Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast, with Caroline Hyde in New York
Speaker 1: and VLA lolow into San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: TSMC posts a strong forecast and results lifting peers, a
Speaker 3: sign that demand related to AI remains robust.
Speaker 4: This as Open AI focuses on it's infrastructure, striking a
Speaker 4: deal with Cerebraus for compute and hunting for hardware partners
Speaker 4: across data centers and consumer devices.
Speaker 3: And the mayor of New York City is suing a
Speaker 3: delivery tech company, accusing it of breaking local worker protection laws.
Speaker 5: We'll get into that in a moment.
Speaker 4: The first we check in on where the markets are,
Speaker 4: and actually we're managing to rally in the a's that
Speaker 4: one hundred after two days of losses. It's all about
Speaker 4: that TSMC headline that you were just discussing ed and
Speaker 4: the rejuvenation in maybe way back into these key AI
Speaker 4: names and video. Indeed, one of the key points rides
Speaker 4: is higher bickerin though not feeling much of the love.
Speaker 4: There's also a delayed to a key Senate markup on
Speaker 4: the market structure Bill so that's putting some pressure on
Speaker 4: the ecosystem more generally. But watch for crypto. But you're
Speaker 4: looking at TSMC.
Speaker 3: Yeah, the world's most important chip contract manufacturer telling us
Speaker 3: capital expenditures up to fifty six billion this year, top
Speaker 3: line growths thirty percent, two markers that.
Speaker 2: The AI demand is intact.
Speaker 3: But ASML, the most important chip equipment making machine making name,
Speaker 3: first European company in a long time to breach five
Speaker 3: hundred billion dollars in market value, shares trading at a
Speaker 3: record high.
Speaker 6: Why.
Speaker 3: Because TSMC is the number one buyer of its gear.
Speaker 3: There's a lot to get into. Let's get to it
Speaker 3: with Bloomberg's Peter Elstrom out in London. This TSMC forecast.
Speaker 2: It's big.
Speaker 3: It's big for markets, it's big for the industry, it's
Speaker 3: big for AI. Very interesting though to listen to Cca
Speaker 3: give a note of caution on how to deploying that
Speaker 3: capital carefully is important.
Speaker 7: Yeah, that's right. The earnings report from TSMC was very,
Speaker 7: very strong. As you said, they forecast that revenue is
Speaker 7: going to be up close to thirty percent this year.
Speaker 7: As you mentioned, they're boosting their capex outlook too. It's
Speaker 7: going up more than thirty five percent at the high
Speaker 7: end of that range, up to fifty six billion dollars.
Speaker 7: As you say, that's from forty point nine billion dollars
Speaker 7: last year, so it's a big boost. It's very clear
Speaker 7: who's going to benefit from this, as you mentioned ASML
Speaker 7: is one of the big beneficiaries. Its shares were up
Speaker 7: to a record today, Applied materials up today to a record.
Speaker 7: KLA is also up to a record, So you see
Speaker 7: that these chip equipment makers are definitely benefiting from this.
Speaker 7: But as you suggested, cc Way and the call afterwards
Speaker 7: was not exuberant about this. He was not reassuring in
Speaker 7: all respects about the AI trade. Somebody asked them directly,
Speaker 7: do you think that we're in an AI bubble at
Speaker 7: this point? And he said, yes, you're asking us whether
Speaker 7: the AI demand is real. So beyond the capital spending
Speaker 7: is demand. On the other side, he said, I'm very
Speaker 7: nervous about this. He said, we're investing fifty two to
Speaker 7: fifty six billion dollars. If we don't do it carefully,
Speaker 7: there could be a big disaster for TSFC. Just to
Speaker 7: be clear, TSMC is the one that's spending tens of
Speaker 7: billions of dollars for these new fabs that are going
Speaker 7: to come online two or three years down the line,
Speaker 7: and Video is not doing that, and Vidia is just
Speaker 7: buying chips from them.
Speaker 4: As is Apple and made its chips via TSMC, one
Speaker 4: of its biggest revenue drivers, and is also trying to
Speaker 4: stereous as to where the memory story goes as well. Peter,
Speaker 4: how did you hear about whether or not that's going
Speaker 4: to impact high end phones at least?
Speaker 7: Yeah, he touched on a very important point. There has
Speaker 7: been a shortage of memory chips, especially for some of
Speaker 7: these consumer electronics smartphones and the like. That's partly because
Speaker 7: there's so much demand for the AI to pair the
Speaker 7: memory chips with AI that that's squeezing up a lot
Speaker 7: of the capacity that's out there from Samsung and s
Speaker 7: K Heinez and Mike Cron in particular, so that's driving
Speaker 7: up prices. Ccway was asked about that, he said that
Speaker 7: he thinks it's going to be manageable going forward. That
Speaker 7: is a big issue go especially for smartphones and consumer electronics.
Speaker 3: Peter elite EDG chip fab is a fixed cost fifteen
Speaker 3: to twenty five billion dollars. It takes several years to
Speaker 3: come online, and you can't know what the demand will
Speaker 3: be when it does come online. Right, No one as
Speaker 3: a crystal ball. But a part of this is geopolitics.
Speaker 3: TSMC is at the heart of trade talks between the
Speaker 3: US and Taiwan and is under pressure to put more
Speaker 3: capacity in this country, the United States.
Speaker 7: You're touching on a very important point. Maybe let's start
Speaker 7: with a company challenge here. Historically TSMC has done all
Speaker 7: of its important manufacturing in Taiwan. It's easier, it's a
Speaker 7: very contained location where their engineers can share intelligence across
Speaker 7: the country, across the island. And now they're trying to
Speaker 7: also build in the United States and they're building more
Speaker 7: and more fabs. So right now the and Taiwanese officials
Speaker 7: are talking about a trade deal that would lower some
Speaker 7: of the tariffs for Taiwanese goods going into the United States.
Speaker 7: As part of that deal, we understand that TSMC will
Speaker 7: probably step up its investments in the United States. They're
Speaker 7: talking about adding four or five fabs on top of
Speaker 7: the existing ones that they already planned to build. So
Speaker 7: TSMC has said, we don't want to do our most
Speaker 7: cutting edge chips in the United States. But there are
Speaker 7: increasing capacity there that will be part of this deal.
Speaker 7: We anticipate that could come. It could come out publicly
Speaker 7: over the next week or so.
Speaker 4: Flu Mex Peter Elstrom, thanks so much for the breakdown.
Speaker 4: Let's tournal attention to New York City Mayor now Son
Speaker 4: mum Danny. He's giving his promise on focusing on better
Speaker 4: working conditions and pay for food delivery drivers. Now the
Speaker 4: city is accusing door Dash and Uber of depriving workers
Speaker 4: and more than five hundred and fifty million dollars in
Speaker 4: tips due to changes in their apps. But an I
Speaker 4: see is even looking to shut down a company called
Speaker 4: moto Click, behind the scenes delivery tech company that works
Speaker 4: with these big platforms using it a breaking local worker.
Speaker 5: Protection laws from Mex.
Speaker 4: Miles Miller has the latest and moto click is a
Speaker 4: focus for you.
Speaker 8: What's been up to Yeah, according to the Mayor's office,
Speaker 8: Moto click has not been paying the required minimum wage
Speaker 8: great and has been deducting canceled and refund orders directly
Speaker 8: from these workers paycheck. The city filing a lawsuit in
Speaker 8: a state Supreme court here in New York City and
Speaker 8: say that these practices left some of these couriers owing
Speaker 8: money to the company, and they say that they work
Speaker 8: with Uber and grubhub and DoorDash. What is central here
Speaker 8: is that this is the new focus of the new mayor,
Speaker 8: primely focus on the gig economy and food and delivery
Speaker 8: tech and really making sure that these new laws that
Speaker 8: protect these workers, whether it be wages, whether it be
Speaker 8: other fairness issues, are top of mine and front and center.
Speaker 8: That is what he is announcing today, and he is
Speaker 8: putting the onus on these companies doing really an education
Speaker 8: campaign to make sure that these companies know how they
Speaker 8: should protect their workers.
Speaker 2: What we know is that this company, in particular Notopliq.
Speaker 8: Integrates their point of service program or point of sale
Speaker 8: programs to generate orders from photographs of receipts really the
Speaker 8: last mile of that delivery until it gets to your home.
Speaker 8: We know that this is really focus off to the
Speaker 8: Mayor's office because he's appointed a former head of the
Speaker 8: Enforcement Provision of the FGC, as well as Shuley Sue,
Speaker 8: the former Labor Commissioner, and he's been a Labor secretary
Speaker 8: or president wide and he's also getting a lot of
Speaker 8: advice from Later Kant of course, Brandy MPGC and was
Speaker 8: very critical of fees and more importantly of the fees
Speaker 8: of these kind of app companies and what Magely.
Speaker 3: Lumos, Male Miller, Males Miller, thank you very much, and Caro,
Speaker 3: you know you and I have reflected on this story
Speaker 3: in the last couple of days that the main thing
Speaker 3: the audience needs to know is that come January twenty sixth,
Speaker 3: in that state of city, at least there is new laws.
Speaker 3: It's codified, the set of rules that protect the issue
Speaker 3: that Males has just been out.
Speaker 4: Yeah, motor Click is one issue and quite a significant
Speaker 4: step that even a city would look to shut a
Speaker 4: company down. But also what's been being reported on is
Speaker 4: the fact that doord Ashneuber make changes to their own
Speaker 4: apps and when you pay a tip, when you would
Speaker 4: say it's rational to pay the tip after the service,
Speaker 4: but it's meant that those tips have come way down
Speaker 4: for some of these drivers, and they're being accused of
Speaker 4: costing drivers about five hundred and fifty million dollars in tips.
Speaker 4: So is something that they're going to have to navigate
Speaker 4: and narrate as the story continues.
Speaker 3: We asked what would New York's new mayor do with
Speaker 3: the tech industry. This is the sort of early play
Speaker 3: of what his intentions are and if coming up on
Speaker 3: Bloomberg Tech, open Ai ramps up its real world ambitions,
Speaker 3: looking to shure up US hardware supply chains for future devices.
Speaker 2: We have more on next net Next. This is Bloomberg Tech.
Speaker 5: Open Ai.
Speaker 4: Well, it's looking to bolster its US hardware supply chain.
Speaker 4: Company looks to find partners for us to push into
Speaker 4: consumer devices, into robotics, and also of course into data
Speaker 4: centers and the Chatchip team maker has put out requests
Speaker 4: for proposals from various component companies in the United States.
Speaker 4: Mer Seth Fiegman, who covers open ai, joins us some more.
Speaker 4: This is about a local supply chain, but this is
Speaker 4: all about signaling where the future revenue is going to
Speaker 4: be coming from for the company, right.
Speaker 9: It's true some of this isn't keeping with the data
Speaker 9: center expansion that we've of course talked about before, but
Speaker 9: the idea of getting into robotics and supply chains for that,
Speaker 9: there's a little bit of a new development here. We
Speaker 9: know that open i has made some key hires on
Speaker 9: the robotics front. They haven't really said too much about
Speaker 9: it in recent months, and this is the first real
Speaker 9: signal in a while that they're serious about it and
Speaker 9: serious about focusing manufacturing for it in the US. Now,
Speaker 9: I will say, what's interesting is there's the hardware elevant
Speaker 9: of it, but also they're focusing a lot on the
Speaker 9: software and building the brains behind these AI robots.
Speaker 3: Are we looking for clues set of what a consumer
Speaker 3: facing device looks like from open Ai, what form factory is.
Speaker 3: As far as I can tell, we still a little
Speaker 3: bit in the dark there, I think.
Speaker 9: We are, And to be honest, it feels like openie
Speaker 9: I might also still be a little bitger than Dark Year.
Speaker 9: I mean, the last remarks that we heard from Jonie
Speaker 9: I've since his he was acquired by them, is that
Speaker 9: there's a dozen or more different design possibilities here for it,
Speaker 9: and he's almost overwhelmed by the different possibilities here. But
Speaker 9: it seems like it might be a subtle device, and
Speaker 9: I think most folks are expecting something in the next year.
Speaker 3: Bloomberg Seth Figman, who's OURAI editor leading the team there,
Speaker 3: thank you so much that stay with open Ai. The
Speaker 3: company has signed a multi year hardware deal with Cerebrus,
Speaker 3: giving open ai access to seven hundred and fifty megawatts
Speaker 3: of computing power. According to sources, the agreement is valued
Speaker 3: at more than ten billion dollars and would expand open
Speaker 3: AI's efforts in AI infrastructure buildout. Let's get to Bloomberg
Speaker 3: Senior Tech editor Mike Sheppard.
Speaker 2: Mike, what do we need to know?
Speaker 6: Well, this is just the latest massive data center deal
Speaker 6: that OpenAI has inc over the past year or in
Speaker 6: twenty twenty five, we saw them sign a ten gigawatt
Speaker 6: deal within video valued at roughly one hundred billion dollars
Speaker 6: in a six gigawat deal with AMD, So this is
Speaker 6: just another instance of them looking for more hardware suppliers,
Speaker 6: and it's just another sign that the demand for infrastructure
Speaker 6: is still there, especially on the hyperscaler side.
Speaker 2: For Cerebrus, this is a big moment.
Speaker 10: This is the deal that the CEO, Andrew Feldman, who
Speaker 10: has been on this program before, says will launch the
Speaker 10: company into the big leagues. They say that their technology
Speaker 10: runs as quickly and more efficiently than in vidias and
Speaker 10: they are really trying to challenge the market leader in
Speaker 10: this space for AI chips and AI hardware and what
Speaker 10: they are looking to do now is perhaps expand on that,
Speaker 10: and the company is also in talks for a capital
Speaker 10: raise of as much as one billion dollars that would
Speaker 10: take their total valuation to twenty two billion dollars. Now,
Speaker 10: this deal is not complete on the rais, but it
Speaker 10: certainly is drawing more attention to a company that is
Speaker 10: trying to establish itself as a real market competitor to
Speaker 10: AMD and Nvidia in this area of AI chips.
Speaker 3: Blue Mags, Mike, thank you very much. There's many more
Speaker 3: news stories out there today in the world of tech.
Speaker 11: Caro, there are.
Speaker 5: It's time now for talking tech.
Speaker 4: A first up, Ali Baba is looking to unify its
Speaker 4: various services in its AI app Quenn. The company is
Speaker 4: looking to connect the likes of Talbot, Alipay, Fliggy to
Speaker 4: the Quenn app, offering users just one single platform to shop,
Speaker 4: to book, travel, to pay for services for the help
Speaker 4: of AI prlus Amazon while it's challenging Saxes Chapter eleven
Speaker 4: filing coming. The luxury retailer breached a deal tied to
Speaker 4: selling sax products on Amazon and then its equity stake
Speaker 4: is now presumptively worthless. Sax is seeking court approval to
Speaker 4: access as much as one point sent five billion dollars
Speaker 4: in financing to pay vendors, payroll and other expenses, and
Speaker 4: elol Musk's XAI when it's disabled the ability for users
Speaker 4: to generate sexualized images of real people using its.
Speaker 5: Clock AI chatbot.
Speaker 4: In a post on x then, the company says it
Speaker 4: has quote zero torrant for any forms of child sexual exploitation,
Speaker 4: non consensual nudity and unwanted sexual content, and changes up
Speaker 4: to all users on x when using glock, and they
Speaker 4: include premium subscribers to ed Okay.
Speaker 3: Coming up, A grid operator cuts its power demand forecast,
Speaker 3: offering a reality check to the AI boom that conversation's next.
Speaker 3: This is Bloomberg Tech, the biggest grid operator in the US.
Speaker 3: PGM Interconnection cut its power demand forecast for summer twenty
Speaker 3: twenty seven by more than two percent to about one
Speaker 3: hundred and sixty gigawats. That may seem surprising given that
Speaker 3: big cloud providers and AI firms keep talking up their
Speaker 3: need for electricity, and even more so when you consider
Speaker 3: that PGM manages the region which includes data center heavy
Speaker 3: Northern Virginias.
Speaker 2: What does all this mean?
Speaker 3: Let's bring in medi Parriearb, CEO of the Washington, DC
Speaker 3: based International Data Center Authority, a think tag but also
Speaker 3: global advisor on data centers. This data set is really
Speaker 3: important throughout industry. A lot of people have said, keep
Speaker 3: watching it. But what it indicates is that there is
Speaker 3: a big difference, right MEDI between those projects announced on
Speaker 3: data center capacity and those that are actually being built
Speaker 3: and those that are actually utilizing electricity not just contracted
Speaker 3: for it.
Speaker 2: What do you make of it?
Speaker 12: Yeah, yes, we see this happening all the time. What's
Speaker 12: announced is usually very different from what's actually planned and deployed,
Speaker 12: so reports need to rely on planned projections, not announced projections.
Speaker 12: And you know this, this report doesn't really relate to
Speaker 12: the actual reality of the datalin industry for simple reasons.
Speaker 12: First of all, you know the one hundred and sixty
Speaker 12: four game of what deviation to one sixty gig a
Speaker 12: what is just two point four percent drop? And the
Speaker 12: way power companies work, they try to double the projected
Speaker 12: average and this is not a significant job in terms
Speaker 12: of power projection. However, the fact that the day center
Speaker 12: industry is actually growing, not by anyways diminishing, is because
Speaker 12: of the fact that data centers are not just bottlenecked
Speaker 12: by power, but also by water, by connectivity, by human capital,
Speaker 12: by policy, taxation, and so many other reasons. That's why,
Speaker 12: for example, workforce there is simply not to know people
Speaker 12: out there to run data centers. But the most important
Speaker 12: reasons that this report could be misleading is two reasons. First,
Speaker 12: chip maturity, because chips are evolving so fast that it
Speaker 12: became so difficult for las center owners and operators to
Speaker 12: build day centers fast enough that before they become obsolete.
Speaker 12: It usually takes twenty four most tobilit day center and
Speaker 12: just we're changing multile basis, but in twenty twenty six,
Speaker 12: we're predicting that a lot of maturity and clarity.
Speaker 2: Yes, how valuable is this data?
Speaker 3: Right? Because what PGM does is tell us their forecast
Speaker 3: for the next five years summertime peak demand, winter time
Speaker 3: peak demand, and then they tell us that by twenty
Speaker 3: thirty five they expect that demand forecast to keep growing.
Speaker 2: That's quite a long time horizon.
Speaker 13: Yeah.
Speaker 12: But one of the main reasons that I don't find
Speaker 12: this report too relevant is because it's totally ignoring onside
Speaker 12: power generation. Because because of the slow development of the
Speaker 12: power companies and then meeting the demand needs of the
Speaker 12: days of the operators. A lot of dacent companies are
Speaker 12: reverting to onside power generation. If you want to grab
Speaker 12: a gas turbine, you can't find anything in the market today.
Speaker 12: Everything is backloaded. So a lot of people are reverting
Speaker 12: to onside power generation, whether it's gas, solar or other
Speaker 12: means hydro and including asmrs. You know this, This report
Speaker 12: totally dismisses the fact that a lot of day center
Speaker 12: industries relying on onside power generation and not on the grid.
Speaker 14: And that's why you really can depend on the board.
Speaker 4: Many I've seen caterpillars stop go way high because people
Speaker 4: have been trying to bring on local power generation in
Speaker 4: this way. But you do want SMRs. They're not really
Speaker 4: out there in the field yet. I mean that's something
Speaker 4: that we factor in at least in five years time, right.
Speaker 12: Yeah, I mean the maturity process, you know, governance, everything
Speaker 12: outside of the country, Nuclear is becoming very popular. United
Speaker 12: Arab Emirs, for example, is a nuclear country. They are
Speaker 12: building data centers that giga capacities. So when you look
Speaker 12: at the world map, nuclear in general is becoming the
Speaker 12: solution to go to for data centers and SMRs for
Speaker 12: outside power generation of the way to go. But in
Speaker 12: the meantime, there's a transitional fuel, which is natural gas,
Speaker 12: which everybody is relying on, and that is totally being missed,
Speaker 12: you know, dismissed in most findings and most sports. So
Speaker 12: the projections of power companies trying to provide electes stay
Speaker 12: on the grid doesn't really reflect the reality of the
Speaker 12: data center industry growth. We're going from sixty gigo to
Speaker 12: three hundred gigabot capacity in just five years, and that's
Speaker 12: that's not even.
Speaker 14: A very optimistic explanation of the market.
Speaker 12: Is a very conservative projection because looking at the company
Speaker 12: like Nvidia, where chips and the development of AII is
Speaker 12: totally blocked and bottlenecked by the development and speed of
Speaker 12: growth of data centers, you will see that there is
Speaker 12: no other option where companies like Nvidia are hunting for
Speaker 12: data center power so that they can sell more chips.
Speaker 5: Can I Can I get this straight?
Speaker 4: Then you think that ultimately this power provider is underestimating
Speaker 4: how much power we're going to be needing in five
Speaker 4: years time.
Speaker 14: Definitely is totally underestimated.
Speaker 5: It's the consumer.
Speaker 4: You're someone who goes around and advises governments worldwide about
Speaker 4: what to do in terms of getting their data centers online.
Speaker 4: What does that mean in terms of power prices to
Speaker 4: the everyday consumer.
Speaker 12: The only way countries can keep up with this is
Speaker 12: either you need to stop technology from growth, which is
Speaker 12: not possible, or every day is touched by data centers
Speaker 12: and AI and the evolution of technology.
Speaker 14: This interview wouldn't be possible.
Speaker 12: The flights everything around us is only possible through technology
Speaker 12: and ultimately true days, so you cannot stop that. What
Speaker 12: you need to do at the national level, government level,
Speaker 12: you need to make sure that you're provisioning in our
Speaker 12: power to your people, to your citizens as you don't
Speaker 12: you don't burden your citizens.
Speaker 14: By the cause of electricity.
Speaker 12: By making sure that you're not just sitting around letting
Speaker 12: the market drive things you need to. You need to
Speaker 12: make sure that you are always ahead of the Unfortunately,
Speaker 12: governments aren't as informed.
Speaker 14: That there should be. So that's that's a major tanks
Speaker 14: for us when we advise governments.
Speaker 4: Many Pravi, We thank you for your time, CEO of
Speaker 4: International Data Center Authority, A pretty busy man, right now,
Speaker 4: Let's stick with all maybe that story about power grids
Speaker 4: by PGN about that outlook for the forecast and bringing
Speaker 4: blue megs rue Manik, who's been writing up all about
Speaker 4: this for the un well, unbathed and deep knowledge of
Speaker 4: power and how it works here in the United States,
Speaker 4: is a is the outlook of one hundred and sixty
Speaker 4: the right one?
Speaker 5: Do you think? How do they come to these sorts
Speaker 5: of numbers?
Speaker 15: Yeah, just to quickly put context, power demand has been
Speaker 15: so like flat in PGM that they still haven't touched
Speaker 15: the all time record that was hit in two thousand
Speaker 15: and six, which is one hundred and sixty five gigawats,
Speaker 15: and they won't get there until twenty twenty eight. So
Speaker 15: this pullback now for next year of about nearly four gigawatts,
Speaker 15: that's a lot. That's four nuclear reactors worth of.
Speaker 5: Power supply.
Speaker 15: And so I think what PGM is trying to do,
Speaker 15: This is an industry that is overwhelmed with so many
Speaker 15: requests to build power plan data centers that can consume
Speaker 15: as much power as cities. This is all being passed
Speaker 15: on to consumers, so they're trying to find out what's
Speaker 15: actually happening and on what timeline, And this is specifically
Speaker 15: for next year but then and that will affect consumers
Speaker 15: prices because they had a shortfall of nearly six gigawatts
Speaker 15: in the capacity auction. So now that shortfall is smaller,
Speaker 15: so it has direct costs and consumers. I think longer term,
Speaker 15: what you're hearing is right, like those numbers are gonna
Speaker 15: change a lot. We might see a hockey stick type
Speaker 15: of momentum here, right.
Speaker 2: Nor in real quick.
Speaker 3: The reason that this data kind of peaks the interest
Speaker 3: is that PGM goes back and only includes projects that
Speaker 3: will take some load that they think are actually going
Speaker 3: to be real and be built.
Speaker 2: Just explain the methodology they use. Yeah, this is.
Speaker 15: Actually a new methodology. They have historically and not had
Speaker 15: that much insight into what's happening on the demand side.
Speaker 15: They usually look at power generation, but this demand is
Speaker 15: coming so fast that they went back and with the
Speaker 15: work while working with utilities, looked at which projects have
Speaker 15: like engineering contracts, construction contracts, and electricity service contracts. So
Speaker 15: these are more real. That's not to say you can't
Speaker 15: see more, but you are seeing also a huge scramble
Speaker 15: to write build on site generation.
Speaker 3: Bloombergsnorine Mallick, great reporting, Thank you very coming up. Hardware
Speaker 3: makers Apple, HP others feeling the pain of the memory
Speaker 3: crunch as next. Rising memory prices starting to make investors nervous,
Speaker 3: especially when it comes to hardware makers that rely heavily
Speaker 3: on those components. You can see it in the stocks.
Speaker 3: Shares of Apple and HP have been under pressure this year.
Speaker 3: Apple down more than four percent so far in twenty six,
Speaker 3: Hpa down more than six percent. Bloomberg Equities reported Ryan
Speaker 3: Vasellak has been writing about exactly that the situation is right. Severe,
Speaker 3: severe demand for memory storage and high bandwidth from the
Speaker 3: data center is making tight supply for everyone else, shooting
Speaker 3: prices up. But now we're seeing it in the equities
Speaker 3: those names that rely on it most.
Speaker 2: What do we need to know? Hey, good morning, Thanks
Speaker 2: for having me.
Speaker 16: So we've been talking a lot about how strong the
Speaker 16: memory and storage companies have been, especially this year and
Speaker 16: in recent months, sand Disk, Western Digital, Seagate, Micron. The
Speaker 16: flip side of that is those other customers for those companies,
Speaker 16: like you said, HP del to a certain extent, all
Speaker 16: these companies that make consumer hardware, they are seeing this
Speaker 16: in the form of higher memory prices, which is having
Speaker 16: an impact on their margins.
Speaker 2: On their cost of goods.
Speaker 16: It's really become something of a major concern for these companies,
Speaker 16: ECHP being probably the most prominent example. There's a lot
Speaker 16: of concern about what is this going to mean for
Speaker 16: their ability to have favorable prices for PCs. What will
Speaker 16: raising prices do to demand? What we'll keeping prices steady
Speaker 16: due to margins. A lot of concerns there because memory
Speaker 16: is a pretty big component for building out PCs and
Speaker 16: our phones products like that.
Speaker 4: What's interesting is we tie it back to TSMC's results
Speaker 4: and we hear from the CEO who sort of guided
Speaker 4: us to the idea that the memory chip price increases
Speaker 4: actually aren't going.
Speaker 5: To affect that.
Speaker 4: Perhaps Apple so much, they're big customer because they send
Speaker 4: the high end phones, but really it's an HP and
Speaker 4: a Dell story. Is it because they've got less of
Speaker 4: a margin to be able to take a hit, they
Speaker 4: have to pass it on to the consumer.
Speaker 2: Yeah. Absolutely so.
Speaker 16: A lot of these companies have like supply agreements that
Speaker 16: are probably going to last through the first half of
Speaker 16: twenty twenty six or so. After that, this equation is
Speaker 16: going to get a lot tougher. A lot of the
Speaker 16: brides in these memory prices has occurred over the past
Speaker 16: several months, so it is something people are worried about,
Speaker 16: especially as you look into the second half of twenty
Speaker 16: twenty six. I know we just started, but people are
Speaker 16: already looking there, really looking at what is this going
Speaker 16: to mean for their margins and how should we consider
Speaker 16: them on a valuation basis. If you have this suddenly
Speaker 16: new you know, increased costs in the form of higher
Speaker 16: memory chips.
Speaker 3: There is an upside for someone and that is that
Speaker 3: the memory names themselves. We were just cycling through the
Speaker 3: charts right on a one year basis, some of those
Speaker 3: memory names are up hundreds of percent, some of them
Speaker 3: more than one thousand percent. This has changed the fortunes
Speaker 3: and also I guess the reputation of some of the
Speaker 3: names like sand Disk, Western Digital.
Speaker 2: Seagate, Rhyme. Yeah. Absolutely so.
Speaker 16: Historically a lot of these companies traded at much lower
Speaker 16: multiples because they had a pretty shorter cycle as far
Speaker 16: as their boom and.
Speaker 2: Bus cycle goes.
Speaker 16: So you would see something like a PC refresh cycle
Speaker 16: or an iPhone or smartphone upgrade cycle, and you would
Speaker 16: see a little bit of a boost in the memory prices,
Speaker 16: and then you'd see it fall back again, and you'd
Speaker 16: see the stock sort of reacting along that sort of cadence.
Speaker 16: But now you have these new customers, all these hyperscalers,
Speaker 16: all of this money that's being spent on AI. That
Speaker 16: has really changed the kind of equation, the kind of
Speaker 16: cycle that these companies are operating under. So you really
Speaker 16: seem just so much growth coming out of these companies,
Speaker 16: and really, so far it doesn't seem like it's going
Speaker 16: to stop anytime soon. It seems like memory prices are
Speaker 16: continuing to be biased upwards, and that just has people
Speaker 16: being very optimistic about their prospects from here, especially since
Speaker 16: a lot of these companies continue to trade at a
Speaker 16: discount to your videos of the world and so forth.
Speaker 5: And Estelleka always with some of the most red stories.
Speaker 5: Thank you very much. Let's get a market analysis now.
Speaker 4: In fact, Oshkadeshka is with us senior analyst over at
Speaker 4: Swiss Code.
Speaker 5: And what's really interesting.
Speaker 4: You've been thinking about some of these bottlenecks, and we
Speaker 4: think memory is one. We've been thinking about how infrastructure
Speaker 4: is one of them as well. We're thinking about how
Speaker 4: power is too impact. How are investors trying to play this?
Speaker 4: Are they still worried about an AI bubble. Are they
Speaker 4: still all in on the areas that still are in demand.
Speaker 13: Well, there are now bottlenecks where trying to pop. As
Speaker 13: you say, one is energy memory chase. We also have
Speaker 13: a heavy rise in metal prices, especially copper prices, are
Speaker 13: pressuring input prices higher, and these pressure and input prices
Speaker 13: started to worry investors in many segments. Not all segments
Speaker 13: are concerned, but many segments, especially hallway companies and data centers,
Speaker 13: are now feeling the pinch of higher input costs and
Speaker 13: eventually higher energy prices as well. And one of the
Speaker 13: other problems is obviously see the trade tensions, the potential
Speaker 13: shock to supply chains, and all of that is just
Speaker 13: playing quite negatively into this AI. The optimistic AI narrative
Speaker 13: that we had seen over the past three years.
Speaker 4: And then comes TSMZ that's sort of eased a lot
Speaker 4: of that anxiety, saying AI demand, we see it, shortly, cautious,
Speaker 4: but we see it and we build. What does that
Speaker 4: mean about the ultimate story? How much did optimism get
Speaker 4: brings back?
Speaker 11: Well, it did TSMC beat estimates.
Speaker 13: That was not surprised as just another quarter of very
Speaker 13: strong results from TSMC, and they say that the demand
Speaker 13: and AI remains strong and they're building more data and
Speaker 13: more and more chip plans. Excuse me, and that also
Speaker 13: justifies TSMC's building chip plans outside the United States and Japan,
Speaker 13: in Europe and obviously in the US as well.
Speaker 11: Demands remain strong.
Speaker 13: But building these chip plans and building the data centers
Speaker 13: requires components, and the components, the supply of components is
Speaker 13: unfortunately not infinite infinite, so that is going to be
Speaker 13: a bottleneck, and that's going to be the capacity constraint
Speaker 13: that could eventually become a headache for the sector and
Speaker 13: the growth expectations, UPEG.
Speaker 3: If I showed you a long term chart of memory
Speaker 3: spot pricing, it would be for a number of years
Speaker 3: basically steady only because of the severity in the surge
Speaker 3: in the last month. At this juncture, do we need
Speaker 3: to start talking about the impact of memory You mentioned
Speaker 3: energy as well on inflation and have a more economic
Speaker 3: discussion about what this shock, this bottleneck is causing.
Speaker 13: Well, obviously there are no rising worries about the fact
Speaker 13: that all these AI demands and resources being limited is
Speaker 13: going to start pushing prices higher for the memory chips.
Speaker 11: We're talking about very big numbers.
Speaker 13: I mean thirty percent rise only last quarter according to
Speaker 13: some songs record earlier this month. And as Ryan also said,
Speaker 13: I mean, this is a very important component of hardware
Speaker 13: companies and it will eventually start pressuring their their profit
Speaker 13: margins and lead to price pressures. Now, the question is
Speaker 13: how much of these costs, of the additional costs will
Speaker 13: be pushed onto the end customers. The reality is that
Speaker 13: we do not know. But the higher the demand, the
Speaker 13: higher the prices we are going to be going up,
Speaker 13: and the higher the pressure will be on the profit margins.
Speaker 13: There the competition is going to be important. The higher
Speaker 13: the competition will the bigger the impact on profit margins,
Speaker 13: and these companies will not be able to push the
Speaker 13: prices too high because well then there will be there
Speaker 13: will be implications on the demands side.
Speaker 3: The memory bottleneck. Is that going to be the talking
Speaker 3: point of this technology earning season.
Speaker 13: Well, yes, I think that is going to be one
Speaker 13: of the major talking points, along with energy and the
Speaker 13: metal prices as well.
Speaker 11: All of these input prices are rising.
Speaker 13: The other thing that we will be really watching very
Speaker 13: closely in this earning season is obviously the headline numbers,
Speaker 13: but not only we will be also looking very closely
Speaker 13: into how the revenues are being booked and how the
Speaker 13: loans are also being booked in order to not let
Speaker 13: the technology companies builders narrative, but also try to dig
Speaker 13: into the risk that could be underline.
Speaker 5: IPEC, We thank you IPEC. Os Kadashka. Great to have
Speaker 5: you from Swiss. Quote.
Speaker 4: I mean, we're talking about energy, we're talking about power,
Speaker 4: and we have some breaking news at the moment. All
Speaker 4: regarding the offshore wind band that Trump had imposed has
Speaker 4: been blocked for a second time in the US court.
Speaker 4: So Equinor has run on ruling to resume a US
Speaker 4: wind project that have been halted by President Trump. So
Speaker 4: this all fits into the context of power, the need
Speaker 4: for it, but also the calmdown on certain green projects
Speaker 4: from the current administration.
Speaker 3: Okay, coming up, four astronauts landed safely back on Earth
Speaker 3: last night in NASA's first ever medical evacuation. When it
Speaker 3: comes to space, President Trump is more focused on defense.
Speaker 3: We'll have the latest on that next. This is Bloomberg Tech.
Speaker 10: If we don't take Greenland, Russia up, what China will
Speaker 10: take Greenland?
Speaker 9: And I am not going to let that happen.
Speaker 1: Jure, I'd loved about it, and make a deal with them.
Speaker 2: It's easier we went to one way or the other.
Speaker 5: We're going to have Greenland, President Trump speaking there now.
Speaker 4: One reason the US has stressed its need to take
Speaker 4: over Greenland is for the Golden Dome Air and Missile
Speaker 4: defense system. Let's talk about that, the technical difficulties, the challenges,
Speaker 4: the operations. Laura Crabtree, co founder CEO of Exscellon three,
Speaker 4: a provider of resource management software for the space industry.
Speaker 4: And really you've done such a deep dive on how
Speaker 4: technically difficult Golden Dome will be to execute from a
Speaker 4: partner perspective, talk us through.
Speaker 10: It, law.
Speaker 17: Yeah, So the biggest challenge, I think is not necessarily
Speaker 17: going to be just the technology.
Speaker 14: It's going to be the cooperation between the.
Speaker 17: Government and the commercial partners that are providing solutions to
Speaker 17: the government. And that is everything from the technology, the
Speaker 17: acquisition of programs, the operations of those programs, and then
Speaker 17: everything in between. And so I think not only the
Speaker 17: cost is a little bit of a risk, but also
Speaker 17: the risk of the number of people that need to
Speaker 17: be involved in Golden Dome and the number of things
Speaker 17: that need to go correctly for the Golden Dome to
Speaker 17: be successful program.
Speaker 4: I mean, aside from the fact that the geopolitics of
Speaker 4: it all. As Secretary Hegseth has been saying that Greenland
Speaker 4: is vital to US paths to build the Golden Dome
Speaker 4: missile defense shield in particular, I'm interested in ultimately whether
Speaker 4: you think get pulled off in what succession, How is
Speaker 4: yourself for how are people thinking about aligning partners.
Speaker 17: Yeah, the one thing that I keep going back to
Speaker 17: is the demonstration of the commercial partnership in companies like SpaceX,
Speaker 17: the coordination with NASA, the coordination with all of the
Speaker 17: different partnerships that SpaceX has formed over the life cycle
Speaker 17: of the company, and all the partnerships that are going
Speaker 17: to need to come from the Golden Dome. So I
Speaker 17: think looking at that and the technological challenges for that,
Speaker 17: and the communication and coordination, we've taken a look at
Speaker 17: how much we need to be able to provide our
Speaker 17: commercial partners to be able to work in concert with
Speaker 17: the government partnerships that they are forming in the future
Speaker 17: and right now, so that we can make sure that
Speaker 17: it is as successful as it can be.
Speaker 3: At this stage, Laurie in a Golden dome, is an idea,
Speaker 3: a proposal, a plan for missile defense. But increasingly the
Speaker 3: focus of the administration, as we discuss at the top,
Speaker 3: is space as either a war fighting domain or critical
Speaker 3: domain to defense, you know, leveraging your experience at SpaceX.
Speaker 3: But currently, what's your assessment of how this administration is
Speaker 3: going about that as a priority.
Speaker 17: Well, I think from the discussions I've had, the priority
Speaker 17: is on acquisition, letting the commercial partners develop technology and
Speaker 17: then having the government acquire it. I think there's still
Speaker 17: some work to be done on acquisition of programs, acquisition
Speaker 17: of technologies, and then how the partnership actually works between them,
Speaker 17: and then I think there's probably some financial discussions that
Speaker 17: also need to be worked out a little bit. But
Speaker 17: there Yeah, you're right, it is still in development, so
Speaker 17: I think a lot of those things are in discussion,
Speaker 17: and I'm very hopeful that some of the roadblocks that
Speaker 17: we've seen in the past to government acquisition will be
Speaker 17: removed going forward.
Speaker 3: I've got to ask you about a first ISS medical evacuation.
Speaker 3: You know, SpaceX at the heart of it, but NASA
Speaker 3: moved incredibly quickly again reflecting on your time in industry,
Speaker 3: what you made of it, And you know, we say
Speaker 3: on this program a lot. The ability to put humans
Speaker 3: into orbit and return them from ISS is now routine
Speaker 3: through SpaceX.
Speaker 2: Is that more evidence of that?
Speaker 11: It absolutely is.
Speaker 17: And the partnership that was formed when I started at
Speaker 17: SpaceX in two thousand and nine, it didn't start as
Speaker 17: it is right now. There were still open questions on
Speaker 17: whether or not SpaceX was going to come to the
Speaker 17: table with real hardware, with real operational mindset, and we
Speaker 17: did prove to NASA that we were there to basically
Speaker 17: run a successful program, and over the course of the
Speaker 17: number of years that we've been working with them, we've
Speaker 17: really built a level of trust with NASA such that
Speaker 17: they can move quickly, they can make decisions quickly, and
Speaker 17: I think part of that is the underlying software and
Speaker 17: infrastructure and decision making that has been sort of part
Speaker 17: of the program from the beginning, and that has enabled
Speaker 17: them to move quickly and diorbit a crew in a
Speaker 17: very short period of time, something that is not easy
Speaker 17: the technologies there. Clearly, we've returned many humans from space
Speaker 17: at this point. However, the decision usually is multiple weeks months,
Speaker 17: and you know, if you have six months of planning,
Speaker 17: you know what the weather is going to be, you
Speaker 17: know exactly who does what, you know the stowage, you
Speaker 17: know everything. But in order to move quickly, you need
Speaker 17: to have all of that very well planned out. And
Speaker 17: I think that it is a really nice thing to
Speaker 17: see the the movement in that.
Speaker 4: And now you've built Epsilon three, and now your customers
Speaker 4: are not just NASA itself but other rival space companies.
Speaker 4: There's a worry that SpaceX is too dominant.
Speaker 5: Would you say it is.
Speaker 11: I would not say it is.
Speaker 17: I would say that we need companies like SpaceX to
Speaker 17: have a lot of success to show the market how
Speaker 17: impactful a very, very large and successful space company can be.
Speaker 17: And it's also enabling a lot of other companies to
Speaker 17: get to space quickly and effectively, and also at a
Speaker 17: cost that is much lower than previous So it's actually
Speaker 17: enabling the rest of the space economy and I'm really
Speaker 17: glad to see it. It's something that I wanted to
Speaker 17: be a part of from the beginning of my journey
Speaker 17: in this industry.
Speaker 3: Laura Crabtree, CEO and co founder of Epsilon three, thank
Speaker 3: you very much crucial to both space and defense tech
Speaker 3: are rare earths, and on Wednesday, President Trump signed a
Speaker 3: proclamation aimed at securing US access to critical minerals. The
Speaker 3: move to reduce China's dominance in the supply chain has
Speaker 3: spurred investors to pour money into the startups and companies
Speaker 3: in the sector, some of which are focused on the
Speaker 3: green energy transition, joining US as Bloomberg Climate Tech editor
Speaker 3: Brian Kahan gives some hope what the President wants to
Speaker 3: do is cut into China's dominance, but actually there's there's
Speaker 3: a whole industry, a lifeline being provided to green tech.
Speaker 18: Yeah, that's right, it's definitely. I would say that President
Speaker 18: Trump is nicely focused on green tech, but there is
Speaker 18: very much a knock on side effect, yeah, side effect. Yeah,
Speaker 18: And well, you know for the green tech industry at
Speaker 18: this point, they'll take it. There's a lot of pushback.
Speaker 18: You know, we just heard earlier about the offshore win
Speaker 18: back and forth. But you know, there are some wins
Speaker 18: that are happening, and when it comes to rare that
Speaker 18: is one of those wins we've seen by the President
Speaker 18: putting in sort of the way of the federal government
Speaker 18: behind it. And pushing for this onshoring of the supply chain.
Speaker 18: We've seen a major investment from the private sector, including
Speaker 18: a record set last year of nearly six hundred and
Speaker 18: thirty million dollars RAN.
Speaker 4: I think it's worth just going that big picture because
Speaker 4: rare earth extracting them is an incredibly messy and climate
Speaker 4: impactful affairs. So is that why green energy gets a
Speaker 4: lifeline and what types of companies do.
Speaker 5: Well out of this?
Speaker 18: I mean, the companies that are going to get a
Speaker 18: lifeline out of this are you know, for just one example,
Speaker 18: EV's if you look at the rare earth you.
Speaker 2: Know who's using rare earths?
Speaker 18: About twenty two percent of all use last year was
Speaker 18: through evs, vikes, you emobility essentially, So those are the
Speaker 18: kind of companies that can really benefit from seeing a
Speaker 18: more diverse supply chain.
Speaker 14: You know.
Speaker 18: In addition to that, there are other parts of the
Speaker 18: tech industry at largely use them as well as defense.
Speaker 18: But I'd say, like when you're looking at where are
Speaker 18: the biggest gains that could be made, it's going to
Speaker 18: be emobility that could see the biggest you know, boost
Speaker 18: from see more rare earth production.
Speaker 3: The national security element clearly important. Brian, Sorry if this
Speaker 3: is a dumb question, but where is the president going
Speaker 3: to find these rare earths if he's not going to
Speaker 3: get them from China.
Speaker 18: Well, there are a number of ways to kind of
Speaker 18: get them in some of the interesting ways that we're
Speaker 18: seeing some of these companies in the US work is
Speaker 18: actually looking at mining waste. So there's a company called
Speaker 18: Phoenix Tailings. Their big thing is taking mining waste from
Speaker 18: other processes and basically sort of digging out essentially maybe
Speaker 18: a one more fancy than digging out, but they're essentially
Speaker 18: getting the rare earths that are hidden in there out
Speaker 18: of that mining waste and processing it. And they've just
Speaker 18: opened up a plant in New Hampshire actually last year.
Speaker 18: You know, they're producing a pretty small amount at this points,
Speaker 18: about two hundred tons annually. That's a very small fraction
Speaker 18: of the six hundred and twenty thousand tons that China produces.
Speaker 18: But it shows that there are going to be some
Speaker 18: unique ways to get into the supply chain beyond just
Speaker 18: mining them out.
Speaker 19: Of the ground.
Speaker 5: Brian KHM. Fascinating. Thanks for joining us. We appreciate it.
Speaker 4: Now coming up, go to Oracle making a big bet
Speaker 4: on Nashville. The workers don't seem to be been on
Speaker 4: locating at the company's new global at quarters on that
Speaker 4: next this room leg Tech.
Speaker 3: Oracle may be an attractive bet for investors, but the
Speaker 3: company is struggling to do a workers to its new
Speaker 3: global headquarters in Nashville, Tennessee. Belue most Brady for has
Speaker 3: been covering Oracle's efforts, and what's interesting is, you know,
Speaker 3: go back a couple of years in Larius and was
Speaker 3: positioning this is like, this is gonna be world HQ.
Speaker 2: They want people, they're hiring there.
Speaker 3: There are postings, but actually behind Missouri and California, it's
Speaker 3: actually pretty low down the total workforce table.
Speaker 2: What are they pitching here?
Speaker 19: Right If you're sitting in California or Seattle, which is
Speaker 19: where a lot of experienced cloud and for social people sit,
Speaker 19: and you hear let's move to Nashville, maybe you love
Speaker 19: country music and you're stumped. But in a lot of
Speaker 19: cases that we're hearing, they say, oh, you know, there's
Speaker 19: not a whole lot of industry out there. What if
Speaker 19: I move out there and I get laid off? You know,
Speaker 19: So this is one of these tales of the tech
Speaker 19: industry wanting to become more distributed across the US, lower
Speaker 19: cost of living, lower taxes. But you know, your talent
Speaker 19: and workforce is still clustering in these West Coast hubs.
Speaker 4: You've been speaking to local officials over in Nashville, they
Speaker 4: still seem pretty upbeat.
Speaker 19: Yeah, yeah, I mean they're excited, right. You hear one
Speaker 19: of the most important tech companies wants to bring eight
Speaker 19: thousand workers and develop a new campus. That's great news
Speaker 19: for local economic development. Just the question will be how
Speaker 19: long does it take to attract all of these people,
Speaker 19: what does it look like, and does it bring these
Speaker 19: network effects. I mean, the campus is on track, they
Speaker 19: are developing it. It's just a question of hiring at
Speaker 19: this point.
Speaker 3: Nashville is a good time. I can attest to that
Speaker 3: at a minimum. But what you were saying about, you know,
Speaker 3: industry and footprint, This is something's happened with Austin, Texas, right,
Speaker 3: There is actually more of an industry footprint there. What
Speaker 3: about leadership. Where's Larry Ellison currently basing himself and spending
Speaker 3: his time?
Speaker 19: Well, that's what's so interesting about the HQ designation, right,
Speaker 19: I mean, Larry Ellison spends most of the time in
Speaker 19: Hawaii or Florida, old CEO staff or cast it as well.
Speaker 19: What gives Nashville some real credibility though, is that their
Speaker 19: new co CEO claim of work. He sits there in Nashville, right,
Speaker 19: So if you want to cozy up to the boss,
Speaker 19: you might say, I'm putting the cowboy hat.
Speaker 4: Bloomberg's Brody Ford. Who would skip a cowboy hat? That
Speaker 4: does it for this edition of Bloomberg Tech. It's great
Speaker 4: to see Brody out there in San Francisco with you, Ed, right.
Speaker 3: Yeah, it's great to have him here. He's really owns
Speaker 3: this beat, not just of infrastructure but software as well.
Speaker 3: I've got a lot of things in my head about memory,
Speaker 3: memory chips, and memory pricing. Recap our discussion on that
Speaker 3: from the show through the podcast. You know where to
Speaker 3: find it on the Bloomberg platforms as well as online
Speaker 3: on iHeart, Spotify, and Apple.
Speaker 2: This is Bloomberg Tech.