Speaker 1: From the heart of where innovation, money and power collide
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Caroline Hyde and Ed Ludlow.
Speaker 2: Live from San Francisco. This is Bloomberg Technology coming up.
Speaker 2: Big Tech volatile after Moody's downgrades, America's credit rating, and
Speaker 2: Nvidia allowing customers to use rival chip makers in an
Speaker 2: effort to expand its AI ecosystem, And why Apple has
Speaker 2: been spending billions of dollars on AI and still hasn't
Speaker 2: managed to crack the code. This is what financial markets
Speaker 2: look like across major averages. We've paired some of the
Speaker 2: early declines in Monday's session, but the story broadly is
Speaker 2: tech is pulling us down and leading us lower, and
Speaker 2: that center is particularly on semiconductors.
Speaker 3: And AI infrastructure names.
Speaker 2: In terms of the single names that we're watching, you
Speaker 2: have stocks like Tesla under pressure, and Video has actually
Speaker 2: paid a lot.
Speaker 3: Of it's declined from the open.
Speaker 2: It was down two percent at one point in Video
Speaker 2: is at the heart of the news cycle and it's
Speaker 2: going to be at the heart of today's program as well.
Speaker 3: With a lot of news out of Taiwan.
Speaker 2: Let's get to the big picture on technology and financial markets.
Speaker 2: Here to break down the tech moves, Bloomberg's Ryan Vostelica, Ryan,
Speaker 2: what's going on?
Speaker 4: Hey, good morning, Thanks for having me. So there is
Speaker 4: a lot of uncertainty, a lot of volatility in the
Speaker 4: market today. You mentioned the Moody's downgrade. I think that
Speaker 4: just speaks to the level of political uncertainty.
Speaker 3: In particular.
Speaker 4: Of this, of course comes in the back of all
Speaker 4: the back and forth on tariffs in the trade war.
Speaker 4: There's just so much uncertainty in terms of policy, and
Speaker 4: the implications of this, I think are for a lot
Speaker 4: of people to just continue sort of selling the US
Speaker 4: look for defensive areas, look for safety. In that case,
Speaker 4: that means a lot of big tech names, especially since
Speaker 4: tech has been pretty over the past couple of weeks.
Speaker 4: So this could just be some profit taking, but I
Speaker 4: do think it underlines how uncertain people feel about the
Speaker 4: economic outlook.
Speaker 2: The mag seven have a sort of disproportionate impact to
Speaker 2: the index level, but it's AI, infrastructure and semiconductors where
Speaker 2: I see most weakness.
Speaker 3: Basically this Monday. Why is that?
Speaker 4: Yeah, So, I think you know, this is an area
Speaker 4: that is very much tied to the trade situation given
Speaker 4: to sort of the nature of the products that we're
Speaker 4: talking about here, there's still a lot of uncertainty about
Speaker 4: you know, chip restrictions and all these other kinds of things.
Speaker 4: And this also comes on the back of, you know,
Speaker 4: people still continue to want to see more return on
Speaker 4: all this AI related spending that is going on. There's
Speaker 4: just a lot of concerns maybe that you know, has
Speaker 4: there been sort of a bubble in AI infrastructure. So
Speaker 4: I think this is an area where because of these
Speaker 4: group has done so well because the outlook is so
Speaker 4: debated right now, it's just a very natural place for
Speaker 4: people to be taking profits, especially on any kind of
Speaker 4: sort of negative headline that you see cross the wire.
Speaker 2: Bloomboas round Vastelica with the market moves this Monday, thank you,
Speaker 2: let's get more on markets. Hillary Frisch, senior Research analysts
Speaker 2: for Software and IT services at Clearbridge Investments.
Speaker 3: Is with us.
Speaker 2: Last week, the tailwind was in all of the headlines
Speaker 2: about the billions and billions of dollars of AI infrastructure
Speaker 2: deals the United States and the Gulf Nations, Nvidia, super Micro, Dell.
Speaker 3: But that's the area of weakness.
Speaker 2: This Monday morning, is it just a little bit of
Speaker 2: a reality check on how soon some of that investment
Speaker 2: will be felt.
Speaker 5: It's a good question, ed.
Speaker 6: It may be a reality check, it may just also
Speaker 6: be profit ticking. And we went from overbought to severely
Speaker 6: oversold to overbought again within just about the span of
Speaker 6: a month. So the tech sector in general has had
Speaker 6: a very strong run recently, and we can talk more
Speaker 6: about why that's the case, but I think investors are
Speaker 6: just looking seeing, okay, we can take some profits at
Speaker 6: this point.
Speaker 2: Well, in part of why that's the case is earnings, right,
Speaker 2: I think we're still a little bit digesting what the
Speaker 2: net takeaways from the calendar first quarter earnings were. What
Speaker 2: were your main takeaways from that period?
Speaker 6: Sure, well, first of all, it was I think what
Speaker 6: was notable was just how resilient Q one results were.
Speaker 6: And it wasn't just in Q one, it was in
Speaker 6: the subsequent weeks through to the quarterly reports, and that
Speaker 6: encompassed a period of Teriff related headlines and uncertainties. So
Speaker 6: that was refreshing and encouraging. And it wasn't just AI
Speaker 6: or a series of AI proof of concepts at the
Speaker 6: expense of all else, which is largely what it felt
Speaker 6: like last year. It was AI strength plus real core
Speaker 6: business strength, and that was refreshing. Now we're coming up
Speaker 6: upon April quarter earnings reports, and I could imagine that
Speaker 6: some of those companies who would have had to close
Speaker 6: their quarters in the midst of tariff uncertainty might see
Speaker 6: some variability, might have seen some pausing and spend, but
Speaker 6: overall the underlying results are very encouraging.
Speaker 2: What I found super interesting about that earnings period. In technologies,
Speaker 2: you have like primary data and secondary data. The primary
Speaker 2: data like the commentary and what's in the earning statement,
Speaker 2: but some of the secondary data we were tracking, for example,
Speaker 2: in the AI infrastructure space, was leases, data center leases,
Speaker 2: and that caused all kinds of noise going into the
Speaker 2: prints and we had to decipher what it was that
Speaker 2: was the truth, you know, based on executive comments, How
Speaker 2: did you navigate that?
Speaker 6: Yes, set of data, tons of noise in the space.
Speaker 6: That was probably maximum noise that we've seen in a
Speaker 6: long time.
Speaker 5: But it's fascinating.
Speaker 6: Starting with the underlying demand trends, you saw hyperscale vendors
Speaker 6: reaffirming CAPEX plans. You saw some of them increase them.
Speaker 6: Microsoft in particular talked about rising near and long term
Speaker 6: demand signals, which could actually cause them to prolong their
Speaker 6: investment in long live assets, meaning land and buildings, which
Speaker 6: they've been engaging in our over the course of the
Speaker 6: last eighteen months. So how do we marry that up
Speaker 6: with data center lease cancelations. Well, it's interesting Microsoft in
Speaker 6: particular makes a lot of use of leases. They came
Speaker 6: from behind relative to the strong demand signals they're seen
Speaker 6: in getting that requisite capacity to be able to fulfill
Speaker 6: AI and other demand for the next five ten years,
Speaker 6: So they were building rapidly. Within that, they signed a
Speaker 6: ton of leases across the globe, which was a brilliant strategy,
Speaker 6: by the way, because it froze it froze some of
Speaker 6: those opportunities to competitors. And then within that, I think
Speaker 6: they decided that they didn't want to be the sole
Speaker 6: source of training for open AI. And also within that
Speaker 6: there were power constraints, and I think they realized that
Speaker 6: these leased facilities wouldn't be up and running until twenty
Speaker 6: seven to twenty twenty nine, and in that vein they
Speaker 6: could actually shift to some degree to own data centers
Speaker 6: as well as least data centers and you're seeing that
Speaker 6: kind of across the board. But in the end, some
Speaker 6: of the data center lease capacit we were hearing was
Speaker 6: five x what you were seeing signed on for by
Speaker 6: an Amazon, for instance, for the rest of the ecosystem.
Speaker 6: And last time I choked, Microsoft wasn't five x the
Speaker 6: size of an Amazon. So basically they were giving themselves optionality.
Speaker 6: And in retrospect, they're still building and they're still demand.
Speaker 2: And again a part of the higher capex reflects the
Speaker 2: higher cost of doing business because of the impact of
Speaker 2: tariffs to supply chain. I've been thinking a lot, as
Speaker 2: one does, about year to date performance of the hyperscalers.
Speaker 2: And it's interesting, right if you just say hyperscalers Microsoft,
Speaker 2: Amazon alphabet. Microsoft stock is up more than eight percent
Speaker 2: year to day. The other two names have been under pressure.
Speaker 2: We of course kickoff with Microsoft Build, but we also
Speaker 2: talked last week about some of the difficulty Microsoft has
Speaker 2: in reaching its own goals because of its relationship with
Speaker 2: open AI. This is something you've been thinking about as well.
Speaker 6: Yes, Well, first of all, with respect to relative to performance,
Speaker 6: I think you're almost seeing from a cloud perspective in
Speaker 6: the other two what we saw with Microsoft for the
Speaker 6: end of last year and early this year, which is
Speaker 6: that they're behind a getting capacity and that is constraining
Speaker 6: cloud growth. So it hasn't been a demand issue, it's
Speaker 6: been a supply issue. Second of all, Microsoft has been
Speaker 6: very tethered to open Ai. They've been diversifying, but the
Speaker 6: two are quite aligned. I'm not sure I view it
Speaker 6: at all in terms of their not being able to
Speaker 6: realize their goals. I think their goals are to focus
Speaker 6: on their own compute capabilities for their customers and to
Speaker 6: add in open ai and other LLLM vendors, but especially
Speaker 6: open Ai as part of that equation. I think it
Speaker 6: was a deliberate decision not to focus solely on training
Speaker 6: that would have crowded out a lot of the other
Speaker 6: exciting and high margin endeavors Microsoft can engage in an
Speaker 6: as core customer base, and in the meantime it's a
Speaker 6: highly symbiotic relationship. Microsoft's infrastructure was originally built in AI
Speaker 6: to around open Ai and the related infrastructure it has
Speaker 6: in finnabaum throughout it has some tremendous capabilities and I
Speaker 6: believe the two companies want to continue to work together.
Speaker 2: Hillary Frish, Senior Research Analystic Clearbridge Investments.
Speaker 3: Thank you for joining us.
Speaker 2: Now coming up, Video announces new AI products as the
Speaker 2: computing giants descend. On Compute's twenty twenty five, We'll go
Speaker 2: out to Taiwan next this Spoomberg Technology.
Speaker 7: We're outside the venue here where Jensen Wang just kicked
Speaker 7: off Kombu Techs for twenty twenty five. This is one
Speaker 7: of the biggest tech events in Asia and Jensen Wang,
Speaker 7: the founder and CEO of Nvidia, was on stage for
Speaker 7: ninety minutes at talking through his vision for AI and
Speaker 7: the products that are going to be needed to sustain it.
Speaker 8: Today we're announcing the Fox Kind Taiwan. The Taiwanese government
Speaker 8: and VideA. We're going to build the first giant AI supercomputer.
Speaker 7: The focus was on greater AI applications, so specifically the
Speaker 7: integration of AI into products like humanoid robots, also autonomous
Speaker 7: driving vehicles. On the product front, we did get an
Speaker 7: update on the next generation GB three hundred system that
Speaker 7: is expected to come in the third quarter of this year. Also,
Speaker 7: Nvideo is going to be offering a new version of
Speaker 7: the complete computers that it provides to its data center customers.
Speaker 7: Now what that means in a nutshell is that it's
Speaker 7: going to be opening its AI servers to chips from
Speaker 7: other companies. This is its names like Microsoft, Amazon, they
Speaker 7: try to design their own.
Speaker 5: Processors and accelerators.
Speaker 7: In Taipei, I'm Annabel Drawlers Bloomberg News for more.
Speaker 2: On computext and Nvidea's latest revealed Bloombozine. King joins us
Speaker 2: here in San Francisco. What we're talking about is envy
Speaker 2: link Fusion. You and I have sat through many briefings
Speaker 2: about envy link Fusion and read and written about a
Speaker 2: lot of it.
Speaker 3: But it's a high speed into connect.
Speaker 2: You can connect lots of GPUs and in this case
Speaker 2: also CPUs.
Speaker 3: The main point here is in Vidia is.
Speaker 2: Saying if you are a hyperscaler, perhaps with custom Silicon,
Speaker 2: then we can allow you into data centers where we dominate,
Speaker 2: and it kind of opens up this place where everyone
Speaker 2: is not only and solely reliant on one single name,
Speaker 2: which is in video.
Speaker 9: I think the other way to look at this would
Speaker 9: be it's a business decision, right if you have your
Speaker 9: biggest customers who are essentially creating rival efforts, rival efforts
Speaker 9: that may one day mean that they need less of
Speaker 9: you why not make it easier to actually work with
Speaker 9: you say hey, great, yeah you've got a great CPU,
Speaker 9: come work with us. Hey you've got a great GPU,
Speaker 9: Come work with us. This is a way to keep
Speaker 9: people in in Video's ecosystem and to stop them going elsewhere.
Speaker 3: That's the pitch.
Speaker 2: Computexts is a really big deal, and in VideA seems
Speaker 2: to have dominated it in more recent years. What else
Speaker 2: do we learn about things of substance that they're actually
Speaker 2: doing at all?
Speaker 9: Anything of substance, Well, computext wasn't a big deal up
Speaker 9: until in Video basically made it a big deal again
Speaker 9: when they started using it on this worldwide trip that
Speaker 9: they do.
Speaker 3: To keep the.
Speaker 9: Air momentum going as a show, it was definitely fading away.
Speaker 9: So they put a lot of updates of things out there, robotics,
Speaker 9: new servers, new designs for data centers, and basically just
Speaker 9: trying to keep the momentum of this massive AI infrastructure
Speaker 9: build out going.
Speaker 2: Is there anything else happening at computext that is not
Speaker 2: in Video related?
Speaker 9: Well, our old friend Christiano Amon actually appeared on stage
Speaker 9: with Qualcom right the Corecom CEO. As we reported a
Speaker 9: long time ago, they want to get into the data
Speaker 9: center with their technology. This is part of his diversification
Speaker 9: and if you can't beat them, join them. So he's
Speaker 9: there saying we'll work with in video as a step
Speaker 9: towards the data center strategy, and that is very pragmatic
Speaker 9: and we'll see how it works out.
Speaker 2: Okay, Bloombozie and King, who leads our coverage of semiconductors,
Speaker 2: Thank you very much. I want to stay on that
Speaker 2: news out of Computex in Taiwan and bringing Michelle Geider.
Speaker 2: She's the CEO of the Crash Institute for Tech Diplomacy
Speaker 2: at Purdue. She's also served as Assistant Secretary of State
Speaker 2: for Global Public Affairs under the first Trump administration between
Speaker 2: twenty eighteen and twenty twenty. For me away from the
Speaker 2: technology news, the absolute key piece of importance was Jensen
Speaker 2: one talking about his relationship with Taiwan and in Vidia's
Speaker 2: relationship with Taiwan.
Speaker 3: The basic plan is to.
Speaker 2: Build a supercomputer for Taiwan, but he was kind of
Speaker 2: at pains to point out that this is in partnership
Speaker 2: with TSMC and other leading names that are Taiwanese champions.
Speaker 3: Purely from a geopolitical perspective.
Speaker 2: How crucial was that or how high level was that
Speaker 2: for Jensen Wong to say such a thing.
Speaker 10: It's very important and in video with Jensen Wang at
Speaker 10: the Helm has been on quite the tech diplomacy tour,
Speaker 10: the chip diplomacy tour really over the past few in
Speaker 10: the past week, including in Taiwan, as you reference where
Speaker 10: they're talking about building a supercomputer. Taiwan is a very
Speaker 10: strategic partner and trusted partner of the United States.
Speaker 11: It's very important for our shared security.
Speaker 10: And that's right off the heels of some major deals
Speaker 10: announced in the Golf over the weekend and late last
Speaker 10: week with Saudi Arabia with a UAE who also want
Speaker 10: to be global capitals when it comes to artificial intelligence,
Speaker 10: and there's going to be more sharing of advanced chips there.
Speaker 10: So all of that is really important as the United
Speaker 10: States seeks to secure trusted partnerships with important partners across
Speaker 10: the globe when it comes to advance semiconductors.
Speaker 2: Michelle, those deals with Golf nations, how concerned are you
Speaker 2: that they can act as sort of backdoor indirect access
Speaker 2: for China to US technology.
Speaker 10: It's definitely a concern among some in the US government.
Speaker 10: Including in Congress. But I'll say the big picture is
Speaker 10: we have to do two things. One is maximum proliferation
Speaker 10: of American technology, including our semiconductors, because if it's not
Speaker 10: our technology, it's going to be our adversaries technology like China,
Speaker 10: So max proliferation is really important. At the same time,
Speaker 10: we also have to have maximum security controls to make
Speaker 10: sure that those technologies, including chips, don't get diverted toward
Speaker 10: adversaries like China.
Speaker 12: Those two things have to happen.
Speaker 10: It can be done, but it requires that companies and
Speaker 10: the US government and our allies by the way, work
Speaker 10: really closely together.
Speaker 12: And that's what tech diplomacy is all about.
Speaker 10: And I think you see the White House, the Commerce Department,
Speaker 10: as well as leaders in Congress with the new Chip
Speaker 10: Security Act making sure that those security controls are in place.
Speaker 2: Jensen Wong's text diplomacy, I think it is worth lingering
Speaker 2: on Taiwan is clearly important to Nvidia, and we remind
Speaker 2: ourselves that the mainstay of TSMC's lead edge fabrication is
Speaker 2: in Taiwan. But China is also important to Jensen one
Speaker 2: whether that market is closed to him or not, is
Speaker 2: he getting the balance right.
Speaker 10: Well, it's interesting that you mentioned that because on this
Speaker 10: tech diplomacy tour there were the deals announced in the
Speaker 10: golf there's the news in Taiwan today. But let's also
Speaker 10: not forget that he announced a new research center in
Speaker 10: Shanghai just a few days ago. And it's no coincidence
Speaker 10: that all of these things are happening in the same time.
Speaker 10: And look, he's got a global business to run. He
Speaker 10: definitely has multiple interests that he's trying to meet. But
Speaker 10: we have to make sure from the US national security
Speaker 10: standpoint is that all of that doesn't endanger American national
Speaker 10: security and give some of our most advanced technologies to China.
Speaker 10: So the role that he plays in working together with
Speaker 10: our government, we have to make sure that business objectives
Speaker 10: meet national security objectives. And it can be done, but
Speaker 10: we have to be working together in.
Speaker 11: Order to do it.
Speaker 2: In January of this year, Anderill's co founder Pamelucky told
Speaker 2: me point blank that they are preparing for scenario where
Speaker 2: China invades Taiwan at some point in the coming years.
Speaker 2: It is one severe come take that argument and extrapolate
Speaker 2: it out to ai infrastructure and semiconductive manufacturing and Taiwan's
Speaker 2: role in everything that we've just discussed.
Speaker 10: Well, it's a reason that we have to make sure
Speaker 10: Taiwan's resilience and the US resilience when it comes to
Speaker 10: these critical sectors like semiconductors is really strong, and so
Speaker 10: partnerships like with Nvidia TSMC is investing another one hundred
Speaker 10: billion dollars year in the United States to build out
Speaker 10: its FABS, to build out advanced packaging facilities.
Speaker 12: All of that has to scale so.
Speaker 10: That we have some more strategic partners and it's also
Speaker 10: with other allies like Japan, like Korea s Khiiniz is
Speaker 10: investing in an advanced manufacturing facility for semiconductors at Predue
Speaker 10: Research part where the CROC Institute is. All of that
Speaker 10: has to happen more deeply in its scale in order
Speaker 10: to make sure our shared resilience and security, because.
Speaker 12: We have to be prepared for a scenario like that.
Speaker 10: But rather than just try to slow China down, we
Speaker 10: have to make sure that we are turbot our own
Speaker 10: supply chains, our own resilience in our collaboration with our allies.
Speaker 2: Michelle Guided, CEO of the Cracked Institute for Tech Diplomacy
Speaker 2: at Purdue, Thank you very much. Okay, take a quick
Speaker 2: look at shares of Ali Barber and Apple. The New
Speaker 2: York Times reporting that the Trump administration has raised concerns
Speaker 2: over a potential AI deal between Apple and Ali Barba
Speaker 2: that would allow the Chinese firm to make it's AI
Speaker 2: available to use on iPhones in China.
Speaker 3: We will track that story as we go, and we
Speaker 3: stay on Apple.
Speaker 2: The tech giant promised a bold leap into AI, but
Speaker 2: instead Siri has been left stumbling and the company's AI
Speaker 2: ambitions are lagging behind rivals. It's the subject of the
Speaker 2: latest Bloomberg Big Take, and its author Mark German joins us. Now,
Speaker 2: this is a deeply reported piece about the people inside
Speaker 2: Apple working on AI, the rollout of Siri and Apple Intelligence.
Speaker 2: But if you could just summ arise the pace, how
Speaker 2: would you summarize it?
Speaker 13: I think the best way to summarize it is that
Speaker 13: Apple has a history of coming into emerging areas late.
Speaker 13: You saw that with tablets, smart watches and B three players,
Speaker 13: even smartphones. But they've come in and then they've destroyed
Speaker 13: or vanquished the competition. We've seen that with the iPod,
Speaker 13: the iPhone, the iPad, and.
Speaker 5: The Apple Watch with AI.
Speaker 13: Not only were they late compared to many of the competition, right,
Speaker 13: but they're not the best. In fact, it's fair to
Speaker 13: say all the big technology companies, they're behind more than
Speaker 13: anyone else. And there are philosophical issues, management issues, prioritization issues,
Speaker 13: financial issues, perhaps even innovation issues, and many questions that
Speaker 13: led to this point. Apple was caught off guard when
Speaker 13: chat GPT launched in twenty twenty two. There are questions
Speaker 13: about how a company of Apple scale and expertise could
Speaker 13: have not seen this coming. Then there are questions of
Speaker 13: how they released, with all their resources products that appeared
Speaker 13: so rush to market, And this story takes a deep
Speaker 13: look at the how and why about all of that.
Speaker 2: I remember, not necessarily twenty eleven specifically, but twenty eleven
Speaker 2: and twelve thirteen early editions of Syria and being like, Wow, Siri,
Speaker 2: what is this? This is astonishing, and then quickly it
Speaker 2: just fades away.
Speaker 3: At the heart of your reporting.
Speaker 2: Is the hiring of a key executive in twenty sixteen.
Speaker 2: Who is that person and why do you follow that
Speaker 2: executive's passage through Apple?
Speaker 5: Yes, John g Andrea.
Speaker 13: He was the head of search and AI at Google
Speaker 13: until Apple hired him in twenty eighteen, so about seven
Speaker 13: years ago. And he runs the show when it comes
Speaker 13: to AI, or at least he did run the show
Speaker 13: when it came to AI. For the last several years,
Speaker 13: he was in charge of SIRI, in charge of foundation
Speaker 13: models LMS, AI testing AI infrastructure teams designed to annotate
Speaker 13: in train data to determine how well llms and the
Speaker 13: different AI technologies are working. And him come right to
Speaker 13: Apple was very exciting for the company. They thought they
Speaker 13: would turn into an AI powerhouse. Instead, the one person
Speaker 13: in charge of AI oversaw as the company completely missed
Speaker 13: the boat on this technology. But as they get into
Speaker 13: the piece, it's not him alone. Marketing issues, finance issues
Speaker 13: and software issues.
Speaker 2: Blue most Mark German with the latest Bloomberg Big Take.
Speaker 2: It is an absolutely must read on what's happening inside
Speaker 2: Apple with AI. Thank you very much, Welcome back to
Speaker 2: Bloomberg Technology Ed Lovelow here in San Francisco. So stocks
Speaker 2: have pared some of the declines, but the story in
Speaker 2: the session has very much been AI infrastructure, semiconductor names
Speaker 2: under pressure. There was the impact of Moody's credit rating
Speaker 2: downgrade for America from Friday Night but actually I think
Speaker 2: a lot of it is a reality check from all
Speaker 2: of the headlines of last week about all of the
Speaker 2: billions of dollars of investment in AI infrastructure Microsoft, the
Speaker 2: exceptions of the rule of up half of percent, There
Speaker 2: is a lot going on right now in the technology industry.
Speaker 2: There are several events either underway or due to take
Speaker 2: place this week. Computext we talked about in video focus
Speaker 2: of that Google iOS coming up, Dell Technology World coming up,
Speaker 2: and then there's Microsoft Build.
Speaker 3: And I think that's a good place to start.
Speaker 2: Let's get to what we can expect from Microsoft Build
Speaker 2: and bring in anarag Rana of Bloomberg Intelligence. You've done
Speaker 2: a little preview piece of research for Microsoft Build, and
Speaker 2: I think that you, like everyone, are kind of expecting
Speaker 2: Microsoft to talk about how we're actually going to be
Speaker 2: using some of the AI tools that they charge us for.
Speaker 14: Yeah, you know, when you look at the air infrastructure space,
Speaker 14: Microsoft has really made a name for themselves to saying,
Speaker 14: you know, we will focus a lot more on inferencing
Speaker 14: rather than then training, and this is where a lot
Speaker 14: of the innovation I think it's going to come from.
Speaker 14: They're going to come from new products that are going
Speaker 14: to be launched throughout the ecosystem, more focus on small
Speaker 14: language mores and that you know may or may not
Speaker 14: use that much of GPU use out there, And I
Speaker 14: think that's the way they want to focus on. Is
Speaker 14: the company that you know is more focused on inferencing
Speaker 14: than then training.
Speaker 2: Well, so important about Bloomberg technology this show and RAGU
Speaker 2: is like lots of people that watch it are either
Speaker 2: already at one of those events on their way to it,
Speaker 2: or they'll be tracking it closely their developers or their
Speaker 2: workers in the technology industry. And part of your research
Speaker 2: is focusing on the lower cost large language model. Why
Speaker 2: is that important? Why does it impact all of the
Speaker 2: people across the world of technology that are watching this
Speaker 2: program right now.
Speaker 14: So one of the most important things for us is
Speaker 14: how do you get this technology to be used, you know,
Speaker 14: throughout the masses, whether it's on the consumer applications or
Speaker 14: on the enterprise applications. So when you look at even
Speaker 14: Microsoft co Pilot, you know, subscription it's at thirty dollars
Speaker 14: per user per month, and with that high rate, we
Speaker 14: think the adoption rate is going to be a lot
Speaker 14: lower than if they bring it down. You can extrapolate
Speaker 14: that on the enterprise use cases. Also. Currently we're in
Speaker 14: a phase where running a large language model costs a
Speaker 14: lot of money. Now, over time the cost of computing
Speaker 14: will go down or broken usage, and I think this
Speaker 14: is where one of the ways you can do that
Speaker 14: is by using a small language model that does one
Speaker 14: specific task and one specific task very well. And for
Speaker 14: that you really don't need that sophisticated orf A hardware
Speaker 14: to run it.
Speaker 3: All, right, Ran or Bloomberg Intelligence.
Speaker 2: Let's catch up at the end of the week, when
Speaker 2: all of these events are out the way, we can
Speaker 2: assess what was said. There is more AI news out
Speaker 2: of the Middle East and Europe in video and Abadabi
Speaker 2: Investment Vehicle MNGX partnering with French firms to build Europe's
Speaker 2: largest AI data center campus. The moves follow a week
Speaker 2: of AI announcements. We've been over them during the hour
Speaker 2: during President Trump's visit to the Middle East, and that
Speaker 2: includes plans by Saudi investment fund STV to launch a
Speaker 2: one hundred million dollar like AI Focus fund.
Speaker 3: We're backing from Google.
Speaker 2: STV General partner and COO Luca Barbie joins us now
Speaker 2: from Riad. Congrats on the fund. You're one of the
Speaker 2: biggest sort of private growth equity venture firms out there
Speaker 2: in terms of money under management that's focused on like
Speaker 2: a very specific domain. What do you want to do
Speaker 2: with this fund and what is the unlock of everything
Speaker 2: that happened last week because your region is so under
Speaker 2: the microscope with all of the infrastructure investment that's taking place.
Speaker 15: Thanks for letting me. STV Indeed is a povate technology company.
Speaker 15: We invest in technology in the Middle East, so we
Speaker 15: have a one point five billion of asset under the
Speaker 15: management and last week we announced.
Speaker 12: A thematic fund for AI.
Speaker 15: So our thesis is that this time to invest in
Speaker 15: the application layer. The Middle East has tool in itself
Speaker 15: being able to build a technology company. Today we have
Speaker 15: fifteen unicorns in the region and more in the pipeline.
Speaker 15: In our portfolio, we have nine companies that are preparing
Speaker 15: for IPO and so there is enough knowledge, there is
Speaker 15: enough momentus, there are enough infrastructure to compete and play
Speaker 15: a role in the AI arena. The fund will be
Speaker 15: focused on the application area. As I mentioned, there are
Speaker 15: a number of use caes that are immediate relevant and
Speaker 15: can find tangible application in the market, especially with the
Speaker 15: customer service or enterprise, automension or legal This is where
Speaker 15: we are focusing today.
Speaker 2: We talked about Google backing this fund. Which are the
Speaker 2: notable LPs and investors? Have you managed to get behind you?
Speaker 15: Most of the things that are still in the making,
Speaker 15: So we disclosed name in the new course, But we
Speaker 15: have a number of institutional investors that have been with
Speaker 15: us before, and we'll come also in the iFun and
Speaker 15: I think the time is right to attract international investors
Speaker 15: in our fund and in general in the vision.
Speaker 2: A big factor in the Gulf is the activity of
Speaker 2: the sovereign wealth funds. So you think about Saudi Arabia
Speaker 2: for example, we covered a lot last week on the
Speaker 2: show Humane.
Speaker 3: How does that impact your ability to do deals?
Speaker 2: Do you kind of get muscled out by either the
Speaker 2: public investment fund or another vehicle like Humane?
Speaker 3: Or are you looking at.
Speaker 2: Different company sizes and targets for your investments?
Speaker 15: What's the foundership puting prim and public sectors so far
Speaker 15: has worked quite well, even in the most recent announcement
Speaker 15: that we had last week.
Speaker 12: Most of these money and capital will.
Speaker 15: Be deployed in the infrastructure layer, so large project costs
Speaker 15: billions of dollars to develop data center, to develop also
Speaker 15: and localize and models.
Speaker 12: So this is.
Speaker 15: Actually favoring the initiative of the private sector. And as
Speaker 15: I mentioned before, we focus more on the application layers.
Speaker 12: So this is actually enforcing our teases that investing in
Speaker 12: AI in the application layer.
Speaker 15: In this vision we make more and more sense as
Speaker 15: the infrastructure will be comparable to what we see in
Speaker 15: the most developed markets.
Speaker 2: President Trump's visit kind of put Saudi's name out there,
Speaker 2: even if you forget the infrastructure layer right now, are
Speaker 2: you worried about evaluations a little bit? Given how much
Speaker 2: interest and energy there is into looking at Saudi Arabia
Speaker 2: as an investment opportunity, There's.
Speaker 12: Always a challenging job.
Speaker 15: There is a lot of volatility that we have observed
Speaker 15: across different cycles, so we need to deal with it.
Speaker 15: We need to put forward our reputation as a long
Speaker 15: term credible investors that can add on a number of
Speaker 15: value adding activity, in particular to integrate company in our ecosystem,
Speaker 15: talking to government, reguletto large layers.
Speaker 12: And make things happen. So we believe that smart and
Speaker 12: experienced entrepreneur we value that.
Speaker 15: Actually, we welcome the Trump visit I think the world
Speaker 15: is more and more noticing what's.
Speaker 12: Happening in our region, in the Middle East. So far
Speaker 12: things have been under the RADA.
Speaker 15: But I think, you know, especially in our sector, in technology,
Speaker 15: the growth is exponential and I would expect in the
Speaker 15: next three five years to become you know, the success
Speaker 15: case of the Middle East intact to become more visible,
Speaker 15: and so we'll be more more more global capital and
Speaker 15: more global investors. I see we enter the market and
Speaker 15: play a role next to us.
Speaker 2: Luca, you talked about some of the unicorns in the
Speaker 2: region and some of what's in your portfolio. You must
Speaker 2: be about excited about some exits this year. Any case
Speaker 2: studies where you see an IPO or even M and
Speaker 2: A giving you a nice exit.
Speaker 12: Absolutely so.
Speaker 15: Look, I mentioned fifteen unicorns so far, right, five of
Speaker 15: those fifteen.
Speaker 12: Being materialized the next eighteen months.
Speaker 15: This is why I was talking about the exponential shape
Speaker 15: of how things happen in technology. You know, our portfolio,
Speaker 15: we have other four candidates.
Speaker 12: One of it is actually already unicorner. It's Toby by
Speaker 12: Now paying later.
Speaker 15: They raised recently around that three point two billion's dollar
Speaker 15: valuation and as a credible path to be listed in
Speaker 15: the Middle East Socket Change in the next eighteen months.
Speaker 15: So we need more of this success case to hove
Speaker 15: ourself and the rest of the global audience that the
Speaker 15: market is big enough, entrepreneurs are innovative enough, and the
Speaker 15: capital can be you know, put a play with attractive.
Speaker 2: Y Luca Barbie, general partner and COO of STV. Great
Speaker 2: to have you here on Bloomberg Technology. Thank you very much.
Speaker 2: Now coming up, we're going to talk to Luxe Capitalist
Speaker 2: Josh Wolf about the firm's helpline for academics and scientists
Speaker 2: and the state of research in this country.
Speaker 3: This is Bloomberg Technology.
Speaker 2: As the US public sector pulls back on funding for
Speaker 2: research and development, some big name private sector names are
Speaker 2: stepping in. That includes Lux Capital Managing partner Josh Wolf
Speaker 2: is here. Lux Capital's portfolio includes names like Anderil and
Speaker 2: drug discovery company Icon Therapeutics. What you were doing, Josh,
Speaker 2: is a one hundred million dollar commitment for basically a
Speaker 2: helpline for American scientists, American researchers whose work might otherwise
Speaker 2: be taken from underneath them because of the lack of funding.
Speaker 11: That's absolutely right.
Speaker 16: You go back eighty years American competitiveness started with that
Speaker 16: of the Bush. Yeah, this great thing, the Endless Frontier.
Speaker 16: That is what gave us competitive advantage. We attracted the
Speaker 16: best and the brightest from German Jews that came here
Speaker 16: and made sure that we had the atomic bond, went
Speaker 16: to the Institute for Advanced Studies at Princeton. You go
Speaker 16: through the Cold War in the eighties, attracting Russian emigree
Speaker 16: so that we can have the best in the brightest
Speaker 16: sciences in the world, all of our academic institutions being funded.
Speaker 11: Then you fast forward to two thousand and five.
Speaker 16: You've got Normal Augustine, previously head of major defense company,
Speaker 16: writing the Gathering Storm, which was basically like the clouds
Speaker 16: are gathering and we are starting to lose, particularly to China. Today,
Speaker 16: I would call it a perfect storm. You've got politicization
Speaker 16: at universities. You've got massive federal cuts and that is
Speaker 16: not a political thing between the Republicans and the Democrats.
Speaker 16: That is the past twenty two years we've had major
Speaker 16: funding cuts in federal government. We are at the lowest
Speaker 16: level in science funding from the government since nineteen ninety seven.
Speaker 16: Why does this all matter? We are competing with China,
Speaker 16: This is not a left or right, or red or blue.
Speaker 16: It is a past verse future thing. And with those
Speaker 16: funding cuts and the politicization on the problems that scientists
Speaker 16: are facing, the lifeblood of venture capital, the life blood
Speaker 16: of innovation is this.
Speaker 11: So we're stepping forward and seeing at.
Speaker 16: Least one hundred million dollars, we're going to be doubling
Speaker 16: down on early stage venture creation around scientists.
Speaker 2: Josh I discussed this exact issue with Michael Kratzios, recently
Speaker 2: Director of the White House Office for the Science Technology
Speaker 2: Right just listen to how he summarized funding right.
Speaker 17: Now, if you spend a lot of money on the
Speaker 17: wrong things, it's worse for spending a little money on
Speaker 17: the right things. So we're making sure of that the
Speaker 17: biggest priorities for the nation, things like leading artificial intelligence,
Speaker 17: leading in quantum information science. Can we continue to fund
Speaker 17: those areas and make sure that our universities are a
Speaker 17: big part of that agenda.
Speaker 2: How mister Kratzios would summarize it is that it's how
Speaker 2: and where you spend money, spend but.
Speaker 3: Research funds rather than the volume.
Speaker 2: Your reaction to that, and I guess that the lack
Speaker 2: of knowledge right now and the direction that this administration
Speaker 2: is going in terms of committing to growing.
Speaker 3: R and D budgets.
Speaker 16: Well, first of all, I have a lot of respect
Speaker 16: for Kratzios. I think he's doing a great job across
Speaker 16: many things. I would say as it relates to funding
Speaker 16: the things that are evident and obvious science and the
Speaker 16: fundoing for it is not a slot machine for strategy returns.
Speaker 16: This is about the slow burn of serendipity. We never
Speaker 16: knew that COVID was coming, but thank god we were
Speaker 16: able to have messenger RNA mRNA vaccine that was there.
Speaker 16: We would have been late to the game if we
Speaker 16: were trying to fund it when the moment happened. So
Speaker 16: when we were talking about the things today that mattered,
Speaker 16: AI and quantum, which I'm super skeptical about, and some
Speaker 16: of the cutting edge areas and robotics and aerospace and defense,
Speaker 16: those kinds of things are the things that we've been
Speaker 16: funding for ten years. So the venture industry has been
Speaker 16: funding it for ten years, which means that the breakthroughs
Speaker 16: have come from science and academia, and that's.
Speaker 11: Fifteen years ago.
Speaker 16: So the things that we should be funding now are
Speaker 16: this slow burn of serendipity that five, ten, fifteen years.
Speaker 16: Hence folks like us from the private sector come in,
Speaker 16: identify and take the risk and put in risk capital
Speaker 16: behind the human capital, behind the human capital and the
Speaker 16: intellectual capital of intellectual property and patents owned by the
Speaker 16: US and owned by our government and licensed to the
Speaker 16: universities and to the researchers, and then ultimately to the
Speaker 16: startups that can create multi billion dollar companies doing exact
Speaker 16: actly what great cratios are saying. So I do not
Speaker 16: agree that we should be funding the here and now.
Speaker 16: We want to own the future. We should be funding
Speaker 16: the future, and you never know where it's going to
Speaker 16: come from. If we did, it wouldn't be science.
Speaker 2: Josh, you this conversation pretty clear. This is about competition
Speaker 2: with China, right, And I record conversation I had with
Speaker 2: Jensen Wong in March where he basically said, look, fifty
Speaker 2: percent of AI research is being done either in China
Speaker 2: or by Chinese researchers in other domains. It is simple
Speaker 2: and clear cut as the Chinese government just being willing
Speaker 2: to commit capital and do what it takes kind of
Speaker 2: attitude for them to come out on top. Or is
Speaker 2: it different to that, what is the domain for the
Speaker 2: competition here?
Speaker 16: It is a geopolitical domean. It is a cultural competition.
Speaker 16: Cultures get what they celebrate. When we're celebrating celebrities like
Speaker 16: Kardashians and Paris Hillmen, TikTok and nonsense, and they are
Speaker 16: directing their youth to go after the cutting edge that
Speaker 16: will define competitive advantage, to let them dominate in biotech,
Speaker 16: in aerospace, in breakthrough materials, in space itself, in life
Speaker 16: saving drugs. Today most of the world depends on the
Speaker 16: American biotech industry. You go back to Conan Boyer on
Speaker 16: the West Coast that launched Genetech and helped to create
Speaker 16: this vibrant industry unleashing cancer diagnostics and drugs, immunotherapies and
Speaker 16: JLP ones for weight loss. All of that came from basic,
Speaker 16: undirected science. It's absolutely critical. You go to aerospace and
Speaker 16: again the atomic bomb, thank god it was built here
Speaker 16: and not.
Speaker 11: Somewhere else through our Manhattan Project.
Speaker 16: That was massive directed scientific research with lots of unknowns,
Speaker 16: where we had Germans and Austrians and British all coming
Speaker 16: here to work so that the Allies could have superior advantage.
Speaker 16: So we are fighting and losing right now in nearly
Speaker 16: forty to forty four critical technology areas where China is dominating,
Speaker 16: and Jensen from Nvidia one hundred percent correct, fifty percent
Speaker 16: of all AI graduates today are coming from China. That's
Speaker 16: not a twenty twenty three or twenty twenty four decision.
Speaker 16: We're in twenty twenty five. This was a decision from
Speaker 16: fifteen years ago. So the decisions we're making today about
Speaker 16: long horizon science is what is going to give venture
Speaker 16: capitalists like us the ability to go in to early
Speaker 16: stage science and do what we do. We've done over
Speaker 16: twenty companies Denovo from university research, but that wasn't research
Speaker 16: that was done a year ago. It was research that
Speaker 16: was funded ten to fifteen plus years ago. Being able
Speaker 16: to back Nobel Prize winners like Richard Axel, Josh where
Speaker 16: we in Caliobe, or or all kinds of other companies
Speaker 16: critically important that the science research funding is there now
Speaker 16: so that US venture capitalists in the private sector can
Speaker 16: step in tomorrow.
Speaker 2: I sorry to interrupt you, Josh, I just want to
Speaker 2: go back to the lux Science Helpline before we run
Speaker 2: out of time. And it used to be that you
Speaker 2: would require those researchers to have their work ninety ninety
Speaker 2: five percent scientifically proven before you'd commit capital. You've lowered
Speaker 2: the bar to fifty percent scientifically proven. What are the
Speaker 2: risks with that and the motivation for doing so? We
Speaker 2: have about a minute left.
Speaker 16: Lowering the bar for the science risk is raising the stakes.
Speaker 16: Before we would want to only take market risk, technology risk,
Speaker 16: people risk, product risk, financing risk. Science risk we wanted
Speaker 16: funded by the US taxpayer and by the university. Now
Speaker 16: we're saying, if it's not fully baked, it's okay. If
Speaker 16: it's half baked, if it's down to fifty percent ready,
Speaker 16: and it still needs money from the private sector, in
Speaker 16: a private lab, in a venture supported company, We're willing
Speaker 16: to take that risk because the stakes are that high,
Speaker 16: the profits for the scientists, for us, for our limited
Speaker 16: partners are that high. It's worth doing. We're not talking
Speaker 16: about a huge amount of money. We can't do it alone.
Speaker 16: We're leading this effort. We're inviting our venture peers who
Speaker 16: can be scientifically minded to create syndicates of American greatness
Speaker 16: here to come along for the ride.
Speaker 2: Lux Capital Managing partner Josh Wolf, thank you very much
Speaker 2: coming back on the program, and thropt pic has cultivated
Speaker 2: a reputation for taking issues such as safety and responsibility seriously,
Speaker 2: more seriously than the company from which it is sprung,
Speaker 2: open Ai. But can it keep up while remaining so
Speaker 2: focused on safety? Bloomberg Shering Gafari joins us for more
Speaker 2: on her Business Week's story. I look at Anithropic and
Speaker 2: as you know, like you spend a lot of time
Speaker 2: talking with Anthropic as well over several years, I feel
Speaker 2: like they have managed to move quickly, but it's this
Speaker 2: kind of repetition of safety. What are you talking about
Speaker 2: in the Business Week piece?
Speaker 3: Right?
Speaker 18: If you think about just even a few years ago, right,
Speaker 18: Dario Miday, the CEO of Anthropic, was someone who really
Speaker 18: had an academic background.
Speaker 5: He had worked at open Ai and buy New Google,
Speaker 5: but largely spent his time as.
Speaker 18: A biophysics researcher right running experiments. And so now he's
Speaker 18: in this position where he's actually running a sixty one
Speaker 18: billion dollar startup while trying to balance that sort of
Speaker 18: academic commitment that he has to his ideals around safety.
Speaker 3: In the piece, what do you report on how they're
Speaker 3: getting that balance?
Speaker 16: Right?
Speaker 2: Running a business versus the safety responsibility.
Speaker 5: Right, So they have some impressive numbers.
Speaker 18: I mean the latest annualized revenue projections they have are
Speaker 18: two billion, and that's double what it was at the
Speaker 18: beginning of the year. So it's nothing to you beat
Speaker 18: an eyelash at. And at the same time they are
Speaker 18: going to have to keep racing it this very fast
Speaker 18: feed to keep up with deep Seek, to keep up
Speaker 18: with open Ai, with Google, and so how do you
Speaker 18: sort of balance it when sometimes you do have to
Speaker 18: take a step back.
Speaker 5: That's going to be the challenge I think in the
Speaker 5: years ahead.
Speaker 2: When I speak to computer scientists or even people in
Speaker 2: the enterprise software space, I think what and frop It
Speaker 2: gets a lot of credit for, and what they're good
Speaker 2: at is coding agents and those sorts of domains. How
Speaker 2: have they done well there? And what are their products?
Speaker 2: What is it that the anthropic cells to the world.
Speaker 18: Yeah, So another nugget in this piece is it one
Speaker 18: of the biggest sources of growth for them recently has
Speaker 18: been through their coding agents and sort of coding technology,
Speaker 18: and that's essentially software that helps engineers write their code.
Speaker 18: And that is, on the one hand, a huge boon
Speaker 18: to them because if they have the best software for that,
Speaker 18: they're going to get big contracts. On the other hand,
Speaker 18: it also provides a complication in terms of what does
Speaker 18: that mean for the future of work?
Speaker 5: What does that mean for employees?
Speaker 18: Even with an anthropic whose jobs are going to change,
Speaker 18: you know, and A told me, we don't want to
Speaker 18: slow down. We don't want to have to fire our
Speaker 18: employees because of our product claud code, but that means
Speaker 18: we may have to slow down hiring in the future, right,
Speaker 18: So I think he's being quite open about the trade offs.
Speaker 2: Here very quickly, just twenty seconds. Where are Anthropic? Were's
Speaker 2: home for them? And who are their biggest investors?
Speaker 18: So they are based here in San Francisco actually, where
Speaker 18: Drio Meda is from. And their biggest investors are folks
Speaker 18: like light Speed.
Speaker 5: You know. Eric Schmidt was.
Speaker 18: An early investor who I talked to Google and Amazon
Speaker 18: of course, who will also partner with them on the Infrat.
Speaker 2: By Sharen Gafari with Frankly must read in BusinessWeek.
Speaker 3: Thank you very much.
Speaker 2: That does it for this edition of Bloomberg Technology. Don't
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Speaker 3: This is Bloomberg Technology.