: bookings guidance and say that it indicates maybe deceleration in
Speaker 6: the back end of the year. So let's put the
Speaker 6: numbers to one side. What does the world look like
Speaker 6: right now to door Dash, both in terms of like
Speaker 6: driver supply demand from the consumer corporate demand.
Speaker 7: Consumer demand on the platform continues to be really strong.
Speaker 7: If you look at twenty three, in a year when
Speaker 7: people thought consumers were pulling back, our users set a
Speaker 7: record high.
Speaker 8: Our scale at thirty seven million.
Speaker 7: Consumers globally continues to order with us every single month,
Speaker 7: and usage levels have also increased, where our order frequency
Speaker 7: has reached a record high. And from a supply perspective,
Speaker 7: we've been really well supplied. Supply has been as good
Speaker 7: as been over the last couple of years. When you
Speaker 7: look at the consumer demand, it's really strong. When you
Speaker 7: look at the supply side metrics, it continues to be
Speaker 7: really strong, which is allowing us to drive growth as
Speaker 7: well as the bottom line profitability that you're seeing in
Speaker 7: the business today.
Speaker 6: Robbie, I always think about though, DASH it's like a
Speaker 6: really big software company and we don't really have a
Speaker 6: talk about that side of the business, right the creation
Speaker 6: of a marketplace, but also you're essentially offering software to
Speaker 6: third parties making their back end. How is that side
Speaker 6: of your business doing.
Speaker 7: Our platform services business, which is the software aspect of
Speaker 7: our business, continues to do really well. Our goal is
Speaker 7: to be with where merchants want us to be. We
Speaker 7: want a power merchants with their own.
Speaker 8: First party channel. We offer a product called Storefront, which powers.
Speaker 7: Merchants' own websites, and at the same time we are
Speaker 7: providing our logistics engines for merchants in order to help
Speaker 7: them augment their own service as well.
Speaker 4: You're not just serving merchants in the United States. You
Speaker 4: made a key acquisition, and I'm thinking of Walt in particular,
Speaker 4: the effort to go into national RAWI do you stay
Speaker 4: in the countries you're in and expand from there, even
Speaker 4: though that perhaps not as populated as others in Western Europe?
Speaker 4: Or do you look to acquire or build yourself elsewhere.
Speaker 7: Today we are operating in about twenty eight countries outside
Speaker 7: the United States. When I look at our international business,
Speaker 7: it's going really fast, sometimes even five to six times
Speaker 7: faster than peers, which is allowing us to gain share
Speaker 7: in virtually almost all of the markets that we operate in.
Speaker 7: Even in the markets that we operate in today, we
Speaker 7: are just serving a small fraction of the users. We
Speaker 7: have our hands full with our existing markets. We're going
Speaker 7: to contain new to innovate in those markets by offering
Speaker 7: new products. We're bringing grocery to many of the inter
Speaker 7: national markets where the penetration levels in some countries are
Speaker 7: even higher than what we're seeing in the US. As always,
Speaker 7: our goal is to drive improvements in selection, drive improvements
Speaker 7: in quality as well as affordability across all the countries
Speaker 7: that we operate in, Tonet, and let's talk.
Speaker 4: About that affordability. Tony also echoing that then, really twenty
Speaker 4: twenty four is about making sure that the service is affordable.
Speaker 4: How do you do that, Rabi? When we've got, you know,
Speaker 4: still relatively information re environments on here in the.
Speaker 7: US, affordability is a key strategic priority for US and
Speaker 7: top of mind today. More than half of our users
Speaker 7: do not pay any delivery fee. Almost eighteen million subscribers
Speaker 7: on our dash Pass program, and we've lounched that program
Speaker 7: just about five years ago, and we've saved consumers over
Speaker 7: ten billion dollars. And at the same time we are
Speaker 7: innovating on the product side. We're really proud that low
Speaker 7: income families can use government subsidies to be able to
Speaker 7: order groceries on the platt and this is our way
Speaker 7: of giving back convenience, value and time to our consumers.
Speaker 6: Robbie, let's use free cash flow as a kind of
Speaker 6: strategy conversation. You know, you did really well twenty twenty three,
Speaker 6: but you know, carolinees bringing out some really kind of
Speaker 6: big points. There's a lot of anxiety right about credit
Speaker 6: card data. And I bring that up because at some
Speaker 6: point the consumer might go away, and like your your
Speaker 6: industry peers, you might have to say we need to
Speaker 6: do more discounts, incentivizing promotional work. And I'm assuming that
Speaker 6: that does impact free cash flow going forward.
Speaker 8: Free cash flow is a really important metric for us.
Speaker 7: If you look at twenty twenty three, I'm really proud
Speaker 7: that we generated over one point three billion of free
Speaker 7: cash flow, which, as you pointed out, as an important
Speaker 7: help metric for us and investors when we look at
Speaker 7: the overall health of the business. Our focus has always
Speaker 7: been on product as well as innovation on in terms
Speaker 7: of technology.
Speaker 8: I mean just a few examples.
Speaker 7: The way we're driving growth is today We have more
Speaker 7: than one hundred and fifty thousand stores that are outside
Speaker 7: of restaurants. Virtually, when I joined the company a few
Speaker 7: years ago, there was no stores that are grocery related
Speaker 7: on the platform. Our goal is to bring technology, bring
Speaker 7: product innovation to the thirty seven million consumers.
Speaker 8: We have on the platform, and that's what's going to
Speaker 8: drive both.
Speaker 7: Growth as well as profitability in the business for us,
Speaker 7: which ultimately what RABI.
Speaker 6: What is the next technology frontie, what is the next
Speaker 6: new product for door Dash.
Speaker 7: We are operating in three large segments, Restaurants, grocery, and international,
Speaker 7: each of which are roughly about a trillion dollars, where
Speaker 7: the penetration levels are still very very early. I'm excited
Speaker 7: about the progress we've made, but we continue to drive
Speaker 7: more in terms of adding more categories, adding more selection,
Speaker 7: which is content on the platform, while making the product
Speaker 7: more horrible.
Speaker 8: As well as high quality. If we continue to.
Speaker 7: Do that, we're going to drive more users, have them
Speaker 7: ordered more with us, which is ultimately going to drive.
Speaker 3: Pro actibility for Dash.
Speaker 6: CFO Ravian a kind of great catch up with you
Speaker 6: here on the program.
Speaker 5: This has been Bow Technology.
Speaker 6: Super micro stock has been on a roller coaster shares,
Speaker 6: whip sword in volatile trading today, there anything to derail
Speaker 6: what's set to be or was set to be the
Speaker 6: server maker's best week on record. I'm delighted to say
Speaker 6: super Micro's founder, president and CEO, Charles Leang, joins us
Speaker 6: now live. Charles, good morning to you, and welcome to
Speaker 6: the program.
Speaker 5: Let's start there. Okay, let's just get it done.
Speaker 6: The store one has been on a good morning, the
Speaker 6: stock has been on a wild ride. Is your company
Speaker 6: fairly valued.
Speaker 2: Years?
Speaker 1: I mean, I said, you know, we deliver the based
Speaker 1: generality AI playform in our world, especially in terms of
Speaker 1: time to market or enable new technology available. We are
Speaker 1: able to deliver new product to the market, and we
Speaker 1: deal in a system debl.
Speaker 2: Or re scale. We call our rec program play.
Speaker 1: When casone we see they are ready to be online,
Speaker 1: they're programing to.
Speaker 2: Cable, the cable and the power cable, and then they
Speaker 2: are ready to be on nine.
Speaker 1: So casone like good quality, time to market and ready
Speaker 1: to run avantage.
Speaker 6: Charles, there's clearly a lot of excitement in the market
Speaker 6: that whatever is happening in AI infrastructure investment. You are
Speaker 6: a core beneficiary, but one of the questions that Caroline
Speaker 6: and I get for you consistently is what is it
Speaker 6: that super micro does. There's any different from your biggest
Speaker 6: competitors names like Dell, Hpe.
Speaker 1: Very good question. Yeah, I've been spatial first. We have
Speaker 1: a very market company since thirty years ago. I founded
Speaker 1: a company Shivomanco. We use building Brock solution, a matriology
Speaker 1: design to build our server to build our total solutions,
Speaker 1: and the building Brock solution enabled us to design more
Speaker 1: efficientcy with better quality, better inventory leverage, and better a
Speaker 1: service efficiency. That's why we are able to deliver new
Speaker 1: technology time to market earlier than adults.
Speaker 2: And plus our two global.
Speaker 1: Company, we have an engineer working Samos Bay Area and
Speaker 1: also a pig team in Taiwan, so we two.
Speaker 2: Team Asia and USA.
Speaker 1: So we are able to design more efficiently than others basically, and.
Speaker 4: We can see for our radio audience. We can see
Speaker 4: all the products that you make behind you and I'm interested, Charles,
Speaker 4: the scale of the market size here, the total addressable market?
Speaker 4: How big can it be? How big get chunk of
Speaker 4: the pie are you're going to get?
Speaker 3: Oh?
Speaker 1: Yeah, that's another advantage we have with design, protum barrier
Speaker 1: and manufacturing barrier and global as well. So I mean
Speaker 1: we open with Cosmo from design stage vedidation stage, and
Speaker 1: here we ship the Cosmo MACADM problem play. And yes,
Speaker 1: we have a huge capacity ready now in Silicon Vedia
Speaker 1: alone we are able to build a four thousand rack
Speaker 1: of months or equal to about fifteen thousand systems per months,
Speaker 1: and in Asia in Europe we also have a per
Speaker 1: thousand capability there. So basically we are able to build
Speaker 1: a enough server for our customer. But now, as you know,
Speaker 1: the shortage, the chip shortage, so once we have a
Speaker 1: more surprise from the chip company in media, then we
Speaker 1: can shiver more to customer.
Speaker 4: Let's talk about the chip makers being videos. But you're
Speaker 4: kind of agnostic here, right you take trips and mentally
Speaker 4: take chips and inn video.
Speaker 5: What are your relationships like?
Speaker 3: Okay?
Speaker 1: Indeed, we both companies are founded in nineteen ninety three,
Speaker 1: so both companies are thirty years old company. We start
Speaker 1: to work together almost since day onide, so we're thirty
Speaker 1: years relationship, engineering partnership and then go to market, define
Speaker 1: that market, that's speak.
Speaker 2: So we have been at working medic closely. However, we
Speaker 2: hope they have a more cheap.
Speaker 6: Available, Charles, do you have a number, a dollar value
Speaker 6: for the total addressable market that you see for your
Speaker 6: company in the context of an AI infrastructure build out.
Speaker 1: You know, were always facing to pick back older. So
Speaker 1: the market size is growing asid you know, aipoom. Basically
Speaker 1: they as a start. We believe the market have a
Speaker 1: big loom to grow a lot of our integry leader
Speaker 1: Hybular seven feed in so as today our Protusian capacity
Speaker 1: can support our revenue up to twenty five billion dollars
Speaker 1: for example, but we need a more chip like why
Speaker 1: he hasn't mentioned. So again, the market continued to grow
Speaker 1: and we continue to get mac jal because of a
Speaker 1: bitter product, because of red.
Speaker 2: Scale program play.
Speaker 1: So we are continuing growing our Patussian capacity in United
Speaker 1: State and globally as well.
Speaker 6: For a Bloomberg television and radio audience were speaking to
Speaker 6: super Micro CEO Charles Liang. Charles, when we said that
Speaker 6: you were coming on the program, our audience had many questions.
Speaker 6: One of them is about the SEC action taken against
Speaker 6: your company in August of twenty twenty. The SEC charged
Speaker 6: super Micro and the former CFO of the company with
Speaker 6: what they call widespread accounting violations and some numbers presented
Speaker 6: by the company. Could you update our audience in your
Speaker 6: investor base on where that process is and if you've
Speaker 6: put those concerns behind you.
Speaker 9: Oh?
Speaker 1: Yeah, those concerns have been behind us for many years.
Speaker 1: So first so we are study detail.
Speaker 2: Hey, well we can.
Speaker 1: Improve during that few years, and then we are add
Speaker 1: a more telling, more expertise like our new CFO debut Wagan.
Speaker 2: So we have been improving.
Speaker 1: Our seism and today our system maybe I can say
Speaker 1: perfect in concern, but have been much stronger than before
Speaker 1: ever and we are continue to improved.
Speaker 3: Thank you.
Speaker 4: I'm interested in Therefore, when you see the stock market move,
Speaker 4: the anticipation of growth, the fact that you're seeing, well
Speaker 4: only one current analyst on your stock is saying sell
Speaker 4: after the huge rally that you've had two and fifty
Speaker 4: percent just this year alone, what do you do as
Speaker 4: the leader in the face of that, of that bullishness?
Speaker 4: Do you start to sell your stock? Are you starting
Speaker 4: to buy more of it? Is some of your members
Speaker 4: of your boardermen doing.
Speaker 1: I guess the most important product again, the market demand
Speaker 1: is so strong and in turned out we have the
Speaker 1: base of the product. H non jazz technology turn to market,
Speaker 1: but quality and application optimized.
Speaker 2: We sat our operating book solution.
Speaker 1: We are able to custumomize our system easily to specifically
Speaker 1: optimize for customer okerlow for theirs.
Speaker 2: In the environment, that's a matter.
Speaker 1: For air couting, free air cooting or the cooling. So oh,
Speaker 1: those make our product really popular around the market. And
Speaker 1: I believe we are continuing to gain max jail and
Speaker 1: uh continue to grow.
Speaker 4: So it sounds like you're long, Charles. I mean I'm
Speaker 4: interested in well, your expertise. Let's put it in geopolitics,
Speaker 4: in global supply chains and the fact that you had
Speaker 4: to pull out your manufacturing from China previously because of
Speaker 4: ultimately the Chinese intelligence services inserting malicious components into your
Speaker 4: server and motherboards. It was like the story of twenty eighteen.
Speaker 4: How do you see that restriction on supply and the
Speaker 4: ongoing relationship between US and China now and affecting your business?
Speaker 1: Okay, I mean we are USA company, located in the
Speaker 1: city company, so we follow the national as though country.
Speaker 1: The compliance beveryware and that's number one. And then we
Speaker 1: try to service CASMO Global as much as we could,
Speaker 1: especially customer in the USA. So today most of our
Speaker 1: production facility are in USA and Passio in Taiwan, and
Speaker 1: we are debtap in a new campus in Malaysia. So
Speaker 1: of Podus security dibility supply chain, I believe we are
Speaker 1: in a one past the position.
Speaker 4: Just neine more of those chips, Charles m. It has
Speaker 4: been great speaking with you. An extraordinary share price move
Speaker 4: and great to have some time with you today to
Speaker 4: see the product behind you as well for our TV audience,
Speaker 4: with our radio audience, thanks you for your time. To
Speaker 4: super Micro CEO, Charles Leangler. Apple, where is it with
Speaker 4: its AI capabilities? They've been racing, in fact, to near
Speaker 4: the completion of a critical new software tool for app
Speaker 4: developers that could potentially rival Microsoft Get Help Copilot, and
Speaker 4: according to sources, it could be available to third party
Speaker 4: software makers as early as this year. Here with more
Speaker 4: of course, the man with the scoop mark them and
Speaker 4: we're pleasure to welcome you as always.
Speaker 3: Just talk us through.
Speaker 4: We'd all been waiting with beta breathas to ultimately how
Speaker 4: Apple adopts AI.
Speaker 8: Yeah, thank you so much for having me.
Speaker 9: So twenty twenty four it's ther of AI for Apple
Speaker 9: Generative AI in large language models. To be specific, the
Speaker 9: company is working on several new artificial intelligence initiatives to
Speaker 9: run on both the iPhone and the Mac. And one
Speaker 9: of the most important things is setting your sort of
Speaker 9: infrastructure and foundation to integrate AI.
Speaker 8: Into your products.
Speaker 9: And the most core thing you can do is add
Speaker 9: artificial intelligence to your programmed right tools. That's x code,
Speaker 9: that's the software used by developers inside Apple and outside Apple,
Speaker 9: so they'll be adding AI to that.
Speaker 6: I'm really interested mark on the pressure that Craig Feederigi's
Speaker 6: under because if you read the detail in your story,
Speaker 6: which is terrific by the way, you know the boards
Speaker 6: was given a demo of the latest and AI at
Speaker 6: the end of last year and they've almost real They
Speaker 6: basically said, you three key personnel, give us the product.
Speaker 3: Yeah.
Speaker 9: Craig Fedorigi, he's Apple Senior vice president of Software Engineering.
Speaker 9: He's really taken bold by the horn here. He's a
Speaker 9: huge proponent.
Speaker 8: Of LM's and generative AI.
Speaker 9: When chat GPT started to hit the market a couple
Speaker 9: of years ago, he was the one really pushing and
Speaker 9: investigating his Apple went to miss out on this technology.
Speaker 9: Does Apple need to integrate this technology? And so Federighi,
Speaker 9: along with Apple's Cloud Services organization as well as the
Speaker 9: Artificial Intelligence Organization Right run by Eddie Q and John
Speaker 9: gen Andrea. Specifically, those three groups have been working together
Speaker 9: on these Genai initiatives, with Federigi implementing it into iOS.
Speaker 9: The Jenai the underlying technologies obviously developed by Apples AI group,
Speaker 9: but it's Federigi who's consumerizing that technology, and they plan
Speaker 9: to release Status part of iOS eighteen this year, which
Speaker 9: I expect to be one of the biggest updates, if
Speaker 9: not the most significant update in the sixteen year history
Speaker 9: of the iPhone.
Speaker 5: Bluembo's Mark German ahead of a game, Welcome back.
Speaker 4: To Blouebog technology. I'm Caroline Heid in New York and.
Speaker 5: I'm ed Lovelo in San Francisco.
Speaker 6: Go to apply materials chip equipment maker forty five percent
Speaker 6: of revenues still coming from China, but their signals were
Speaker 6: really strong, Carrow, and we're basically saying, Okay, if this
Speaker 6: is the leading US maker of chip equipment or chip
Speaker 6: making equipment and they're getting orders, what does that mean
Speaker 6: about the investment cycle in twenty twenty four and what
Speaker 6: does it mean about end markets? Is actually finally a
Speaker 6: positive sign in the chip space. Maybe we should dig
Speaker 6: into it.
Speaker 4: Let's do that. We've got the perfect guest, Janet Roy,
Speaker 4: head of market analysis at RBC. Ruined Dolphin and Janet,
Speaker 4: great to have your real semiconductor expertise here. Where are
Speaker 4: we in this cycle?
Speaker 3: What do you read.
Speaker 4: Into applied materials and ultimately the forecast looking pretty rosy?
Speaker 8: Hi, thanks for having me.
Speaker 10: We're pretty positive on the semiconductor cycle. I think right
Speaker 10: now we are seeing bottoming out. We saw that from
Speaker 10: the Applied Materials Earninge's results and aside from BET, we
Speaker 10: also have previously seen a PSMC is and they're also
Speaker 10: showing the signs of the end of the stocking cycle
Speaker 10: and also a strong demand for AI chips.
Speaker 8: So I think this gives us.
Speaker 10: More confidence on our conviction on Wollershviel on the semiconductor sector.
Speaker 10: So that's the cyclical side of things, and the structural
Speaker 10: side is very exciting obviously with AI in the key
Speaker 10: driver's seat. And also I think there is a lot
Speaker 10: of needs to build out the AI infrastructure with a
Speaker 10: lot of upgrades, more sophisticated chaps, etc.
Speaker 8: So I think in terms of.
Speaker 10: The semiconductor manufacturers, the founderies, they are going to benefit
Speaker 10: from these trends, regardless of the end Byket.
Speaker 4: And we hold our breath for Wednesday. Video comes with
Speaker 4: its numbers, Janet, And I'm interested. We were just having
Speaker 4: a conversation with Charles Yngg. He's, of course the CEO
Speaker 4: of Supercomputer, super micro Computer, and I'm interested in his
Speaker 4: like ultimately the infrastructure and he needs the chips. He's
Speaker 4: saying that there isn't enough supply. Where do we stand
Speaker 4: on this push full of supp demand dynamics?
Speaker 10: Yeah, so I think right now there is clearly a
Speaker 10: lot of demand out there, and if you look at Navidia,
Speaker 10: there's no shortage of demand. I think it's more about
Speaker 10: supply capacity problem. So I think that that is the
Speaker 10: reason why we are more positive of the you know,
Speaker 10: the equipment manufacturer, the semiconductor manufacturer, the pigs and shovels
Speaker 10: play because the world needs all these air chips and
Speaker 10: the manufacturing capacity to deliver all these orders. So I
Speaker 10: would say that there is a strong demoannd that has
Speaker 10: yet to been met by a strong supply capacity.
Speaker 6: Janet, Good morning from San Francisco. How worried are you
Speaker 6: about the stickiness of inflation. Given the week we had
Speaker 6: in economic data.
Speaker 10: I think recently the inflatient data in the US did
Speaker 10: show a bit of stickiness and a bit of reacceleration
Speaker 10: in the headline and the producer prices today, I think
Speaker 10: it just raids a bit of a concern, although if
Speaker 10: you look ahead to the twelve month or twenty four
Speaker 10: month view, I think it's still more likely than not
Speaker 10: that inflation is going to come down in primarily if
Speaker 10: you look at the money supply growth, it is trending lower,
Speaker 10: and I think that's really a pretty good indicator of
Speaker 10: inflation going forward. I think inflation invictation for consumers is
Speaker 10: so pretty steady there's no worry insign from there. So
Speaker 10: I would say on a twelve month view, pretty confident
Speaker 10: is still going down. But I think I think together
Speaker 10: with the economic resilience, I think that there is probably
Speaker 10: less argument for a lot of rape casts this year.
Speaker 10: So I think even a couple, you know, three four
Speaker 10: rate cuts could be at risk.
Speaker 6: You know, Caroline, we've got to give some sympathy to
Speaker 6: the market out there. Imagine trying to be an investor
Speaker 6: and learn about the technology sector from earning season and
Speaker 6: then think about inflation, and it's not easy.
Speaker 3: Janet's the big backs and that's why I think.
Speaker 6: Right, you know, let's let's end the week on a positive.
Speaker 6: You know, we're coming to kind of the end of
Speaker 6: what's been a very busy one Q earning season. Janet,
Speaker 6: what did you learn about the technology sector in the
Speaker 6: last few weeks.
Speaker 10: I think generally the earning's delivery is still pretty strong.
Speaker 8: I think for some of these mericap.
Speaker 10: Companies, they're still trading on relatively attractive p multiples. Obviously,
Speaker 10: some of the names that they're getting more expensive, but
Speaker 10: if you look actually versus the twenty twenty one levels,
Speaker 10: the multiples are not outrageous. And if you look at
Speaker 10: the key multiples over growth, that's even more appealing. So
Speaker 10: I think that it's still likely further room to go
Speaker 10: for these technology madcaps. And obviously you have to distinguish
Speaker 10: between some of it, but overall speaking, our more conviction
Speaker 10: is on the semiconductor, particularly in manufacturing and equipment producers.
Speaker 6: January, Head of Market Analysis. Obviously, Brundolphin love having you
Speaker 6: on the show. Happy Friday, Join us again soon. Like
Speaker 6: we talked about the public markets, let's talking about the
Speaker 6: private markets in today's VC spotlight and bringing Battery Ventures
Speaker 6: General partner dar Meshsaka, who's with me here on sat
Speaker 6: in San Francisco. You heard my preamble about if you're
Speaker 6: in LP and you're thinking where do I put my money?
Speaker 6: You go and get five percent of treasuries right now,
Speaker 6: and then you've got your desk sitting there going well,
Speaker 6: hold on, I would like to take some of your capital.
Speaker 6: Is that a real factor for you right now? Where
Speaker 6: rates are? Your ability to raise more capital if you
Speaker 6: wanted to for a new fund.
Speaker 11: For first and foremosts Ed and Caroline, thank you for
Speaker 11: having me here. I don't think our LPs will been
Speaker 11: with us for forty years. Think about macroeconomic cycles in
Speaker 11: two or three year windows and compare us toward the
Speaker 11: risk free ratist. Then look at the innovation cycle and say, hey,
Speaker 11: in the gorse of ten twenty years, can you create
Speaker 11: one hundred or twillion dollars behemoths? Does Battery or the
Speaker 11: funds they invest and have a good chance at getting
Speaker 11: in those behemoths? And if so, it's going to well
Speaker 11: be for itself. Most of the LPs don't necessarily compare
Speaker 11: VC returns to the risk free rate per se and
Speaker 11: they make ten year allocations. But having said that, there
Speaker 11: is certainly a lot of pressure because it feels like
Speaker 11: the winners have gotten much larger. There's mega winners, and
Speaker 11: the VC funds that are involved in those winners will
Speaker 11: see a pretty nice pay day, while there's.
Speaker 3: Going to be a lot of losers.
Speaker 11: And there's a lot of first time funds that got
Speaker 11: LP money which will be challenged to raise the next fund.
Speaker 3: So it's a zero or one game.
Speaker 11: You either get in the mega winners and you make
Speaker 11: a substantial return, or you don't, in which case you
Speaker 11: don't raise money at any cost.
Speaker 6: The reason I find Battery Ventures interesting is you have
Speaker 6: some scale. You know, the deployable capital is up there,
Speaker 6: forty years of experience as you point it out. But
Speaker 6: also you're pretty broad you know, consumer, industrial technology, software
Speaker 6: where you focus most. Out of that that pretty broad.
Speaker 11: Spectrum, Battery has historically made a call to go deep
Speaker 11: in software. Even if you're in industrials or healthcare, there's
Speaker 11: a software.
Speaker 3: Element to most of these companies.
Speaker 11: And so I would say eighty five ninety percent of
Speaker 11: what we do is business software, and within that we
Speaker 11: have a global presence, so we'll look for the best
Speaker 11: companies in US.
Speaker 3: Europe and Israel.
Speaker 11: We have offices all over the world and we'll find
Speaker 11: them mostly at the Series AIRB stage, but sometimes we
Speaker 11: also willing to go late stage or take control of
Speaker 11: a company in a private equity style transactions. So we're
Speaker 11: very focused on business software that that part of the
Speaker 11: economy keeps on growing, and we're very bullish in that.
Speaker 11: We feel the software market could grow from two trillion
Speaker 11: over the last ten years to over four to five
Speaker 11: trillion on the heels of AI, and so we're very
Speaker 11: excited about that market and stay committed to it.
Speaker 4: You've packed some real winners in the private market of
Speaker 4: artificial intelligence. I think of data bricks at the moment,
Speaker 4: and we've heard from the CEO of that particular business
Speaker 4: sort of anticipating and eventually batter the ultimate infrastructure costs
Speaker 4: saw the money that they have to put in the
Speaker 4: chip costs for example, for RAYI are going to plummet.
Speaker 4: We are going to make it more cheaply. But where
Speaker 4: do you see the opportunities to be investing in artificial intelligence?
Speaker 4: Is it the picks and shovels is it the software
Speaker 4: lair the applicates.
Speaker 3: Great, great question, Caroline.
Speaker 11: So we've looked up and down the stack, and I
Speaker 11: feel like the infrastructure layer, the picks and shovels, as
Speaker 11: you say, the large language models, the core chipsets that
Speaker 11: make up the AI stack.
Speaker 3: Those are very important businesses.
Speaker 11: But I don't think this adventure backable in my humble opinion.
Speaker 3: If you look at the.
Speaker 11: Last couple of technology revolutions, look at Amazon, Google, Microsoft
Speaker 11: Cloud services. They're part of Amazon, Google, Microsoft because they
Speaker 11: need tens of billions of dollars and they need a
Speaker 11: captive customer base of ten to twenty thousand customers where
Speaker 11: you can try out these services in.
Speaker 3: Much the same way.
Speaker 11: Open AI and Tropic coher Mistrial the very important elements
Speaker 11: of the AI stack, but they need tens of billions
Speaker 11: of dollars multiple years before you know, there's union economics
Speaker 11: that make sense, and that's just not a venture backable business.
Speaker 11: And it totally makes sense that Microsoft has invested ten
Speaker 11: twelve billion dollars in Open AI, and Google and Amazon
Speaker 11: are investing in their competitors. However, what we're excited about
Speaker 11: is the higher layers of the sack. If you look
Speaker 11: at the middleware stack. If you look at the cloud
Speaker 11: revolution the last ten.
Speaker 3: Years, you have companies like data Dog and Mongo.
Speaker 11: And Snowflake and Pile of Water networks that make up
Speaker 11: the databases and monitoring the security stack in much the
Speaker 11: same way, You're going to see a similar play out
Speaker 11: in the AI place. Where you see a vector database
Speaker 11: to store the data for AI, you see monitoring of
Speaker 11: models companies like a Rise and others that are monitoring
Speaker 11: these models. You see security for AI, and so I
Speaker 11: think that market will play to the one hundred to
Speaker 11: two hundred billion dollars spent in the middleware stack. But
Speaker 11: the most exciting part of AI, I think is the
Speaker 11: application stack.
Speaker 3: If you think.
Speaker 11: About just the human labor that is inefficient that can
Speaker 11: be automated and augmented by AI, I think there's a
Speaker 11: lot of promise there.
Speaker 4: So just to follow up on that damage, how does
Speaker 4: open AI Microsoft not just to eat all of that lunch?
Speaker 4: I mean, are we seeing really viable competitors be able
Speaker 4: to get specific? Is it about going really deep into
Speaker 4: one particular industry group, going all in, non legal, all
Speaker 4: in on healthcare Because ultimately it feels like they've got
Speaker 4: some really tough, well monetized competitor out there.
Speaker 3: Yeah, I think it's a fair point.
Speaker 11: I would think Microsoft is more focused on the trillion
Speaker 11: dollars spent in semiconductors and Nvidia and building their own
Speaker 11: shape than trying to go build an HR software company.
Speaker 3: You know, if I'm microsoftware at Google.
Speaker 11: If you're a two or three trillion dollar company, a
Speaker 11: ten billion dollar business doesn't really move the needle.
Speaker 3: You've got to get into a business that.
Speaker 11: Is hundreds of billions, call it semiconductor systems and compete
Speaker 11: with each other, and it benefits you to go be
Speaker 11: the Switzerland and have companies go build applications on you.
Speaker 3: Just like the Apple.
Speaker 11: Marketplace iOS marketplace benefited by having millions of developers built apps.
Speaker 11: Apple didn't have to compete with them, each of them
Speaker 11: paid the Apple tax. In much the same way as
Speaker 11: you are an open AI, Google and anthropic, Amazon and
Speaker 11: Nthropic can build a substrate on which applications can be built.
Speaker 3: And the ones who get the most number of.
Speaker 11: Applications built are the ones who benefit, and that drives
Speaker 11: trillions or dollars in value for them. I don't think
Speaker 11: they need to goal compete with their customers, it probably
Speaker 11: is not the right business model for them.
Speaker 4: Meanwhile, you back those customers. Battery Adventures General partner DAMESH.
Speaker 4: Thacker can talk for so much longer. We thank you
Speaker 4: so much for your time. I meanwhile, coming up, will
Speaker 4: take a closer look at draftings the fourth quarter results
Speaker 4: CEO Jason Robbins. A lot to dig into there, as
Speaker 4: well as the M and A that they announced as
Speaker 4: a bluebod technology.
Speaker 6: Take a look at Draftking shares kind of up one percent.
Speaker 6: It's been a choppy session after the company reported fourth
Speaker 6: quarter results announcing that they would buy the lottery app
Speaker 6: jack Pocket for seven hundred and fifty million dollars in
Speaker 6: a cash and stock deal. Delighted to say to walk
Speaker 6: us through the numbers, CEO Jason Robbins, Actually where I
Speaker 6: want to start, Jason, and good morning to you. There's
Speaker 6: a note out from Morgan Stanley that says the results
Speaker 6: in the quarter are gone, were impacted by unfavorable sports results,
Speaker 6: and it just goes back to the idea that there's
Speaker 6: a marketplace you operate.
Speaker 5: What do you make of that?
Speaker 12: Well, I think that you know, when you're taking action
Speaker 12: on sports, then sometimes they're subject to those outcomes, and
Speaker 12: sometimes they swing the better's way and sometimes they swing
Speaker 12: the books way.
Speaker 13: This happened to be.
Speaker 12: The worst two week stretch of I should say, the
Speaker 12: most customer friendly two week stretch of outcomes we've seen
Speaker 12: since becoming a public company. And you know that happens
Speaker 12: over the course of time. It certainly swings, you know,
Speaker 12: either way, and it evens out. But in a quarter,
Speaker 12: you know, you can get bit and in this case,
Speaker 12: we had just issued guidance and reaffirmed it in our
Speaker 12: investor day literally the week before, and so you know
Speaker 12: sometimes that happens timing wise, but if you adjust for that,
Speaker 12: the underlying fundamentals of the business were incredibly strong. I mean,
Speaker 12: that was why we were able to raise our guidance
Speaker 12: for this year by so much. On the revenue side,
Speaker 12: we increased our adjusted even to a guidance by fifteen percent.
Speaker 12: That was really due to a record customer acquisition quarter
Speaker 12: as well as really strong engage from our existing players.
Speaker 6: So the M and A piece was really interesting, and
Speaker 6: you know, I guess do you just see it as
Speaker 6: a new market that you wanted to move into. What
Speaker 6: was the motivation there?
Speaker 12: Well, we did some analysis to directly compare our customer
Speaker 12: base with theirs, and there was significant overlap. So we
Speaker 12: feel good that it's an audience that really crosses over
Speaker 12: and with actual CRM and real cross sell marketing, we
Speaker 12: think we can increase that significantly. The other thing we
Speaker 12: saw was that the customers that overlapped actually spent more
Speaker 12: by about fifty percent with DraftKings on average, and the
Speaker 12: customers who did not overlap with Jackpockets audience. So not
Speaker 12: only are is there good crossover, it's also a higher
Speaker 12: value customer that we can cross sell.
Speaker 13: So there's a lot to like there.
Speaker 12: And we think this really, you know, this is all
Speaker 12: about CAC and LTV.
Speaker 13: That's the nature of the business.
Speaker 12: How do you get the customers on the platform as
Speaker 12: efficiently as possible, and then how do you engage them
Speaker 12: and keep them and get the highest LTV over time
Speaker 12: as possible. And so anything that helps on either side
Speaker 12: of that equation, let alone both like this does, I
Speaker 12: think really will strengthen our ability to compete and win
Speaker 12: in the US online gaming industry.
Speaker 13: And so that's really what it's about.
Speaker 12: That's our focus, and we feel like this is a
Speaker 12: huge step forward for that.
Speaker 4: Tell us about the equation that you have to decide
Speaker 4: on whether to.
Speaker 3: Build or buy. Why buy in this occasion.
Speaker 12: Jason, Well, the team that we got is incredible. Pete
Speaker 12: in his team or really sharp and understand this market
Speaker 12: and understand this customer better than anyone I've ever met.
Speaker 13: Also, the technology they've built is hard.
Speaker 12: You know, it's not easy to build a system that
Speaker 12: can scale to fulfill in multi state and this type
Speaker 12: of setup, so really that is tough. We looked at,
Speaker 12: you know, potentially different options, and we felt like this
Speaker 12: team was the best. And also the technology they built
Speaker 12: is the best. So while I certainly think there's always
Speaker 12: different ways to approach things, and of course we think
Speaker 12: we got a good deal too, not always part of it,
Speaker 12: but I think there's always different ways to approach things,
Speaker 12: and in this case, we felt like the combination of
Speaker 12: the team we were getting and the technology they've built
Speaker 12: was just too good to pass up.
Speaker 4: Talking of different ways to approach things, and we are
Speaker 4: indeed speaking with Jason Robbins, drafting CEO, to our TV
Speaker 4: and radio audiences, what about this new sports streaming bundle?
Speaker 4: What about Disney getting into bed with Fox with Warner Brothers,
Speaker 4: What do you make of it.
Speaker 3: Do you think you'll get through the regulators?
Speaker 13: Well, it'll be really interesting to see.
Speaker 12: I mean, first of all, I'm not surprised that you're
Speaker 12: seeing deals like that. Obviously we've seen the media industry
Speaker 12: get really disrupted by streaming, and sports has sort of
Speaker 12: been that thing that everybody's kind of still waiting to see.
Speaker 13: How does this evolve? How does this shake out?
Speaker 12: And so you're going to continue to see more innovation,
Speaker 12: more disruptive deals, and.
Speaker 13: You know where it all shakes out. I don't know.
Speaker 12: If I did, i'd be you know, i'd be making
Speaker 12: more bets on those spaces than I am.
Speaker 13: But it's not our world.
Speaker 12: Were kind of watching and waiting to see, and I think,
Speaker 12: you know, usually in those situations, opportunities to partner with
Speaker 12: new interesting ventures can emerge.
Speaker 13: So we'll have to see how it all shakes out.
Speaker 12: But certainly a fascinating time in the sports media space.
Speaker 6: Jason, what's the next step in DraftKings technology story?
Speaker 3: Now?
Speaker 6: What is it you want to do with the platform
Speaker 6: and what do you want to build?
Speaker 12: Well, first, I think we still have a lot to
Speaker 12: do to just continue to create an incredible product in
Speaker 12: OSB and I gaming for our customers, Jack Pocket. Hopefully
Speaker 12: when we close that that'll be something that there's a
Speaker 12: lot of runway. They still have only launched Scratchers in
Speaker 12: one or two states, and a lot more to go there.
Speaker 12: I think, so tons to do on the product side,
Speaker 12: just to continue to build out and reach, you know,
Speaker 12: a wider audience and also provide more interesting things for
Speaker 12: people to engage in. I think on the sports betting side,
Speaker 12: live betting and game betting continues to be a big
Speaker 12: untapped opportunity. We're seeing it naturally increase and that's what
Speaker 12: I think. A lot of the core piece of the ecosystem,
Speaker 12: like broadcast latency totally.
Speaker 13: Figured out across sports.
Speaker 12: So a lot of room I think still to grow
Speaker 12: in many areas of the product, and we're going to
Speaker 12: continue focusing on the customer, listening to what our customers
Speaker 12: say and try and deliver a great experience for them.
Speaker 4: Jason Robbins always great catching up with you. Thanks so much.
Speaker 4: Busy Old week Draftking CEO. I mean it was a
Speaker 4: sensation online yesterday Open aiyes new text video generator called Sora.
Speaker 4: The company announced it's launched on X yesterday. The model
Speaker 4: currently available to only a small number of researchers and
Speaker 4: creatives who will basically stress test it before a broader
Speaker 4: public release. Let's bring in bloom Meg's Rachel Metz, and
Speaker 4: first of all, we're all bowled over by just the
Speaker 4: beauty of what's created and ultimately what any future filmmaker
Speaker 4: is going to be doing.
Speaker 14: Yeah, I mean, I think the equality that they are
Speaker 14: showing off with some of these videos is really phenomenal
Speaker 14: and it looks certainly better than other examples I've seen,
Speaker 14: and I've seen as many as I can of these
Speaker 14: AI generative video creation systems over the past few years.
Speaker 14: They've gotten a lot better, but this one seems to
Speaker 14: be better and to be able to generate lengthier videos
Speaker 14: that seem to work than other people have created.
Speaker 6: Let's point out, though, that the first thing they did
Speaker 6: with it was generate content that's dog related or puppy related,
Speaker 6: which is not a shock to anyone but Cara. I
Speaker 6: think what's interesting in Bloembos Rachel mets Key with the
Speaker 6: reporting there, thank you, is safety question right that we
Speaker 6: go straight to the question about how we know what
Speaker 6: is AI generated and what is not. A story that
Speaker 6: I broke with some colleagues about Open AI and it's
Speaker 6: CEO Sam Outman. He's working to get a green light
Speaker 6: carat from the US government. He wants approval or a
Speaker 6: blessing to move forward with that massive venture to boost
Speaker 6: the global output of AI chips and sources are telling
Speaker 6: us that there's a risk here that it raises an
Speaker 6: national security and antitrust look by lawmakers on the hill
Speaker 6: and also government agencies. You know, we've meet he has
Speaker 6: been meeting with investors, particularly in the Middle East in.
Speaker 5: Asia over the last few weeks.
Speaker 6: I'm hearing that in DC that is a particular concern.
Speaker 4: I can imagine. I mean, the amount of money that
Speaker 4: they want to raise the investment is eyewatering. But most
Speaker 4: of all, I think these conversations with Gina Ramando that
Speaker 4: you've been reporting on key, I mean, he wants to
Speaker 4: work in lockstep here really with the government, doesn't he?
Speaker 13: Yeah, he does.
Speaker 6: And you know the final thing about it is he
Speaker 6: can get money from anywhere.
Speaker 4: Seems so meanwhile, that does it For this edition of
Speaker 4: Bloomberg Technology.
Speaker 6: Massive show recap on the podcast that's where we publish it.
Speaker 6: It has been an amazing week. This is Bloomberg Technology