WEBVTT - Has the AI Reckoning Arrived?

0:00:02.720 --> 0:00:09.879
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. There's a closing bill

0:00:09.960 --> 0:00:13.080
<v Speaker 1>for this Tuesday on Wall Street, where a renewed tech

0:00:13.240 --> 0:00:16.520
<v Speaker 1>selloff dragged down stocks from mere record levels.

0:00:17.280 --> 0:00:21.560
<v Speaker 2>Bring AI anxiety is coursing through the stock market right now.

0:00:22.160 --> 0:00:25.160
<v Speaker 2>The Nasdaq one hundred fell more than one percent Tuesday

0:00:25.600 --> 0:00:30.880
<v Speaker 2>as investors pulled back from tech and tech adjacent stocksby.

0:00:30.120 --> 0:00:31.360
<v Speaker 1>I'm not sure what they make on the.

0:00:31.320 --> 0:00:34.279
<v Speaker 3>Price action today, Yeah, pairing losses, but so we're down

0:00:34.360 --> 0:00:36.199
<v Speaker 3>nine tenths of a percent on the S and P

0:00:36.280 --> 0:00:38.320
<v Speaker 3>five hundred, even more when you take a look at

0:00:38.360 --> 0:00:38.839
<v Speaker 3>the NARASAQ.

0:00:39.400 --> 0:00:42.479
<v Speaker 2>Last week was topsy turvy two after some of the

0:00:42.479 --> 0:00:46.599
<v Speaker 2>world's largest tech companies released their latest quarterly earnings reports.

0:00:47.000 --> 0:00:50.279
<v Speaker 2>An investors process the results, Apple.

0:00:50.000 --> 0:00:52.199
<v Speaker 3>Earning really beating it out of the path. When it

0:00:52.240 --> 0:00:54.520
<v Speaker 3>comes to the quarterly earning.

0:00:54.400 --> 0:00:57.360
<v Speaker 2>Microsoft having a very hard day, biggest drop since March

0:00:57.360 --> 0:00:59.720
<v Speaker 2>of twenty twenty four hundred billion dollars in market cap.

0:00:59.760 --> 0:01:03.960
<v Speaker 1>Share shares of meta platforms are surging seven and a

0:01:04.000 --> 0:01:04.760
<v Speaker 1>half percent.

0:01:05.240 --> 0:01:09.160
<v Speaker 2>These reactions might seem all over the place, but Bloomberg's

0:01:09.160 --> 0:01:13.680
<v Speaker 2>Big Tech editor Sarah Fryer says there's an underlying anxiety

0:01:13.800 --> 0:01:15.000
<v Speaker 2>that explains them all.

0:01:15.319 --> 0:01:19.680
<v Speaker 3>It's all about this existential question of are we spending

0:01:19.760 --> 0:01:23.640
<v Speaker 3>quickly enough on AI? Are we spending too quickly? And

0:01:23.880 --> 0:01:28.240
<v Speaker 3>can we afford what we're spending on this massive infrastructure

0:01:28.280 --> 0:01:29.440
<v Speaker 3>built out?

0:01:30.160 --> 0:01:33.560
<v Speaker 2>Last year, investors were willing to be patient with companies

0:01:33.560 --> 0:01:37.000
<v Speaker 2>who are taking big swings on AI, building out huge

0:01:37.080 --> 0:01:41.240
<v Speaker 2>data centers, filling them with expensive technology, and hiring lots

0:01:41.280 --> 0:01:46.320
<v Speaker 2>of pricey talent. Now investors want to see big results.

0:01:46.600 --> 0:01:51.000
<v Speaker 3>Investors are looking not just at this spending, but also

0:01:51.120 --> 0:01:54.440
<v Speaker 3>at you know, are we seeing some return on investment

0:01:54.880 --> 0:01:58.960
<v Speaker 3>and are the legacy businesses growing fast enough to support

0:01:59.400 --> 0:02:00.000
<v Speaker 3>that investment.

0:02:00.840 --> 0:02:04.320
<v Speaker 2>Sarah says, all this pressure is putting tech companies in

0:02:04.400 --> 0:02:07.800
<v Speaker 2>a bind. If they spend too much without the cash

0:02:07.840 --> 0:02:10.760
<v Speaker 2>flow or the customers to show for it, their stock

0:02:10.880 --> 0:02:13.680
<v Speaker 2>could take a hit, And if they spend too little,

0:02:14.280 --> 0:02:15.920
<v Speaker 2>they risk falling behind.

0:02:16.480 --> 0:02:17.920
<v Speaker 3>I think this is the year where the chips are

0:02:17.919 --> 0:02:20.640
<v Speaker 3>going to fall. We're going to find out if the

0:02:20.760 --> 0:02:23.640
<v Speaker 3>spending that's occurring on AI is going to result in

0:02:23.840 --> 0:02:26.560
<v Speaker 3>real change for these businesses. What are you going to

0:02:26.639 --> 0:02:28.880
<v Speaker 3>build with this investment in AI?

0:02:31.800 --> 0:02:33.960
<v Speaker 2>I'm Sarah Holder, and this is the big take from

0:02:33.960 --> 0:02:38.320
<v Speaker 2>Bloomberg News Today on the show The AI Reckoning is Coming.

0:02:38.880 --> 0:02:41.680
<v Speaker 2>Why pressure is building on tech companies to prove all

0:02:41.760 --> 0:02:54.120
<v Speaker 2>their AI investment will pay off big and soon. If

0:02:54.120 --> 0:02:57.240
<v Speaker 2>you're looking for evidence that investors are getting antsy about

0:02:57.280 --> 0:03:00.640
<v Speaker 2>all this AI spending, just look at the reaction to

0:03:00.760 --> 0:03:05.200
<v Speaker 2>Microsoft's earnings last week. The company reported what would typically

0:03:05.200 --> 0:03:07.079
<v Speaker 2>be considered solid results.

0:03:07.560 --> 0:03:12.079
<v Speaker 3>CEO Satya Nadella says total sales increased seventeen percent and

0:03:12.160 --> 0:03:14.840
<v Speaker 3>more than eighty one billion dollars in the quarter.

0:03:15.200 --> 0:03:18.360
<v Speaker 2>But when investors read between the lines, they saw a

0:03:18.440 --> 0:03:21.919
<v Speaker 2>red flag. The company said it was planning to spend

0:03:21.960 --> 0:03:25.359
<v Speaker 2>more than one hundred billion dollars this year, even as

0:03:25.360 --> 0:03:29.200
<v Speaker 2>the growth of a core business, cloud computing, had slowed.

0:03:29.960 --> 0:03:31.800
<v Speaker 2>Investors wanted out.

0:03:31.960 --> 0:03:35.160
<v Speaker 1>The Microsoft move yesterday was incredible, the second biggest drop

0:03:35.160 --> 0:03:37.280
<v Speaker 1>in market cap that we got for that stock.

0:03:38.000 --> 0:03:42.200
<v Speaker 2>Microsoft stock price tumbled ten percent the next day. In

0:03:42.240 --> 0:03:45.680
<v Speaker 2>two sessions, three hundred and eighty billion dollars in market

0:03:45.760 --> 0:03:47.040
<v Speaker 2>value was gone.

0:03:47.240 --> 0:03:48.520
<v Speaker 3>This was a dramatic one.

0:03:48.720 --> 0:03:49.840
<v Speaker 2>Bloomberg Sarah Fryar.

0:03:50.120 --> 0:03:53.360
<v Speaker 3>Microsoft actually ended up dropping the most in six years

0:03:53.960 --> 0:03:57.440
<v Speaker 3>the day following this report, which showed that their cloud

0:03:57.480 --> 0:04:01.120
<v Speaker 3>business was slowing, and therefore their mass of spending on

0:04:01.600 --> 0:04:06.720
<v Speaker 3>AI infrastructure was a little suspected. Investors were uncomfortable with that.

0:04:07.240 --> 0:04:10.160
<v Speaker 2>Investors want to make sure that other parts of Microsoft's

0:04:10.200 --> 0:04:14.080
<v Speaker 2>business continue to grow to help fund these massive investments

0:04:14.120 --> 0:04:17.719
<v Speaker 2>in AI, and they also want to see the company

0:04:17.760 --> 0:04:21.039
<v Speaker 2>find ways to put AI to use to drive even

0:04:21.160 --> 0:04:21.880
<v Speaker 2>more growth.

0:04:22.120 --> 0:04:24.279
<v Speaker 3>There was a lot of scrutiny around how much have

0:04:24.760 --> 0:04:30.080
<v Speaker 3>customers taken on copilot, how much is Microsoft's integration of

0:04:30.200 --> 0:04:34.880
<v Speaker 3>AI into everyday tools resonating with customers, and if the

0:04:34.880 --> 0:04:38.760
<v Speaker 3>cloud business slows are if their growth is not as

0:04:38.839 --> 0:04:41.480
<v Speaker 3>high as expected that gives people pause.

0:04:41.880 --> 0:04:43.680
<v Speaker 2>Well, I want to talk about Meta too, because that

0:04:43.720 --> 0:04:48.239
<v Speaker 2>company is also making massive investments in AI. It's projecting

0:04:48.240 --> 0:04:50.799
<v Speaker 2>it'll spend between one hundred and fifteen and one hundred

0:04:50.839 --> 0:04:53.800
<v Speaker 2>and thirty five billion dollars in twenty twenty six, which

0:04:53.839 --> 0:04:56.000
<v Speaker 2>is nearly twice what it's spent in twenty twenty five,

0:04:56.000 --> 0:04:58.880
<v Speaker 2>which is already a record spending year for the company.

0:04:59.120 --> 0:05:02.120
<v Speaker 2>So how did an investor react to that news where

0:05:02.200 --> 0:05:03.960
<v Speaker 2>they similarly spooked?

0:05:04.240 --> 0:05:07.159
<v Speaker 3>You know, it's interesting because in this report they were

0:05:07.200 --> 0:05:10.000
<v Speaker 3>not spooked. In prior quarters, they have been spooked and

0:05:10.080 --> 0:05:13.640
<v Speaker 3>it all depends on how quickly the ad business is growing.

0:05:13.880 --> 0:05:16.560
<v Speaker 3>So in this quarter, the ad business grew quite well,

0:05:17.080 --> 0:05:21.120
<v Speaker 3>and so investors looked at that higher spending projection, which was,

0:05:21.400 --> 0:05:25.120
<v Speaker 3>as you note, a record insane, and they thought, okay,

0:05:25.440 --> 0:05:28.120
<v Speaker 3>that's fine. Meta had warned them that it was going

0:05:28.200 --> 0:05:32.720
<v Speaker 3>to be significantly higher than past years, so it was

0:05:32.760 --> 0:05:36.160
<v Speaker 3>sort of expected. But what was maybe not as expected

0:05:36.240 --> 0:05:41.840
<v Speaker 3>was how well the legacy business would perform, and specifically

0:05:42.880 --> 0:05:46.359
<v Speaker 3>how much it had been optimized by the implementation of

0:05:46.400 --> 0:05:50.119
<v Speaker 3>AI into making the algorithm better to show people posts

0:05:50.160 --> 0:05:52.159
<v Speaker 3>that they might care about, to show people ads that

0:05:52.200 --> 0:05:55.800
<v Speaker 3>are even more personalized than ever before. So it's using

0:05:55.920 --> 0:06:00.679
<v Speaker 3>AI to basically guess what people will want to see

0:06:00.839 --> 0:06:04.080
<v Speaker 3>and they're advertising, and they're also using it to make

0:06:04.120 --> 0:06:07.200
<v Speaker 3>the feed better, to make the content that you see

0:06:07.200 --> 0:06:12.520
<v Speaker 3>as you scroll more personalized. So forget about followers and following.

0:06:12.640 --> 0:06:17.320
<v Speaker 3>It is all algorithmically determined to entertain you. The more

0:06:17.360 --> 0:06:19.640
<v Speaker 3>you scroll, the more ads you see, the more effective

0:06:19.680 --> 0:06:24.040
<v Speaker 3>METASID business is. So investors saw that they thought, great,

0:06:24.200 --> 0:06:29.680
<v Speaker 3>AI must be not just contributing to their future prospects,

0:06:29.760 --> 0:06:32.680
<v Speaker 3>but with the current business we're seeing it really have

0:06:32.720 --> 0:06:36.279
<v Speaker 3>an effect on how well they can perform.

0:06:36.760 --> 0:06:38.640
<v Speaker 2>It seems like what you're describing as a tale of

0:06:38.680 --> 0:06:42.560
<v Speaker 2>two tech companies here right met Microsoft. They're both spending

0:06:42.680 --> 0:06:46.400
<v Speaker 2>a lot on AI, they're producing different results, and investors

0:06:46.400 --> 0:06:50.960
<v Speaker 2>are reacting differently. What does this tell you about where

0:06:50.960 --> 0:06:52.680
<v Speaker 2>we're at in the AI race right now?

0:06:53.360 --> 0:06:56.680
<v Speaker 3>I think that we are at this point where in

0:06:56.960 --> 0:06:59.760
<v Speaker 3>order to have a return on an investment on all

0:06:59.800 --> 0:07:02.599
<v Speaker 3>of the billions, the hundreds of billions, maybe even more

0:07:02.640 --> 0:07:05.440
<v Speaker 3>than trillion dollars that is going to be spent on

0:07:05.520 --> 0:07:09.360
<v Speaker 3>the AI build out, businesses need to become that much

0:07:09.440 --> 0:07:13.240
<v Speaker 3>more productive. They need to continue to accelerate. We need

0:07:13.280 --> 0:07:16.560
<v Speaker 3>to look at these tech businesses that have been growing

0:07:17.040 --> 0:07:20.600
<v Speaker 3>at unprecedented levels for the last two decades and expect

0:07:20.640 --> 0:07:24.880
<v Speaker 3>them to grow even faster, even more, get even bigger

0:07:25.440 --> 0:07:29.400
<v Speaker 3>in order to justify all that has been promised. AI

0:07:29.520 --> 0:07:34.360
<v Speaker 3>is such a such a dramatic industry shaking force that sure,

0:07:34.400 --> 0:07:36.640
<v Speaker 3>why not, Why couldn't they get that much more productive?

0:07:36.880 --> 0:07:38.840
<v Speaker 3>Or you could look at it and say, like everything

0:07:38.880 --> 0:07:45.320
<v Speaker 3>has already been so optimized and incrementally improved quarter over quarter,

0:07:46.040 --> 0:07:49.239
<v Speaker 3>Can this really continue? Can we really get that much

0:07:49.360 --> 0:07:55.120
<v Speaker 3>more value? Out of the businesses via AI and much

0:07:55.240 --> 0:07:58.720
<v Speaker 3>that much more value to these businesses customers, especially in cloud,

0:07:59.480 --> 0:08:02.200
<v Speaker 3>just by hosts, sting and helping them improve what they

0:08:02.240 --> 0:08:03.920
<v Speaker 3>do with these AI tools.

0:08:05.200 --> 0:08:07.880
<v Speaker 2>What about the rest of the mag seven We got

0:08:08.000 --> 0:08:11.520
<v Speaker 2>Apples earnings late last week. How did they fit into

0:08:11.560 --> 0:08:14.680
<v Speaker 2>this narrative? How much is Apple spending on AI and

0:08:14.800 --> 0:08:17.240
<v Speaker 2>how did that land with investors?

0:08:17.680 --> 0:08:22.640
<v Speaker 3>Well, I think Apple has really fallen behind on their

0:08:22.720 --> 0:08:27.560
<v Speaker 3>plan to integrate AI. Apple intelligence is not that intelligent,

0:08:28.080 --> 0:08:31.840
<v Speaker 3>and people are looking at this company that has been

0:08:32.760 --> 0:08:35.800
<v Speaker 3>such a leader in such a leader space. In other ways,

0:08:35.880 --> 0:08:39.839
<v Speaker 3>had an amazing holiday quarter with iPhone sales. They did

0:08:39.840 --> 0:08:41.960
<v Speaker 3>well in China. I mean, it was really like a

0:08:42.000 --> 0:08:46.000
<v Speaker 3>striking quarter in the traditional Apple business sense. But that

0:08:46.120 --> 0:08:51.280
<v Speaker 3>AI question is like looming over the company's future, which

0:08:51.320 --> 0:08:55.160
<v Speaker 3>is maybe why this share response to Apple's earnings was

0:08:55.200 --> 0:08:58.520
<v Speaker 3>not as celebratory as you might have expected. And they're

0:08:58.559 --> 0:09:00.760
<v Speaker 3>really going to be leaning on Google, well on Gemini

0:09:01.320 --> 0:09:04.400
<v Speaker 3>for the future of their AI business. You know, they're

0:09:04.400 --> 0:09:06.680
<v Speaker 3>saying they're going to still develop some stuff in house,

0:09:07.160 --> 0:09:10.040
<v Speaker 3>but that hasn't gone so well up to this point,

0:09:10.240 --> 0:09:13.839
<v Speaker 3>and they need help. And so I'm curious when Google

0:09:13.920 --> 0:09:16.280
<v Speaker 3>reports that we'll hear more about that Apple deal, I

0:09:16.320 --> 0:09:19.600
<v Speaker 3>guess as we probably will not, but that's something that

0:09:19.640 --> 0:09:21.800
<v Speaker 3>we're certainly going to be keeping an eye on.

0:09:22.440 --> 0:09:25.160
<v Speaker 2>So, I mean, you've talked a little bit about the

0:09:25.280 --> 0:09:28.559
<v Speaker 2>positive science that investors are seeing in these earning reports.

0:09:28.600 --> 0:09:31.840
<v Speaker 2>But I'm wondering, like, does what these companies are spending

0:09:31.840 --> 0:09:35.920
<v Speaker 2>their money on matter to investors? Are their kinds of

0:09:35.960 --> 0:09:39.560
<v Speaker 2>AI investments they're more comfortable with or less comfortable with,

0:09:39.760 --> 0:09:40.880
<v Speaker 2>and what determines that.

0:09:41.320 --> 0:09:47.440
<v Speaker 3>Well, so far, the most expensive aspect of the AI

0:09:47.559 --> 0:09:50.520
<v Speaker 3>build out is the data center, and I think that

0:09:50.679 --> 0:09:55.760
<v Speaker 3>investors understand that there needs to be this massive infrastructure

0:09:55.760 --> 0:09:58.480
<v Speaker 3>build out. The problem is we might just run out

0:09:58.559 --> 0:10:00.480
<v Speaker 3>of real estate, we might run out of chips, we

0:10:00.559 --> 0:10:02.720
<v Speaker 3>might run out of water, of power.

0:10:02.840 --> 0:10:05.320
<v Speaker 2>You know. There might see more resistance to data.

0:10:05.080 --> 0:10:07.600
<v Speaker 3>Similar resistance politically to data centers. It might become a

0:10:07.600 --> 0:10:10.720
<v Speaker 3>big issue in the midterm elections. So I think that

0:10:11.640 --> 0:10:14.360
<v Speaker 3>while these deals are getting announced like this may be

0:10:15.480 --> 0:10:18.360
<v Speaker 3>the beginning of a year of reckoning, I'm like, is

0:10:18.400 --> 0:10:21.800
<v Speaker 3>that capital really possible to deploy at the rate that

0:10:21.880 --> 0:10:25.719
<v Speaker 3>companies want to deploy it? It's really difficult to imagine

0:10:25.920 --> 0:10:28.800
<v Speaker 3>that all of the promises about how much will be

0:10:28.840 --> 0:10:30.839
<v Speaker 3>spent can be spent in that timeframe.

0:10:32.400 --> 0:10:36.240
<v Speaker 2>Why investors' AI nerves have spread beyond the mag seven

0:10:37.000 --> 0:10:48.880
<v Speaker 2>that's next. We've been talking a lot about investors' anxiety

0:10:49.080 --> 0:10:52.960
<v Speaker 2>that big tech companies investments in AI won't pay off,

0:10:53.800 --> 0:10:57.200
<v Speaker 2>but they're also anxious about what will happen if they do.

0:10:57.640 --> 0:11:02.199
<v Speaker 1>Anthropic unveil a new AI powered automation tool for legal

0:11:02.320 --> 0:11:05.719
<v Speaker 1>and data services, able to read through legal briefs and

0:11:05.800 --> 0:11:08.880
<v Speaker 1>contracts with these and that sent chairs have experienced Thompson

0:11:08.920 --> 0:11:12.040
<v Speaker 1>Reuter's Legal Zoom, the London Stock Exchange Group, and other

0:11:12.120 --> 0:11:12.760
<v Speaker 1>legal software.

0:11:12.840 --> 0:11:16.920
<v Speaker 2>On Tuesday, after the AI startup Andthropic released a productivity

0:11:16.920 --> 0:11:21.000
<v Speaker 2>tool for in house lawyers, investors started dumping stocks of

0:11:21.120 --> 0:11:25.720
<v Speaker 2>legal software and publishing firms. Thompson Reuter's corporation was down

0:11:25.800 --> 0:11:29.720
<v Speaker 2>sixteen percent and Legal Zoom dot Com plummeted twenty percent.

0:11:30.600 --> 0:11:33.920
<v Speaker 2>That sparked a broader sell off across the software sector,

0:11:34.800 --> 0:11:37.840
<v Speaker 2>and Bloomberg Sarah Fryar says this could be a sign

0:11:37.880 --> 0:11:38.880
<v Speaker 2>of what's to come.

0:11:39.559 --> 0:11:45.280
<v Speaker 3>Well, we have seen some skepticism around software companies that

0:11:45.440 --> 0:11:49.080
<v Speaker 3>building software has become somewhat democratized that anyone can do

0:11:49.120 --> 0:11:52.440
<v Speaker 3>it if you have the right kind of coding companion.

0:11:52.960 --> 0:11:56.120
<v Speaker 3>And so do you really need a salesforce SAP in

0:11:56.200 --> 0:11:59.679
<v Speaker 3>any of these like big software companies that are selling

0:11:59.679 --> 0:12:02.240
<v Speaker 3>this big enterprise software? Are you really going to need

0:12:02.240 --> 0:12:05.480
<v Speaker 3>those services of these companies that have grown into large

0:12:06.320 --> 0:12:11.520
<v Speaker 3>enterprise businesses selling to corporations that want to make their

0:12:11.559 --> 0:12:16.600
<v Speaker 3>processes more efficient with their software when you can use

0:12:16.720 --> 0:12:19.360
<v Speaker 3>AI for that, or you can build your own internal

0:12:19.400 --> 0:12:22.679
<v Speaker 3>tool that might be more effective. So I think that

0:12:22.760 --> 0:12:26.360
<v Speaker 3>there's going to be a lot of skittishness as we

0:12:26.440 --> 0:12:32.160
<v Speaker 3>see AI tools hit the market around companies that make

0:12:32.200 --> 0:12:35.000
<v Speaker 3>those tools or that provide those services, whether they'll still

0:12:35.000 --> 0:12:35.719
<v Speaker 3>be necessary.

0:12:37.160 --> 0:12:40.240
<v Speaker 2>As investors and the public try to measure how big

0:12:40.280 --> 0:12:44.000
<v Speaker 2>a threat AI poses to these software companies, they're also

0:12:44.040 --> 0:12:47.360
<v Speaker 2>trying to measure how valuable the AI winners could become.

0:12:48.280 --> 0:12:52.920
<v Speaker 2>What kind of results really matter here? Like what are

0:12:53.440 --> 0:12:57.120
<v Speaker 2>investors looking for to prove all the spending is worth it?

0:12:57.720 --> 0:13:01.080
<v Speaker 3>One metric that I'm looking forward to hear more from Google.

0:13:01.120 --> 0:13:04.160
<v Speaker 3>Sometimes they say how much of their code productivity has

0:13:04.200 --> 0:13:07.400
<v Speaker 3>come from AI, And that's like something that investors look

0:13:07.440 --> 0:13:10.240
<v Speaker 3>for as as a sign of like how good is

0:13:10.320 --> 0:13:14.520
<v Speaker 3>AI coding getting Another thing that you know investors have

0:13:14.600 --> 0:13:17.800
<v Speaker 3>looked at is Meta talking about AI specifically affecting its

0:13:17.840 --> 0:13:21.880
<v Speaker 3>AD business, making the AD business way more effective, especially

0:13:21.960 --> 0:13:25.559
<v Speaker 3>considering Meta can't get the same data on mobile users

0:13:26.000 --> 0:13:29.320
<v Speaker 3>as it used to under Apple privacy rules. They've still

0:13:29.320 --> 0:13:32.360
<v Speaker 3>been able to overcome that and have an even more

0:13:32.360 --> 0:13:35.600
<v Speaker 3>effective AD business just using AI. So I think that

0:13:35.720 --> 0:13:41.080
<v Speaker 3>when investors see changes like that that are directly attributed

0:13:41.160 --> 0:13:45.719
<v Speaker 3>to AI investment, that gets them excited. And when they

0:13:45.760 --> 0:13:51.280
<v Speaker 3>see businesses deploy or say they've deployed AI and not

0:13:51.400 --> 0:13:54.040
<v Speaker 3>have that much of a change, or not even had

0:13:54.080 --> 0:13:58.240
<v Speaker 3>to hire fewer people or been more efficient, then they

0:13:58.240 --> 0:14:00.679
<v Speaker 3>get really nervous that this is all kind of a

0:14:00.760 --> 0:14:01.320
<v Speaker 3>hype cycle.

0:14:01.840 --> 0:14:05.000
<v Speaker 2>Sarah says. Something that can make things even more interesting

0:14:05.040 --> 0:14:08.760
<v Speaker 2>this year would be the entrance of more publicly traded

0:14:08.880 --> 0:14:13.640
<v Speaker 2>AI players. Open Ai and Anthropic are both eyeing IPOs

0:14:14.160 --> 0:14:18.120
<v Speaker 2>and Elon Musk. SpaceX had been planning one too. On Monday,

0:14:18.400 --> 0:14:22.160
<v Speaker 2>Musk announced that SpaceX will be merging with Xai, which

0:14:22.160 --> 0:14:25.280
<v Speaker 2>makes the chatbot Grock, in a deal that values the

0:14:25.280 --> 0:14:29.200
<v Speaker 2>combined company at one point twenty five trillion dollars. A

0:14:29.240 --> 0:14:32.520
<v Speaker 2>person familiar told Bloomberg that the company still has plans

0:14:32.560 --> 0:14:34.400
<v Speaker 2>for an IPO later this year.

0:14:35.560 --> 0:14:38.680
<v Speaker 3>Well, it means that if you want exposure to a

0:14:38.800 --> 0:14:44.160
<v Speaker 3>fast growing AI company, you have another option, So that

0:14:44.280 --> 0:14:49.920
<v Speaker 3>could affect the investment in Microsoft, Amazon, Google Meta. It

0:14:50.000 --> 0:14:53.200
<v Speaker 3>also means that we'll get so much more transparency about

0:14:53.240 --> 0:14:58.720
<v Speaker 3>those businesses. Those businesses have been spending like crazy, growing

0:14:58.760 --> 0:15:01.560
<v Speaker 3>like crazy. What's our plan for making money down the road?

0:15:01.800 --> 0:15:03.720
<v Speaker 3>Are they going to be making money down the road

0:15:03.960 --> 0:15:07.200
<v Speaker 3>or are they going to continue spending at that level

0:15:07.200 --> 0:15:10.160
<v Speaker 3>for such a long time. Xai need to merge with

0:15:10.200 --> 0:15:14.680
<v Speaker 3>SpaceX in part because the cost of running an AI

0:15:14.760 --> 0:15:18.360
<v Speaker 3>business is so high, so resource intensive, so talent intensive,

0:15:18.760 --> 0:15:22.760
<v Speaker 3>that honestly they need the cash flow that SpaceX has

0:15:22.760 --> 0:15:27.479
<v Speaker 3>in order to keep going, and they need the fundraising

0:15:27.520 --> 0:15:31.320
<v Speaker 3>event of an IPO. Even for the richest man in

0:15:31.360 --> 0:15:33.840
<v Speaker 3>the world, you need some money.

0:15:34.040 --> 0:15:36.760
<v Speaker 2>So is that a bad sign? What does that say?

0:15:37.120 --> 0:15:39.240
<v Speaker 3>I think it just says that either investors are going

0:15:39.280 --> 0:15:42.680
<v Speaker 3>to have to get used to businesses that just spend

0:15:42.720 --> 0:15:45.200
<v Speaker 3>way more than they make in the hopes that they

0:15:45.200 --> 0:15:49.680
<v Speaker 3>will one day have an epiphany moment, or those businesses

0:15:49.760 --> 0:15:53.520
<v Speaker 3>are going to have trouble once people see their balance sheets.

0:15:53.960 --> 0:15:58.200
<v Speaker 3>But you know their companies like Amazon in their early days,

0:15:58.640 --> 0:16:02.160
<v Speaker 3>who didn't really have a profit for a while, and Meta,

0:16:02.680 --> 0:16:04.920
<v Speaker 3>you know, they had this thesis in the beginning, and

0:16:04.960 --> 0:16:06.880
<v Speaker 3>we want to have a lot of users for this

0:16:06.920 --> 0:16:09.560
<v Speaker 3>product before we even add advertising. So it's not unheard

0:16:09.640 --> 0:16:13.120
<v Speaker 3>of in tech for a business to not make a

0:16:13.120 --> 0:16:15.880
<v Speaker 3>ton of money when they're trying to grow fast. In fact,

0:16:16.040 --> 0:16:17.880
<v Speaker 3>some people would say it's spending on growth is the

0:16:17.880 --> 0:16:20.440
<v Speaker 3>smart thing to do right now when you're trying to

0:16:21.280 --> 0:16:25.640
<v Speaker 3>be the main choice for consumers. As people are coming

0:16:25.680 --> 0:16:28.640
<v Speaker 3>on to using this product for the first time. That

0:16:28.680 --> 0:16:30.920
<v Speaker 3>doesn't mean that it's going to last forever.

0:16:32.960 --> 0:16:35.160
<v Speaker 2>We've been talking a lot about the risks and rewards

0:16:35.320 --> 0:16:38.160
<v Speaker 2>for tech companies, but the mag seven is essentially propping

0:16:38.240 --> 0:16:41.320
<v Speaker 2>up the entire stock market right now. So what are

0:16:41.360 --> 0:16:44.600
<v Speaker 2>the consequences if these bets don't pay off long term?

0:16:45.120 --> 0:16:47.880
<v Speaker 3>I think, well, we will all feel it. There are

0:16:47.880 --> 0:16:51.160
<v Speaker 3>a lot of things that are shaky about our current economy,

0:16:51.800 --> 0:16:54.640
<v Speaker 3>and there's that saying that the stock market is not

0:16:54.680 --> 0:16:56.800
<v Speaker 3>the economy. But I think a lot of people do

0:16:57.200 --> 0:16:59.480
<v Speaker 3>feel that way when they look at their four one

0:16:59.560 --> 0:17:03.040
<v Speaker 3>K when I look at their accounts, like they see

0:17:03.400 --> 0:17:06.760
<v Speaker 3>their stock's going up. And so even when everything's getting

0:17:06.800 --> 0:17:09.359
<v Speaker 3>more expensive, even when it's hard to find a job,

0:17:09.440 --> 0:17:14.520
<v Speaker 3>there's that. And it also could really affect what happens

0:17:14.560 --> 0:17:17.919
<v Speaker 3>in the midterms. We could see a reckoning there. But

0:17:18.280 --> 0:17:20.600
<v Speaker 3>you know, this is a global story. It could also

0:17:20.640 --> 0:17:26.119
<v Speaker 3>affect US versus China long term. These companies. One reason

0:17:26.240 --> 0:17:30.840
<v Speaker 3>that they've gotten such social leeway from the administration to

0:17:30.880 --> 0:17:34.119
<v Speaker 3>do what they're doing is because the US wants to

0:17:34.160 --> 0:17:36.000
<v Speaker 3>get ahead of China and AI race.

0:17:37.720 --> 0:17:40.600
<v Speaker 2>Well, so I mean, looking forward, how do you expect

0:17:40.600 --> 0:17:43.520
<v Speaker 2>twenty twenty six, Well, compare it to twenty twenty five

0:17:44.160 --> 0:17:48.000
<v Speaker 2>when it comes to AI and the AI race. How

0:17:48.040 --> 0:17:50.040
<v Speaker 2>critical will this next year be?

0:17:50.480 --> 0:17:54.000
<v Speaker 3>I think twenty twenty five was a year of announcements

0:17:54.040 --> 0:17:58.159
<v Speaker 3>of standing alongside Donald Trump at the White House and

0:17:58.200 --> 0:18:01.680
<v Speaker 3>saying we're deploying Section drabil over this many years on AI.

0:18:02.320 --> 0:18:03.840
<v Speaker 3>This is going to be a year of like, okay,

0:18:03.840 --> 0:18:07.320
<v Speaker 3>so what now, who's getting that money? Are you spending

0:18:07.320 --> 0:18:09.120
<v Speaker 3>that money? And is it going to work?

0:18:16.040 --> 0:18:18.560
<v Speaker 2>This is the big take from Bloomberg News. I'm Sarah

0:18:18.640 --> 0:18:21.480
<v Speaker 2>Holder to get more from The Big Take and unlimited

0:18:21.520 --> 0:18:25.280
<v Speaker 2>access to all of bloomberg dot Com. Subscribe today at

0:18:25.320 --> 0:18:29.560
<v Speaker 2>Bloomberg dot com slash podcast offer. If you like this episode,

0:18:29.680 --> 0:18:32.320
<v Speaker 2>make sure to subscribe and review The Big Take wherever

0:18:32.320 --> 0:18:35.200
<v Speaker 2>you listen to podcasts. It helps people find the show.

0:18:36.080 --> 0:18:38.560
<v Speaker 2>Thanks for listening. We'll be back tomorrow