Speaker 1: From Marhard where Innovation of Money and Power colle in
Speaker 1: Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde
Speaker 1: and Ed lud Love.
Speaker 2: Live from New York and San Francisco. This is Bloomberg Technology.
Speaker 2: Coming up, open.
Speaker 3: AI's historic funding round. We discussed one of the largest
Speaker 3: ever private investments and its new loan agreement securing ten
Speaker 3: billion dollars in total liquidity.
Speaker 4: And AI dominates VC deals.
Speaker 5: We have the latest data for venture funding in the
Speaker 5: third quarter and in.
Speaker 3: Video insiders cash in on the AI height, selling one
Speaker 3: point eight billion dollars of shares this year alone. That
Speaker 3: and so much more coming uphead.
Speaker 4: Yeah, straight to our top story.
Speaker 5: Open ai said it has completed a deal to raise
Speaker 5: six point six billion dollars in new giving the AI
Speaker 5: company a one hundred and fifty seven billion dollar valuation
Speaker 5: and bolstering its efforts to build the world's leading generative
Speaker 5: AI technology. In the last hour, the startups also announced
Speaker 5: a four billion dollar credit line from banks around the world,
Speaker 5: giving access to a more than ten billion dollar war chest.
Speaker 5: Blion both Rachel Metz joins us on set in San Francisco,
Speaker 5: and we've been tracking this for weeks and months and
Speaker 5: it's finally done. But the important point is they need
Speaker 5: the money because the cutting edge model requires the money
Speaker 5: to train and build.
Speaker 6: Yes, they are in a very expensive business. If you
Speaker 6: want to build a cutting edge large language model, any
Speaker 6: kind of cutting edge AI model, at this point, you're
Speaker 6: looking at potentially spending up to hundreds of millions of dollars.
Speaker 6: So if you think about multiplying that out over a
Speaker 6: couple of billion dollars, I mean it's like, well, you
Speaker 6: can train a couple models there, and what if you
Speaker 6: train one and you're like, you know what, I'm not
Speaker 6: that happy with this. I mean a lot of money. Also,
Speaker 6: they need you know, chips, they have staff, they have
Speaker 6: all kinds of expenses there. They are bringing in revenue
Speaker 6: of course, but it's still costs quite a bit to
Speaker 6: do what they're doing.
Speaker 3: It is the future revenue growth, the future profitability. That
Speaker 3: means standout names from VC like Thrive Capital, like Coast
Speaker 3: a Ventures back the round, but numerous big substantial banks
Speaker 3: back the credit facility. We're looking at Goldman, Sachs, JP
Speaker 3: Morgan santunder Wells Fargo to name but a few. What
Speaker 3: is the future growth model that they're all building one
Speaker 3: hundred and fifty seven billion dollar valuation on.
Speaker 6: Rachel, I mean they're looking at businesses using their products
Speaker 6: going forward. They're hoping that businesses will increasingly do things
Speaker 6: like fine tune the models. They recently made it so
Speaker 6: that businesses can do that and use them in different
Speaker 6: parts of their workflow and find it useful enough that
Speaker 6: they will keep paying for it, and they are starting
Speaker 6: to see uptake. They have quite a number of both
Speaker 6: individual and business users at this point. They recently passed
Speaker 6: the one million business user mark for business users of
Speaker 6: chat GBT in particular, But they still have a long
Speaker 6: ways to go if they want to get to this
Speaker 6: level that this valuation is showing them going to at
Speaker 6: some point.
Speaker 5: There's two points I want to make really quick with
Speaker 5: my sort of finance coverage on this is a pre
Speaker 5: EBITDAR private company or a pre positive EBITDAR private company,
Speaker 5: so that it could go to banks and get four
Speaker 5: billion dollars in credit is remarkable. And also the eagle
Speaker 5: eyed audience will say some of those banks are in Europe.
Speaker 4: That is also remarkable, Rachel.
Speaker 5: When they announced the closing of the equity round, they
Speaker 5: also gave us data on how they're doing not necessarily
Speaker 5: financial metrics, but like how many people are using open Ai.
Speaker 5: Do we know anything about like the scale of this
Speaker 5: company in the real world.
Speaker 2: Yes, we do.
Speaker 6: We know that there are I think it's two hundred
Speaker 6: and fifty million weekly users of Chat GBT as we
Speaker 6: previously reported. They also recently passed more than one million
Speaker 6: business users for chat GPT, and that spans a couple
Speaker 6: of different products related both to an educational product, they
Speaker 6: have a smaller business product like for smaller companies, and
Speaker 6: then also like a larger, more enterprise y product. So
Speaker 6: they're definitely trying to hit out a lot of different
Speaker 6: people in a lot of different areas, and they are
Speaker 6: doing it. They are they are certainly bringing in revenue,
Speaker 6: and they are seeing users. Uh. I think what remains
Speaker 6: to be seen is how well this will all work
Speaker 6: over time? What kind of you know, investors have to
Speaker 6: be willing to wait. They have to be very patient.
Speaker 4: Right.
Speaker 2: This is not like your.
Speaker 6: Average startup where it's like, well, y, you know, you
Speaker 6: might get a short term return and then maybe you'll
Speaker 6: get a long term return. This is like, well, you're
Speaker 6: gonna have to wait and see what we.
Speaker 2: Come up with. Over time. Rachel Metz, we thank you
Speaker 2: so much.
Speaker 3: Meanwhile, Coast and Adventures participated in the Open AI round.
Speaker 3: As we mentioned, tune in tomorrow our interview with Vinode
Speaker 3: Coast and on this and of course AI's future impact.
Speaker 3: Now we tend to another key story. US prosecutors are
Speaker 3: broadening a probe of potential price fixing by German software
Speaker 3: maker SAP and tech reseller Carasoft, seeking to examine the
Speaker 3: company's work with almost one hundred government agencies.
Speaker 2: It's according to a new court record. Imers Jake Bleiberg
Speaker 2: is here with more.
Speaker 3: You've been sifting through these court documents, remind us what
Speaker 3: is being investigated, if not accused quite yet.
Speaker 7: Absolutely, the investigation is looking at the companies you mentioned, SAP, Kerosoft,
Speaker 7: and then some other companies, the identities of which we
Speaker 7: don't all know, for a potential scheme. And I should
Speaker 7: stress that it's potential, not proven, to fix the prices,
Speaker 7: to inflate the prices in sales of SAP technology to
Speaker 7: the US government.
Speaker 5: Jake, you joined us the other day to discuss your
Speaker 5: original reporting. What I'm trying to do is understand what's
Speaker 5: new here. One hundred agencies is more than the agencies
Speaker 5: you outline the other day. That's new, But is there
Speaker 5: an expansion in the scope of what they're looking at.
Speaker 5: Have they discovered more information that prompted more agencies to
Speaker 5: say we better get on board with this.
Speaker 7: Absolutely, it's difficult to say what the prosecutors have discovered
Speaker 7: at this point.
Speaker 4: And something we do.
Speaker 7: Know is that they say they've been having difficulty getting
Speaker 7: information from the company. Sort of at the heart of
Speaker 7: this Kerasoft. But as you point to, what has happened
Speaker 7: is they went from an investigation primarily focused on sales
Speaker 7: to the Department of Defense and then just as of July,
Speaker 7: broaden this out pretty dramatically to look at sales to
Speaker 7: ninety four or as many as ninety four civilian government
Speaker 7: agencies as well.
Speaker 3: We're looking now at the statements coming from the company's
Speaker 3: SAP saying it follows the rules around disclosing legal risks
Speaker 3: are based on the current circumstances. There was still no
Speaker 3: requirement to report on the individual cases. Karasoft also gave
Speaker 3: us a statement. But ultimately, how are they going to
Speaker 3: be interacting with these hundreds of agencies?
Speaker 2: What role do they now play in this?
Speaker 4: It's a great question.
Speaker 7: The sort of historic role that both of these companies
Speaker 7: have played is by putting out a product. SAP makes
Speaker 7: all sorts of workforce software, time cards, HR software, and
Speaker 7: the complicated process of selling that sort of software to
Speaker 7: the US government is sort of handled by Carasoft, which
Speaker 7: stands in the middle and does a lot of the
Speaker 7: difficult work of helping the software manufacturer navigate.
Speaker 4: These regulatory hurdles.
Speaker 7: So what those relationships will look like going forward in
Speaker 7: the middle of this investigation is a big open question.
Speaker 5: Bloomberg's Jake Blybag, who broke the original story and continues
Speaker 5: across the developing story, Thank you very much. Now coming
Speaker 5: up here on this show, is job displacement caused by
Speaker 5: AI something to brace for or is this just all hype?
Speaker 5: We discussed with MIT economist Darren Smoglu, who gives us
Speaker 5: his more skeptical view on what's really happening with AI
Speaker 5: in the jobs market.
Speaker 4: This is Bloomberg Technology.
Speaker 3: Softbag founder Asoshi's son has sketched out one of the
Speaker 3: most aggressive timelines for the adoption of AI yet, envisioning
Speaker 3: a near future where the technology would run entire households
Speaker 3: from monitoring the health of family members to grocery shopping now.
Speaker 3: In a speech add an annual forum for enterprise clients
Speaker 3: earlier today, Sun said that artificial general intelligence or AGI would.
Speaker 2: Arrive within the next two to three years.
Speaker 5: ED, but not everyone is so bullish on AI, at
Speaker 5: least not when it comes to jobs. Darren Asmoglu, a
Speaker 5: renowned professor at MIT, says that by his calculation, only
Speaker 5: a small percent of all jobs round five percent is
Speaker 5: right to be taken over at least heavily aided by
Speaker 5: AI over the next decade. Darren Asamogli joins us now
Speaker 5: and welcome to the program. This was one of the
Speaker 5: most read stories on Bloomberg in the last twenty four hours.
Speaker 5: There's no surprise about that. It has all of the
Speaker 5: facets of a story that would you know, just engage
Speaker 5: our audience on Bloomberg technology. Let's get specifics why only
Speaker 5: five percent of jobs and which sectors in industries are
Speaker 5: you basing your thesis on.
Speaker 8: Well, thanks, Ed, It's great to be on the program.
Speaker 8: I think right now there is a lot of potential excitement,
Speaker 8: perhaps hyper about AI, but if you look at its
Speaker 8: current capabilities, you know we are very far from AI,
Speaker 8: either general to AI or other types of AI performing
Speaker 8: any of the tasks that involve a heavy level of
Speaker 8: interaction with the physical world construction work, manufacturing work, carpentry.
Speaker 8: Those perhaps one day will be much more feasible, for example,
Speaker 8: if AI becomes so much more advanced, so much more reliable,
Speaker 8: and can be integrated with so much better robots, for instance,
Speaker 8: But it's not something that's going to happen in the
Speaker 8: next five or ten years now. There's a lot of
Speaker 8: other potential for future AI, perhaps to perform some social tasks,
Speaker 8: but those are not going to be possible right now either.
Speaker 8: You know you're not going to go to an AI
Speaker 8: psychiatrist anytime soon, So if you stip out all of these,
Speaker 8: you're not going to be left with much more than
Speaker 8: five percent of the economy.
Speaker 5: Professor may I jump in and push back with a
Speaker 5: point raised by our audience when I said you were
Speaker 5: coming on, which is that AI technology is exponential, much
Speaker 5: in the way that the invention of electricity with time
Speaker 5: led to all sorts of breakthroughs. Right now, you're saying
Speaker 5: five percent of jobs, But in two years or five
Speaker 5: years from now, would you need to rethink your thesis
Speaker 5: or redo your calculations.
Speaker 8: I should have prefaced this by saying there's a huge
Speaker 8: amount of uncertainty in any forecast about AI, and apologies
Speaker 8: that I didn't do that. I tried to do that
Speaker 8: all the time. I was very excited. I just jumped
Speaker 8: into it. There's a huge amount of uncertainty, and one
Speaker 8: source of uncertainty is exactly what's gonna happen with AI
Speaker 8: in the next several years. I don't think that the
Speaker 8: most optimistic views in the industry, which sometimes people refer
Speaker 8: to as scaling laws, actually will hold water when you
Speaker 8: look at it within the next five years or ten years,
Speaker 8: which say, you know, just double the amount of data,
Speaker 8: double the amount of computer power, and then you're gonna
Speaker 8: get double the amount of capabilities. Because to do that
Speaker 8: we would actual need higher quality data. So if you
Speaker 8: want AI to do the job of a carpenter, you
Speaker 8: really need a completely different kettle of fish when it
Speaker 8: comes to the kinds of data, and something like that
Speaker 8: might be feasible with a different architecture of AI, but
Speaker 8: right now all of the money is going into the
Speaker 8: sort of the basic dominant architecture, which has its limitations
Speaker 8: both in terms of reliability in terms of high level reasoning.
Speaker 8: So that's the basis of my belief that, of course
Speaker 8: generative AI and other types of AI will improve, but
Speaker 8: we're not going to see a qualitative jump within the
Speaker 8: next five to ten years.
Speaker 3: So as like your belief, what is exactly based on
Speaker 3: what data, what historical norms are you looking back on
Speaker 3: to drive and push forward on this five percent take?
Speaker 8: Yeah, I think this is why there is so much uncertainty.
Speaker 8: There's nothing that's identical to generative AI in the past,
Speaker 8: and that's part of the reason why people can hold
Speaker 8: very different beliefs. But what I'm basing that on is,
Speaker 8: first of all, other waves of digital technologies that promised
Speaker 8: a lot of automation, sometimes a lot of productivity improvements,
Speaker 8: sometimes a lot of changes in the way that we
Speaker 8: would organize our offices and things like that, and at
Speaker 8: the end, all of those changes have been very gradual.
Speaker 8: And also what we have seen over the last two
Speaker 8: and a half years, where you know, there have been advances,
Speaker 8: but the advances haven't really been sort of qualitative in nature.
Speaker 8: They haven't really exceeded the sort of the basic capabilities
Speaker 8: of GPT three point five or three point GPT four.
Speaker 8: So there will be advances, but I don't think any
Speaker 8: of those advances will very quickly change the way that
Speaker 8: we do various tasks in the economy. So, for example,
Speaker 8: I do not believe that in five years time, when
Speaker 8: we look at the labor market, we're going to see
Speaker 8: certain occupations that will have completely disappeared.
Speaker 2: Think you would say that they would be augmented.
Speaker 3: The idea is, perhaps the optimist view is we will
Speaker 3: not lose lots of people from the labor force, but
Speaker 3: their productivity will be scaled.
Speaker 8: Where you think that's a yes, I think that's a
Speaker 8: very very interesting and important point. I am not an
Speaker 8: AI denier or an AI pessimist. I actually believe AI
Speaker 8: has a lot of potential, And in fact, the real
Speaker 8: potential is exactly what you said, Caroline, which is that
Speaker 8: AI becomes a tool for workers to boost their productivity.
Speaker 8: And again we're seeing some of that happening. You know,
Speaker 8: Microsoft has a lot of co pilots. You know, some
Speaker 8: of them work and they give some productivity improvements. There
Speaker 8: are a few areas where we're seeing really phenomenal improvements, like,
Speaker 8: for example, if you want to write simple subroutines in
Speaker 8: one of the common programming languages. You know, GPT four
Speaker 8: is great. Before then getthub copilot was pretty good. So
Speaker 8: there are some things in which that sort of help
Speaker 8: to decision makers as possible. But again, when you look
Speaker 8: at the whole economy, that means helping carpenters, electricians, plumbers,
Speaker 8: blue collar workers, construction workers, transport workers, people who are
Speaker 8: doing teaching, people who are doing journalism. Those are things
Speaker 8: that could be achieved perhaps at some point, but the
Speaker 8: reliability and the reasoning of the models is not up
Speaker 8: to the task yet.
Speaker 5: Do you see specific job creation in specific industries from AI.
Speaker 8: Well, there is one class of jobs where AI is
Speaker 8: leading a big boost, which is people who have AI fluency,
Speaker 8: either people who are AI programmers, AI integrators, or other
Speaker 8: AI related service activities. But in my research, albeit from
Speaker 8: a previous wave of AI in the late twenty tens,
Speaker 8: we didn't see any other job category get a boost
Speaker 8: in terms of hiring. And there are some other jobs
Speaker 8: that I think there will be some retrenchment. So if
Speaker 8: you're in IT security and you're doing so routine end
Speaker 8: of IT security, there will be declines and job vacancies
Speaker 8: in that area because some of these AI tools can
Speaker 8: actually perform that quite well.
Speaker 3: When you see the headline that open ai is worth
Speaker 3: one hundred and fifty seven billion dollars, when you see
Speaker 3: that in Video is now worth almost three trillion, what
Speaker 3: do you make of that in terms of how truly
Speaker 3: the capital markets are analyzing the growth here.
Speaker 8: Well, I think there's a difference between Nvidia and open Ai.
Speaker 8: Nvidia is riding a wave which is based on the
Speaker 8: belief that those chips are going to become more valuable
Speaker 8: because generative AI and other types of AI are going
Speaker 8: to continue to boom, but they are generating revenues. Open ai,
Speaker 8: on the other hand, I think does hasn't found a
Speaker 8: revenue model that could justify the types of valuations we
Speaker 8: are seeing at the moment now. It may well be
Speaker 8: that in the future suddenly their API is going to
Speaker 8: be so valuable and other firms are going to start
Speaker 8: building on it, but it doesn't seem like there are
Speaker 8: the kinds of applications that can have deep impact on
Speaker 8: the productivity of workers or the automation of firms that
Speaker 8: are going to be sold within the next five years
Speaker 8: ten years. So I'm a little bit skeptical. But on
Speaker 8: the other hand, open ai is also emerging as the
Speaker 8: market leader, and the current ecosystem in the digital world
Speaker 8: is right firms that take over the market and they
Speaker 8: can use all of the data. They can you know,
Speaker 8: interact with the consumers or the programmers directly. Those have
Speaker 8: become very valuable because of venture capital or other deep
Speaker 8: pocketed funders.
Speaker 3: Can't wait to see the response to this interview. I'm
Speaker 3: sure someone has some thoughts. It economics professor drown Asmlgloo.
Speaker 3: We appreciate your time, Aura. It's just world a new
Speaker 3: flagship device with the Ring four of dating its popular
Speaker 3: smart rings with new sensors, but a battery life and
Speaker 3: about an algorithm. This is competition is really heating up.
Speaker 3: Samsung of course, debuting its own Galaxy Ring for more
Speaker 3: or a CEO Tom Hale joins us, So, how does
Speaker 3: this make me distinct from the crowd.
Speaker 9: Well, the thing about the or Ring four is that
Speaker 9: it's slimmer, sleeker, thinner, better, of course, and the feel
Speaker 9: of the ring is what matters to many people because
Speaker 9: there's a lot of technology packed in here.
Speaker 4: You want it to be small and compact.
Speaker 9: Maybe more importantly, we've taken a big leap forward in
Speaker 9: sensing with something we call smart sensing, and smart sensing
Speaker 9: adjusts dynamically to your body because not everyone's the same.
Speaker 9: Your anatomy is not the same, your physiology is not
Speaker 9: the same, your skin color is not the same, and
Speaker 9: we adjust dynamically even as you rotate the ring a
Speaker 9: little bit, we actually are able to keep the most
Speaker 9: accurate signal.
Speaker 5: Tom, who do you consider it to be the composition
Speaker 5: for this ring? Is it other rings or is it
Speaker 5: other form fact? As a device, I think a lot
Speaker 5: about watches it the moment, particularly having just been at
Speaker 5: Apples event in recent weeks.
Speaker 9: What's interesting to me is that amongst our users, almost
Speaker 9: two thirds wear a second wearable, usually a smart watch.
Speaker 9: On the smart watch great for daytime notifications, you're getting
Speaker 9: alerts all the time, but has an achilles heel, which
Speaker 9: is battery life.
Speaker 4: And the ring is.
Speaker 9: Something that doesn't ask for your attention, doesn't send you notifications.
Speaker 9: It's just in the background, seamlessly fitting into your life,
Speaker 9: capturing your physiology so that you don't have to pay.
Speaker 4: A ton of attention to it.
Speaker 9: And as a result, you have an eight day battery
Speaker 9: life with the or four ring. And so what that's
Speaker 9: really interesting to think about is that you just don't
Speaker 9: have to worry about your health as much, and then
Speaker 9: therefore the watch in the ring can be compatible. So
Speaker 9: in many ways we find these things to be two
Speaker 9: devices that can work together on one person's body.
Speaker 3: And what's interesting is you've been working with other companies
Speaker 3: that make other devices. We understand from Mark German's reporting
Speaker 3: that you've been working alongside Meta's Raband team, for example. Well,
Speaker 3: how do you see integration with other businesses going.
Speaker 9: Well, we've got so many great partners that we work with.
Speaker 9: We haven't announced anything formally with Meta, but you can
Speaker 9: imagine this world where you have this cloud of devices
Speaker 9: on your body that you're using in different contexts. Maybe
Speaker 9: it's headphones, maybe it's glasses with an AI assistant, And
Speaker 9: how does your busiological state and something that you've got
Speaker 9: on your body all the time work, maybe as a controller,
Speaker 9: maybe as a way to guide, maybe as a way
Speaker 9: to provide input, maybe as a way to give you
Speaker 9: your other wearables a sense of whether you're stressed or
Speaker 9: whether you're well rested, whether you're ready. There's a lot
Speaker 9: of really interesting opportunities to explore when you think about
Speaker 9: a permanently worn device that's oriented around your health that's
Speaker 9: on your body. Twenty four to seven.
Speaker 5: Tom, we've just shown your latest financials and the trajectory
Speaker 5: of this company. Your focus this point has been technology
Speaker 5: and innovation. But where do you see this company going
Speaker 5: from here? The direction for the business.
Speaker 9: Yeah, I mean, I think there's a lot of headroom
Speaker 9: for us to grow just simply in the ring category.
Speaker 9: Rings are new. People are just learning about the benefits
Speaker 9: of long term health tracking, learning about the benefits of
Speaker 9: getting sleep, learning about the understanding of their body. So
Speaker 9: you know, the way the ring works is it can
Speaker 9: tell you when you're getting sick, it can tell you
Speaker 9: when you're doing well.
Speaker 4: It gives you.
Speaker 9: Lots of information and lots of insights, even an AI
Speaker 9: coach that helps you make behavior changes. And I think
Speaker 9: there's a lot of headroom just in that category. But
Speaker 9: as you look beyond that, not only is it interaction
Speaker 9: with other devices, but it might be potentially other devices
Speaker 9: that you might see, Like we've seen prototypes for a
Speaker 9: locket that sits on your chest. We've seen prototypes for
Speaker 9: things that look more like designer rings. We introduced a
Speaker 9: product with Gucci a couple of years back where we
Speaker 9: have something that looks much more like jewelry and much
Speaker 9: more like you know, much less like a piece of technology,
Speaker 9: and it really fits into your life. So I think
Speaker 9: the future is very bright for Rings. Lots of headroom
Speaker 9: for us to grow this business. But more importantly, I
Speaker 9: think people being aware of their health and understanding how
Speaker 9: to manage their health is just a really big opportunity.
Speaker 9: Everybody on the planet should have one of these things.
Speaker 4: Tom Hale or a CEO, good to catch up, Thank you.
Speaker 2: Welcome back to read Technology.
Speaker 5: I'm Caroline Hid in New York and Amed Lovelow in
Speaker 5: San Francisco. If you're just joining us this fine Thursday morning,
Speaker 5: or waking up to financial markets as a technology investor,
Speaker 5: this is what it looks like Now's that one hundred
Speaker 5: is kind of flat. There's a modest outperformance in semiconductors,
Speaker 5: with the modest gain on the socks. Bitcoins have been
Speaker 5: under pressure throughout the US morning session. If you're an investor,
Speaker 5: it's been about weighing an escalating conflict in the Middle East,
Speaker 5: with some economic data, a lot of hype around AI,
Speaker 5: but no strong movement in either direction apart from a
Speaker 5: few single names.
Speaker 4: One of them is in Nvidia.
Speaker 5: In an interview last night, Jensen Wang, the CEO, saying
Speaker 5: that demand for Blackwell the latest GPU is insane. No
Speaker 5: direct correlation, but the at one point trading its highest
Speaker 5: level since August. Then ev go on track for its
Speaker 5: biggest jump since twenty twenty one, trading its highest level
Speaker 5: I think since May of twenty twenty three.
Speaker 4: It secured a one point.
Speaker 5: One billion dollar loan from the Department of Energy. Those
Speaker 5: are two kind of movers. A lot going on, but
Speaker 5: in video in particular, on a daily basis, it's still
Speaker 5: the name that people are talking about character.
Speaker 3: Because it's worth more than three trillion dollars when you're
Speaker 3: looking at its market capitalization and look insiders, they've been
Speaker 3: cashing in.
Speaker 2: On what is a huge valuation jump.
Speaker 3: They've actually sold one is worth more than one point
Speaker 3: eight billion dollars in shares so far this year. The
Speaker 3: selling is it expected. Jess Menton is here to put
Speaker 3: this into context. We often see insiders sell shares and
Speaker 3: feels a lot when the market caps up so much.
Speaker 10: That's right, and this is in focus, and this is
Speaker 10: a really the great story from Jeron Wodenstein and Crimin
Speaker 10: Renicky on our equities team that put this together. And
Speaker 10: whenever this happens, people want to question a company whether
Speaker 10: or not there's growth concerns and things like that. But Jensen,
Speaker 10: of course the CEO, this was pre planned and he
Speaker 10: actually went through and did this from mid June until
Speaker 10: mid of last month. That actually correlated with obviously the
Speaker 10: drawdown that we saw with the stock because there was
Speaker 10: such a huge run up. I mean, it's still up
Speaker 10: close to like one hundred and fifty percent year to date,
Speaker 10: but of course it's still down from that June peak
Speaker 10: around nine percent, and still the S and P five
Speaker 10: hundred has been able to rally even without one of
Speaker 10: the biggest wings, but at a certain point it actually
Speaker 10: eclipsed Microsoft and Apple and that market capitalization. But moving forward,
Speaker 10: there's actually supposed to be additional sales, so in Vidia's
Speaker 10: director is still supposed to sell about three million additional shares.
Speaker 10: So that's kind of a question mark of whether or not,
Speaker 10: well we still continue to see the stock held back
Speaker 10: a little bit, even though we've seen it rally and
Speaker 10: come back from some of those lows that we saw
Speaker 10: earlier this summer, or will keep those gains in check,
Speaker 10: but of course I was talking to you all about
Speaker 10: this yesterday. But evercre actually made a call for chip
Speaker 10: makers and is more optimistic that we would see a
Speaker 10: rebound in the fourth quarter of this year.
Speaker 5: Suggests for so many people watching Bloombog technology, it will
Speaker 5: be a familiar story. It is a classic in Silicon
Speaker 5: Valley wealth creation from stock compensation. You sell shares over
Speaker 5: time you get more money than you could ever have
Speaker 5: dreamed of. But there is a paragraph in the story
Speaker 5: that raises the question of whether or not the sales
Speaker 5: inspire confidence in the stock.
Speaker 4: Do they inspire confidence or not?
Speaker 10: Well, there's someone too that when it comes to portfolio
Speaker 10: managers that the reporters were speaking with, and Kim Mahoney
Speaker 10: was actually one of them at for Mahony Asset Management,
Speaker 10: and he was talking about sometimes you shouldn't read too
Speaker 10: much into it, say, for instance, Jensen was already pre planned.
Speaker 10: But a lot of times it's not just because of
Speaker 10: reasons of growth concerns about the company. Obviously, you were
Speaker 10: just mentioning earlier ed about how the CEO is talking
Speaker 10: about this insane demand for the Blackwell chips. Of course,
Speaker 10: there was a lot of scrutiny in recent weeks because
Speaker 10: obviously the investors want the valuation of the company to
Speaker 10: justify those future earnings and the growth. But still those
Speaker 10: executive directors in the company, they sold about eleven million
Speaker 10: shares so far in twenty twenty four, and so to
Speaker 10: put that into context, that's the most since twenty twenty
Speaker 10: when you are excluding, of course different stock splits like
Speaker 10: earlier this year and in twenty twenty one. But you
Speaker 10: do have some portfolio managers arguing it's not just because
Speaker 10: of growth concerns.
Speaker 5: Ed Bloombergs just meant it brilliant as always, Thank you
Speaker 5: very much. Now it's launched ay for the Roundhill China
Speaker 5: Dragons ETF. It tracks an equal weighted basket of Chinese
Speaker 5: tech companies under the ticker drag Bloombergs. Isabel A had
Speaker 5: a story that hit the wire in the website in
Speaker 5: the last couple of hours.
Speaker 4: What's the idea behind the CTF.
Speaker 11: So this tracks a basket that Roundhill made. So it's
Speaker 11: five to ten Chinese companies that they can they qualified
Speaker 11: as those that impress, those that exhibit great economies of scale,
Speaker 11: competitive advantages, and really basically companies that they believe in.
Speaker 11: So they're five to ten stocks and for another are nine.
Speaker 11: These includes pdd Ali, Baba, may Twan, buid net Ease.
Speaker 11: And what sets this apart from the other ets out
Speaker 11: there that track Chinese linked stocks is that it's more targeted.
Speaker 11: We have the biggest I shares one attracts some thirty.
Speaker 11: We have k Webcrane shares attracts some thirty or fifty.
Speaker 11: So this is just five to ten and that's what
Speaker 11: they say. You don't want those little companies diluting you're
Speaker 11: trying to exposure.
Speaker 3: These are megacap tech names, in particular Isabelle. And the
Speaker 3: timing is kind of beautiful. It comes in line with
Speaker 3: everyone getting over excited in a fomo feel around Chinese stocks.
Speaker 2: Was it always plans to come out. Now, that's the
Speaker 2: thing with ETFs.
Speaker 11: You file for they filed earlier this year, you don't
Speaker 11: really know when it will come out. So they said
Speaker 11: that the timing couldn't have been better. But then they
Speaker 11: said they also really just make products when they see
Speaker 11: investor demand. And that actually is what caught my attention,
Speaker 11: because even if we all hear these kind of negative
Speaker 11: rhetoric around China, there are still investors who want China. Remember,
Speaker 11: there are two ways to look at China. It's too cheap,
Speaker 11: so let's buy it, or it's too cheap so let's
Speaker 11: kind of stay away. And it's proving that the former
Speaker 11: is still kind of that their echo calls are kind
Speaker 11: of loud because for Roundhill to launch and ETF like
Speaker 11: this just really showcases the demand of clients. But for
Speaker 11: now it's trading today and it's really interesting. It's also
Speaker 11: cheaper than some of its peers. It's only at fifty
Speaker 11: nine basis points.
Speaker 5: I guess it's also for us like an interesting data
Speaker 5: set here on the show, we often look at the
Speaker 5: NASA Golden Dragon Index as like a barometer sentiment towards
Speaker 5: China tech. How unique is this ets in the kind
Speaker 5: of landscape of products where they first are there more
Speaker 5: to come?
Speaker 11: It's unique in the sense that it's round here. Round
Speaker 11: Hill's selection for now, they're only nine. They're only going
Speaker 11: to limit it to five to ten, and they can
Speaker 11: drop stocks that they think doesn't show economies of scale
Speaker 11: or solid fundamentals or competitive advantages. So that is kind
Speaker 11: of very interesting because if you look at the Bloomberg
Speaker 11: Magnificent seven Index, it only really tracks those magnificent seven
Speaker 11: stocks and a's that one hundred tracks all the big
Speaker 11: tech stocks. So to an extent, some investors really just
Speaker 11: want those targeted focus You don't want this broad based index.
Speaker 11: You just want this little slice of the market.
Speaker 3: Being backs as well. LEI, thanks for bringing it to us.
Speaker 3: Coming up, where is the bench money going? Funnily enough
Speaker 3: if you'll probably guess given the open AI News got
Speaker 3: the latest state to the pitch book analyst Carl Stamford,
Speaker 3: and we also dig into it all with the VC
Speaker 3: Dinis Shiker.
Speaker 2: This is Bloomberg.
Speaker 3: Poolside is a startup building AI software for programmers, who
Speaker 3: just raised five hundred million dollars from investors ahead of
Speaker 3: the company's plans to release an initial product.
Speaker 2: And the round was led by Bane.
Speaker 3: Capital Ventures and includes funds from DST Globals, Stepstone Groups,
Speaker 3: City Ventures, and HSBC Ventures, Poolside said in a statement yesterday. Now,
Speaker 3: as Bloomberg reported last month, the new financing gives a
Speaker 3: startup foundation of three billion dollars.
Speaker 5: Venture deal making hobbled along at a slightly better pace
Speaker 5: than a year ago in dollar terms, but investors are
Speaker 5: getting more selective and cash went to just a handful
Speaker 5: of companies. Open AI's latest funded raising bodes more of
Speaker 5: the same to come for the current quarter and beyond.
Speaker 5: Let's bring in Carl Stanford from Pitchbook, who's been crunched
Speaker 5: that data, and I point out from the offset that
Speaker 5: the data to date does not include that open Ai round.
Speaker 5: We can get to it, but summarize the pitch book
Speaker 5: data as of third quarter.
Speaker 1: Right it does not include that open aideal. But what
Speaker 1: we've seen is that venture still continues to be a
Speaker 1: really slow market. When you look at exits and you
Speaker 1: look at fundraising, you can really see why that is.
Speaker 1: There's nothing coming out of the market right now. And
Speaker 1: some of the US during Q three there's about thirty
Speaker 1: seven and a half billion invested, which is lower than
Speaker 1: the quarter before, but that had a few large deals.
Speaker 1: But there's nothing really exciting happening outside of AI in
Speaker 1: terms of investments being made.
Speaker 3: Right now, Where is the excitement happening in AI?
Speaker 2: From a geographical perspective.
Speaker 1: Club right, it's happening in San Francisco, It's happening here
Speaker 1: in the US.
Speaker 2: Right.
Speaker 1: If you look at open AI, I think the deal
Speaker 1: that just close shows two things. One, it shows the
Speaker 1: incredible amount of capital that AI needs and the cost
Speaker 1: that these companies are incurring, and also shows the excitement
Speaker 1: around own AI in the technology. Right, if you look
Speaker 1: at who is in that Nvidia, Microsoft, They Thrive Capital,
Speaker 1: soft Bank, you know, all of these all these investors
Speaker 1: are looking at this deal and this company has something
Speaker 1: that's going to be able to provide them huge returns
Speaker 1: moving down down the road, right, And that's how you know,
Speaker 1: many of these investors have looked at AI, you know,
Speaker 1: up and down the venture life cycle, and so that
Speaker 1: has definitely been the interest area of interest for investors,
Speaker 1: you know, in the USN and globally up to this point.
Speaker 5: So if we got on the basis that the data
Speaker 5: we're showing on the screen as of September thirtieth does
Speaker 5: not include the open AI round, how does it change
Speaker 5: the trajectory for twenty twenty four against prior years when
Speaker 5: we do take that round into account.
Speaker 1: Yeah, right, I mean I think we can look at
Speaker 1: it and say, yeah, and obviously it is going to
Speaker 1: make twenty twenty four look much better. But if it's
Speaker 1: only one deal, it's not really capital available for the
Speaker 1: entire marketing. And I think something that something we've been
Speaker 1: saying with past quarters rounds of core Weave, Toropic, these
Speaker 1: are very exciting, interesting, you know, scaling companies, But that's
Speaker 1: not what the rest of the market is seeing.
Speaker 3: Right.
Speaker 1: Valuations in AI are forty percent higher than in other verticals,
Speaker 1: deal sizes are much larger. Obviously, six point six billion
Speaker 1: dollars is not a typical deal that many of these
Speaker 1: companies should expect anytime soon or ever. And so when
Speaker 1: you talk about the trajectory of the dollar value dollars
Speaker 1: going into the US world, the global venture market, I
Speaker 1: think that really needs to be taken into account.
Speaker 2: What unplugs for the rest.
Speaker 3: If you're not AI native, but you're AI adopting and
Speaker 3: you've got a decent run rate in terms of revenue,
Speaker 3: do we need more exits to be able to see
Speaker 3: the money come back in?
Speaker 4: Yeah?
Speaker 1: Right, I mean exits are still the kind of dam
Speaker 1: of the of vanter activity. When we look at distributions
Speaker 1: that are coming out of the market, we know that
Speaker 1: there has been very very little for the past two years.
Speaker 1: Even the IPOs of Q one and Q two did
Speaker 1: not We're not able to sustain the venture market. And
Speaker 1: so we take how large the AUM has grown for
Speaker 1: VC in the past few years. Then just consider that
Speaker 1: all of that is stuck private and LPs have no
Speaker 1: way to use that cash for more investments or to
Speaker 1: recycle it back into venture. You can really start to
Speaker 1: see why there's such a slow market over the past
Speaker 1: few quarters and something we should expect for the coming
Speaker 1: quarters as well.
Speaker 3: Kyle Stanfa Pitchfoot, lead VC research on list.
Speaker 2: Me, thank you.
Speaker 3: Let's got some more analysis from the horse's mouth. Someone
Speaker 3: who's in VC. Lux Capital general partner Diana Shacker, joins us. Now,
Speaker 3: Dina does not feel what you're seeing a tone of
Speaker 3: two hobs.
Speaker 12: Why now you know it has in many ways a
Speaker 12: tale of two cities. But I don't think I would
Speaker 12: agree with the sentence that there's nothing exciting outside of AI,
Speaker 12: and at Lux we love to invest in the intersections.
Speaker 12: In fact, we just had our AI summit here in
Speaker 12: New York on Tuesday, and what you see is a
Speaker 12: lot of AI, but AI intersecting intersecting with life sciences,
Speaker 12: intersecting with physical intelligence, intersecting with health tech, even with
Speaker 12: medic Caid care deliveries. So while I do think AI
Speaker 12: is very exciting, it's an area we've been investing in
Speaker 12: for quite some time. It's not necessarily the only area
Speaker 12: that we're seeing exciting investments these days.
Speaker 5: That was the point when you launched a new fund, right,
Speaker 5: I remember all the things that I get excited about robotics,
Speaker 5: dare I say life sciences? But has it been an
Speaker 5: easy environment to cut checks in because you sometimes have
Speaker 5: to find willing partners who have the same level of
Speaker 5: excitement that you do in those fields.
Speaker 12: Yes, these are all areas we are still excited in.
Speaker 12: And I think one way in which it's a tale
Speaker 12: of two cities is that you're seeing these these seasoned
Speaker 12: operators who are on their second or third company, who
Speaker 12: maybe building an AI or outside of AI, that are
Speaker 12: getting these very large megarounds, and then other companies that
Speaker 12: are struggling to raise those early dollars.
Speaker 2: That being said, we.
Speaker 12: Have companies across different stages and sectors that are continuing
Speaker 12: to raise. I think the big question, which Kyle pointed out,
Speaker 12: is really what the exit market looks like. And as
Speaker 12: we you know, we sat here two years ago Caroline
Speaker 12: talking about twenty twenty three being the year.
Speaker 2: Twenty twenty four should be the year.
Speaker 12: I think we're all looking to twenty twenty five to
Speaker 12: be the year where we start to see more of
Speaker 12: those exits and distributions.
Speaker 4: Do you get that question and that pressure.
Speaker 5: From the LPs for there to be exit opportunities?
Speaker 12: You know, we are a deep tech fund, so we've
Speaker 12: always had long life cycles. We invest what we like
Speaker 12: to invest in the impossible and turn it into the inevitable.
Speaker 12: And so we have patient LPs who know that these
Speaker 12: companies take time, and we look for the generational large
Speaker 12: companies that turn into into very big outcomes.
Speaker 3: Did any of those LPs want you to be in
Speaker 3: the open AI round?
Speaker 2: Well, we'll see.
Speaker 3: Well what's interesting is some of the nuances around that
Speaker 3: round A people are sitting up and seeing who's leading it,
Speaker 3: but they're also sitting up and saying, oh, they're not
Speaker 3: allowed to invest in competitors.
Speaker 2: Is that usual?
Speaker 3: Actually, when you invest in like a runway which you're in,
Speaker 3: would ultimately you not go out and reallocate to a
Speaker 3: competitor in that space?
Speaker 12: I would say that is normal, but not every fund
Speaker 12: approach is that the same way. From our perspective, we
Speaker 12: certainly don't intentionally invest in competitive companies. We like to
Speaker 12: put our resources, our connections our network behind our investments.
Speaker 12: Oftentimes companies will evolve over time and eventually end up intersecting,
Speaker 12: and that can certainly happen, but we do try to
Speaker 12: be careful to put our eggs in a basket and
Speaker 12: really double down on our winners.
Speaker 5: The something you mentioned a moment ago, Dina, that I
Speaker 5: think is probably true of whether you're in deep tech
Speaker 5: or in AI, in industrials or otherwise, which is the
Speaker 5: type of investor coming in is different. You see the
Speaker 5: very large mutual funds being a player or Nvidia comes
Speaker 5: in as like a strategic you're a sizeable venture firm,
Speaker 5: But is it difficult for you to get in on
Speaker 5: some rounds because of those new types of player?
Speaker 2: You know, our current fund is over a billion.
Speaker 12: We're investing in everything from incubation through pre ipo, and
Speaker 12: so we have ability to construct a portfolio across different stages.
Speaker 12: The job of any good VC, of course is to
Speaker 12: buy low and sell high, and so we're able to
Speaker 12: do that across the spectrum of these companies where we
Speaker 12: believe there's still a massive outcome, even investing.
Speaker 2: At a later stage. We will do that and we
Speaker 2: have the ability to do that.
Speaker 12: And we also have the ability to start companies ourselves.
Speaker 12: Companies in our portfolio like Evolutionary Scale, which is applying
Speaker 12: AI to life sciences that we were early into, or
Speaker 12: a life health which we were the first institutional capital
Speaker 12: in applying AI to the fertility space.
Speaker 3: What about the companies that on as we say AI natives,
Speaker 3: you say, there's a lot of excitement in the areas
Speaker 3: of intersection, But how are some of the other companies
Speaker 3: in the older portfolios able to cope with this current environment?
Speaker 2: Are they steering well?
Speaker 3: Are they managing to ensure that they're cutting costs and
Speaker 3: dotting in on revenue growth?
Speaker 12: Absolutely, And it's those two things, well three things, I
Speaker 12: would say. One, AI is a way of doing things.
Speaker 12: It's not AI for AI's sake, So hopefully it's enabling efficiency,
Speaker 12: it's enabling better accuracy, it's enabling.
Speaker 2: Better profit margins.
Speaker 12: And so every company needs to have an answer to that,
Speaker 12: not because it's what they need for fundraising, although it
Speaker 12: likely is, but also because it's what they need to
Speaker 12: survive in the world. This is a huge paradigm shift,
Speaker 12: it's a seismic shift. So all of our companies are
Speaker 12: doing that, and some of the most exciting applications I've
Speaker 12: seen are actually in companies that are very much still
Speaker 12: human oriented companies like Waymark in our portfolio, which is
Speaker 12: leveraging community health workers to deliver healthcare and medicaid communities,
Speaker 12: but are using AI to help predict emergency room admissions
Speaker 12: and to help streamline the operations of healthcare providers.
Speaker 4: Dina, you've been busy.
Speaker 5: You're always a busy person, but you've also become an author.
Speaker 5: Lina Moe CEO, very quickly tell me about it.
Speaker 12: Yes, Linamo's CEO brand new book just released last week.
Speaker 12: It's a story about a young girl who builds a
Speaker 12: robot to help shovel snow outside of our house, goes
Speaker 12: through the process of building a team raising money, and
Speaker 12: was inspired by my own journey as a parent trying
Speaker 12: to explain venture cap to a bunch of preschoolers, which,
Speaker 12: as it turns out, is just as hard as explaining
Speaker 12: to fully grown adults.
Speaker 5: You know, founders are getting younger, but that young I
Speaker 5: don't know. Lux Capital General Partner Dina Shaiker, thank you
Speaker 5: very much.
Speaker 3: Today's big take how global supply chains are the latest
Speaker 3: concern in the Ukraine Russia war. As US designed chips
Speaker 3: are finding their way inside Russia made missiles. For more
Speaker 3: Bloomberg Stephanie Baker, who joins US now. She's also the
Speaker 3: author of a new book, Punishing Putin, Inside the Global
Speaker 3: economic war to bring down Russia. Stephanie, you always tell
Speaker 3: stories with such depth and humanity. It's a difficult story
Speaker 3: to read, to be honest. But what we bring to
Speaker 3: our audience now is the intricacies of what chips made
Speaker 3: by who are finding their way into certain Russian missiles.
Speaker 4: Right.
Speaker 13: So, if you remember, after the invasion, the US joined
Speaker 13: with its European allies and imposed sweeping export controls on
Speaker 13: Russia to deny the Russian military access to Western semiconductors
Speaker 13: and other technology. And they tighten those restrictions again starting
Speaker 13: last year, and there'd been various reports about citing trade
Speaker 13: data about components getting through, semiconductors getting through to Russia.
Speaker 13: What we wanted to do was really drill down and
Speaker 13: go do a deep dive on one missile attack where
Speaker 13: Ukrainian investors had documented Western components by specific companies, as
Speaker 13: well as examining.
Speaker 2: Their entire database.
Speaker 13: And what we came up with was that there's one
Speaker 13: company whose components keep getting found and more. Our most
Speaker 13: frequently found on the battlefield, and that is analog devices.
Speaker 13: And we wanted to sort of put a human face
Speaker 13: on what was a sort of trade data story to
Speaker 13: show that actually Russia's very dependent on Western technology to
Speaker 13: guide its missiles missile attacks on Ukraine.
Speaker 5: Stephanie, what was the response from Analog and also I
Speaker 5: suppose from the United States to the reporting.
Speaker 13: Right, Well, Analog says they regard this as an illicit
Speaker 13: diversion of their products and they do not condone any
Speaker 13: of this trade. And what we tried to get into
Speaker 13: and the story was explaining the complex supply chain for semiconductors,
Speaker 13: that there's a lot of production happening in Southeast Asia.
Speaker 13: There are a lot of middlemen acting particularly through Hong Kong,
Speaker 13: using shell companies to do this trade. So it's been
Speaker 13: very hard to crack down. This is not Analog selling
Speaker 13: directly to Russia, and the US has tried to enforce
Speaker 13: these export controls through the Commerce Department. That has proven
Speaker 13: difficult just because of the global nature of the supply
Speaker 13: chain and the many layers that semiconductors get traded through
Speaker 13: before actually reaching Russia.
Speaker 5: Bloomberg Phony Baker who's in London. And as a reminder,
Speaker 5: the big take is titled Russian Missiles American Chips. Find
Speaker 5: it on the Bloomberg Terminal, find it on Bloomberg dot com.
Speaker 4: It is a must read with detailed reporting, Caroline, it is.
Speaker 3: Meanwhile, it's been detailed throughout. That does it for this
Speaker 3: edition of Bloomberg Technology. A lot of news when it
Speaker 3: comes to the private markets, the tech markets, the public markets.
Speaker 2: As well ed.
Speaker 5: Yeah, probably a historic day. We'll find out on that
Speaker 5: big Open AI round recap all the reporting on the podcast.
Speaker 5: You know where to find it on the Bloomberg Terminal
Speaker 5: as well as online on Apple, Spotify, and iHeart big
Speaker 5: shout out to the team in New York City and
Speaker 5: everyone here in San Francisco.
Speaker 4: This is Bloomberg Technology.