Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is a
Speaker 1: live from Coast to Coast with Caroline Hyde in New
Speaker 1: York and Vla low in sent Francis Goal.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: Apple surprises with a strong outlook, demand roaring and signs
Speaker 3: its coping with a supply crunch.
Speaker 2: The stock source back to life plus.
Speaker 4: Roadblocks plunges as an aggressive push to enhance safety tempered
Speaker 4: daily user growth will discuss for the CEO and.
Speaker 3: A Bloomberg interview with Open AI CFO Sarah Fryer, who
Speaker 3: pushes back on the AI leader missing its own target
Speaker 3: and bigs up its stretch goals.
Speaker 4: Let's talk about goals. Let's talk about where the nast
Speaker 4: that one hundred is and the moment if you're doing
Speaker 4: at publicly traded companies. We're up nine ten percent on
Speaker 4: the Key Tech benchmark ed. We are at a record high,
Speaker 4: and in fact we've had five strength weeks of gains,
Speaker 4: the same as we're seeing on the SMP longest winning
Speaker 4: streak and weekly gains that's back in twenty twenty four.
Speaker 4: Even as we're still waiting with Beta Breast between some
Speaker 4: sort of deal between the US and Iran a longer
Speaker 4: term piece. The market is hopeful for that, but really
Speaker 4: it's been tech driving it, and you've got the keystock.
Speaker 3: Yeah, Apple is the big story, and this is a
Speaker 3: big move higher. We're off session highs, but we're looking
Speaker 3: at a three point five standard deviations move on track
Speaker 3: for the best day at one point in almost a year.
Speaker 3: This doesn't normally happen. The last time we got an
Speaker 3: immediate post earnings move like this from Apple was in
Speaker 3: May of twenty twenty four. The outlook for sales in
Speaker 3: the June quarter is growth of fourteen percent to seventeen percent,
Speaker 3: and Apple was super clear demand for their products is
Speaker 3: outpacing their ability to supply. We'll get into the specifics
Speaker 3: and more on the consumer demand side of the Apple
Speaker 3: story with Julia Ask Julias Advisory, a tech futurists who
Speaker 3: studies consumer behavior and of course a long time follower
Speaker 3: of Apple and what's going on inside Apple. Let's be
Speaker 3: very focused on demand. Apple has a wealthy, high income
Speaker 3: customer base and all of the evidences they're very happy
Speaker 3: right now to buy iPhone, iPad and Mac.
Speaker 2: Yes, give me more.
Speaker 5: Yeah, So I think if you look at the US economy.
Speaker 5: You know, the economy grew by two percent gup, and
Speaker 5: the Ied States grew by two percent in the first quarter.
Speaker 5: Folks have tax refunds in their pockets, and we all
Speaker 5: know that we're in a I guess we're going to
Speaker 5: call it a k or a view shaped economy here
Speaker 5: where the affluent, you know, the affluent folks the United
Speaker 5: States are still doing well and still spending a lot
Speaker 5: of money, and that outpaces some of the things on
Speaker 5: the other side, like low consumer sentiment, high energy prices,
Speaker 5: and you know, things dragging the economy in the other direction.
Speaker 3: It's a formula, right, an equation demand versus supply. And
Speaker 3: you know what Tim Cook's talking about is principally chips
Speaker 3: being a supply constraint and mac is a focus that
Speaker 3: they can't get enough out there into the real world.
Speaker 3: What was your interpretation of the real story there, of
Speaker 3: what's really happening, of how Apple's managing in that environment.
Speaker 5: Yeah, I think you know, Tim Cook is a genius
Speaker 5: when it comes to supply chain. He's also been very
Speaker 5: good at navigating the political environment, and you know, you
Speaker 5: could I don't think they've gotten lucky here. I think
Speaker 5: they've planned well. I think the second thing you know,
Speaker 5: you look at too, when we think about all of
Speaker 5: the AI and all of these use cases, it's driving
Speaker 5: to demand for more powerful machines and more memory, and
Speaker 5: that certainly fits into apple sweet spot.
Speaker 4: I'm surprised, Julie that there isn't more handwringing about the
Speaker 4: forward guidance that these constraints and supply chain are going
Speaker 4: to remain, that this is going to affect gross margin
Speaker 4: in the second half of the year. When Tim Cook's
Speaker 4: handed over the reins. Why is there not more worry
Speaker 4: about that.
Speaker 5: You know, I don't have a good thing. I don't
Speaker 5: have to be honest with you. I don't have insights
Speaker 5: into the supply chain. I mean, certainly, Apple is one
Speaker 5: of the most prominent brands in the world. They probably
Speaker 5: have more power in purchasing in the supply chain, and
Speaker 5: they've also done a lot of things over the past
Speaker 5: couple of years to diversify their supply so it's yeah,
Speaker 5: I wouldn't underestimate what they're doing.
Speaker 4: What's interesting is they've diversified the supply chain out of China,
Speaker 4: but finally China is back ramping in terms of demand.
Speaker 4: What did you make of the stella gains that they're making.
Speaker 5: That, Yeah, honestly, I was impressed.
Speaker 2: It was.
Speaker 5: You know, one of the things that suppressed me with
Speaker 5: others is that the iPhone sales grew by twenty percent,
Speaker 5: but they seem to have made gains in every market
Speaker 5: around the world, and they kept emphasizing it wasn't just
Speaker 5: the developed markets, but it was also the emerging market.
Speaker 5: So an impressive quarter for sure.
Speaker 3: We wanted to learn a little bit more about Apple's
Speaker 3: future and the story of Apple's growth trajectory, and we
Speaker 3: got the smallest of glimmers when John Turners popped up
Speaker 3: on the earnings call and he said, there's a great
Speaker 3: product roadmap. I'm just not going to tell you anything
Speaker 3: about it, simple as that. Really, I mean, what is
Speaker 3: the expectation from experience industry analysts like you on how
Speaker 3: John Turnus would be any different on the product side
Speaker 3: to how Tim Cook has been.
Speaker 5: Well, I think there's a few things I keep in mind.
Speaker 5: I think the first one is there's really no device
Speaker 5: like an IT device on the horizon that's going to
Speaker 5: replace the smartphone.
Speaker 2: You don't think the foldable phone is an IT device?
Speaker 5: Okay, So maybe, but fundamentally we are glued to screens.
Speaker 5: We like cameras, we like social media, we like YouTube,
Speaker 5: we like watching sports. To a screen is important. I
Speaker 5: don't believe the next device, so to speak, is going
Speaker 5: to be an aipin that's listening to us and generating
Speaker 5: context for a number of reasons, like the use cases,
Speaker 5: the privacy and so forth. So I think that's a
Speaker 5: piece of it, and I think the other side of
Speaker 5: it is too. Certainly, you know, we talk about AI
Speaker 5: will increase demand for more powerful devices with more memory
Speaker 5: and more speed.
Speaker 4: Judiosk from Judiosk Advisory, it's great to have you back
Speaker 4: on the network. Thank you very much for joining us.
Speaker 4: Now look for that AI deployment you need on the
Speaker 4: hyperscalers to spend, and boy are they on track to
Speaker 4: spend at the moment over seven hundred billion dollars on
Speaker 4: AI infrastructure. A new macro analysis, though, suggests there's limited
Speaker 4: evidence that the payoff thus far justifies the extreme cost.
Speaker 4: Tatiana Daria Daria is here with us from New York
Speaker 4: to break it all down. Tatiana, your piece actually caught
Speaker 4: my attention because I thought it was positive about the
Speaker 4: fact that people are using AI, deploying AI in their businesses,
Speaker 4: and actually the labor markets and climbing at the same time.
Speaker 4: So maybe we releave some angst about labor and AI,
Speaker 4: but the angst about paying for infrastructure and AI. What
Speaker 4: was the data that showed you that we're only not
Speaker 4: saying a payoff these hyper scalers yet.
Speaker 6: Yeah, exactly so the macro anks. Perhaps this does not
Speaker 6: justify that because the workforce is growing, at least for
Speaker 6: the fourteen large corporations that I looked at, which arguably
Speaker 6: have the largest budgets to deploy AI. But it is
Speaker 6: the cost of those who are enabling this technologist worth it.
Speaker 6: And if you look at a cross measures, I mean,
Speaker 6: everyone has their favorite CFA metric, right, I'm not saying
Speaker 6: these are the only ones. But I'm a macroturist, so
Speaker 6: I look from a bird's eye view, and I looked
Speaker 6: at things like sales to grow sassets. I look at
Speaker 6: things like return on investment investment capital. This is a
Speaker 6: key one because it has turned the corner lower in
Speaker 6: recent quarter so and it's a new development. It has
Speaker 6: been going up since ever since the launch of chat Gipt,
Speaker 6: and it's turning lower now. And that explains why investors
Speaker 6: are getting very gitterally here, because yes, it will take
Speaker 6: time for these investments to pay off, but how much time?
Speaker 4: That is the key question.
Speaker 3: Tadiyanna, I'm going to help the Bloomberg tech audience out
Speaker 3: a bit. The reason we're talking about this now is
Speaker 3: on Wednesday night, four of the biggest tech companies in
Speaker 3: the world told us this year they're going to spend
Speaker 3: a lot of money on the infrastructure that powers AI,
Speaker 3: and everyone wanted to know, well, what's the result of that,
Speaker 3: what comes out the other side? And so in your analysis,
Speaker 3: the dynamic is that AI is improving efficiencies, it's not
Speaker 3: displacing jobs, and it's undermining the cost cutting case the technology.
Speaker 3: Tease that out a bit and also explain like why
Speaker 3: did you dive into this data set?
Speaker 6: Yeah, well, the key question is, well, it's really AI
Speaker 6: revolutionary for companies yet, and it shows that it's boosting
Speaker 6: productivity but it's not displacing labor seta means the benefits
Speaker 6: are real, but perhaps modest and not as revolutionary as
Speaker 6: some altman is selling you and telling you that AI
Speaker 6: will displace all humans. And then that has to shadow
Speaker 6: and how much demand will these companies ultimately get down
Speaker 6: the line right If a CEO decides, well, it's great,
Speaker 6: but perhaps not worth all of this investment because it's
Speaker 6: only helping me four percent, then perhaps they will slow
Speaker 6: down the spending, will slow down the demand. But the
Speaker 6: big tech hyperscalers, they're investing ahead of the demand. And
Speaker 6: this is something obviously we've seen back in the dot
Speaker 6: com when the internet infrastructure is the same key risk.
Speaker 6: What they have going for now, the hyperscalers have going
Speaker 6: for them now is the strength of their balance sheets
Speaker 6: and their profits. That is earning them little bit of
Speaker 6: the benefit of the doubt. But some of this metrics
Speaker 6: are already mixed. If you look at return on assets,
Speaker 6: it has been falling for Meta and Microsoft, but searching
Speaker 6: for Amazon and Alphabet. So only companies who are really
Speaker 6: delivering very solid results, like Alphabet it was just an
Speaker 6: outstanding report. Those will earn the benefit of the doubt
Speaker 6: more than the others because the evidence is really mixed
Speaker 6: across the companies.
Speaker 3: Bloombergs Tatiana Derrie with the macro view and the data
Speaker 3: analysis and what's really happening in tech, Thank you very much.
Speaker 3: Now coming up Open AI CFO Sarah Fryer tells Bloomberg
Speaker 3: the company sees a quote vertical wall of demand for
Speaker 3: its products.
Speaker 2: We have more from that conversation next Carot.
Speaker 4: We've got some key CEO conversations to come up, and
Speaker 4: we've had some big volatility in the stocks that they represent.
Speaker 4: Roadblocks off by fifteen percent. This as they move aggressively.
Speaker 4: They say to adopt safety precautions. It's all about age verification,
Speaker 4: but it's that's putting some friction into new users. With
Speaker 4: down fifty percent, Twilio ramping up seventeen percent, the age
Speaker 4: of AI is an inflection point. We have both of
Speaker 4: the CEOs on later in the show. Stick around for that.
Speaker 4: Ed what else?
Speaker 3: Okay, let's get to Shares of Spirit Airlines down severely,
Speaker 3: sharply about sixty percent after a report from the Wall
Speaker 3: Street Journals saying the company is preparing to cease operation
Speaker 3: operations after bailout talks with the US government have failed.
Speaker 3: That is from a Wall Street Journal report where they
Speaker 3: cite sources. Remember last week, over the course of many
Speaker 3: trading sessions, we saw one hundred and fifty percent gains
Speaker 3: to the upside, bigger gains to the upside because there
Speaker 3: was an idea the US government would bail out Spirit.
Speaker 2: Looks like it's not happening. We'll be right back. This
Speaker 2: is Spoomberg Tech.
Speaker 3: Open AI CFO Sarah Fryar tells Bloomberg the company is
Speaker 3: meeting objectives and sees strong demand for its products. Pushed
Speaker 3: back on a Wall Street Journal report earlier this week
Speaker 3: that the company missed internal goals for revenue and user growth.
Speaker 3: Let's get the details from Bloombergshery and Gafari, who conducted
Speaker 3: that interview. I want to start with the pushback right
Speaker 3: that the metric that was out there from the journal
Speaker 3: is that they are not hitting a billion active weekly
Speaker 3: active users on chat GPT. And in the course of
Speaker 3: the conversation you had with Sarah Fryer, she's talking about
Speaker 3: them hitting the highest levels that they have and stretch goals.
Speaker 2: What did you learn from that?
Speaker 7: Yeah, I think she was talking in the perspective of
Speaker 7: the internal revenue targets, which there were also you know
Speaker 7: in that report that Opening I did not hit some
Speaker 7: internal revenue monthly goals earlier this year and some other
Speaker 7: revenue targets. And what she said was that, you know,
Speaker 7: at the highest level. We feel like we're beating our plan,
Speaker 7: but how we often get there moves around from period
Speaker 7: to period because it's still a young business that's not
Speaker 7: perfectly for pastable across every metric. So how I interpreted
Speaker 7: that and how she explained the stretch goals was an
Speaker 7: acknowledgment that internally they may have not met certain goals,
Speaker 7: but that overall, she you know, assured confidence in them
Speaker 7: meeting their revenue targets at a higher level.
Speaker 8: Is sort of the.
Speaker 7: Direction of how I interpreted her comments and swing that
Speaker 7: confidence with that quote saying we've got a vertical war
Speaker 7: of demand.
Speaker 4: So it's still the argument that actually it's compute that
Speaker 4: limits the ability for the company to grow at perhaps
Speaker 4: and pace it even could.
Speaker 2: Yeah, that's right.
Speaker 7: So she talked about the fact that she feels there's
Speaker 7: still very compute constrained meeting. They want more compute, they're
Speaker 7: scouring for more compute. Now we've seen the Stargate plan
Speaker 7: shift as we reported a pullback and some sites in
Speaker 7: Norway and UK. I asked her about that, and you know,
Speaker 7: the response again was that while the details may change
Speaker 7: and the types of compute deals they do, they do
Speaker 7: that overall, they want to be able to serve products
Speaker 7: like Codex or their new image generation model more broadly,
Speaker 7: and the compute is still a limitary there to getting
Speaker 7: more revenue.
Speaker 4: Essentially, it is such a great story, basically the most
Speaker 4: read on the terminal throughout the morning screen and all
Speaker 4: about how they've got a genuine friendship, Sir Friar and
Speaker 4: Sam Altman. We appreciate the reporting. Thank you. Now. Elon
Speaker 4: Musk told a jury that there was no contract dictating
Speaker 4: the terms of his early donation to open Ai. Now
Speaker 4: the trial of the AI company's nonprofit status, Musk said
Speaker 4: he was reassured by his fellow founders that open ai
Speaker 4: would continue to operate as a charity.
Speaker 9: Now.
Speaker 4: During his three days of testimony that Tesla boss stressed
Speaker 4: his concerns about AI safety, Open ai co founders Sam
Speaker 4: Altman Greg Rockman, Well, they're set to take the stand
Speaker 4: later in the trial.
Speaker 3: Ed Elon Musk's annual compensation from Tesla was one hundred
Speaker 3: and fifty eight billion dollars last year. That information revealed
Speaker 3: in a regulatory filing from the company late last night,
Speaker 3: about six months after investors signed off on a one
Speaker 3: trillion dollar stock award for the Billionaire and compensation plan.
Speaker 3: The finally also offered new insight into the overlap between
Speaker 3: his companies, showing that Tesla made more than half a
Speaker 3: billion dollars in revenue last year from selling products to
Speaker 3: other Musk run companies, in particular XAI. Another top story,
Speaker 3: The Pentagon has struck agreements with Nvidia, Microsoft, Reflection AI,
Speaker 3: and AWS for use of advanced AI tools on classified
Speaker 3: military networks, according to a Defense department's statement and two
Speaker 3: defense officials. This adds on to other tech companies that
Speaker 3: have agreed to similar deals like SpaceX, Open AI, and Google.
Speaker 3: Bloomberg Senior Tech editor Mike Sheppard joins us from Washington, DC.
Speaker 3: I just want to go to basics with this, what
Speaker 3: the deals are for, what the underlying technology we're talking
Speaker 3: about is.
Speaker 10: Well, this takes these companies which already have been providing
Speaker 10: some AI tools to the Pentagon them into the classified
Speaker 10: space along with SpaceX, Open AI, and of course the
Speaker 10: company that didn't get mentioned by the Pentagon, and that
Speaker 10: is Anthropic. Anthropic was really the first to break in
Speaker 10: and until recently they were the only AI provider that
Speaker 10: was allowed and cleared to work in the classified space.
Speaker 10: So this gives the Defense Department a wider range of
Speaker 10: vendors to choose from if in the end they really
Speaker 10: do part ways as they have threatened with Anthropic in
Speaker 10: this dispute. Over terms, the ideas that you would see
Speaker 10: these companies use their products were in both intelligence platforms
Speaker 10: and in combat operations platforms like the Maven system that
Speaker 10: has been used in operations against Iran.
Speaker 4: That anthropic context is important because many are feeling the
Speaker 4: perhaps they're just broadening the circle of AI expertise they
Speaker 4: can lean on in video for example, talk to us
Speaker 4: about how this new agreement expands the use cases for
Speaker 4: the Pentagon.
Speaker 10: Well, in a way, the Pentagon is also thinking about
Speaker 10: some edge deployment of AI, and what that would mean
Speaker 10: is that if they wanted to move a data center
Speaker 10: to a remote location somewhat closer to the battlefield, well,
Speaker 10: that would mean that they are not connected to a
Speaker 10: cloud per se and running a very small data center.
Speaker 10: And I'm speaking of this in more hypothetical terms, but
Speaker 10: if you wanted to bring some of Nvidia's processors remotely
Speaker 10: in a way from a cloud and away from the
Speaker 10: safety of say a large data center in northern Virginia
Speaker 10: or at a large military base in the Middle East
Speaker 10: or elsewhere. This would be a way to do it.
Speaker 10: And of course that the Pentagon wants to expand the
Speaker 10: data centers it runs and provides on its own property,
Speaker 10: and we have reporting on that from earlier in this
Speaker 10: earlier in the year that they intend to do sort
Speaker 10: of facility in Georgia. This would give them more leeway
Speaker 10: to do so on a classified basis as well. So
Speaker 10: for Nvidia, this is an expansion of their interest in
Speaker 10: at work. We saw it at the GtC here, Edwin,
Speaker 10: you were here in October. There was a lot of
Speaker 10: talk about what more n Vidia could do for the government,
Speaker 10: and certainly the Pentagon has been one of the biggest
Speaker 10: buyers of tech services and really a driver historically of
Speaker 10: advances in technology over the years.
Speaker 4: Bluembags Mike Shephard fascinating as always, Thanks for bringing us
Speaker 4: from Washington. Now coming up, Twilio absolutely saws after reporting
Speaker 4: strong first quarter results. CEO Cozy Maship Chandler is going
Speaker 4: to be here with us next. This is bloom Beg Tech.
Speaker 3: Twilio shares taking off after strong first quarter results. The
Speaker 3: company reported its fastest revenue growth in over three years,
Speaker 3: fueled by a massive surge in AI driven demand, joining
Speaker 3: us to discuss what he describes as quote a milestone quarter,
Speaker 3: Twilio CEO Cozmoship Chandler the stocks on track for its
Speaker 3: best day right now since the end October, point since
Speaker 3: May of twenty twenty.
Speaker 2: This doesn't happen every day.
Speaker 3: So in that milestone quarter, what were the milestones that
Speaker 3: you think your company's hit that's got the market thinking like.
Speaker 11: This, Yeah, thanks for having me on. I'd point to
Speaker 11: a handful of things. First off, I would say this
Speaker 11: was one of the best quarters in the company's history.
Speaker 11: And you know, we've been in the process of a
Speaker 11: turnaround for a handful of years, and I think this
Speaker 11: marks a really important inflection point in terms of, you know,
Speaker 11: the history that's unfolded over those couple of years. I think,
Speaker 11: in particular in the quarter, something that was really exciting
Speaker 11: for us was that our voice channel grew up to
Speaker 11: twenty percent. That's the sixth consecutive quarter of accelerated growth
Speaker 11: in a row for us in that channel, and you
Speaker 11: can see a lot of that sort of been catalyzed
Speaker 11: by voice AI workloads that you see from so many
Speaker 11: different kinds of startups, and I think what's exciting about
Speaker 11: that is is that these conversations are being enriched by data,
Speaker 11: which also speakst our strengths, and in particular, these conversations
Speaker 11: are moving from things that used to be human to human,
Speaker 11: and increasingly human to acient to human.
Speaker 2: For lots of people.
Speaker 3: The kind of base level story is messaging demand right,
Speaker 3: going back to Twilio's roots, The more exciting story is
Speaker 3: that Twilio's on this journey where it goes from being
Speaker 3: that messaging and communications offering to being much more of
Speaker 3: an infrastructure layer. You know, you hold yourself to really
Speaker 3: high standards. I know that we've discussed that, But where
Speaker 3: do you think you are on the journey towards that
Speaker 3: kind of much more encompassing platform that you wanted Twilio
Speaker 3: to be.
Speaker 11: Yeah, I mean I would say that we're executing well
Speaker 11: on it. We've got our big customer conference signal next week,
Speaker 11: so I don't want to get too.
Speaker 2: Far ahead of that and front run it.
Speaker 11: But the way that I would characterize it is very
Speaker 11: similar to the way that you described it. Like these
Speaker 11: things tend to start in a channel life messaging like voice,
Speaker 11: our ambition is that many more of these translate into
Speaker 11: cross channel communications, in which there's this channel orchestration layer,
Speaker 11: which means basically that however a customer wants to be reached,
Speaker 11: whenever they want to be reached, whatever the kind of
Speaker 11: context with which they want to be reached, they are
Speaker 11: and that allows for a highly enriched, deeply personalized interaction,
Speaker 11: whether again that's human to human or agent to human.
Speaker 11: And I think at a time when the lms are
Speaker 11: unleashing so much power, being able to add context to
Speaker 11: those conversations is crucial, and that's something that Twilio is
Speaker 11: really able to do.
Speaker 4: Cos MAYA so B to B, but how much she's
Speaker 4: starting to see or B two ce like the whole
Speaker 4: world of vibe coding. I'm having to set up twilios
Speaker 4: to be able to connect my WhatsApps with what I'm writing,
Speaker 4: to be able to basically see the way in which
Speaker 4: I use AI personally. Is everyone suddenly using Twilio in
Speaker 4: a more consumer focused way?
Speaker 11: I think predominantly we're like ninety nine percent B to B.
Speaker 11: To be honest, I mean, I think for the lay developer,
Speaker 11: maybe that's kind of the angle of your question. I
Speaker 11: think it's never been easier to use our console than
Speaker 11: it is today. We've actually done a ton of behind
Speaker 11: the scenes work to make that console experience super simple.
Speaker 11: So we've always been a very very attractive brand for developers.
Speaker 11: I think increasingly, whether you're a Vibe code or whether
Speaker 11: you're just experimenting, whether frankly you're launching an agent for
Speaker 11: the first time and asking your agent to do the
Speaker 11: work on your behalf. Are consoles ready for that. We're
Speaker 11: seeing pretty limited volume, I would say so far, but
Speaker 11: we definitely think that that's going to take off, and
Speaker 11: we're super excited about it.
Speaker 4: This is clearly a very positive story for the stock.
Speaker 4: We're up four billion in terms of market cap today alone.
Speaker 4: What does it mean for people at the moment? Cosmo?
Speaker 4: Are you hiring in this moment?
Speaker 11: Yeah, I would say were you're doing like some modest hiring.
Speaker 11: Like by and large, over the last couple of years,
Speaker 11: our workforce has been relatively flat. I think, like a
Speaker 11: lot of companies, we're seeing tremendous productivity gains as a
Speaker 11: result of AI. I'll speak for myself, but I think
Speaker 11: this is true of our workforce. I'm ten to fifteen
Speaker 11: percent more productive today than I was two years ago
Speaker 11: as a result of using different kinds of AI tools.
Speaker 11: We deploy a variety of them with very very strict
Speaker 11: security guardrails to our workforce. But I think everybody is
Speaker 11: seeing a real improvement. Rather than turn that into a
Speaker 11: layoff or something of that nature, instead we're turning it
Speaker 11: back to how can we accelerate innovation evelocity twenty.
Speaker 4: I see you Kaizimoship Chandler on the back of big
Speaker 4: moves on a big earning support. We appreciate it now
Speaker 4: coming up roeblocks, aggressive push for safety features. It's costing
Speaker 4: then nearly a billion dollars. We're going to discuss that
Speaker 4: and the outlet with the CEO of David Zuki. This
Speaker 4: is BlueBag Tech. Welcome back to Blue Beg Tech. And
Speaker 4: let's get back to Apple's earnings and break down one
Speaker 4: of the highlights. Today's big number twenty and a half
Speaker 4: billion dollars. That's how much Apple made in the China market,
Speaker 4: where look, Apple has struggled in recent years, beating Wall
Speaker 4: Street projections this time and then some they thought it
Speaker 4: was just going to be eighteen point nine billion dollars,
Speaker 4: and we are seeing a significant move in the stock,
Speaker 4: at one point hitting a new record high. We're up
Speaker 4: four point six percent, and this really is just showing
Speaker 4: that Apple is back to firing on all cylinders. What
Speaker 4: was amazing though, was they were really clear about the
Speaker 4: supply chain headaches, about the cost pressures, but for now
Speaker 4: investors not worrying about the margin hits.
Speaker 3: Let's talk about the change topping Apple investors' minds. What
Speaker 3: to expect from incoming CEO John Turners, who as Mark German,
Speaker 3: joins us for more and Mark led our coverage of
Speaker 3: the earnings print last night, and in the end right
Speaker 3: it becomes a pretty simple story where they give an
Speaker 3: outlook for the June quarterer, and we know that there
Speaker 3: is a supply constraint, particularly on Mac. But the moment
Speaker 3: that John Turners popped up on the call, could I
Speaker 3: just ask you, Mark, now that you've had a night
Speaker 3: to sleep on it, what the takeaway from that was
Speaker 3: of what mister Turners had to say.
Speaker 8: Well, he certainly didn't keep me up all night thinking
Speaker 8: about it. He didn't really say much. He praised the
Speaker 8: guy who hand picked him at his successor. He said
Speaker 8: the right thing for the audience on the call, which
Speaker 8: was we're going to continue with the financial discipline that
Speaker 8: we've had the last two decades under Tim Cook. But
Speaker 8: the real comments related to Turnis actually didn't come from
Speaker 8: Turnis himself. They came at the very end of the
Speaker 8: prepared remarks from CFO Kevin Breck, where he said, we're
Speaker 8: having a CEO transition and we're reevaluating what we do
Speaker 8: with our cash. And this practice we've had about share
Speaker 8: buybacks giving money back to the shareholders. We've given back
Speaker 8: over a trillion dollars. Well, we're going to continue that.
Speaker 8: We're doing another one hundred billion dollar buyback that we're
Speaker 8: announcing today. But the fact that we're talking about it
Speaker 8: means something is going to change. And what they're doing
Speaker 8: is they're giving themselves more flexible ability now to give
Speaker 8: less money back to shareholders and hold on to the
Speaker 8: cash for things like deals or investments for infrastructure for
Speaker 8: R and D. And that is a really big deal.
Speaker 8: And this puts John Turnis in terms of what they're
Speaker 8: going to be doing with their cash somewhere in the
Speaker 8: middle between Steve Jobs and Tim Cook. Tim Cook was
Speaker 8: all the way on one side, giving as much back
Speaker 8: as possible, right trying to get to net cash neutral.
Speaker 8: Steve Jobs was on the other end of the spectrum
Speaker 8: where he didn't want to get anything back to the
Speaker 8: shareholders because he wanted to hold onto as much as
Speaker 8: possible for investment, and by the way he lived through
Speaker 8: the early years of the company and Apple nearly going
Speaker 8: into bankruptcy. The turnus is somewhere in the middle, whereas
Speaker 8: they're not going to keep it all to themselves. They're
Speaker 8: still going to give money back, but they want to
Speaker 8: be more judicious with that money as needed.
Speaker 4: Some analysts have perhaps read into holding onto cash not
Speaker 4: promising as many big buybacks, perhaps or hinting at that
Speaker 4: under the new leadership as being also, we've got some
Speaker 4: price pain to swallow. We're going to have to take
Speaker 4: a hit to gross margins if we are going to
Speaker 4: see the pricing pressure from Memory, for example, Mark, is
Speaker 4: there that anxiety? Should there be that anxiety?
Speaker 8: That might be a small component of it, But I
Speaker 8: would be surprised if Apple's response to pricing changes related
Speaker 8: to Memory ends up being taking money out of their
Speaker 8: own bank account and eating those margins. I think they're
Speaker 8: going to offset some of that by raising prices. Typically
Speaker 8: in these types of scenarios. Apple likes to a split, right,
Speaker 8: They like to eat some of it and like to
Speaker 8: give some of it to the consumer.
Speaker 2: So it may be some of that, but we'll see.
Speaker 8: I don't think that's going to be entirely clear until
Speaker 8: the tail end of the year or early next year.
Speaker 4: Mark Gman all over the Apple News. Thank you very much. Indeed,
Speaker 4: now on another earnings front, Roadblocks is paying a price
Speaker 4: for children's safety. The stock pumpted after the company cudits full.
Speaker 4: Your book is forecast making clear though that that new
Speaker 4: age verification and child safety features that they've embedded, they're
Speaker 4: creating some friction for user growth.
Speaker 9: See you.
Speaker 4: David Zuki joins us now, and you made really bold
Speaker 4: statements in the investor letter saying this is worth it.
Speaker 4: This is worth it long term because it's building a
Speaker 4: safer global standard of safety. Talk us through when you
Speaker 4: will see actually that friction die down.
Speaker 12: Hey, great to be here at highlighting, coming off a
Speaker 12: great quarter, forty three percent year on your bookings growth
Speaker 12: bookings of one point seven billion dollars more than twice.
Speaker 12: What we've shared with investors is our long term growth trajectory.
Speaker 12: And yes we've highlighted our commitment to setting the global
Speaker 12: standard for healthy, safe, age appropriate digital engagement. We have
Speaker 12: rolled out age check all around the world this quarter.
Speaker 12: We now have over sixty five percent of US users
Speaker 12: who we have age checked.
Speaker 2: But we did.
Speaker 12: Highlight in our earnings call there is some short term
Speaker 12: friction from communication and other factors. We believe though this
Speaker 12: is worth it. We are well on our path to
Speaker 12: ten percent or more of the global gaming market and
Speaker 12: more of that of US, and we want to bring
Speaker 12: along all of our under sixteen users as well as
Speaker 12: the over sixteen who are growing very rapidly.
Speaker 4: How about bringing along the industry, Dave, Because you're a
Speaker 4: first adoptor here of this technology that can help age verify.
Speaker 4: Do you think others in gaming will have to do this?
Speaker 4: Do you think others will experience such friction as you
Speaker 4: come out of it.
Speaker 12: I want to highlight if you go to our corporate
Speaker 12: site and read our values, one is take the long
Speaker 12: view and the others respect the community. We've continuously innovated
Speaker 12: on safety since we started in the company, and as
Speaker 12: the technology got good enough to age check, we've leaned
Speaker 12: into it. This is an addition, of course, to our
Speaker 12: industry leading text filtering. The fact that we don't allow
Speaker 12: image sharing on the platform allowed us to do several things.
Speaker 12: In addition to age checking, we're going to be introducing
Speaker 12: kids accounts and select accounts. We're able to do this
Speaker 12: within our same app because we are age checking. Also,
Speaker 12: because we're age checking, we can now identify the eighteen
Speaker 12: and up players on our platform and we've introduced some
Speaker 12: interesting economics for them. So we do think we're setting
Speaker 12: the industry's standard and we have this commitment to what
Speaker 12: we call the global standard.
Speaker 2: Dave, good Morning.
Speaker 3: You came on the program three weeks ago and I
Speaker 3: asked you if you would kindly model for us at
Speaker 3: that moment when you were announcing the new policy and
Speaker 3: new platform changes with safety in mind, how that would
Speaker 3: impact user behavior. And that's kind of played out in
Speaker 3: the earnings print right, Just explain that the interaction between
Speaker 3: the policy that you put in place and why it
Speaker 3: would impact user metric and behaviors platform.
Speaker 12: Well, I want to highlight we're using age checked and
Speaker 12: we're asking our users to age check if they want
Speaker 12: to use the communication functionality on roadblocks. So in Australia
Speaker 12: we're over seventy percent age checked in the US over
Speaker 12: sixty five percent, but that does highlight there could be
Speaker 12: roughly thirty five percent of our users in the US
Speaker 12: who currently are not communicating on our platform. We believe
Speaker 12: that can contribute to some short term friction. In addition,
Speaker 12: as we go along on our eighteen and over segment,
Speaker 12: we've shared that more and more we're using our recommendation
Speaker 12: algorithms to support long term retention on the platform more
Speaker 12: than shorter term monetization. These both have contributed to short
Speaker 12: term friction.
Speaker 3: Dave, let's talk about Roadblocks this future and Roadblocks reality.
Speaker 3: This seems like a big play, a big upgrade from
Speaker 3: Roebox Studio.
Speaker 2: We talk all the time to Unity.
Speaker 3: I am very into unreal engine right and how that
Speaker 3: impacts my experience in the games that I play. This
Speaker 3: presents an opportunity for you to do work with some
Speaker 3: of the big budget developers. Could you just explain the
Speaker 3: pathway to that.
Speaker 12: I want to highlight two separate levels of this. We
Speaker 12: have continued to release over the last quarter and will
Speaker 12: continue functionality that is very unique to Roadblocks. Roadblocks is
Speaker 12: a game engine, a client, a cloud, and together we're
Speaker 12: committed to publishing once and having whatever you publish work
Speaker 12: both super high quality on a gaming PC but also
Speaker 12: perform very well on a two gigabyte Android phone. Those
Speaker 12: are very different configurations. We want to support both with
Speaker 12: the same build as well as when our creators build
Speaker 12: on Roadblocks they go around the world. The future for
Speaker 12: us is a hybrid architecture, and what we want to
Speaker 12: do is make it easy for creators to create experiences
Speaker 12: that are ultimately multiplayer and photorealistic and do it very
Speaker 12: easily by powering it with AI. So we have combined
Speaker 12: really a hybrid architecture we're starting to show it off
Speaker 12: that combines our multiplayer synchronization with cutting edge real time
Speaker 12: video world models. We believe this is the ultimate hybrid
Speaker 12: architecture to democratize photorealistic multiplayer.
Speaker 4: I like that about the democratization and making the building
Speaker 4: of games open to many. How do you think about
Speaker 4: the pricing structure?
Speaker 12: Briefly, Dave, we've said initially roadblocks reality will not be free.
Speaker 12: I mean real time video AI modeling in the cloud
Speaker 12: is expensive, but just like with the rest of the
Speaker 12: AI world, these prices are going to come down and down.
Speaker 12: I want to highlight this is complemented really with our
Speaker 12: vision for creation, and if we look at what's happening
Speaker 12: in the coding space over the last six months, more
Speaker 12: and more software engineers are literally having AI run overnight
Speaker 12: doing multiple literations to help build software. Gaming is much
Speaker 12: more complex. It involves software, three D assets, NPCs, real
Speaker 12: time operations, terrain geometry. We're really pursuing that same vision
Speaker 12: that agentic multiple itteration AI work. With Roadblock Studio, we
Speaker 12: started introducing things as innovative as using NPCs to help
Speaker 12: test software, and we believe we're uniquely poised to help
Speaker 12: creators build more quickly, higher quality, and more diverse experiences.
Speaker 2: David Zuki, CEO of Roadblocks, thank you very much.
Speaker 3: Now coming up on the program, sources tell Bloomberg Peter
Speaker 3: Teals founder's fun has raised six billion dollars to back
Speaker 3: later stage companies less than a year after its last
Speaker 3: growth stage hall. We'll have the details next. This is
Speaker 3: Bloomberg Tech. These the Teals found his fund has raised
Speaker 3: six billion dollars of fresh capital to back growth stage startups.
Speaker 3: That's according to sources. The new fund comes less than
Speaker 3: a year after it closed. It's lost late stage vehicle
Speaker 3: Bloomberg'sventure Report, and Attash Mascarinus broke the story and it
Speaker 3: is with us. I think this has found his fund
Speaker 3: biggest ever hall So it's not just that it came
Speaker 3: in quick succession from the last fund being done. They're
Speaker 3: going big and so's everyone else.
Speaker 2: At the moment, totally.
Speaker 13: I mean, I'm made a joke on X earlier this
Speaker 13: year that firms we're going to have to raise new
Speaker 13: funds just because of how much they're putting into Open
Speaker 13: AI and Anthropic, And now we're seeing exactly that. I mean,
Speaker 13: their last growth fund they closed last year around four
Speaker 13: point six billion, invested that in less than a year,
Speaker 13: and now they're back in the market. The last growthum
Speaker 13: was only invested in seven companies. We saw its first
Speaker 13: ever investment in Anthropic, a one point twenty five billion
Speaker 13: dollar check, big investment in Opening Eye as well, and
Speaker 13: then across there are other late stage investments like Cognition
Speaker 13: and Stripe.
Speaker 4: Natasha who's wanting to recommit hit is it LP's and
Speaker 4: new money's coming in to founders fund? Yeah?
Speaker 13: No, I mean it's it's four point five billion from
Speaker 13: their institutional LPs. So we're talking sovereign wealth funds from
Speaker 13: across the world institutions, and then one point five billion
Speaker 13: from Founder's Fund employees as well, including Peter Tiel. And
Speaker 13: this is something that people really do focus on because
Speaker 13: it is unique to Founder's Fund. A lot of times
Speaker 13: when venture capitalists raise fund, you might see just the
Speaker 13: general partners, the tops in your management put in some capital.
Speaker 13: But this is the largest amount that actually the employees
Speaker 13: the Founder's Fund have put in to the fund itself.
Speaker 4: To putting the money where the math is putting by
Speaker 4: Natasha and Mescarin, we thank you so much, just all
Speaker 4: of these keys when it comes VC. Now, let's talk
Speaker 4: more about general to AI right now, because it's turned
Speaker 4: coding from a specialized skill into something anyone can do
Speaker 4: the simple prompt. But as AI writes more code, its
Speaker 4: impact is being felt on hiring for junior software engineers.
Speaker 4: Just take a list.
Speaker 14: I actually tried a whole bunch of tools in the beginning,
Speaker 14: and this was about a year ago, which I think
Speaker 14: is like feels kind of like the stone ages of
Speaker 14: vibe coding. I was able to make the foundations of
Speaker 14: the app in maybe a month, and as like a
Speaker 14: totally non technical person, I was actually able to build
Speaker 14: a full stack app, so there's like front end and
Speaker 14: back end capabilities, and I was able to get it
Speaker 14: out on the app Store just entirely myself.
Speaker 3: And whilst that's opened up new possibilities, there is a downside.
Speaker 3: Since twenty twenty two, employment for software engineers right out
Speaker 3: of college has fallen by nearly twenty percent. Nagel thinks
Speaker 3: companies are making a big mistake.
Speaker 15: Think that one of the biggest risks of the whole
Speaker 15: thing is that people are going to get too focused
Speaker 15: on the short term and not think about the long
Speaker 15: term enough.
Speaker 2: First of all, if you don't hire.
Speaker 15: Any new people, who's going to run the company in
Speaker 15: ten to fifteen years. But second of all, our research
Speaker 15: and others has shown that these junior people are actually
Speaker 15: the ones who are able to change their job and
Speaker 15: get the most out of using these tools.
Speaker 14: Chen agrees, I feel very strongly that this is like
Speaker 14: not replacing engineers. I think the more you use AI
Speaker 14: to build, the more you understand the space and kind
Speaker 14: of even know what you can and can't do. It's like,
Speaker 14: technically I can make it, but an engineer probably could
Speaker 14: have made this in a much shorter timeline. And probably
Speaker 14: with like much more robust code.
Speaker 3: Watch the full Wall Street Week episode later today six
Speaker 3: pm easton three pm Pacific time. Okay, coming up, we're
Speaker 3: going to get back to Apple and the week that
Speaker 3: was in tech earnings.
Speaker 2: What a week it was.
Speaker 3: Apple back up towards session highs, up five percent.
Speaker 2: This has been big tech.
Speaker 3: NASA administrator Jaredizigman says a future space economy cannot be
Speaker 3: completely taxpayer driven and cannot be forced into existence, but
Speaker 3: NASA can.
Speaker 2: Work to set off the spark.
Speaker 3: He laid out his vision on Blueberg Surveillance this morning.
Speaker 9: A space economy sure would be great, because I don't
Speaker 9: think we're going to have that sci fi future we
Speaker 9: imagine with lots of space stations in orbital outposts and
Speaker 9: a Mars space if it's entirely paid for by the taxpayers.
Speaker 9: So I want data centers in space to work. Why
Speaker 9: not take advantage of a giant fusion reactor that's already
Speaker 9: out there. I want you, I want us three D
Speaker 9: printing organs. I want us making cancer curing drugs in microgravity.
Speaker 9: I want all that to come to fruition. We can't
Speaker 9: force it into existence and now so, but we can
Speaker 9: do all we can to ignite it.
Speaker 4: Not to discuss, but let's get back to our main
Speaker 4: story of the day. It's Apple shares, as you can see,
Speaker 4: at five percent, basically at a record high. Gene Monster,
Speaker 4: managing partner at deep Water Asset Management, joins us in
Speaker 4: Gene Before this you weren't but perhaps stop's not getting
Speaker 4: enough credit? Are we getting enough credit?
Speaker 16: Yet we're engine there five I would have guess based
Speaker 16: on these results, you'd probably be up closer to ten percent.
Speaker 16: And Callen, I think what's at the core of this
Speaker 16: is a concern that we're kind of at the peak here,
Speaker 16: that this is the supercycle over the past three quarters.
Speaker 16: Just to put this in a perspective about this disconnect
Speaker 16: which I believe between what's going on in Apple, what
Speaker 16: the stock is doing, versus the fundamentals, I think there's
Speaker 16: this piece and important piece around the concern that we
Speaker 16: are at the peak. As I mentioned, over the past
Speaker 16: three quarters, iPhone's grown at twenty percent. The previous three
Speaker 16: years to that it was up one and a half percent,
Speaker 16: so you see that supercycle. Of course, investors are always
Speaker 16: looking forward for next year. The iPhone growth is now
Speaker 16: expected to be six percent, So you see that big
Speaker 16: drop down, and that's what investors are wrestling with. If
Speaker 16: they truly believed what we saw in the March quarter,
Speaker 16: in the June guidance that there was any form of
Speaker 16: sustainability to that the stock would be up more than
Speaker 16: ten percent. So I think this idea of understanding what's
Speaker 16: beyond the supercycle is at the substance of understanding what's
Speaker 16: in front of the stock?
Speaker 4: What about beyond the June quarter? And Tim Cook, who's
Speaker 4: hanging over the reins after the June quarter saying, look,
Speaker 4: we believe memory costs will drive an increasing impact on
Speaker 4: our business. Is that also what's holding about the stock?
Speaker 16: Well, I think you know, the memory piece is showing
Speaker 16: that they're doing an incredible job of navigating that. So
Speaker 16: the guidance that they gave did anticipate some depression in
Speaker 16: margins very small amount, thirty basis points. Effectively, the street
Speaker 16: had been expecting about one hundred and twenty basis points
Speaker 16: compression because of these component environments. So yes, they are
Speaker 16: seeing in effect, and that could be part of kind
Speaker 16: of what's going on here. But I think an aggregate
Speaker 16: investors are probably feeling better today about how they're managing
Speaker 16: this environment than they did a couple of days ago,
Speaker 16: and so there's also this dynamic, kind of a unique dynamic. Again,
Speaker 16: I think this is about understanding growth for next year.
Speaker 16: But in fairness to the conversation today, there's a dynamic
Speaker 16: around capital ALEC returning capital to investors, and they added
Speaker 16: some new language about putting the business priorities first. Now
Speaker 16: they of course always do that, but the fact that
Speaker 16: they had added that language to their conversation about capital
Speaker 16: return really sparked some questions on the call, like are
Speaker 16: they thinking about doing some sort of upsize in terms
Speaker 16: of their investment pace, which is very much behind, of course,
Speaker 16: not just on the cap X but on everyday R
Speaker 16: and D compared to the other tech companies. And so
Speaker 16: that was another small dynamic. But again I think this
Speaker 16: comes back to a very basic question is what's the
Speaker 16: true growth rate of Apple?
Speaker 2: Gina.
Speaker 3: I love following you on the socials because in real
Speaker 3: time you're just giving your honest thought. I think you're
Speaker 3: in the camp of people that made a big deal
Speaker 3: of John Turners being on the call, and though he
Speaker 3: didn't say much, you got some vision out of it, right,
Speaker 3: You see the direction of travel for Apple under turnus.
Speaker 16: Yeah, you can. I think, like you said, you didn't
Speaker 16: say a ton and you have to put everything that
Speaker 16: they say in the context of what they've always said
Speaker 16: in the past and kind of decode it. In the
Speaker 16: case of what Turner said, he did lead with talking
Speaker 16: about them having financial discipline continuing that, which basically means
Speaker 16: that they're not going to go and start to spend
Speaker 16: a ton of money unexpectedly. So I think this idea
Speaker 16: that they're going to join some sort of hyperscaler capex races,
Speaker 16: that's just simply off the table. The other PIEC jokingly said,
Speaker 16: I'm not going to talk about new products, but if
Speaker 16: we think about what we're doing, this is the most
Speaker 16: excited I've been because of what is going on at
Speaker 16: this time now the most exciting that I've ever been.
Speaker 16: They say that that standard op breading language, but at
Speaker 16: this time this time is referencing, of course, the AI chapter,
Speaker 16: and I think that you know, he knows what's at
Speaker 16: steak here, and they've got a lot to do to
Speaker 16: change investors and consumers alike in terms of their competent.
Speaker 3: Classic Apple maximalist language. Gen Munster, managing partner at Dewad
Speaker 3: Asset Management. Thank you very much. Breaking news on the
Speaker 3: Bloomberg terminal. President Trump says he will increase tariffs on
Speaker 3: EU autos to twenty five percent. See shares of Stilantis
Speaker 3: dropping pretty quickly. This isn't a true social post where
Speaker 3: he says it is understood that if those companies were
Speaker 3: to build cars in the United States, there would be
Speaker 3: no tariffs. So of course this is impacting cars built
Speaker 3: in the EU shipped into the United States.
Speaker 2: It's a developing story.
Speaker 4: Character it is, and just think how well many of
Speaker 4: the analysts say Apple has navigated such tarists. For example,
Speaker 4: we tied up a story on Apple on so much
Speaker 4: more does it for this edition a Blomberg Tech.
Speaker 3: Check out the pod. It's worth it. It will give you
Speaker 3: everything you need to know. This is Blomberg Tech.