WEBVTT - Intel Soars on Potential Deals, Musk says Grok-3 is "Smartest AI" 0:00:02.759 --> 0:00:09.960 Bloomberg Audio Studios, podcasts, radio news from the heart of 0:00:10.000 --> 0:00:15.760 where innovation, money and power collide in Silicon Valley and beyond. 0:00:16.160 --> 0:00:20.239 This is Bloomberg Technology with Caroline Hyde and. 0:00:20.400 --> 0:00:36.680 Ed Ludlow live from New York. 0:00:36.760 --> 0:00:40.280 I'm Tim Steneveek and I'm Jackie Devalas in San Francisco. 0:00:40.560 --> 0:00:44.640 This is Bloomberg Technology coming up. Intel shares are soaring 0:00:44.760 --> 0:00:48.920 on reports that both TSMC and Broadcom are only potential 0:00:49.000 --> 0:00:51.720 deals that would split the US chip making Giant. In 0:00:51.880 --> 0:00:57.760 two plus, Elon Musk's artificial intelligence startup XAI showcases it's 0:00:57.880 --> 0:01:01.440 updated Grock three model, a rush challenge to open AI, 0:01:02.000 --> 0:01:05.720 and we'll dive into concerns around AI safety as companies 0:01:05.760 --> 0:01:08.399 and governments appear to change their attitudes on how to 0:01:08.440 --> 0:01:11.600 make the technology safer. But first let's look at markets. Tim, 0:01:11.600 --> 0:01:12.280 what are you looking at? 0:01:12.480 --> 0:01:14.840 I'm looking at the Nazaq one hundred, searching for a 0:01:14.840 --> 0:01:18.920 little bit of direction you can see down not even well, 0:01:18.959 --> 0:01:21.480 not even one tenth of one percent, bouncing between gains 0:01:21.480 --> 0:01:24.679 and losses throughout the session so far, Traders watching the 0:01:24.720 --> 0:01:29.240 latest geopolitical developments. All eyes are what's happening in Eastern Europe. 0:01:29.280 --> 0:01:32.160 This is the US and Russia agreed to more talks 0:01:32.200 --> 0:01:34.920 on resolving the war in Ukraine, but set no date 0:01:34.959 --> 0:01:38.000 for a summit meeting between Donald Trump and Vladimir Putin 0:01:38.360 --> 0:01:41.400 Ukraine's of Vladimir's Olenski canceling his visit. 0:01:41.440 --> 0:01:43.880 To Saudi Arabia. So we'll bring you updates on that 0:01:44.200 --> 0:01:45.640 as we do get them. I am watching. 0:01:45.680 --> 0:01:49.240 Shares of Intel though, up about ten percent as we speak, 0:01:49.280 --> 0:01:52.400 surging after the Wall Street Journal reported that both TSMC 0:01:52.480 --> 0:01:56.480 and Broadcom are molling separate potential deals that would split 0:01:56.560 --> 0:01:59.920 Intel into two. Now the journal is reporting that Broadcom 0:02:00.160 --> 0:02:03.480 would be interested in the chip design and market business. Well, 0:02:03.720 --> 0:02:08.400 TSMC is apparently interested in Intel's chip plants. Today's serge, though, 0:02:08.480 --> 0:02:11.360 does come after Intel had its best week all the way. 0:02:11.280 --> 0:02:12.919 Going back to the year two thousand. 0:02:13.000 --> 0:02:16.800 Shares rows more than twenty percent last week on reports 0:02:16.800 --> 0:02:19.040 that the US government is possibly getting involved with a 0:02:19.080 --> 0:02:22.200 plan that involves both Intel and TSMC. 0:02:22.440 --> 0:02:26.880 Jackie, let's get right too with Bloomberg's Bryan Westelica. Ryan, 0:02:27.000 --> 0:02:29.639 let's talk about those chip plans which Intel is operating 0:02:29.720 --> 0:02:32.040 currently at a loss. What could a potential deal with 0:02:32.080 --> 0:02:34.040 TSMC mean for that business. 0:02:35.480 --> 0:02:37.360 Hey, good afternoon, thanks for having me. So. 0:02:37.440 --> 0:02:40.400 Yeah, so a lot remains unclear right now, but certainly 0:02:40.400 --> 0:02:42.720 this has been a real drag on Intel for quite 0:02:42.720 --> 0:02:47.200 an extended period of time. Obviously, the previous CEO invested 0:02:47.280 --> 0:02:50.600 heavily in the foundry business, you know, billions of dollars 0:02:50.800 --> 0:02:53.120 and really see too much of a return on that. 0:02:53.200 --> 0:02:56.960 It is well behind TSMC and Samsung. So people are 0:02:57.000 --> 0:02:59.079 really looking to see if there is any kind of 0:02:59.160 --> 0:03:01.640 you know, sort of resk you for the foundry business 0:03:01.639 --> 0:03:05.880 that is really expected to really support Intel. If there 0:03:05.960 --> 0:03:08.160 is some kind of deal coming to fruition. 0:03:08.400 --> 0:03:12.640 Ryan, what would be left of Intel if it's TSMC 0:03:13.080 --> 0:03:17.320 and Broadcom were to succeed in this as reported by 0:03:17.320 --> 0:03:18.160 the journal. 0:03:18.400 --> 0:03:19.720 Yeah, that's a great question. 0:03:20.080 --> 0:03:22.359 Again, so many details are still up in the air, 0:03:22.480 --> 0:03:25.240 not yet confirmed. I mean, you know, there is such 0:03:25.280 --> 0:03:27.920 a focus on domestic manufacturing. Intel got a lot of 0:03:27.960 --> 0:03:30.520 money from the Chips Act. It was building out a 0:03:30.600 --> 0:03:33.600 factory in Ohio, for example, So there is certainly a 0:03:33.639 --> 0:03:36.640 geopolitical aspect to this. People want to see more domestic 0:03:36.720 --> 0:03:39.640 chip manufacturing, and if TSMC is able to work with 0:03:39.680 --> 0:03:42.760 Intel in some capacity, obviously that would probably be good 0:03:42.760 --> 0:03:46.400 for PSMC to have more of a domestic presence here, 0:03:47.000 --> 0:03:49.360 certainly good for Intel. But again, we really don't know 0:03:49.400 --> 0:03:51.080 what any of this is going to end up looking like, 0:03:51.240 --> 0:03:52.600 if anything does come to fruition. 0:03:53.640 --> 0:03:56.520 Ryan, Let's talk about some other non sexy names in tech, 0:03:56.960 --> 0:04:00.480 like IBM and Cisco. You wrote this morning that they're 0:04:00.520 --> 0:04:02.360 kind of seeing a run up and showing themselves to 0:04:02.400 --> 0:04:06.000 be AI contenders. What's leading this enthusiasm. 0:04:06.880 --> 0:04:10.280 Yeah, so Cisco last week gave a pretty positive revenue 0:04:10.320 --> 0:04:14.320 forecast talking about the demand it is seeing related to 0:04:14.400 --> 0:04:17.760 all the AI infrastructure that is being built out. IBM 0:04:17.920 --> 0:04:20.799 earlier this year had a pretty strong forecast of its own, 0:04:21.120 --> 0:04:24.440 some strong long term sales targets. These are two companies 0:04:24.480 --> 0:04:26.560 that you know, were sort of forgotten by a lot 0:04:26.560 --> 0:04:29.279 of investors. They are nowhere near you know, like you said, 0:04:29.279 --> 0:04:32.760 they're sexy heydays like Cisco still below its dot com 0:04:32.760 --> 0:04:35.240 erapeak from two thousand, but you know, as it's starting 0:04:35.240 --> 0:04:36.960 to see a little bit more of a growth narrative, 0:04:37.120 --> 0:04:39.680 especially really to AI, people are taking another look. These 0:04:39.720 --> 0:04:42.719 are stocks that are you know, trading at pretty considerable 0:04:42.760 --> 0:04:45.480 discounts to the max seven names. They have pretty strong 0:04:45.520 --> 0:04:48.040 dividend yield. So in a period of time when people 0:04:48.080 --> 0:04:50.479 are maybe wondering, have the Max seven gone too far? 0:04:50.680 --> 0:04:52.080 Is this story already priced in? 0:04:52.320 --> 0:04:55.320 Having some new AI stocks in there, especially mature companies 0:04:55.360 --> 0:04:58.279 with pretty solid cash flow and dividends and so forth 0:04:58.320 --> 0:05:00.640 trading at lower multiples, you can see white people might 0:05:00.640 --> 0:05:01.760 be taking another look at them. 0:05:02.160 --> 0:05:04.720 Well, let's stick with the Mag seven. Bloomberg's Ryan Vistelica 0:05:04.839 --> 0:05:07.040 joining us from Chicago. Always good to see you, Ryan. 0:05:07.279 --> 0:05:09.360 For more, I do want to bring in Dana Dioria. 0:05:09.520 --> 0:05:12.080 She's group president over at invest Net Solutions, also co 0:05:12.200 --> 0:05:16.440 chief investment officer at invest Net. Dana, we heard Ryan 0:05:16.560 --> 0:05:19.040 just now talking about the Mag seven. It's more than 0:05:19.040 --> 0:05:21.240 thirty percent of the makeup of the S and P 0:05:21.360 --> 0:05:26.040 five hundred, those seven stocks. How are your clients diversifying 0:05:26.120 --> 0:05:29.960 away from the MAG seven? Are they overinvested in them? 0:05:30.640 --> 0:05:30.919 Well? 0:05:30.960 --> 0:05:33.920 I mean so, beauties in the eye of the holder, right, 0:05:34.040 --> 0:05:37.200 So there's a lot of you know, research that suggest look, 0:05:37.240 --> 0:05:38.800 if you are invested. 0:05:38.400 --> 0:05:41.120 In the market, the market, the market's. 0:05:40.760 --> 0:05:43.640 Determination is this is what these stocks are worth, and 0:05:43.920 --> 0:05:46.560 you know they're invested where they should be. I think 0:05:46.680 --> 0:05:48.800 a lot of our clients though, are looking at that, 0:05:48.839 --> 0:05:52.120 and obviously on investment, we're talking about retail clients with 0:05:52.240 --> 0:05:56.400 advisors managing our assets, and they look to diverse. 0:05:56.200 --> 0:05:59.080 By in other places. They look to have an overall 0:05:59.120 --> 0:06:01.120 globally allocate portfolio. 0:06:00.760 --> 0:06:03.960 That has international investments that perhaps leans a little bit 0:06:04.000 --> 0:06:06.440 into small caps. But let's be honest, if you are 0:06:06.920 --> 0:06:09.720 you know, more than fifty cents on the dollar that 0:06:09.800 --> 0:06:13.080 goes into our platform goes into passive assets. So if 0:06:13.080 --> 0:06:15.440 you're there, you've got a ton of you said it yourself, 0:06:15.520 --> 0:06:18.760 it's it's thirty percent right of the SMP. But even 0:06:18.760 --> 0:06:21.120 if you're in an actively managed strategy, it's very hard 0:06:21.120 --> 0:06:23.680 at this point to have a ton of tracking error 0:06:23.720 --> 0:06:27.440 to the passive index because it's performed so well in 0:06:27.440 --> 0:06:28.400 the last several years. 0:06:29.600 --> 0:06:31.560 Dana, there's a couple of different ways that we can 0:06:31.600 --> 0:06:36.080 look at tech companies. Now you have software, hardware, enterprise 0:06:36.200 --> 0:06:39.159 and then the consumer focus. How are you thinking about 0:06:39.200 --> 0:06:42.320 how to bucket these sorts of investments going forward and 0:06:42.360 --> 0:06:45.000 the sorts of catalysts you're looking from each bucket? 0:06:46.240 --> 0:06:48.599 Well, so I think you know, for the average client 0:06:48.680 --> 0:06:52.599 on the platform, it's more about the sector, and it's 0:06:52.640 --> 0:06:55.159 more about, you know, where is the sector from a 0:06:55.160 --> 0:06:58.320 market cap weighted perspective within the indexes. And then if 0:06:58.320 --> 0:07:03.000 you're in say a Rust one thousand growth actively managed strategy, 0:07:03.320 --> 0:07:06.120 how are the how is that manager doing that bucketing? 0:07:06.160 --> 0:07:09.880 How are they thinking about playing the AI trade? For example? 0:07:10.040 --> 0:07:13.360 Is it a question of you know, do I diverse by. 0:07:13.320 --> 0:07:16.080 Again away from saying Nvidia right, and and this has 0:07:16.120 --> 0:07:18.600 been a big struggle for them because you know, you 0:07:18.720 --> 0:07:21.400 have to meet forty act rules around diversification in a 0:07:21.480 --> 0:07:24.480 lot of cases, and it's hard to do when you 0:07:24.560 --> 0:07:26.760 have more than fifty percent of say the Russell one 0:07:26.800 --> 0:07:30.320 thousand growth uh, you know, invested in these mag seven 0:07:30.600 --> 0:07:33.040 And so I think that bucketing helps where a good 0:07:33.080 --> 0:07:35.960 active manager who's able to look at the tech sector 0:07:36.000 --> 0:07:38.000 and say, okay, you. 0:07:37.960 --> 0:07:40.000 Know, I see opportunity sets. 0:07:39.760 --> 0:07:43.200 Maybe in some of these suppliers to big you know, 0:07:43.240 --> 0:07:45.320 to the MAG seven right, and these different parts of 0:07:45.320 --> 0:07:48.120 the market where I can still kind of take that 0:07:48.240 --> 0:07:51.080 growthy bet on AI and tech, but. 0:07:51.240 --> 0:07:55.600 Not necessarily you know, be so heavily focused. 0:07:55.200 --> 0:07:58.560 On the MAG seven and you know, not meeting those 0:07:58.560 --> 0:08:00.840 diversification roles. So I think that's something that you know, 0:08:00.880 --> 0:08:03.200 these managers struggle with and every time we see sort 0:08:03.240 --> 0:08:06.480 of a dip, you know, it's a question is it 0:08:06.560 --> 0:08:10.360 a buying opportunity to kind of leg more into those 0:08:10.400 --> 0:08:12.880 types of things as opposed. 0:08:12.480 --> 0:08:14.400 To actually diversifying. 0:08:14.480 --> 0:08:17.160 You know, that's kind of the question where can we 0:08:17.240 --> 0:08:20.640 find certainty? And I know that's asking a lot given 0:08:20.680 --> 0:08:23.640 these days, but when we think about where we can 0:08:23.680 --> 0:08:28.400 see the tangible return, you have concerns around infrastructure capacity 0:08:28.600 --> 0:08:30.840 and then at the same time and consumer you just 0:08:30.840 --> 0:08:33.360 don't really know how these sorts of features are going 0:08:33.400 --> 0:08:35.920 to be monetized. Which one do you think holds more 0:08:35.920 --> 0:08:37.800 certainty for investors? 0:08:37.840 --> 0:08:40.199 Well, I mean, I think the energy theme has been 0:08:40.200 --> 0:08:42.480 a huge one. It's it comes across and you know, 0:08:42.520 --> 0:08:45.199 so we sit at the junction of hundreds of asset managers, 0:08:45.200 --> 0:08:47.000 so we kind of get a good sense of where, 0:08:47.320 --> 0:08:49.199 you know, the zeitgeist is sort of leaning, and I 0:08:49.240 --> 0:08:51.360 would say to you that the secular trend and energy 0:08:51.400 --> 0:08:52.760 has definitely been a theme. 0:08:53.200 --> 0:08:56.360 I also think people understand that this administration. 0:08:55.880 --> 0:08:58.520 Is probably going to be not like pro growth, but 0:08:58.880 --> 0:09:02.840 you know, helpful and terms of energy centers, you know, 0:09:03.360 --> 0:09:05.920 helping the energy sector in general. Here in the US, 0:09:06.600 --> 0:09:09.240 and I have a view. You know that we're going 0:09:09.320 --> 0:09:11.880 to have to meet the energy demands over the next 0:09:12.200 --> 0:09:17.319 several years and into the next you know, decade, et cetera. 0:09:17.760 --> 0:09:19.800 You're going to have energy sources from everywhere. It just 0:09:19.920 --> 0:09:20.480 is what it is. 0:09:20.520 --> 0:09:25.200 So sustainable, yes, you know, more traditional incumbent. Yes, We're 0:09:25.280 --> 0:09:28.760 just not there yet to kind of transition over to sustainable. 0:09:28.920 --> 0:09:31.160 So I think energy is a play that probably a 0:09:31.200 --> 0:09:34.120 lot of investors have focused on for this and you know, 0:09:34.200 --> 0:09:37.480 particularly with this administration, they see the opportunity set there. 0:09:38.160 --> 0:09:39.800 You know, even before AI. 0:09:39.760 --> 0:09:42.199 Right, our energy needs we're going to increase just looking 0:09:42.200 --> 0:09:46.480 at demographic trends, population growth, you know, parts of the 0:09:46.480 --> 0:09:48.680 world that are moving into a better standard of living, 0:09:48.679 --> 0:09:51.240 which is what we obviously want to see. But all 0:09:51.280 --> 0:09:53.679 of that is going to create energy demands even before 0:09:53.679 --> 0:09:54.720 you get to the AI. 0:09:54.640 --> 0:09:58.120 Trade growth versus value. It's a debate that I've been 0:09:58.160 --> 0:10:02.319 having with guests. I started doing this, Is this finally 0:10:02.360 --> 0:10:04.520 the year? I mean, growth is one every year I've 0:10:04.559 --> 0:10:06.360 been doing this, Is this finally the year that we 0:10:06.360 --> 0:10:06.920 see value? 0:10:06.920 --> 0:10:08.040 I perform? 0:10:08.760 --> 0:10:10.720 It is so hard to be a value manager. 0:10:12.440 --> 0:10:16.360 You know, here's what I would say January effect is interesting. 0:10:16.400 --> 0:10:19.560 It's not statistically significant, but you know, there's a little 0:10:19.600 --> 0:10:23.640 signal in there. January did see out performance of value. 0:10:23.840 --> 0:10:26.120 I think, look the notion that we are higher for 0:10:26.200 --> 0:10:30.320 longer on interest rates. Traditionally speaking, that should benefit value, 0:10:30.400 --> 0:10:32.720 right because more of those cash flows are coming earlier, 0:10:33.040 --> 0:10:35.840 and so when you have a higher discount rate, the 0:10:35.880 --> 0:10:40.200 growth stocks should theoretically be impacted worse by that because 0:10:40.200 --> 0:10:42.760 they have more longer dated cash flows, more years that 0:10:42.800 --> 0:10:44.680 you have to discount by a higher number. 0:10:45.000 --> 0:10:48.240 So yeah, theoretically there's some makings for that there, but. 0:10:48.160 --> 0:10:50.120 We all know the AI trade can just you know, 0:10:50.360 --> 0:10:53.320 and or other secular trends can can just blow that 0:10:53.400 --> 0:10:54.040 out of the water. 0:10:54.120 --> 0:10:55.840 So it's very hard I think in the short run 0:10:55.920 --> 0:10:58.080 to say what will win what won't win. 0:10:58.320 --> 0:11:00.720 I will say, you know, I think at the end 0:11:00.760 --> 0:11:02.880 of the day, valuation will always still matter. 0:11:03.320 --> 0:11:05.800 It matters more for medium term expect and return. 0:11:05.840 --> 0:11:07.800 To try to trade on it in the short run 0:11:07.920 --> 0:11:10.040 is you know, it doesn't have a good track record 0:11:10.080 --> 0:11:10.360 for that. 0:11:11.360 --> 0:11:14.840 There's hope yet for value investors. Dana Doria from Investment 0:11:14.920 --> 0:11:26.839 thanks for joining us Elon Musk's XAI has debuted its 0:11:26.920 --> 0:11:30.720 latest GROP three model, promising advanced reasoning and even a 0:11:30.760 --> 0:11:34.320 new smart search feature. This comes just days after Musk 0:11:34.400 --> 0:11:37.240 made an unsolicited bid to buy Sam Motman's open Ai, 0:11:37.360 --> 0:11:40.920 which was ultimately rejected for more. Bloomberg Intelligence analyst man 0:11:40.920 --> 0:11:43.520 Deep Singh joins us Now, Man Deep, what do you 0:11:43.559 --> 0:11:45.360 make of this model? How does it stack up to 0:11:45.559 --> 0:11:46.480 xai rivals? 0:11:47.120 --> 0:11:47.320 Yeah? 0:11:47.360 --> 0:11:50.200 Look, I think what they have showed is another reasoning 0:11:50.280 --> 0:11:54.480 model that can do well on certain benchmarks, and clearly 0:11:54.760 --> 0:11:58.240 was trained on one of the biggest clusters out there. 0:11:58.360 --> 0:12:00.280 And you think about you know the number of. 0:12:00.120 --> 0:12:04.400 GPUs they use for this model, So is there anything groundbreaking? 0:12:04.640 --> 0:12:05.360 I don't think so. 0:12:05.679 --> 0:12:08.280 But at the same time, what they're showing is all 0:12:08.320 --> 0:12:12.920 these llms are narrowing, you know, the capability gap they 0:12:12.960 --> 0:12:16.200 had with open ai, and I still think open ai 0:12:16.400 --> 0:12:19.679 is the preferred model when it comes to the usage 0:12:19.720 --> 0:12:22.760 and the distribution they have created for themselves. It would 0:12:22.760 --> 0:12:26.360 be interesting to see how much upsale xai can have 0:12:26.440 --> 0:12:29.760 on their own platform, Twitter and whether users are willing 0:12:29.800 --> 0:12:31.920 to pay a subscription. That will be the real test. 0:12:32.000 --> 0:12:35.559 But clearly I think it scores well on all the benchmarks. 0:12:35.840 --> 0:12:36.200 Mandeep. 0:12:36.320 --> 0:12:39.760 Is the market big enough now and in the future 0:12:40.760 --> 0:12:45.840 for Claude, for chat, GPT, for you know, whatever comes 0:12:45.920 --> 0:12:48.680 next that's being worked on right now. Is it smart 0:12:48.800 --> 0:12:51.599 enough for Gemini? Is it big enough for Gemini? Do 0:12:51.920 --> 0:12:52.800 we need all of these? 0:12:53.200 --> 0:12:53.400 Yeah? 0:12:53.440 --> 0:12:56.480 Look, I mean we just got off the earning season 0:12:57.120 --> 0:12:59.560 in the past one month, and it's very obvious that 0:12:59.600 --> 0:13:02.680 everyone is doubling down when it comes to their capex investments. 0:13:02.720 --> 0:13:05.160 So the market is big enough to answer your question. 0:13:05.640 --> 0:13:07.920 At the same time, our view is that the field 0:13:08.000 --> 0:13:10.640 is narrowing when it comes to the foundational model players. 0:13:10.640 --> 0:13:13.439 And that's where, you know, only the ones with deep pockets, 0:13:13.480 --> 0:13:17.040 your hyperscalers or XAI for that matter, that can spend 0:13:17.080 --> 0:13:19.640 on these you know, billion dollar training runs will be 0:13:19.679 --> 0:13:22.360 the ones who would have the foundational models and they'll 0:13:22.360 --> 0:13:25.400 try to roll it out for all the applications to use. 0:13:25.800 --> 0:13:28.920 Bloomberg Intelligence analyst Mandeep saying and joining us here in 0:13:28.920 --> 0:13:30.640 New York, Mandy, thanks so much. 0:13:30.679 --> 0:13:31.559 Well sticking with AI. 0:13:31.760 --> 0:13:35.160 Meanwhile, open ai co founder Ilias at Skimer is looking 0:13:35.160 --> 0:13:37.600 to raise more than one billion dollars for his startup, 0:13:38.040 --> 0:13:41.440 Safe Superintelligence. It could value the company at over thirty 0:13:41.600 --> 0:13:45.520 billion dollars. According to sources. San Francisco based VC firm 0:13:45.559 --> 0:13:48.680 Green Oaks Capital Partners is leading the deal. For more 0:13:48.800 --> 0:13:52.320 Bloomberg's Kate Clark joins US now here in New York. 0:13:52.520 --> 0:13:55.719 So where does this company sit in the AI world? 0:13:56.160 --> 0:13:58.520 Well, this company is brand new. It was founded in 0:13:58.640 --> 0:14:02.120 June of last year, which its valuation even more incredible. 0:14:02.400 --> 0:14:06.400 The company is trying to create a safe superintelligence, so it's. 0:14:06.280 --> 0:14:06.920 All in the name. 0:14:07.000 --> 0:14:10.080 But otherwise we don't know very much about this company. 0:14:10.120 --> 0:14:12.600 It is very secretive, it is very much under the radar, 0:14:12.720 --> 0:14:14.200 and it's just getting started. 0:14:15.400 --> 0:14:19.680 Kate, what do we know about why investors are interested? 0:14:19.760 --> 0:14:22.240 As you mentioned, it's super new, it's not really generating 0:14:22.560 --> 0:14:25.320 much revenue. And you add on to the fact that 0:14:25.480 --> 0:14:27.880 kind of the word safety is almost coming out of 0:14:28.000 --> 0:14:31.720 vogue this year amid a new administration that doesn't really 0:14:31.960 --> 0:14:35.400 seem to put too much importance on responsible AI. What 0:14:35.480 --> 0:14:37.120 do you make of that? Like, what's kind of the 0:14:38.160 --> 0:14:41.480 hook here for a VC that's investing in this company. 0:14:41.520 --> 0:14:45.720 There's one huge clear hook, and that's the founder, Iliasitzkiber, which, 0:14:45.760 --> 0:14:47.920 as you both know, is a co founder of open ai. 0:14:48.400 --> 0:14:52.080 Longtime chief scientists and a chief architect of those aim models. 0:14:52.520 --> 0:14:55.400 People really truly believe that he is a singular force 0:14:55.480 --> 0:14:58.800 and that whatever he builds will be a massive, massive success. 0:14:59.280 --> 0:15:01.480 The company has zero revenue and we won't see a 0:15:01.520 --> 0:15:05.480 product for years most likely, as it seeks to create 0:15:05.600 --> 0:15:09.600 this safe super intelligence. So truly it is all about 0:15:09.600 --> 0:15:11.960 the founder in this one, and that is what's justifying 0:15:12.000 --> 0:15:15.160 this thirty billion dollar valuation, which by the way, makes 0:15:15.200 --> 0:15:17.440 this one of the most highly valued companies in the world. 0:15:18.120 --> 0:15:20.040 And I don't have the statistics in front of me, 0:15:20.120 --> 0:15:22.440 but I think having zero dollars in revenue and evaluation 0:15:22.520 --> 0:15:23.560 that high is pretty rare. 0:15:23.720 --> 0:15:25.880 I feel like you're, you know, you're sort of emphasizing 0:15:25.880 --> 0:15:27.680 the fact that this company doesn't have a product at 0:15:27.680 --> 0:15:29.440 this point and it's all on the founder and it 0:15:29.440 --> 0:15:31.320 could be worth billions of dollars at this point. 0:15:31.360 --> 0:15:33.640 Can we can we say froth or VC saying froth. 0:15:34.160 --> 0:15:35.120 Vcs are saying froth. 0:15:35.160 --> 0:15:37.040 I mean vcs are also saying this is a once 0:15:37.120 --> 0:15:40.080 in a generation moment, and they want to get on 0:15:40.160 --> 0:15:42.720 board with people like Ilia because they do believe that 0:15:42.760 --> 0:15:45.480 they will someone like him can create the next trillion 0:15:45.560 --> 0:15:48.320 dollar company. So if you believe that, then sure it's 0:15:48.320 --> 0:15:50.320 a great moment. But I think outside of you know, 0:15:50.640 --> 0:15:53.960 maybe Ilia is a unique person who really will create 0:15:53.960 --> 0:15:56.680 that super intelligence. But you're seeing tens of billions of 0:15:56.680 --> 0:15:59.320 dollars go into one year old, two year old companies. 0:16:00.160 --> 0:16:01.760 It'll take five to ten years before we know how 0:16:01.840 --> 0:16:04.240 much money venture capitalists will lose, but they will lose 0:16:04.400 --> 0:16:05.080 a lot of money. 0:16:06.520 --> 0:16:09.840 That's Bloomberg's Kate Clark, thanks for joining us. Coming up, 0:16:09.920 --> 0:16:12.920 we speak to Cato Network CEO Shlomo Kramer as the 0:16:12.960 --> 0:16:15.920 company sees a big revenue boost in twenty twenty four. 0:16:16.240 --> 0:16:17.640 This is Bloomberg. 0:16:44.960 --> 0:16:47.240 Elon musk Dos team is said to be attempting to 0:16:47.280 --> 0:16:50.440 gain access to a broad range of taxpayer data, raising 0:16:50.480 --> 0:16:55.040 concern from Democratic lawmakers over privacy concerns. Strict US laws 0:16:55.080 --> 0:16:58.520 prohibit the disclosure of taxpayer data, with some exceptions for 0:16:58.600 --> 0:17:00.680 law enforcement resources. 0:17:00.720 --> 0:17:03.480 The team is seeking the data but has not yet 0:17:03.840 --> 0:17:04.439 accessed it. 0:17:04.880 --> 0:17:10.240 Jackie cybersecurity firm Cato Networks as they surpassed two hundred 0:17:10.280 --> 0:17:13.760 and fifty million in annual recurring revenue for twenty twenty four. 0:17:14.080 --> 0:17:16.439 That's a jump of forty six percent compared to the 0:17:16.480 --> 0:17:21.160 year prior. Here with us is Cato Network CEO Shlomo Kramer. Solomo, 0:17:21.200 --> 0:17:23.360 at a time when companies are really on the hook 0:17:23.440 --> 0:17:25.199 to show that they can deliver, can you tell us 0:17:25.240 --> 0:17:26.760 where this demand is coming from. 0:17:28.080 --> 0:17:32.439 The demand is coming from all sizes of organization that 0:17:32.640 --> 0:17:39.359 faces increased complexity of point solution and are looking for 0:17:39.440 --> 0:17:45.560 a platform to deliver the network security with operational efficiency 0:17:45.560 --> 0:17:52.280 and business agility. So it's all about digitively transforming IT 0:17:52.400 --> 0:17:55.760 security to serve the digitive business. 0:17:56.280 --> 0:17:56.639 Soloma. 0:17:56.640 --> 0:17:59.960 Are you seeing a decline in demand in terms of 0:18:00.240 --> 0:18:05.240 total spent on this sector due to investment in AI 0:18:05.960 --> 0:18:08.280 or are you seeing investment grow here? 0:18:09.600 --> 0:18:15.479 We are seeing consistent increase in spending on IT security. Actually, 0:18:15.480 --> 0:18:22.360 in the four years following COVID, spend of IT security 0:18:22.400 --> 0:18:27.760 out of IT budget has gone forty percent, while we 0:18:27.840 --> 0:18:31.240 are not more secure now than we were four years ago. 0:18:31.800 --> 0:18:36.439 So actually this is actually the increase in spend is 0:18:36.480 --> 0:18:40.920 the core problem that platforms such as Kato solved. 0:18:41.560 --> 0:18:42.399 So how do we get. 0:18:42.280 --> 0:18:44.479 More secure If people are and companies are spending more 0:18:44.520 --> 0:18:46.640 money but they're not seeing the results when it comes 0:18:46.680 --> 0:18:48.680 to security, how do we get more secure? 0:18:49.920 --> 0:18:58.320 We replaced the fifty point products that an average CISO has. 0:18:58.880 --> 0:19:04.639 With three four call platforms, you know, a platform on 0:19:04.720 --> 0:19:09.480 the endpoint, a platform on the cloud, a CATO on 0:19:09.520 --> 0:19:14.520 the network side, all integrated together. It's much more manageable, 0:19:14.920 --> 0:19:17.639 it's much more agile. You can say yes to the 0:19:17.680 --> 0:19:20.879 business and you can fit it within the budget and 0:19:21.119 --> 0:19:21.960 talent that you have. 0:19:23.280 --> 0:19:26.480 Let's talk about venture capital. Investors are pretty excited about 0:19:26.480 --> 0:19:29.200 cybersecurity startups. They raised a bunch of money in twenty 0:19:29.240 --> 0:19:32.440 twenty four. You US raised around in twenty twenty three, 0:19:32.400 --> 0:19:34.840 two hundred and thirty eight million dollars. I mean, is 0:19:34.880 --> 0:19:36.359 an IPO next for you this year? 0:19:37.840 --> 0:19:42.600 As a growth company, we have many different options, both 0:19:42.640 --> 0:19:46.719 public and private, and the real goal here is to 0:19:46.720 --> 0:19:52.320 build a long term leader in this new category called 0:19:52.400 --> 0:19:56.560 SASS platform for network security. 0:19:57.600 --> 0:20:00.240 Do you see that being as a possibility this year though? 0:20:00.280 --> 0:20:02.880 I mean, if you were to perhaps speculate on who 0:20:02.960 --> 0:20:05.919 potential buyers could be, perhaps not just for your company, 0:20:05.960 --> 0:20:07.560 but kind of in the space in general. As we 0:20:07.600 --> 0:20:09.439 see M and A tick up, what are you seeing? 0:20:10.520 --> 0:20:10.760 Well? 0:20:10.880 --> 0:20:16.119 Really heads on, heads down on building CATO and I 0:20:16.160 --> 0:20:24.320 can't I won't circulate on any financing M and a 0:20:24.359 --> 0:20:25.280 events this year. 0:20:25.560 --> 0:20:27.920 What would be the next financial benchmark? Though you did 0:20:27.960 --> 0:20:30.600 say you've surpassed two undred and fifty million in arr 0:20:30.960 --> 0:20:33.720 for twenty twenty four, what's the next benchmark? 0:20:34.840 --> 0:20:39.439 So you know, Governor assess is the market is going 0:20:39.680 --> 0:20:48.280 twenty six percent AEOV to twenty eight billion dollars in 0:20:48.359 --> 0:20:54.080 less than four years, and we last year we go 0:20:55.280 --> 0:20:59.920 much more than that, and we fully expect to go 0:21:00.400 --> 0:21:04.639 this year also more than the market and take market 0:21:04.680 --> 0:21:07.160 share and continue to build the company. 0:21:07.200 --> 0:21:10.040 What would you say is the market size? 0:21:10.800 --> 0:21:12.080 It's a huge market, you know. 0:21:13.200 --> 0:21:19.040 Essentially, a SASE our category is the third generation of 0:21:19.240 --> 0:21:24.640 network security. It replaces the second generation, which are the appliances. 0:21:25.200 --> 0:21:28.880 These are many tens of billions of dollars that are 0:21:28.920 --> 0:21:32.120 going to be re architected and five to seven years 0:21:32.160 --> 0:21:36.600 from now, eighty to ninety percent of appliances are going 0:21:36.680 --> 0:21:44.160