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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live

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Speaker 1: from the heart of Silicon Valley with ed La Thow

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Speaker 1: in San Francisco.

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Speaker 2: This is Bloomberg Tech coming up.

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Speaker 3: Apple betts big on Broadcom for the future, expending its

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Speaker 3: custom chip partnership through twenty thirty one. Plus Microsoft eyes

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Speaker 3: a massive reorganization of his expots unit, with plans to

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Speaker 3: eliminate twenty percent of its staff over the next year.

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Speaker 3: And s Kehiiniz begins marketing It's US listing with plans

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Speaker 3: to sell roughly twenty eight billion dollars in American Depository

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Speaker 3: receipts from New York City this week. Welcome to Bloomberg Tech.

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Speaker 3: This is what markets look like. Chip stocks are rebounding,

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Speaker 3: so we conduct to time today as investors return to

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Speaker 3: the AI trade after last week's sell off bedding, the

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Speaker 3: spending cycle still has legs healthy. Semic Inductor index is

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Speaker 3: being led by Broadcom, one of the biggest points contributors,

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Speaker 3: but by the way, AMD is really accelerated into the session,

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Speaker 3: up almost nine percent or so.

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Speaker 2: Our top story is Broadcom.

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Speaker 3: Brockcom isn't just leading the rally, It's also at the

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Speaker 3: center of the biggest news item.

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Speaker 2: The stock is higher.

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Speaker 3: After announcing a new agreement with Apple that extends the

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Speaker 3: partnership through twenty thirty one. Broadcom will develop custom chips

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Speaker 3: for multiple generations of Apple products, Bloomberg's Consumer Tech and

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Speaker 3: Apple Managing EDI, said Mark Gum And also here in

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Speaker 3: New York City. Super interesting. There is a historic relationship

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Speaker 3: with Apple and broadc and we can get to to

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Speaker 3: me reading your report, this might be aiserver related. What

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Speaker 3: do we think multiple generations of products means?

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Speaker 4: You know, when partners to app or put Alvi's press releases,

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Speaker 4: they're as vague as possible. They're not going to come

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Speaker 4: out and see what it is. But what I'm telling

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Speaker 4: you is that this is specifically for a new server.

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Speaker 5: Chip that Apple is developing.

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Speaker 4: They're using some Broadcom technology is called a six chips,

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Speaker 4: and a six chip silicon is single purpose silicon. Right,

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Speaker 4: You're not going to need that for anything really other

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Speaker 4: than a singular functionality, which is processing for AI. And

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Speaker 4: so they're going to be rolling out this chip as

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Speaker 4: early as next year. It's called Bultra within Apple. It's

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Speaker 4: their first server specific chip right now for the Apple

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Speaker 4: Intelligence servers they use M two processors.

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Speaker 2: Those were made for max.

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Speaker 4: This is going to be a version of the M

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Speaker 4: five Ultra, which is going to be the most powerful

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Speaker 4: chip ever, but this is going to have four x

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Speaker 4: that performance on the GPU and on the CPU side.

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Speaker 4: This is going to have some Broadcom technology in there.

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Speaker 3: You heard it first here on Blueberg Tech. This stocks

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Speaker 3: like up four percent at one point it was up

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Speaker 3: six percent and on track for its best day since February.

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Speaker 3: So on the broad commn side, investors saying that this

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Speaker 3: is a big deal for them. What you were just

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Speaker 3: describing were probably most familiar with in the context of

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Speaker 3: the TPU Google's tp That's exactly right, the similar tech.

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Speaker 3: So like the history is that Broadcom had a part

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Speaker 3: in the handset on the iPhone inside. Is there anything

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Speaker 3: that we know about broadening this relationship to devices away

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Speaker 3: from the server.

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Speaker 4: Yeah, this is super exciting for Broadcom in Broadcomm investors. Obviously,

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Speaker 4: you're seeing the stock the bump that you mentioned because

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Speaker 4: Broadcom had been designing combined Wi Fi plus Bluetooth chips

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Speaker 4: for Apple for a number of years. They've been designed

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Speaker 4: out of the new generations of Apple products.

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Speaker 2: Right now, Apple has their own end one chip.

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Speaker 4: That's right, they do Wi Fi plus Bluetooth themselves now

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Speaker 4: in a lot of the new iPhones, Max and iPads,

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Speaker 4: Broadcom had been pushed out. Now they're coming back in

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Speaker 4: for AI and for server purposes.

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Speaker 3: Bloomberg's Mark Gunman, who leads our coverage of consumer tech

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Speaker 3: and all things Apple, thank you very much. Indeed, today's

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Speaker 3: big number twenty eight billion dollars. That's the anticipated value

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Speaker 3: of sk Heinex's US listing, According to a filing with

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Speaker 3: the SEC, the South Korean memory ship maker is looking

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Speaker 3: to sell American depository receipts representing almost eighteen million common

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Speaker 3: shares as it kicks off the formal marketing process for

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Speaker 3: its US debut. For more, Bloomberg's Bailey Litz, who leads

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Speaker 3: our coverage of IPIS, is here. This is a big one, right,

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Speaker 3: This would be the biggest share sale by a foreign

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Speaker 3: entity in the US. But we have the filing hit

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Speaker 3: this morning. Bring us up to speed and what we

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Speaker 3: need to know.

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Speaker 6: The main thing is to keep in mind there is

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Speaker 6: indications of interest for about seven billion dollars of that demand,

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Speaker 6: so seven out of twenty eight already being potentially allocated

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Speaker 6: to the likes of Koa Tu and others who have

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Speaker 6: again kind of propped us up from a cornerstone perspective.

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Speaker 6: Another thing that investors were closely watching was the fungibility

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Speaker 6: of these ADRs or ads is. What that really means

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Speaker 6: is can you exchange the South Korean list in shares

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Speaker 6: for ADRs and vice versa. As of now, our understanding

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Speaker 6: is that you can take these ADRs and convert them

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Speaker 6: into South Korean shares, but not vice versa. The reason

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Speaker 6: that matters, that's exactly what Taiwan Semi has done. That's

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Speaker 6: why TSM shares that trade here in the US trade

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Speaker 6: at such a large premium relative to their age and

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Speaker 6: listed shares. So certainly something to keep an eye on

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Speaker 6: as we get underway. A big presentation at one thirty

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Speaker 6: pm New York time is something a investors are going

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Speaker 6: to be tuned into since that's the only real time

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Speaker 6: sk Hynix is going.

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Speaker 2: To market this deal.

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Speaker 3: This is, on the one hand, about cash right, sk

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Speaker 3: heinis has a really strong position in the high bandwidth

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Speaker 3: memory market. It needs cash to expand capacity. But as

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Speaker 3: you and the team wrote about on July fifth, a

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Speaker 3: must read story, there is more to this listing than that,

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Speaker 3: and this STUS investors bridging the valuation gap.

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Speaker 2: Just run with it.

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Speaker 6: No exactly I was going to say, And this is

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Speaker 6: all kind of twenty eight billion dollars will help fund

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Speaker 6: those expansions, fund those projects in South Korea. But this

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Speaker 6: is about being able to open up the deepest pool

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Speaker 6: of capital here in the US. So investors who don't

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Speaker 6: want to trade overnight or simply don't have the ability

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Speaker 6: in their mandate to invest in emerging market companies, this

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Speaker 6: allows them to trade here in the US. So you're

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Speaker 6: looking at potentially down the line, inclusion in the Nasdaq

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Speaker 6: one hundred. Obviously, retail investor appetite will probably be through

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Speaker 6: the roof, just given what we've seen with Micron and

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Speaker 6: other companies. And you're kind of bread and butter investors,

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Speaker 6: those long only managers who aren't able to invest outside

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Speaker 6: of the US. Now we'll have another company to play

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Speaker 6: as a release to this memory boom.

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Speaker 3: That bit I find fascinating, Like the enthusiasm of the market.

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Speaker 3: I don't know that i've recovered yet from the SpaceX ipo,

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Speaker 3: you know, like that week that I was here with

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Speaker 3: you in New York City, the story around the retail

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Speaker 3: allocation investors trying to understand the AI story for a

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Speaker 3: space and rocket company. Do you get any sense yet

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Speaker 3: about how US investors feel about skhihnix.

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Speaker 6: It's a pure point and they love Micron for the

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Speaker 6: exact same reason. Obviously, this is potentially a debate we

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Speaker 6: have two or three four years from now. Is this

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Speaker 6: still a cyclical business or is this in fact a

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Speaker 6: revolutionary change where we are not going to be talking

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Speaker 6: about the cyclicality of semiconductors. But when you talk to

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Speaker 6: US investors, there's excitement to have exposure to yet another company.

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Speaker 3: Bloomberg's based lipshots will be here all week on this one,

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Speaker 3: Thank you very much. The spite chip make is rallying hard.

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Speaker 3: Morgan Stanley's Mike Wilson says the AI trade is entering

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Speaker 3: a new phase, with investors potentially rotating out of those

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Speaker 3: stocks and into hyperscalers.

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Speaker 7: I expect the hyperscalers now to stabilized and the semi

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Speaker 7: conunter stacks are are going to correct.

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Speaker 5: That's a good development.

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Speaker 7: That doesn't mean the CAMPEC cycle is over, but that

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Speaker 7: ebbing and flowing between the two is a natural kind

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Speaker 7: of governing factor because you can't have this divergence continue.

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Speaker 8: It's unstable.

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Speaker 7: Thirty percent correction in these stacks is, I mean, well

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Speaker 7: within possibility.

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Speaker 3: Let's bring in Janetmui, head of market analysis at RBC

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Speaker 3: Brew and Dolphin, who says the recent pullback in semiconductor

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Speaker 3: stocks looks more like a healthy consolidation after an outstanding

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Speaker 3: rally than the start of a broad reverseal And here

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Speaker 3: we are after the long weekend in US holiday and

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Speaker 3: chip stocks are rebounding again. Do you feel like you

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Speaker 3: got that one right?

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Speaker 4: Hi?

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Speaker 9: Thanks for having me. I guess it's just the fundamentals

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Speaker 9: haven't changed. Is the demands that is far out stripping

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Speaker 9: supply at the moment.

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Speaker 8: So I guess my quest from time to.

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Speaker 9: Time will be spooked by various news. I think last

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Speaker 9: week by Meshurst, you know, entering the cloud computing arena.

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Speaker 9: But I think, you know, the fundamentals remain very strong,

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Speaker 9: and that's why we keep seeing investors buying the deep

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Speaker 9: after some consolidation.

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Speaker 3: The Morgan Stanley view of rotation, specifically out of chip

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Speaker 3: stocks and into hyperscalers, it's kind of an extension of

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Speaker 3: something we've been talking about in the show for a while.

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Speaker 3: The difference between capital expenditure deployers and capital expenditure recipients. Right,

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Speaker 3: how do you view the argument that MS is making.

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Speaker 5: Well.

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Speaker 9: I guess, first of all, it's right for investors who

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Speaker 9: worry about hyperscalers lower cash flow these days is quarterly

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Speaker 9: free cash flows have absolutely plunged where it has gone

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Speaker 9: to other cheam makers, and that's reflected in their share

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Speaker 9: price performance. But on the other hand, I think investors

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Speaker 9: hopefully want to see that one day these investments will

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Speaker 9: come into fruition. Is too early to tell, but we

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Speaker 9: already have seen sort of productivity improvement across various industries,

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Speaker 9: and I think Hyperscalers there are poised to actually benefit

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Speaker 9: from the increased demand from cloud computing and various services

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Speaker 9: they provide to various corporates. So I guess the attractive

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Speaker 9: point about Hyperscaler is that they have really sold off.

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Speaker 9: The evaluations are now trading in. Most of them are

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Speaker 9: in the low twenties and some even below twenties, So

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Speaker 9: I guess you know they have very strong core business

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Speaker 9: models anyway, so I think it's right for them to

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Speaker 9: gain further attention going forward.

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Speaker 3: Is Kapex still the main figure to watch indefinitely.

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Speaker 9: At this point, I think their term sentiment will be

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Speaker 9: very much driven by CAPAX because we have the outcoming

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Speaker 9: earning season, and I think investors will continue to look

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Speaker 9: at are they going to keep spending at this sustainable pace.

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Speaker 9: Any sort of pullback or even just slowing down a

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Speaker 9: little bit, it will potentially cost some wobble in the

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Speaker 9: cheap makers. Although I wouldn't I wouldn't see this as

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Speaker 9: a reversal of that circular trend. I would still view

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Speaker 9: this very strong trend in demands or any sort of

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Speaker 9: pullback will present buying opportunities as we have seen all

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Speaker 9: the past couple of years.

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Speaker 3: Jennet, have you been able to identify any link between

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Speaker 3: what's happening in AI on the infrastructure side, the data

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Speaker 3: center build out, and what you see in US economic data?

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Speaker 3: In other words, like all this stuff's happening, things getting built,

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Speaker 3: money being spent, Who's benefiting from that in the real economy?

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Speaker 9: So directly we have already seen that withootain US real

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Speaker 9: GDP I CAP has spent on AI has already been

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Speaker 9: a very strong driver of GDP growth. And secondly, I think,

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Speaker 9: as I mentioned, there has been already some productivity improvement.

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Speaker 9: You can see that the US economy is doing well,

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Speaker 9: whereas actually there's no longer yes many jobs needers. We

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Speaker 9: have seen that happening, so that that is a reflection

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Speaker 9: of better productivity. So I guess there's also this wealth effect.

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Speaker 9: This AI trade is certainly pushing US dot markets to

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Speaker 9: record highs, and that wealth effect is certainly helping with

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Speaker 9: consumer spending, which is translating into real growth.

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Speaker 3: Finally, at the end of this week, as Bailey was outlining,

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Speaker 3: Skhiinix will list shares in the US a pure play

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Speaker 3: memory name. There is Micron and there is Samsung. What

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Speaker 3: do you expect that to do for markets and what

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Speaker 3: kind of from your desk at least, what kind of

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Speaker 3: appetite do you think there is for investors to get

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Speaker 3: more access to sk.

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Speaker 9: Well, I would be very excited to see the market impact.

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Speaker 9: I would presume there will be a huge appetite because

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Speaker 9: there's just insensible demand for memory makers, and given this

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Speaker 9: as a pure plate and wasn't accessible by US investors before,

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Speaker 9: and it is basically the leading memory cheap make and

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Speaker 9: also than Micron actually, so it will be interesting if

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Speaker 9: that would diverge some of the demand for stops from Micron,

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Speaker 9: and I suppose again the debate over whether this is

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Speaker 9: cyclical or circular will continue. Uh, And I will say

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Speaker 9: on that front, I think the demand is very strong

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Speaker 9: for sure. But obviously Micron, for example, these memory ship makers,

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Speaker 9: they are generating record profits at this point in time,

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Speaker 9: and investors seemed to be kind of interpolating these record

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Speaker 9: profits into the foreseable filter that may not ultimately prove sustainable.

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Speaker 9: So the demand could be very short, but maybe not

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Speaker 9: so sustainable at these kind of rates for many years

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Speaker 9: to come, So we have to be a little bit

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Speaker 9: more cautious.

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Speaker 3: Janet, Mary Barbi Ciber and Dolphin back on Bloomberg Tech.

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Speaker 2: Thank you very much.

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Speaker 3: Indeed, now coming up, Microsoft's Xbox slashes jobs and cut studios.

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Speaker 3: We're gonna have the details. What is a massive overhaul. Next,

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Speaker 3: this is what shares of Microsoft are doing. Right when

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Speaker 3: the news broke, there was this initial big move lower

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Speaker 3: around two percent decline. We're down just a touch above

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Speaker 3: one percent. We're going to get all the details next.

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Speaker 3: This is Bloomberg Tech. Shares of Microsoft sliding down about

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Speaker 3: a percentage point this morning after the Xbox parent announced

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Speaker 3: a major overhaul of its video game unit, including cutting

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Speaker 3: nearly twenty percent of staff and divesting its development studios.

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Speaker 3: Bloomberg's Jason Schreyer, who leads our video games industry coverages

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Speaker 3: with us. Let's start with everything we know where the

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Speaker 3: impact is in terms of headcount, the studios that will

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Speaker 3: be impacted, and also like why Xbox is doing.

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Speaker 10: This tapline is Xbox is laying our thirty two hundred

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Speaker 10: staff or I should say cutting thirty two hundred jobs

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Speaker 10: sixteen hundred to day, and then another sixteen hundred in

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Speaker 10: the coming fiscal gear. That second number also includes divestments

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Speaker 10: from four studios with a fifth to one plan. Two

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Speaker 10: of them will be sold off to undisclosed buyers and

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Speaker 10: two of them are going to go independent. And this

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Speaker 10: is all essentially happening because as new Xbox CEO Asha

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Speaker 10: Sharma has been saying, the business is in a bad place.

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Speaker 10: Asha Sharma calls it a reset where she is restructuring

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Speaker 10: the entire organization in hopes of returning to growth in

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Speaker 10: the immediate future.

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Speaker 3: Jason, do we have a sense of like where the

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Speaker 3: pain points are. I'm a console gamer, as you know,

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Speaker 3: but not an Xbox gamer. I do use Xbox Cloud Gaming,

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Speaker 3: you know, an exports game pass, right like, is the

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Speaker 3: failure in the software side and that they just haven't

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Speaker 3: done well with hit titles or in the hardware space.

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Speaker 3: Consumer technology is just a difficult place to be right now.

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Speaker 10: It's both and the two are linked because the way

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Speaker 10: you sell hardware in this business is by making great

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Speaker 10: software for it and ideally keeping it exclusive to that hardware.

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Speaker 10: So it works for Nintendo with their Switch, and that's

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Speaker 10: what works for Sony with their PlayStation. Microsoft has not

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Speaker 10: been able to pull that off over the last decade,

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Speaker 10: and so their hardware has fallen behind. They have been

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Speaker 10: investing a lot, including of course buying activision Blizzard for

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Speaker 10: sixty nine million dollars in the games industry and making

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Speaker 10: content for what they call Xbox Game Pass, their subscription

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Speaker 10: service basically Netflix for gaming, but that has not panned out.

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Speaker 5: It has not grown. It has actually platt out.

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Speaker 3: Jason, we're showing the other pieces out today to tech

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Speaker 3: in debt about how PlayStation on the console side is

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Speaker 3: giving up on the hard disk. I have a PlayStation

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Speaker 3: five that doesn't have a disk drive at all. What

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Speaker 3: is the attitude of the consumer right now to gaming, Like,

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Speaker 3: where do we find ourselves in the cycle?

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Speaker 10: Yeah, so PlayStation, they're saying we are going in terms

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Speaker 10: of software, we are going digital only starting in twenty

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Speaker 10: twenty eight. And the reason they're doing that is because

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Speaker 10: they looked at a spreadsheet, they looked at their data,

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Speaker 10: and they saw that the majority of purchases on PlayStation

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Speaker 10: are digital, the majority of purchases across the itariums industry

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Speaker 10: are digital, and so they are ditching the disc because

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Speaker 10: it has been extraordinarily controversial. A lot of people are

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Speaker 10: pointing out the problems with that strategy and how many

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Speaker 10: issues it will cause for preservation, for collection, for costs,

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Speaker 10: a lot of potential issues there. But they are doing

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Speaker 10: it in reaction to the market mostly moving to digital purchases.

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Speaker 3: There is just so much more to discuss, and luckily

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Speaker 3: Bloomberg Jason Schreier will be back tomorrow. Tune in tomorrow

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Speaker 3: for a live Q and A with Jason and myself.

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Speaker 3: It's gonna be on Bloomberg dot com starting at one

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Speaker 3: pm Eastern, and we will go back through the Xbox story,

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Speaker 3: but so many others that he's broken up late as well.

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Speaker 3: Now coming up in the show, we're going to speak

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Speaker 3: with Runway CEO Chris the bau Valezuela. Is the company

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Speaker 3: ramps up its global expansion. There are new hubs in Tokyo, London,

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Speaker 3: and in Paris. This is Bloomberg Tech. Runway is going global.

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Speaker 3: The AI video company is opening new hubs in London,

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Speaker 3: Tokyo and Paris, with plans to invest nearly three hundred

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Speaker 3: million dollars over the next few years. Is it scales

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Speaker 3: is its business and also it's AI Research joining us

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Speaker 3: now as Runway co founder and CEO christavau Valezuela. So

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Speaker 3: I think there's a clear link here from where your

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Speaker 3: priority markets are and where you're growing fastest and where

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Speaker 3: you've opened up these hubs explain that.

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Speaker 11: Yeah, I think it's a version of the same. To

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Speaker 11: be honest, we're growing really fast. Of course in the

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Speaker 11: US that's our biggest market, but we're seeing natural expansions

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Speaker 11: happening both in Asia. So a couple of months ago

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Speaker 11: we announced Japan and our office there and our presence there.

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Speaker 11: I've been spending a lot of time in the region

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Speaker 11: and our growth there is consistent, so we want to

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Speaker 11: make sure we have more time and more people just

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Speaker 11: in that region, and more recently we open up two

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Speaker 11: European hubs. We announced London London News and Paris, so

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Speaker 11: we're announcing today. Both of them are on the heels

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Speaker 11: of just growing the markets and are being closer to

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Speaker 11: our customers. The Europe is our second largest market and

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Speaker 11: Japanese our third. We're also making in roads in Latin America,

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Speaker 11: so Brazil will start becoming also a hub, and of

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Speaker 11: course Mexico and so for us, it's more about making

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Speaker 11: sure we're closer our customers, we're close to how we're

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Speaker 11: serving them.

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Speaker 5: And then talent.

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Speaker 11: Talent, this says, is broadly everywhere, so we need to

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Speaker 11: be also everywhere to hire the best people we can.

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Speaker 3: That's three hundred million dollar commitment. How much of it

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Speaker 3: really is talent the cost of talent.

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Speaker 5: A big chunk of it is talent, specifically research.

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Speaker 11: As you know, our researchers are expensive and talent is expensive,

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Speaker 11: and so people is what makes this company really special,

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Speaker 11: and a lot of it is definitely dedicated towards nor

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Speaker 11: only growing our research team, but our go to market team.

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Speaker 5: In Japan, it's kind of interesting because.

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Speaker 11: We've grown a lot there and traditionally everyone will tell

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Speaker 11: you that in Japan you need to have a commercial team,

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Speaker 11: a business team just to be able to sell one

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Speaker 11: contract and being the keys for us, we actually have

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Speaker 11: been able to sell into Japanese enterprises and Asia with

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Speaker 11: no commercial present whatsoever.

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Speaker 5: And so really for us as ability.

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Speaker 11: To double down and make sure we can sell more

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Speaker 11: by having great teams and great people there, and now

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Speaker 11: we're kind of putting time and effort and money into that.

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Speaker 3: The debate facing I was going to say Hollywood, but

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Speaker 3: the industry at large right now has been you know,

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Speaker 3: what will the impact of AI be on content creation?

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Speaker 3: You know, for one of the blanket expression, how much

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Speaker 3: has that shifted christ about to not not whether they

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Speaker 3: should or how they should use the technology.

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Speaker 11: Well, I think the question of like will AI would

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Speaker 11: ever be useful in creative and content in Hollywood was

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Speaker 11: really a question two years ago the most I think

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Speaker 11: these days you could assume, and it's fairly common to

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Speaker 11: assume that every company, every media, every studio is using

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Speaker 11: AI in somehow. I mean, we work with all of them,

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Speaker 11: so we can tell you like from from the inside

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Speaker 11: that that's actually the case.

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Speaker 5: And so companies are.

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Speaker 11: Seeing like significant impact in their business by using the

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Speaker 11: technology the models themselves to make contents just couldn't do before.

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Speaker 11: And we have countless cases of I don't know, the

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Speaker 11: DBC using it to create content you just couldn't do before.

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Speaker 5: Studios us need to create.

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Speaker 11: Storyboards or art directions or edits or things, and so

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Speaker 11: for us, it is that that's kind of like resolved already.

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Speaker 11: You know, Hollywood and media has been all over and

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Speaker 11: has finally fully adopted on.

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Speaker 5: We now need to grow really outside of that.

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Speaker 3: On the studio side, the lions Gate relationships really interesting, right,

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Speaker 3: you're co developing on projects, but they took an equity stake.

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Speaker 3: Why But also is that something you feel like you

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Speaker 3: could replicate with other studios.

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Speaker 5: Yeah, we're replicating it related with other studios.

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Speaker 11: Again, if you're a great technology partner to a lot

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Speaker 11: of his studios, what you're bringing into the table is

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Speaker 11: the ability for the studios to create content you couldn't

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Speaker 11: do before. And Lasgate was one of the first and

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Speaker 11: the most vocal kind of proponanence of this. But really

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Speaker 11: we're working with a lot more studios and companies in

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Speaker 11: similar models.

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Speaker 5: Some of them don't involve back with you at all.

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Speaker 11: It's more about partnerships and our ability to integrate our

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Speaker 11: products into the way they work. And there's so much

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Speaker 11: great ap there's so much great content out there that

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Speaker 11: needs to be made somehow, and so if you can

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Speaker 11: help them make it, they just want to partner with you.

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Speaker 11: And that's kind of what we've done to make sure

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Speaker 11: that hopefully we'll get to see more interesting stories out there.

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Speaker 3: Christ About just very quickly, where is Runway in its

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Speaker 3: efforts to raise money?

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Speaker 2: Need to raise money to fund all of this.

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Speaker 11: We've raised almost like every ten to twelve months, and

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Speaker 11: so we're pretty much probably going to go into that reactory.

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Speaker 11: We close our Series E on late last year, so

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Speaker 11: December last year, so hopefully later this year we will

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Speaker 11: announce something.

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Speaker 3: Christabal Vealezuela Runway CEO expanding outside of its top market

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Speaker 3: the US to Europe and Asia through Paris, London and Tokyo.

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Speaker 3: Thank you very much. Indeed, now coming up is AI

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Speaker 3: a Path to Prosperity and Jobs. Chief Investment Officer Lauren

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Speaker 3: Cassidy of Founders one hundred ETF is going to join

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Speaker 3: us to explain why she's optimistic and why in the

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Speaker 3: ETF space there's a way of tracking the founder trade.

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Speaker 3: Something we talked about in private late stage markets, where

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Speaker 3: you make a bet on founders. You can do it

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Speaker 3: in public markets to She'd argue, this is what markets

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Speaker 3: look like now. Is that one hundred up one and

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Speaker 3: a half percent. But it's the rebound in chip stocks.

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Speaker 3: That's our top story right now. A big part of

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Speaker 3: it broad comes deal with Apple, but there's other things

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Speaker 3: out there. Bitcoin sixty two, three hundred and thirty seven

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Speaker 3: dollars per token. It's halftime. I'm in New York City

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Speaker 3: this week. There is a lot going on. Stay with us.

439
00:22:43,000 --> 00:22:54,919
Speaker 3: This is Bloomberg Tech. Welcome back to Bloomberg Tech. July six,

440
00:22:55,040 --> 00:22:57,159
Speaker 3: twenty twenty six. This is what markets look like, and

441
00:22:57,440 --> 00:22:59,760
Speaker 3: chips are the big story, really rebounding from a bit

442
00:22:59,760 --> 00:23:01,600
Speaker 3: of a sell off last week. There are lots of

443
00:23:01,600 --> 00:23:03,200
Speaker 3: reasons why we're going to get into them in a moment.

444
00:23:03,480 --> 00:23:05,800
Speaker 3: Micro Strategy is down two ten to five percent. It

445
00:23:05,840 --> 00:23:08,320
Speaker 3: had been down a lot more. Basically, they're selling two

446
00:23:08,359 --> 00:23:10,479
Speaker 3: hundred and sixteen million dollars worth of bitcoin. There's been

447
00:23:10,480 --> 00:23:14,520
Speaker 3: this financing overhaul at the company because of the volatility

448
00:23:14,560 --> 00:23:16,760
Speaker 3: and crypto assets. It's one of the most read stories

449
00:23:16,760 --> 00:23:19,560
Speaker 3: on the Bloomberg and it accounts somewhat for the trading

450
00:23:19,560 --> 00:23:21,800
Speaker 3: in bitcoin today, but all eyes on the socks. The

451
00:23:21,800 --> 00:23:26,200
Speaker 3: Philadelphia Semiconductor Index off session highs but up around four percent.

452
00:23:26,520 --> 00:23:29,320
Speaker 3: A big reason why Broadcom one of the biggest points

453
00:23:29,320 --> 00:23:32,159
Speaker 3: gain is it has extended in agreement with Apple for

454
00:23:32,320 --> 00:23:35,640
Speaker 3: multiple generations of Apple products on custom Silicon A six.

455
00:23:35,680 --> 00:23:37,720
Speaker 3: But at Bloombo's Mark German right at the top of

456
00:23:37,760 --> 00:23:39,760
Speaker 3: the show, you heard it here first, it's all about

457
00:23:39,800 --> 00:23:42,520
Speaker 3: an AI server chip, so we'll continue covering that as

458
00:23:42,560 --> 00:23:45,640
Speaker 3: details emerge. It is all about chips today, and markets

459
00:23:45,640 --> 00:23:48,800
Speaker 3: are arguing that AI is here to stay. Air infrastructure

460
00:23:48,960 --> 00:23:53,320
Speaker 3: continues to expand, capex expected to overtake one trillion dollars

461
00:23:53,320 --> 00:23:56,920
Speaker 3: by twenty thirty, and chips are expected to continue generating

462
00:23:57,000 --> 00:24:00,159
Speaker 3: value through inference workloads. Inference will be here for a

463
00:24:00,200 --> 00:24:02,879
Speaker 3: long time. Chief Investment Officer Lauren Cassidy of found As

464
00:24:02,920 --> 00:24:04,919
Speaker 3: one hundred ETF is with us on set and this

465
00:24:04,960 --> 00:24:08,159
Speaker 3: is part of your argument, right that we've shifted to

466
00:24:08,160 --> 00:24:11,000
Speaker 3: the inference phase. The point being, though the infance phase

467
00:24:11,040 --> 00:24:12,679
Speaker 3: is going to be here for a really long time,

468
00:24:13,000 --> 00:24:16,160
Speaker 3: you still see value in the chip stocks for that reason, Yes.

469
00:24:16,080 --> 00:24:18,520
Speaker 12: A tremendous amount of value. We're going to need chips

470
00:24:18,560 --> 00:24:21,840
Speaker 12: for decades to come. They'll be used for training up front,

471
00:24:21,920 --> 00:24:24,679
Speaker 12: but they can be used to your point, for imprints

472
00:24:24,720 --> 00:24:30,520
Speaker 12: for decades. Even the A one hundred servers that were

473
00:24:30,880 --> 00:24:34,480
Speaker 12: created back into the twenty twenty are still in use,

474
00:24:34,680 --> 00:24:37,560
Speaker 12: and we think these are very long lived assets.

475
00:24:38,080 --> 00:24:39,960
Speaker 3: Just to catch our audience up the A one hundred

476
00:24:40,040 --> 00:24:44,159
Speaker 3: again an older generation of GPU or accelerator from Nvidia.

477
00:24:44,480 --> 00:24:46,120
Speaker 3: Some of the data points that you and your peers

478
00:24:46,160 --> 00:24:49,960
Speaker 3: look to is the pricing on renting capacity through those

479
00:24:50,000 --> 00:24:53,080
Speaker 3: older chips is like through the roof, Yes, and the

480
00:24:53,359 --> 00:24:55,719
Speaker 3: latest generations of chips are really hard to get hold of.

481
00:24:56,119 --> 00:24:57,280
Speaker 2: Exactly. What does that tell you?

482
00:24:57,600 --> 00:25:00,359
Speaker 12: Yes, that we are still in the early inning, and

483
00:25:00,440 --> 00:25:02,560
Speaker 12: that we have a long road ahead of us, and

484
00:25:02,600 --> 00:25:06,080
Speaker 12: it's over time create a tremendous amount of prosperity and

485
00:25:06,160 --> 00:25:08,040
Speaker 12: jobs for our country. We're just going to go through

486
00:25:08,040 --> 00:25:12,560
Speaker 12: the transition period first, but we're very puzzled long term.

487
00:25:12,800 --> 00:25:16,240
Speaker 3: There are lots of different themes and arguments here. So

488
00:25:16,359 --> 00:25:18,399
Speaker 3: one of them is we were bound to see a

489
00:25:18,480 --> 00:25:21,000
Speaker 3: sort of pullback in chip stocks eventually because of the

490
00:25:21,160 --> 00:25:25,679
Speaker 3: dramatic performance over a longer time horizon. Morgan Stanley and

491
00:25:25,680 --> 00:25:27,680
Speaker 3: Mike Wilson are saying, well, actually, we think we'll see

492
00:25:27,680 --> 00:25:31,240
Speaker 3: some rotation out of chip stocks and into hyperscalas because

493
00:25:31,280 --> 00:25:33,679
Speaker 3: that's where the sort of AI economy is at. And

494
00:25:33,720 --> 00:25:35,520
Speaker 3: then there's the idea, well, actually there's a lot of

495
00:25:35,560 --> 00:25:39,399
Speaker 3: potential upside memories still tight sk will list this Friday.

496
00:25:39,200 --> 00:25:40,520
Speaker 2: Which is the dominant theme.

497
00:25:41,080 --> 00:25:44,560
Speaker 12: Yes, So actually to exten that, we see a broadening

498
00:25:44,840 --> 00:25:49,000
Speaker 12: from not just the chips and the memory names and

499
00:25:49,520 --> 00:25:55,200
Speaker 12: to the hyperscalers, but also to software names, to security names, observability.

500
00:25:55,320 --> 00:25:58,719
Speaker 12: There's all different areas of AI, and we think that

501
00:25:58,760 --> 00:26:02,120
Speaker 12: we're already seeing some broadening of participation in the tech

502
00:26:02,240 --> 00:26:05,360
Speaker 12: complex and we expect that to trend to continue this year.

503
00:26:05,640 --> 00:26:08,800
Speaker 3: Okay, it's super interested in you the firm and the

504
00:26:08,840 --> 00:26:12,639
Speaker 3: idea of tracking founders. Yes, on Bloomberg Tech, we have

505
00:26:12,680 --> 00:26:15,400
Speaker 3: a lot of late stage vcs that will say, even

506
00:26:15,400 --> 00:26:19,000
Speaker 3: at that late growth stage, we're backing companies where the

507
00:26:19,160 --> 00:26:22,480
Speaker 3: intellectual capital is in the founder. You seem to be

508
00:26:22,520 --> 00:26:24,960
Speaker 3: saying like, actually, there's lots of different ways through the

509
00:26:24,960 --> 00:26:28,240
Speaker 3: ETF market you can do the same exactly.

510
00:26:28,359 --> 00:26:32,000
Speaker 12: So the founder's one hundred ETF ticker FFF invests in

511
00:26:32,000 --> 00:26:35,159
Speaker 12: one hundred of the two hundred largest companies that are

512
00:26:35,200 --> 00:26:38,680
Speaker 12: founder lads that are listed on the US exchanges. We

513
00:26:38,760 --> 00:26:41,359
Speaker 12: really care a lot about fundamentals, so we look at

514
00:26:41,560 --> 00:26:45,120
Speaker 12: a strength of the balance sheet, quality of cash flows

515
00:26:45,160 --> 00:26:48,880
Speaker 12: and earnings, and as well as valuation in deciding each

516
00:26:48,960 --> 00:26:51,320
Speaker 12: quarter the hundred founders that we want to own.

517
00:26:51,880 --> 00:26:53,720
Speaker 3: I'm also looking at SpaceX. You have a lot to

518
00:26:53,760 --> 00:26:56,080
Speaker 3: say on SpaceX. Just to catch the audience up again,

519
00:26:56,359 --> 00:26:59,400
Speaker 3: one hundred and sixty one dollars a share essentially iPod

520
00:26:59,400 --> 00:27:02,400
Speaker 3: at one thirty five opening trade was one fifty. What's

521
00:27:02,440 --> 00:27:04,639
Speaker 3: that experience been like for the last few weeks.

522
00:27:04,960 --> 00:27:10,399
Speaker 12: Yeah, So, you know, as focusing on founders, Elong is

523
00:27:10,520 --> 00:27:13,720
Speaker 12: one of the greatest founders of our generation, and we

524
00:27:13,720 --> 00:27:16,119
Speaker 12: were day one buyers of SpaceX at one hundred and

525
00:27:16,160 --> 00:27:20,480
Speaker 12: fifty a share. We are very excited about what he's building.

526
00:27:20,640 --> 00:27:24,760
Speaker 12: Our thesis is really vertical integration. So terifab he's going

527
00:27:24,800 --> 00:27:26,760
Speaker 12: to have his own chips in memory, not have to

528
00:27:26,760 --> 00:27:31,080
Speaker 12: wait on Samsung, not face shortages or you know, volatility

529
00:27:31,119 --> 00:27:34,399
Speaker 12: and prices if he's providing them for himself. He's going

530
00:27:34,480 --> 00:27:37,480
Speaker 12: to have GROC as his LLM, He'll have X as

531
00:27:37,480 --> 00:27:43,280
Speaker 12: his expert network. So Twitter really provides the insights in

532
00:27:43,359 --> 00:27:46,159
Speaker 12: real time that he can feed and can add to

533
00:27:47,160 --> 00:27:51,520
Speaker 12: insights and intelligence. He then has Starlink for the communications

534
00:27:51,520 --> 00:27:58,359
Speaker 12: globally interterrestrially over time, and then also SpaceX to build

535
00:27:58,359 --> 00:28:00,840
Speaker 12: it all in space over time. We think that he's

536
00:28:00,880 --> 00:28:03,080
Speaker 12: going to be the low cost provider of data centers

537
00:28:03,960 --> 00:28:06,080
Speaker 12: through orbit orbital compute.

538
00:28:06,160 --> 00:28:07,919
Speaker 3: Maybe a little bit more near term, but what's your

539
00:28:07,960 --> 00:28:09,560
Speaker 3: five year outlook for SpaceX.

540
00:28:10,200 --> 00:28:15,879
Speaker 12: Yes, so we really think with no night, no clouds,

541
00:28:16,359 --> 00:28:20,480
Speaker 12: and no Nimbi up in space, that Elon Musk has

542
00:28:20,720 --> 00:28:23,760
Speaker 12: a once in a lifetime opportunity to put data centers

543
00:28:23,800 --> 00:28:28,320
Speaker 12: there and really compete on price against the terustrial players

544
00:28:29,080 --> 00:28:31,960
Speaker 12: including Amazon, Google and Microsoft.

545
00:28:32,320 --> 00:28:34,320
Speaker 3: We just have about a minute left, but you have

546
00:28:34,400 --> 00:28:37,119
Speaker 3: this sort of unwavering belief that in the end AI

547
00:28:37,359 --> 00:28:39,680
Speaker 3: is going to revolutionize the US economy.

548
00:28:39,960 --> 00:28:42,400
Speaker 2: Yes, and the global economy. What is that founded on.

549
00:28:43,080 --> 00:28:46,240
Speaker 12: We're already seeing early evidence that companies that are the

550
00:28:46,280 --> 00:28:50,120
Speaker 12: heaviest investors in AI actually two years later have ten

551
00:28:50,200 --> 00:28:56,000
Speaker 12: percent greater employee headcount. And that's led by entry level workers.

552
00:28:56,040 --> 00:28:58,120
Speaker 12: We've had a lot of fear in the early days

553
00:28:58,200 --> 00:29:00,800
Speaker 12: that some of these initial layoffs that we see as

554
00:29:00,880 --> 00:29:04,040
Speaker 12: right sizing are going to be permanent. But we don't

555
00:29:04,040 --> 00:29:06,959
Speaker 12: see that. Kevin worsh just said a few days ago,

556
00:29:07,240 --> 00:29:10,320
Speaker 12: you know who knew that the internet would bring a

557
00:29:10,360 --> 00:29:12,640
Speaker 12: million and a half Uber jobs. We think there's all

558
00:29:12,680 --> 00:29:14,920
Speaker 12: new industries that are going to be created from AI

559
00:29:15,240 --> 00:29:16,120
Speaker 12: in the years ahead.

560
00:29:16,840 --> 00:29:19,560
Speaker 3: Found this one hundred ETF Chief Investment Officer Lauren Castid.

561
00:29:19,600 --> 00:29:21,680
Speaker 3: Great to have you here in New York on Bloomberg Tech.

562
00:29:22,000 --> 00:29:23,840
Speaker 3: There's more techl allignes to go through. Let's get to

563
00:29:23,840 --> 00:29:26,960
Speaker 3: Bloomberg Hira and who's standing by Hira hi ed?

564
00:29:27,000 --> 00:29:28,920
Speaker 13: Great to have you here in New York. But it's

565
00:29:29,000 --> 00:29:32,920
Speaker 13: time now for talking tech first up. Prosecutors in Singapore

566
00:29:33,000 --> 00:29:35,640
Speaker 13: have filed new charges against the key suspects in a

567
00:29:35,720 --> 00:29:39,200
Speaker 13: money laundering case tied to the alleged transfer of Nvidia

568
00:29:39,280 --> 00:29:43,000
Speaker 13: chips to China. The suspect, a businessman born in China,

569
00:29:43,080 --> 00:29:47,880
Speaker 13: pleaded not guilty. Prosecutors say he misled server manufacturers in

570
00:29:48,000 --> 00:29:51,520
Speaker 13: order to obtain hardware that may have included Nvidia AI

571
00:29:51,640 --> 00:29:56,480
Speaker 13: chips restricted under US export controls plus Bite Dance and

572
00:29:56,520 --> 00:30:00,360
Speaker 13: Ali Baba are dialing back some AI companion features as

573
00:30:00,440 --> 00:30:04,200
Speaker 13: China rules out new regulations. The rules take effect later

574
00:30:04,280 --> 00:30:07,120
Speaker 13: this month and are aimed at preventing users from becoming

575
00:30:07,280 --> 00:30:13,280
Speaker 13: two emotionally attached to human like chatbots. And a Samsung

576
00:30:13,400 --> 00:30:16,520
Speaker 13: union leader who secured bonuses of up to four hundred

577
00:30:16,600 --> 00:30:20,520
Speaker 13: thousand dollars for some workers is now facing backlash. That's

578
00:30:20,520 --> 00:30:24,720
Speaker 13: because employees in less profitable areas received much smaller payouts,

579
00:30:24,760 --> 00:30:28,440
Speaker 13: so thousands of members have quit the union, weakening its

580
00:30:28,520 --> 00:30:32,040
Speaker 13: bargaining power, while others are wearing black to work to

581
00:30:32,120 --> 00:30:33,920
Speaker 13: show their discontent.

582
00:30:34,080 --> 00:30:35,160
Speaker 2: Ed thank you hire.

583
00:30:35,280 --> 00:30:38,320
Speaker 3: Now coming up, countries are shelling out to develop the

584
00:30:38,480 --> 00:30:41,840
Speaker 3: control the battlefield tech of the future. We're going to

585
00:30:41,880 --> 00:30:44,760
Speaker 3: discuss the new two trillion dollar arms race next.

586
00:30:45,160 --> 00:30:46,160
Speaker 2: This is Bloomberg Tech.

587
00:30:54,560 --> 00:30:58,280
Speaker 3: A two trillion dollar race to develop new battlefield technology

588
00:30:58,320 --> 00:31:01,680
Speaker 3: is underway. The spending spree echoes the Cold War build up,

589
00:31:01,760 --> 00:31:06,840
Speaker 3: but instead of nuclear stockpiles, think drones, AI and hypersonic

590
00:31:06,880 --> 00:31:09,680
Speaker 3: weapons the most global defense at as A. Jerry Dare

591
00:31:09,720 --> 00:31:12,719
Speaker 3: wrote today's big take and joins us now you know

592
00:31:13,200 --> 00:31:16,520
Speaker 3: the number is staggering in some sense to others, you know,

593
00:31:16,520 --> 00:31:18,960
Speaker 3: maybe that's what you'd expect. Take us inside the big

594
00:31:19,000 --> 00:31:21,480
Speaker 3: Take what is the point they're getting at at the top.

595
00:31:22,720 --> 00:31:24,840
Speaker 14: Well, the point we're getting at as much as you

596
00:31:24,960 --> 00:31:27,760
Speaker 14: described in the intro. We're used to thinking of an

597
00:31:27,880 --> 00:31:31,120
Speaker 14: arms race in these Cold War terms of building up

598
00:31:31,320 --> 00:31:35,520
Speaker 14: enormous stock piles of varied types and huge numbers of

599
00:31:35,600 --> 00:31:38,400
Speaker 14: nuclear weapons. But we sort of moved past that to

600
00:31:38,440 --> 00:31:41,440
Speaker 14: the point where there are new technologies that countries think

601
00:31:41,640 --> 00:31:45,400
Speaker 14: could reshape the battlefield, could give them an insurmountable edge

602
00:31:45,800 --> 00:31:47,120
Speaker 14: in whatever future.

603
00:31:46,840 --> 00:31:47,680
Speaker 8: Combat looked like.

604
00:31:48,040 --> 00:31:50,680
Speaker 14: And those are things like AI, those are things like

605
00:31:50,960 --> 00:31:54,880
Speaker 14: hypersonic weapons, those are things like the militarization of space

606
00:31:55,160 --> 00:31:58,440
Speaker 14: and drones. Some of these we've already seen in action.

607
00:31:58,600 --> 00:32:03,400
Speaker 14: We've seen rones in heavy use obviously in Ukraine in

608
00:32:03,440 --> 00:32:06,160
Speaker 14: the last four years. We saw them also surface quite

609
00:32:06,200 --> 00:32:09,680
Speaker 14: a bit in the Iran War. We've seen hypersonics used

610
00:32:09,680 --> 00:32:14,920
Speaker 14: in the Iran War, and we even saw and in Ukraine.

611
00:32:14,920 --> 00:32:17,000
Speaker 14: And we even saw the US say that it had

612
00:32:17,120 --> 00:32:20,320
Speaker 14: used AI to help plan its dread campaign against Iran.

613
00:32:20,400 --> 00:32:21,480
Speaker 8: So some of these.

614
00:32:21,320 --> 00:32:24,760
Speaker 14: Technologies are already in use, are already servicing. There might

615
00:32:24,800 --> 00:32:29,160
Speaker 14: be in there sort of initial forms, but they're developing

616
00:32:29,200 --> 00:32:31,920
Speaker 14: into things that the country that can afford to get

617
00:32:31,960 --> 00:32:34,880
Speaker 14: in the game think will be massive game changers.

618
00:32:35,120 --> 00:32:37,440
Speaker 3: There's been a lot of activity in private and in

619
00:32:37,440 --> 00:32:41,160
Speaker 3: public markets, right Lockheed even today buying Ultramarine for almost

620
00:32:41,160 --> 00:32:44,680
Speaker 3: three and a half billion dollars that is out there,

621
00:32:44,720 --> 00:32:49,320
Speaker 3: the legacy prime spending buying different properties in the submarine space.

622
00:32:49,640 --> 00:32:51,600
Speaker 3: What I think is interesting about your story as well

623
00:32:51,680 --> 00:32:55,560
Speaker 3: is that, unsurprisingly it is the US and China that

624
00:32:55,640 --> 00:32:58,360
Speaker 3: are the biggest spenders. Is there any difference in approach

625
00:32:58,400 --> 00:33:00,080
Speaker 3: that they're taking to AI on the wolf.

626
00:33:01,840 --> 00:33:07,240
Speaker 14: Well, China has much closer links between the government and

627
00:33:07,280 --> 00:33:11,360
Speaker 14: the private sphere, so there are undoubtedly a lot of

628
00:33:11,480 --> 00:33:15,400
Speaker 14: investments and developments happening behind the scenes on the commercial

629
00:33:15,480 --> 00:33:18,920
Speaker 14: side that immediately are able to be put into use

630
00:33:19,240 --> 00:33:21,840
Speaker 14: on the government side, where of course, in the US

631
00:33:21,880 --> 00:33:26,760
Speaker 14: there's a lot more separation. Obviously, the military organizations like

632
00:33:26,920 --> 00:33:30,120
Speaker 14: DARPA are trying to develop AI tools on their own,

633
00:33:30,160 --> 00:33:33,680
Speaker 14: but there are massive companies doing this as well, and

634
00:33:34,120 --> 00:33:37,840
Speaker 14: those development don't always immediately make their way into the

635
00:33:37,840 --> 00:33:38,840
Speaker 14: government's hands.

636
00:33:39,040 --> 00:33:41,480
Speaker 3: Bloomberg Jerry Doyer with the big take, Thank you, very

637
00:33:41,520 --> 00:33:44,440
Speaker 3: much sticking with advancing defense tech and a case study

638
00:33:44,720 --> 00:33:48,560
Speaker 3: on DAS, which develops drones and secure wireless communications, has

639
00:33:48,600 --> 00:33:52,440
Speaker 3: agreed by autonomous aircraft maker Design Technologies. The cash and

640
00:33:52,520 --> 00:33:55,480
Speaker 3: stock deal, worth over eight hundred and seventy five million dollars,

641
00:33:55,720 --> 00:33:58,880
Speaker 3: will turn on DAS into a full service autonomous defense

642
00:33:59,120 --> 00:34:00,240
Speaker 3: technology platform.

643
00:34:00,360 --> 00:34:03,400
Speaker 2: On Best chairman and CEO Eric Brock is with us.

644
00:34:03,440 --> 00:34:06,760
Speaker 3: I think this is really interesting, the structure of the deal,

645
00:34:07,240 --> 00:34:10,960
Speaker 3: the timing, the why. But essentially, you know, what is

646
00:34:11,000 --> 00:34:14,120
Speaker 3: it you've been able to acquire that you didn't have

647
00:34:14,640 --> 00:34:15,960
Speaker 3: or that you couldn't have done yourself.

648
00:34:16,040 --> 00:34:19,600
Speaker 15: Eric, yea, so great question, and firstly, thank you for

649
00:34:19,640 --> 00:34:20,959
Speaker 15: having me on the show.

650
00:34:21,000 --> 00:34:23,319
Speaker 8: And it is an important day for on US. So

651
00:34:23,360 --> 00:34:24,480
Speaker 8: what we're seeing in terms.

652
00:34:24,280 --> 00:34:27,320
Speaker 15: Of opportunity is that we're in the really the early

653
00:34:27,400 --> 00:34:31,480
Speaker 15: innings of a mass of adoption cycle around unmanned autonomous systems.

654
00:34:31,800 --> 00:34:33,719
Speaker 15: And this is after a long period of what I

655
00:34:33,760 --> 00:34:37,240
Speaker 15: would call foundational work in terms of developing and maturing

656
00:34:37,280 --> 00:34:40,040
Speaker 15: the text act. So the things you're seeing today in

657
00:34:40,040 --> 00:34:43,879
Speaker 15: the battlefield were really started to be incubated well over

658
00:34:43,920 --> 00:34:46,960
Speaker 15: a decade ago. And for on US, you know, the

659
00:34:47,280 --> 00:34:50,520
Speaker 15: opportunity we're seeing in how this market's going to evolve

660
00:34:50,600 --> 00:34:53,680
Speaker 15: is we think there's a tremendous number of really valuable

661
00:34:53,960 --> 00:34:56,280
Speaker 15: and critical technology platforms being developed.

662
00:34:56,520 --> 00:34:58,760
Speaker 8: However, we need to bring them to the market and scale.

663
00:34:58,760 --> 00:35:01,560
Speaker 15: So that means we have to scale fly chain, fuel,

664
00:35:01,560 --> 00:35:05,760
Speaker 15: support and services, and sustain and essentially industrialize this industry.

665
00:35:06,400 --> 00:35:09,600
Speaker 15: So with Design, it was an amazing opportunity for us

666
00:35:09,600 --> 00:35:13,000
Speaker 15: to really deepen the portfolio that we have been building previously,

667
00:35:13,000 --> 00:35:16,840
Speaker 15: both through internal activities as well as acquisitions. So Design

668
00:35:16,920 --> 00:35:20,200
Speaker 15: for us, as we're across now what we call persistent ISR.

669
00:35:20,600 --> 00:35:23,239
Speaker 15: They bring to what is already a very powerful and

670
00:35:23,280 --> 00:35:26,879
Speaker 15: existing counter drone portfolio and onto us. But now we're

671
00:35:26,880 --> 00:35:30,040
Speaker 15: having wide capabilities and we're just going to be delivering

672
00:35:30,080 --> 00:35:31,520
Speaker 15: those now at scales and customers.

673
00:35:31,719 --> 00:35:33,320
Speaker 2: So that bit I'm interesting.

674
00:35:33,360 --> 00:35:36,879
Speaker 3: You have drones, counter during systems and the communications tech.

675
00:35:37,080 --> 00:35:38,000
Speaker 2: Who is the customer?

676
00:35:38,040 --> 00:35:40,239
Speaker 3: You just basically want to be a one stop shop

677
00:35:40,239 --> 00:35:42,640
Speaker 3: for the Pentagon or it's more complex than that.

678
00:35:43,640 --> 00:35:47,720
Speaker 15: Absolutely, So clearly the Department of War and the Combatant

679
00:35:47,760 --> 00:35:51,000
Speaker 15: Commands and ourned Services branches the United States are critical

680
00:35:51,080 --> 00:35:53,640
Speaker 15: customers for US. But what we're doing in terms of

681
00:35:53,640 --> 00:35:57,520
Speaker 15: business model is really creating a global operating platform so

682
00:35:57,520 --> 00:36:04,480
Speaker 15: we can deliver these tech technologies to to allied countries

683
00:36:04,680 --> 00:36:07,319
Speaker 15: in militaries. So that's in the Middle East, that's in

684
00:36:07,400 --> 00:36:10,239
Speaker 15: Europe in a big way in the United States, which

685
00:36:10,360 --> 00:36:12,600
Speaker 15: of course is the largest market for US.

686
00:36:13,040 --> 00:36:17,520
Speaker 3: Eric, how able are you to do business with US

687
00:36:17,640 --> 00:36:20,600
Speaker 3: allies away from the United States as a customer.

688
00:36:24,440 --> 00:36:27,200
Speaker 15: Yeah, so it's become more complex. You know, we've come

689
00:36:27,719 --> 00:36:32,960
Speaker 15: as we've seen military doctrine and geopolitics evolve, there's an

690
00:36:33,000 --> 00:36:36,320
Speaker 15: extreme effort or emphasis on what I call localization. So,

691
00:36:37,160 --> 00:36:40,440
Speaker 15: for example, Made in America policies mean the technology platforms

692
00:36:40,440 --> 00:36:42,600
Speaker 15: you're developing and bringing to the US have to be

693
00:36:42,600 --> 00:36:44,920
Speaker 15: supported with the US supply chain, have to be sold

694
00:36:44,920 --> 00:36:47,800
Speaker 15: as services sustained by US citizens. The same things happening

695
00:36:47,800 --> 00:36:49,960
Speaker 15: in Europe. Right We've got we're making Europe grade again.

696
00:36:50,480 --> 00:36:53,480
Speaker 15: So what we're doing there is we're partnering with local

697
00:36:53,600 --> 00:36:57,640
Speaker 15: defense and industrial companies who bring expertise in around markets,

698
00:36:58,400 --> 00:37:00,799
Speaker 15: they bring supply chain scale, they be able to bring

699
00:37:00,840 --> 00:37:04,160
Speaker 15: the ability to support these activities in the field.

700
00:37:04,360 --> 00:37:05,560
Speaker 8: I think that's the way we're going to have to

701
00:37:05,560 --> 00:37:06,240
Speaker 8: grow businesses.

702
00:37:06,280 --> 00:37:08,960
Speaker 16: Now you know, you can still be global, but you

703
00:37:09,040 --> 00:37:11,640
Speaker 16: have to be very local and that's the core tenet

704
00:37:11,640 --> 00:37:15,160
Speaker 16: of our business model. You structured this as two hundred

705
00:37:15,160 --> 00:37:18,040
Speaker 16: million dollars in cash and then about six hundred and

706
00:37:18,040 --> 00:37:21,319
Speaker 16: seventy five million in stock with basically a lock up

707
00:37:21,920 --> 00:37:23,040
Speaker 16: for six months.

708
00:37:23,440 --> 00:37:24,680
Speaker 2: Why structure it that way?

709
00:37:24,680 --> 00:37:26,359
Speaker 3: And how much room do you have to do more

710
00:37:26,480 --> 00:37:28,360
Speaker 3: M and A to go out and get properties you

711
00:37:28,400 --> 00:37:30,279
Speaker 3: think add to what you do?

712
00:37:31,120 --> 00:37:33,000
Speaker 8: Sure, So I'll start with the ladder first.

713
00:37:33,160 --> 00:37:36,840
Speaker 15: We have substantial capacity to continue to do to evolve

714
00:37:36,960 --> 00:37:39,560
Speaker 15: what we call the core and Strategic Growth platform, and

715
00:37:39,640 --> 00:37:43,880
Speaker 15: I do believe that continuing to expand the portfolio in

716
00:37:44,080 --> 00:37:48,000
Speaker 15: our operating platform form through acquisitions is going to be

717
00:37:48,000 --> 00:37:51,040
Speaker 15: incredibly valuable for our investors, in our customers and partners.

718
00:37:52,560 --> 00:37:54,319
Speaker 15: So you know, in terms of why we structure the

719
00:37:54,320 --> 00:37:58,480
Speaker 15: deal the way we did, our the counterparty, Highland Partners,

720
00:37:58,920 --> 00:38:01,839
Speaker 15: who was the already owner of Design, of course, had

721
00:38:01,880 --> 00:38:05,360
Speaker 15: liquidity needs. There's going to be taxes and to be paid,

722
00:38:05,440 --> 00:38:07,640
Speaker 15: so we did include cash and the deal. At the

723
00:38:07,680 --> 00:38:09,960
Speaker 15: same time, they were very eager in partner with on

724
00:38:10,200 --> 00:38:12,840
Speaker 15: us the Super Bowlosh on what design does they know?

725
00:38:12,920 --> 00:38:15,440
Speaker 8: The ramp there and they believe in our business model.

726
00:38:15,520 --> 00:38:19,720
Speaker 15: So you know, so Highlander and the investors of Design

727
00:38:19,760 --> 00:38:21,520
Speaker 15: are more than happy to take on to US shares

728
00:38:21,680 --> 00:38:23,480
Speaker 15: because they see quite a bit of upside in both

729
00:38:23,480 --> 00:38:26,200
Speaker 15: the near term and in longer term.

730
00:38:26,560 --> 00:38:28,359
Speaker 3: Eric, I want to go back to the Bloomberg Big

731
00:38:28,400 --> 00:38:31,040
Speaker 3: take that our Defense editor Jerry Doyle was out lining

732
00:38:31,040 --> 00:38:33,920
Speaker 3: the headline the two trillion dollar race for the control

733
00:38:33,960 --> 00:38:37,120
Speaker 3: of the future battlefield. We got into this idea that

734
00:38:37,320 --> 00:38:41,400
Speaker 3: unsurprisingly the United States and China not just the biggest spenders,

735
00:38:41,400 --> 00:38:44,080
Speaker 3: but if you look at China very closely aligned with

736
00:38:44,120 --> 00:38:47,120
Speaker 3: private industry, how does that impact you on das, How

737
00:38:47,160 --> 00:38:50,640
Speaker 3: does that put pressure on you or give you an

738
00:38:50,640 --> 00:38:52,400
Speaker 3: opportunity in this environment?

739
00:38:53,080 --> 00:38:55,200
Speaker 8: Well, certainly there's the arms races.

740
00:38:55,280 --> 00:38:58,960
Speaker 15: It started right and it's not a question of will

741
00:38:59,000 --> 00:39:03,040
Speaker 15: we be able to develop these unmanned systems or not,

742
00:39:03,320 --> 00:39:05,000
Speaker 15: or we will be able to produce the drones.

743
00:39:05,040 --> 00:39:07,040
Speaker 8: We absolutely will be able to.

744
00:39:07,800 --> 00:39:10,960
Speaker 15: At the same time, there are challenges around how we're

745
00:39:11,000 --> 00:39:14,520
Speaker 15: localizing the business. Of course, is well understood that over

746
00:39:14,520 --> 00:39:18,040
Speaker 15: the last twenty plus years we have de industrialized in

747
00:39:18,080 --> 00:39:20,040
Speaker 15: the United States. That means a supply chain has moved

748
00:39:20,040 --> 00:39:23,120
Speaker 15: to China, and I think what you're seeing policy makers

749
00:39:23,200 --> 00:39:26,040
Speaker 15: ranging from the White House to Congress to the Pentagon,

750
00:39:26,280 --> 00:39:30,240
Speaker 15: there is a significant emphasis on rebuilding our defense industrial

751
00:39:30,280 --> 00:39:32,920
Speaker 15: base and we're going to be participating in that. And

752
00:39:32,960 --> 00:39:35,600
Speaker 15: I think when you think about strategies that indust is

753
00:39:35,640 --> 00:39:38,239
Speaker 15: deploying and others in our industry on all sides of

754
00:39:38,239 --> 00:39:42,880
Speaker 15: the table, vendors, supply chain producers, and manufacturers, we have

755
00:39:42,920 --> 00:39:43,960
Speaker 15: to bring scale right.

756
00:39:44,040 --> 00:39:46,040
Speaker 8: So we have to in terms of industrializing.

757
00:39:46,080 --> 00:39:48,400
Speaker 15: We have built hundreds and hundreds of our Cahalm drone

758
00:39:48,400 --> 00:39:51,759
Speaker 15: companies today, we need to put them on operating platforms

759
00:39:51,920 --> 00:39:54,239
Speaker 15: so we can't get the scale and United economics that

760
00:39:54,280 --> 00:39:58,080
Speaker 15: will justify bringing those investments here to the US to industrialize.

761
00:39:58,080 --> 00:40:00,359
Speaker 15: And I think that cycle is already well on its way,

762
00:40:00,600 --> 00:40:03,160
Speaker 15: and I'm very optimistic that we're going to be able

763
00:40:03,200 --> 00:40:06,920
Speaker 15: to rise the occasion. We will have exceptional unmanned autonomous

764
00:40:06,920 --> 00:40:10,160
Speaker 15: systems in leadership in this sector for sure.

765
00:40:10,520 --> 00:40:12,959
Speaker 3: Eric Brocks, CEO of Von Das, who agreed to buy

766
00:40:13,200 --> 00:40:16,040
Speaker 3: autonomous aircraft make a design for eight hundred and seventy

767
00:40:16,040 --> 00:40:18,279
Speaker 3: five zero point eight million dollars, thank you very much.

768
00:40:18,440 --> 00:40:20,400
Speaker 3: Coming up, we're going to have more details on s

769
00:40:20,440 --> 00:40:22,960
Speaker 3: k Heinez's US market debut. We're going to talk a

770
00:40:23,000 --> 00:40:24,920
Speaker 3: little bit about Broadcom and Apple.

771
00:40:25,000 --> 00:40:26,719
Speaker 2: Stay with us. This is Bloomberg Tech.

772
00:40:38,320 --> 00:40:41,680
Speaker 3: Let's get back to Broadcom and Apple's partnership. Bloomberg Intelligence

773
00:40:41,719 --> 00:40:44,840
Speaker 3: out with a note saying this expanded partnership means Apple

774
00:40:44,880 --> 00:40:48,440
Speaker 3: will quote likely have to increase its capex over the

775
00:40:48,480 --> 00:40:51,080
Speaker 3: next few years amid a greater push to add more

776
00:40:51,120 --> 00:40:54,200
Speaker 3: AI features across its products. Joining us now is Bloomberg

777
00:40:54,239 --> 00:40:57,200
Speaker 3: Intelligence Senior analyst Adam rag Rana out with the react

778
00:40:57,400 --> 00:40:59,960
Speaker 3: take us a bit more into it. Why would they

779
00:41:00,040 --> 00:41:02,160
Speaker 3: have to raise capex if they're going to go bigger

780
00:41:02,200 --> 00:41:04,080
Speaker 3: on a six Yeah.

781
00:41:04,120 --> 00:41:04,359
Speaker 8: See.

782
00:41:04,360 --> 00:41:06,560
Speaker 17: One of the things we realized that if you're going

783
00:41:06,560 --> 00:41:10,560
Speaker 17: to do more inferencing both on device and outside, and

784
00:41:10,600 --> 00:41:12,520
Speaker 17: in the case of Apple, they're going to be using

785
00:41:12,560 --> 00:41:16,040
Speaker 17: cloud services from let's say Google or anybody else, but

786
00:41:16,080 --> 00:41:19,000
Speaker 17: they're also going to do their private cloud set up

787
00:41:19,000 --> 00:41:21,399
Speaker 17: as well, which means more data centers. Now we all

788
00:41:21,440 --> 00:41:24,879
Speaker 17: know for data centers you would need chips. Now, either

789
00:41:24,920 --> 00:41:27,000
Speaker 17: you go and buy them from Nvidia or you can

790
00:41:27,000 --> 00:41:29,919
Speaker 17: build your own custom chips, which we have seen that

791
00:41:30,520 --> 00:41:32,760
Speaker 17: you know, you know that Google has their own chips.

792
00:41:32,960 --> 00:41:35,960
Speaker 17: Amazon's built its own chips, and it's today's announcement. And

793
00:41:36,000 --> 00:41:38,719
Speaker 17: thanks to Mark German for actually reporting that. You know,

794
00:41:38,800 --> 00:41:42,200
Speaker 17: that agreement could be related to the AI servers that

795
00:41:42,280 --> 00:41:44,640
Speaker 17: Apple is investing. So, I mean, if they are going

796
00:41:44,680 --> 00:41:47,719
Speaker 17: to be adding more of their custom chips for A servers,

797
00:41:47,880 --> 00:41:49,799
Speaker 17: you know, where is that going to go? It has

798
00:41:49,880 --> 00:41:51,880
Speaker 17: to go, So I mean, I think it all turns

799
00:41:51,920 --> 00:41:52,640
Speaker 17: in nicely.

800
00:41:52,880 --> 00:41:53,959
Speaker 5: But at the same time, and.

801
00:41:53,880 --> 00:41:57,680
Speaker 17: Remember how much does Apple specking capex nothing compared to

802
00:41:57,719 --> 00:42:01,000
Speaker 17: Microsoft or Amazon and the others, So it's not going

803
00:42:01,040 --> 00:42:03,600
Speaker 17: to break their free cash flow nature, but it is

804
00:42:03,640 --> 00:42:05,640
Speaker 17: going to go up compared to what it has been.

805
00:42:05,560 --> 00:42:06,840
Speaker 3: Real quick, an Eric, do you do you think the

806
00:42:06,880 --> 00:42:09,600
Speaker 3: investors will share that though You're absolutely right. You know,

807
00:42:09,680 --> 00:42:13,800
Speaker 3: Apple's stock story has been completely detached from the Capex

808
00:42:13,880 --> 00:42:16,959
Speaker 3: story of the hyperscalers. People have almost been like com

809
00:42:16,960 --> 00:42:18,840
Speaker 3: on Apple, spend a bit of money.

810
00:42:19,800 --> 00:42:21,680
Speaker 17: Yeah, but again, as I said, you know, if they

811
00:42:21,719 --> 00:42:24,239
Speaker 17: are at three percent of their revenue right now, which

812
00:42:24,280 --> 00:42:26,719
Speaker 17: is nothing again you know, fifteen nine billion. If it

813
00:42:26,760 --> 00:42:28,520
Speaker 17: goes to even four percent of revenue or three and

814
00:42:28,560 --> 00:42:31,520
Speaker 17: a half eighteen billion, twenty billion, it's nothing. Compared to

815
00:42:31,840 --> 00:42:33,319
Speaker 17: how much they bring in every year.

816
00:42:33,440 --> 00:42:35,680
Speaker 5: So they if city.

817
00:42:35,480 --> 00:42:37,799
Speaker 17: Is going to help them sell more phones down the road,

818
00:42:38,120 --> 00:42:40,400
Speaker 17: adding another five, ten, fifteen billion is not going to

819
00:42:40,520 --> 00:42:42,080
Speaker 17: you know, to be honest, break the back here.

820
00:42:42,640 --> 00:42:45,920
Speaker 3: Bloomberg Intelligence is aana agrana very quick with the react

821
00:42:46,239 --> 00:42:49,080
Speaker 3: on this Apple Broadcom deal, Thank you very much. Well

822
00:42:49,520 --> 00:42:53,320
Speaker 3: it's not exactly terminator too, but Reddit is using AI

823
00:42:53,480 --> 00:42:57,520
Speaker 3: to fight AI. The platform, which licenses content to JACKVPT

824
00:42:57,680 --> 00:43:01,280
Speaker 3: and Gemini, has become a target for market is trying

825
00:43:01,320 --> 00:43:05,920
Speaker 3: to plant posts that AI chatbots might repeat as genuine

826
00:43:06,000 --> 00:43:09,520
Speaker 3: human opinions. Reddit says its new automated system has caught

827
00:43:09,560 --> 00:43:12,800
Speaker 3: twenty five thousand of these posts and cut users exposure

828
00:43:12,840 --> 00:43:18,040
Speaker 3: to them by twenty percent compared to last year. Okay,

829
00:43:18,200 --> 00:43:20,080
Speaker 3: that does it for this edition of Bloomberg Tech. It's

830
00:43:20,120 --> 00:43:22,239
Speaker 3: day one. I'm here in New York City all week.

831
00:43:22,320 --> 00:43:24,000
Speaker 3: There is a lot going on. I want to check

832
00:43:24,000 --> 00:43:28,120
Speaker 3: really quickly on those big stories. Broadcom up off session

833
00:43:28,160 --> 00:43:30,359
Speaker 3: tized for about four percent, Apple now one point six

834
00:43:30,400 --> 00:43:34,520
Speaker 3: percent higher, an extended multi year agreement for multiple generations

835
00:43:34,520 --> 00:43:35,040
Speaker 3: of products.

836
00:43:35,080 --> 00:43:36,120
Speaker 2: We gave you those details.

837
00:43:36,280 --> 00:43:39,480
Speaker 3: Microsoft off session loads but still down a percentage point

838
00:43:39,640 --> 00:43:44,280
Speaker 3: because Xbox cutting jobs, closing studios. Now bring your Xbox

839
00:43:44,360 --> 00:43:47,680
Speaker 3: questions to an interactive live Q and a live stream. Tomorrow,

840
00:43:47,680 --> 00:43:49,759
Speaker 3: I'm going to be speaking again with Bloomberg's video game

841
00:43:49,760 --> 00:43:52,319
Speaker 3: industry reporter Jason Schreier. Will pick up where we left

842
00:43:52,320 --> 00:43:55,040
Speaker 3: off today and we will take your questions from the

843
00:43:55,080 --> 00:43:58,120
Speaker 3: audience Bloomberg dot com one pm Eastern. Also check out

844
00:43:58,120 --> 00:44:00,480
Speaker 3: the pod. You know exactly where to find it online

845
00:44:00,600 --> 00:44:02,399
Speaker 3: and on Bloomberg. This is Bloomberg Tech