WEBVTT - Apple Forecasts Sales Growth Amid Memory Shortage 0:00:02.520 --> 0:00:13.159 Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is a 0:00:13.240 --> 0:00:17.000 live from Coast to Coast with Caroline Hyde in New 0:00:17.079 --> 0:00:19.720 York and Vla low in sent Francis Goal. 0:00:22.960 --> 0:00:24.920 This is Bloomberg Tech coming up. 0:00:24.960 --> 0:00:29.040 Apple surprises with a strong outlook, demand roaring and signs 0:00:29.160 --> 0:00:31.120 its coping with a supply crunch. 0:00:31.200 --> 0:00:33.760 The stock source back to life plus. 0:00:33.640 --> 0:00:37.640 Roadblocks plunges as an aggressive push to enhance safety tempered 0:00:37.680 --> 0:00:41.279 daily user growth will discuss for the CEO and. 0:00:41.280 --> 0:00:44.800 A Bloomberg interview with Open AI CFO Sarah Fryer, who 0:00:44.880 --> 0:00:48.040 pushes back on the AI leader missing its own target 0:00:48.280 --> 0:00:50.479 and bigs up its stretch goals. 0:00:51.080 --> 0:00:53.040 Let's talk about goals. Let's talk about where the nast 0:00:53.040 --> 0:00:54.440 that one hundred is and the moment if you're doing 0:00:54.440 --> 0:00:57.600 at publicly traded companies. We're up nine ten percent on 0:00:57.680 --> 0:01:00.680 the Key Tech benchmark ed. We are at a record high, 0:01:00.760 --> 0:01:03.760 and in fact we've had five strength weeks of gains, 0:01:03.760 --> 0:01:06.240 the same as we're seeing on the SMP longest winning 0:01:06.280 --> 0:01:09.520 streak and weekly gains that's back in twenty twenty four. 0:01:09.880 --> 0:01:12.759 Even as we're still waiting with Beta Breast between some 0:01:12.800 --> 0:01:14.959 sort of deal between the US and Iran a longer 0:01:15.040 --> 0:01:17.640 term piece. The market is hopeful for that, but really 0:01:17.640 --> 0:01:19.720 it's been tech driving it, and you've got the keystock. 0:01:20.600 --> 0:01:23.240 Yeah, Apple is the big story, and this is a 0:01:23.280 --> 0:01:26.240 big move higher. We're off session highs, but we're looking 0:01:26.240 --> 0:01:29.440 at a three point five standard deviations move on track 0:01:29.480 --> 0:01:32.120 for the best day at one point in almost a year. 0:01:32.280 --> 0:01:34.959 This doesn't normally happen. The last time we got an 0:01:35.000 --> 0:01:38.080 immediate post earnings move like this from Apple was in 0:01:38.120 --> 0:01:41.160 May of twenty twenty four. The outlook for sales in 0:01:41.160 --> 0:01:44.800 the June quarter is growth of fourteen percent to seventeen percent, 0:01:44.800 --> 0:01:48.360 and Apple was super clear demand for their products is 0:01:48.400 --> 0:01:52.640 outpacing their ability to supply. We'll get into the specifics 0:01:52.800 --> 0:01:55.080 and more on the consumer demand side of the Apple 0:01:55.160 --> 0:01:59.160 story with Julia Ask Julias Advisory, a tech futurists who 0:01:59.200 --> 0:02:03.560 studies consumer behavior and of course a long time follower 0:02:03.600 --> 0:02:07.640 of Apple and what's going on inside Apple. Let's be 0:02:07.840 --> 0:02:13.840 very focused on demand. Apple has a wealthy, high income 0:02:14.040 --> 0:02:17.800 customer base and all of the evidences they're very happy 0:02:17.880 --> 0:02:19.880 right now to buy iPhone, iPad and Mac. 0:02:20.440 --> 0:02:22.119 Yes, give me more. 0:02:22.280 --> 0:02:24.440 Yeah, So I think if you look at the US economy. 0:02:24.480 --> 0:02:26.960 You know, the economy grew by two percent gup, and 0:02:26.960 --> 0:02:28.840 the Ied States grew by two percent in the first quarter. 0:02:29.360 --> 0:02:32.560 Folks have tax refunds in their pockets, and we all 0:02:32.600 --> 0:02:34.120 know that we're in a I guess we're going to 0:02:34.200 --> 0:02:36.119 call it a k or a view shaped economy here 0:02:36.760 --> 0:02:39.400 where the affluent, you know, the affluent folks the United 0:02:39.440 --> 0:02:41.320 States are still doing well and still spending a lot 0:02:41.320 --> 0:02:44.040 of money, and that outpaces some of the things on 0:02:44.080 --> 0:02:47.040 the other side, like low consumer sentiment, high energy prices, 0:02:47.080 --> 0:02:49.760 and you know, things dragging the economy in the other direction. 0:02:50.080 --> 0:02:53.400 It's a formula, right, an equation demand versus supply. And 0:02:53.480 --> 0:02:56.880 you know what Tim Cook's talking about is principally chips 0:02:56.880 --> 0:03:00.200 being a supply constraint and mac is a focus that 0:03:00.280 --> 0:03:03.239 they can't get enough out there into the real world. 0:03:03.600 --> 0:03:06.760 What was your interpretation of the real story there, of 0:03:06.800 --> 0:03:09.720 what's really happening, of how Apple's managing in that environment. 0:03:10.120 --> 0:03:12.480 Yeah, I think you know, Tim Cook is a genius 0:03:12.480 --> 0:03:14.640 when it comes to supply chain. He's also been very 0:03:14.680 --> 0:03:18.079 good at navigating the political environment, and you know, you 0:03:18.320 --> 0:03:20.160 could I don't think they've gotten lucky here. I think 0:03:20.200 --> 0:03:23.040 they've planned well. I think the second thing you know, 0:03:23.080 --> 0:03:24.760 you look at too, when we think about all of 0:03:24.800 --> 0:03:27.280 the AI and all of these use cases, it's driving 0:03:27.280 --> 0:03:30.360 to demand for more powerful machines and more memory, and 0:03:30.400 --> 0:03:32.280 that certainly fits into apple sweet spot. 0:03:33.280 --> 0:03:38.360 I'm surprised, Julie that there isn't more handwringing about the 0:03:38.400 --> 0:03:41.280 forward guidance that these constraints and supply chain are going 0:03:41.320 --> 0:03:44.360 to remain, that this is going to affect gross margin 0:03:44.720 --> 0:03:46.720 in the second half of the year. When Tim Cook's 0:03:46.720 --> 0:03:49.000 handed over the reins. Why is there not more worry 0:03:49.000 --> 0:03:49.400 about that. 0:03:52.080 --> 0:03:54.119 You know, I don't have a good thing. I don't 0:03:54.160 --> 0:03:56.160 have to be honest with you. I don't have insights 0:03:56.200 --> 0:03:58.600 into the supply chain. I mean, certainly, Apple is one 0:03:58.640 --> 0:04:02.000 of the most prominent brands in the world. They probably 0:04:02.040 --> 0:04:05.560 have more power in purchasing in the supply chain, and 0:04:05.560 --> 0:04:07.480 they've also done a lot of things over the past 0:04:07.760 --> 0:04:10.839 couple of years to diversify their supply so it's yeah, 0:04:10.880 --> 0:04:12.560 I wouldn't underestimate what they're doing. 0:04:12.720 --> 0:04:16.200 What's interesting is they've diversified the supply chain out of China, 0:04:16.320 --> 0:04:19.320 but finally China is back ramping in terms of demand. 0:04:19.360 --> 0:04:21.560 What did you make of the stella gains that they're making. 0:04:21.320 --> 0:04:24.839 That, Yeah, honestly, I was impressed. 0:04:24.960 --> 0:04:25.440 It was. 0:04:25.520 --> 0:04:27.040 You know, one of the things that suppressed me with 0:04:27.160 --> 0:04:29.560 others is that the iPhone sales grew by twenty percent, 0:04:29.600 --> 0:04:31.839 but they seem to have made gains in every market 0:04:31.880 --> 0:04:34.159 around the world, and they kept emphasizing it wasn't just 0:04:34.200 --> 0:04:36.640 the developed markets, but it was also the emerging market. 0:04:36.760 --> 0:04:39.839 So an impressive quarter for sure. 0:04:40.920 --> 0:04:43.560 We wanted to learn a little bit more about Apple's 0:04:43.600 --> 0:04:47.200 future and the story of Apple's growth trajectory, and we 0:04:47.320 --> 0:04:51.359 got the smallest of glimmers when John Turners popped up 0:04:51.400 --> 0:04:53.520 on the earnings call and he said, there's a great 0:04:53.560 --> 0:04:56.599 product roadmap. I'm just not going to tell you anything 0:04:56.640 --> 0:04:59.800 about it, simple as that. Really, I mean, what is 0:04:59.800 --> 0:05:03.560 the expectation from experience industry analysts like you on how 0:05:03.800 --> 0:05:06.800 John Turnus would be any different on the product side 0:05:06.839 --> 0:05:08.440 to how Tim Cook has been. 0:05:08.839 --> 0:05:10.640 Well, I think there's a few things I keep in mind. 0:05:10.680 --> 0:05:13.080 I think the first one is there's really no device 0:05:13.200 --> 0:05:15.279 like an IT device on the horizon that's going to 0:05:15.279 --> 0:05:16.360 replace the smartphone. 0:05:16.400 --> 0:05:18.520 You don't think the foldable phone is an IT device? 0:05:19.720 --> 0:05:23.960 Okay, So maybe, but fundamentally we are glued to screens. 0:05:24.000 --> 0:05:26.680 We like cameras, we like social media, we like YouTube, 0:05:26.720 --> 0:05:29.359 we like watching sports. To a screen is important. I 0:05:29.360 --> 0:05:31.719 don't believe the next device, so to speak, is going 0:05:31.800 --> 0:05:34.960 to be an aipin that's listening to us and generating 0:05:35.279 --> 0:05:37.800 context for a number of reasons, like the use cases, 0:05:37.839 --> 0:05:40.160 the privacy and so forth. So I think that's a 0:05:40.200 --> 0:05:41.800 piece of it, and I think the other side of 0:05:41.800 --> 0:05:44.240 it is too. Certainly, you know, we talk about AI 0:05:44.320 --> 0:05:47.080 will increase demand for more powerful devices with more memory 0:05:47.120 --> 0:05:47.719 and more speed. 0:05:48.520 --> 0:05:51.640 Judiosk from Judiosk Advisory, it's great to have you back 0:05:51.680 --> 0:05:53.560 on the network. Thank you very much for joining us. 0:05:53.839 --> 0:05:57.000 Now look for that AI deployment you need on the 0:05:57.040 --> 0:06:00.120 hyperscalers to spend, and boy are they on track to 0:06:00.160 --> 0:06:02.680 spend at the moment over seven hundred billion dollars on 0:06:02.720 --> 0:06:06.320 AI infrastructure. A new macro analysis, though, suggests there's limited 0:06:06.360 --> 0:06:09.960 evidence that the payoff thus far justifies the extreme cost. 0:06:10.200 --> 0:06:13.719 Tatiana Daria Daria is here with us from New York 0:06:13.880 --> 0:06:17.320 to break it all down. Tatiana, your piece actually caught 0:06:17.320 --> 0:06:19.080 my attention because I thought it was positive about the 0:06:19.080 --> 0:06:22.839 fact that people are using AI, deploying AI in their businesses, 0:06:22.880 --> 0:06:25.240 and actually the labor markets and climbing at the same time. 0:06:25.720 --> 0:06:28.920 So maybe we releave some angst about labor and AI, 0:06:29.360 --> 0:06:32.560 but the angst about paying for infrastructure and AI. What 0:06:32.760 --> 0:06:34.960 was the data that showed you that we're only not 0:06:34.960 --> 0:06:36.680 saying a payoff these hyper scalers yet. 0:06:37.400 --> 0:06:41.160 Yeah, exactly so the macro anks. Perhaps this does not 0:06:41.440 --> 0:06:44.479 justify that because the workforce is growing, at least for 0:06:44.560 --> 0:06:47.919 the fourteen large corporations that I looked at, which arguably 0:06:48.000 --> 0:06:51.080 have the largest budgets to deploy AI. But it is 0:06:51.120 --> 0:06:54.600 the cost of those who are enabling this technologist worth it. 0:06:54.640 --> 0:06:56.440 And if you look at a cross measures, I mean, 0:06:56.480 --> 0:06:59.719 everyone has their favorite CFA metric, right, I'm not saying 0:06:59.760 --> 0:07:02.440 these are the only ones. But I'm a macroturist, so 0:07:02.480 --> 0:07:05.080 I look from a bird's eye view, and I looked 0:07:05.120 --> 0:07:07.880 at things like sales to grow sassets. I look at 0:07:07.880 --> 0:07:11.440 things like return on investment investment capital. This is a 0:07:11.520 --> 0:07:14.480 key one because it has turned the corner lower in 0:07:14.760 --> 0:07:17.160 recent quarter so and it's a new development. It has 0:07:17.200 --> 0:07:19.720 been going up since ever since the launch of chat Gipt, 0:07:20.120 --> 0:07:23.440 and it's turning lower now. And that explains why investors 0:07:23.480 --> 0:07:26.920 are getting very gitterally here, because yes, it will take 0:07:26.960 --> 0:07:30.080 time for these investments to pay off, but how much time? 0:07:30.440 --> 0:07:31.480 That is the key question. 0:07:32.480 --> 0:07:34.920 Tadiyanna, I'm going to help the Bloomberg tech audience out 0:07:34.960 --> 0:07:37.200 a bit. The reason we're talking about this now is 0:07:37.240 --> 0:07:39.600 on Wednesday night, four of the biggest tech companies in 0:07:39.640 --> 0:07:42.040 the world told us this year they're going to spend 0:07:42.040 --> 0:07:44.920 a lot of money on the infrastructure that powers AI, 0:07:45.400 --> 0:07:47.920 and everyone wanted to know, well, what's the result of that, 0:07:48.160 --> 0:07:51.320 what comes out the other side? And so in your analysis, 0:07:51.600 --> 0:07:55.880 the dynamic is that AI is improving efficiencies, it's not 0:07:56.000 --> 0:08:01.200 displacing jobs, and it's undermining the cost cutting case the technology. 0:08:01.240 --> 0:08:03.600 Tease that out a bit and also explain like why 0:08:03.600 --> 0:08:05.119 did you dive into this data set? 0:08:05.400 --> 0:08:08.000 Yeah, well, the key question is, well, it's really AI 0:08:08.160 --> 0:08:11.880 revolutionary for companies yet, and it shows that it's boosting 0:08:11.920 --> 0:08:15.680 productivity but it's not displacing labor seta means the benefits 0:08:15.720 --> 0:08:19.160 are real, but perhaps modest and not as revolutionary as 0:08:19.160 --> 0:08:22.080 some altman is selling you and telling you that AI 0:08:22.240 --> 0:08:25.400 will displace all humans. And then that has to shadow 0:08:25.440 --> 0:08:29.120 and how much demand will these companies ultimately get down 0:08:29.200 --> 0:08:32.120 the line right If a CEO decides, well, it's great, 0:08:32.160 --> 0:08:34.640 but perhaps not worth all of this investment because it's 0:08:34.679 --> 0:08:37.959 only helping me four percent, then perhaps they will slow 0:08:38.040 --> 0:08:40.720 down the spending, will slow down the demand. But the 0:08:40.720 --> 0:08:45.360 big tech hyperscalers, they're investing ahead of the demand. And 0:08:45.440 --> 0:08:48.320 this is something obviously we've seen back in the dot 0:08:48.360 --> 0:08:51.360 com when the internet infrastructure is the same key risk. 0:08:51.640 --> 0:08:55.319 What they have going for now, the hyperscalers have going 0:08:55.360 --> 0:08:57.600 for them now is the strength of their balance sheets 0:08:57.800 --> 0:09:00.600 and their profits. That is earning them little bit of 0:09:00.679 --> 0:09:03.360 the benefit of the doubt. But some of this metrics 0:09:03.400 --> 0:09:06.520 are already mixed. If you look at return on assets, 0:09:06.559 --> 0:09:09.280 it has been falling for Meta and Microsoft, but searching 0:09:09.320 --> 0:09:13.040 for Amazon and Alphabet. So only companies who are really 0:09:13.080 --> 0:09:16.040 delivering very solid results, like Alphabet it was just an 0:09:16.120 --> 0:09:19.480 outstanding report. Those will earn the benefit of the doubt 0:09:19.559 --> 0:09:22.679 more than the others because the evidence is really mixed 0:09:22.720 --> 0:09:23.760 across the companies. 0:09:24.880 --> 0:09:28.040 Bloombergs Tatiana Derrie with the macro view and the data 0:09:28.040 --> 0:09:31.240 analysis and what's really happening in tech, Thank you very much. 0:09:31.280 --> 0:09:35.840 Now coming up Open AI CFO Sarah Fryer tells Bloomberg 0:09:35.920 --> 0:09:40.320 the company sees a quote vertical wall of demand for 0:09:40.480 --> 0:09:41.079 its products. 0:09:41.200 --> 0:09:44.280 We have more from that conversation next Carot. 0:09:44.600 --> 0:09:47.640 We've got some key CEO conversations to come up, and 0:09:47.720 --> 0:09:50.840 we've had some big volatility in the stocks that they represent. 0:09:50.960 --> 0:09:55.280 Roadblocks off by fifteen percent. This as they move aggressively. 0:09:55.320 --> 0:09:59.040 They say to adopt safety precautions. It's all about age verification, 0:09:59.440 --> 0:10:01.800 but it's that's putting some friction into new users. With 0:10:01.840 --> 0:10:04.960 down fifty percent, Twilio ramping up seventeen percent, the age 0:10:04.960 --> 0:10:07.520 of AI is an inflection point. We have both of 0:10:07.559 --> 0:10:10.520 the CEOs on later in the show. Stick around for that. 0:10:10.679 --> 0:10:11.240 Ed what else? 0:10:11.920 --> 0:10:16.199 Okay, let's get to Shares of Spirit Airlines down severely, 0:10:16.280 --> 0:10:19.480 sharply about sixty percent after a report from the Wall 0:10:19.520 --> 0:10:23.120 Street Journals saying the company is preparing to cease operation 0:10:23.920 --> 0:10:27.800 operations after bailout talks with the US government have failed. 0:10:27.880 --> 0:10:30.199 That is from a Wall Street Journal report where they 0:10:30.240 --> 0:10:34.040 cite sources. Remember last week, over the course of many 0:10:34.080 --> 0:10:37.640 trading sessions, we saw one hundred and fifty percent gains 0:10:37.679 --> 0:10:40.720 to the upside, bigger gains to the upside because there 0:10:40.760 --> 0:10:42.840 was an idea the US government would bail out Spirit. 0:10:43.080 --> 0:10:45.680 Looks like it's not happening. We'll be right back. This 0:10:45.760 --> 0:10:46.560 is Spoomberg Tech. 0:10:52.679 --> 0:10:56.640 Open AI CFO Sarah Fryar tells Bloomberg the company is 0:10:56.760 --> 0:11:00.400 meeting objectives and sees strong demand for its products. Pushed 0:11:00.480 --> 0:11:03.160 back on a Wall Street Journal report earlier this week 0:11:03.240 --> 0:11:06.840 that the company missed internal goals for revenue and user growth. 0:11:06.960 --> 0:11:10.480 Let's get the details from Bloombergshery and Gafari, who conducted 0:11:10.480 --> 0:11:13.079 that interview. I want to start with the pushback right 0:11:13.160 --> 0:11:15.840 that the metric that was out there from the journal 0:11:16.400 --> 0:11:21.320 is that they are not hitting a billion active weekly 0:11:21.360 --> 0:11:24.000 active users on chat GPT. And in the course of 0:11:24.040 --> 0:11:27.240 the conversation you had with Sarah Fryer, she's talking about 0:11:27.280 --> 0:11:31.240 them hitting the highest levels that they have and stretch goals. 0:11:31.440 --> 0:11:32.400 What did you learn from that? 0:11:34.280 --> 0:11:36.360 Yeah, I think she was talking in the perspective of 0:11:36.400 --> 0:11:40.360 the internal revenue targets, which there were also you know 0:11:40.440 --> 0:11:43.120 in that report that Opening I did not hit some 0:11:43.240 --> 0:11:47.640 internal revenue monthly goals earlier this year and some other 0:11:47.679 --> 0:11:50.920 revenue targets. And what she said was that, you know, 0:11:51.040 --> 0:11:53.320 at the highest level. We feel like we're beating our plan, 0:11:53.400 --> 0:11:56.079 but how we often get there moves around from period 0:11:56.080 --> 0:11:59.120 to period because it's still a young business that's not 0:11:59.200 --> 0:12:04.160 perfectly for pastable across every metric. So how I interpreted 0:12:04.160 --> 0:12:06.320 that and how she explained the stretch goals was an 0:12:06.360 --> 0:12:10.240 acknowledgment that internally they may have not met certain goals, 0:12:10.280 --> 0:12:15.200 but that overall, she you know, assured confidence in them 0:12:15.400 --> 0:12:18.199 meeting their revenue targets at a higher level. 0:12:18.360 --> 0:12:18.880 Is sort of the. 0:12:18.840 --> 0:12:21.920 Direction of how I interpreted her comments and swing that 0:12:22.080 --> 0:12:25.960 confidence with that quote saying we've got a vertical war 0:12:26.200 --> 0:12:26.920 of demand. 0:12:27.320 --> 0:12:30.040 So it's still the argument that actually it's compute that 0:12:30.200 --> 0:12:33.000 limits the ability for the company to grow at perhaps 0:12:33.040 --> 0:12:33.920 and pace it even could. 0:12:35.280 --> 0:12:36.000 Yeah, that's right. 0:12:36.080 --> 0:12:38.360 So she talked about the fact that she feels there's 0:12:38.400 --> 0:12:41.600 still very compute constrained meeting. They want more compute, they're 0:12:41.640 --> 0:12:45.920 scouring for more compute. Now we've seen the Stargate plan 0:12:46.240 --> 0:12:49.319 shift as we reported a pullback and some sites in 0:12:49.800 --> 0:12:53.320 Norway and UK. I asked her about that, and you know, 0:12:53.360 --> 0:12:56.880 the response again was that while the details may change 0:12:57.080 --> 0:12:59.080 and the types of compute deals they do, they do 0:12:59.240 --> 0:13:02.040 that overall, they want to be able to serve products 0:13:02.080 --> 0:13:06.680 like Codex or their new image generation model more broadly, 0:13:06.840 --> 0:13:09.880 and the compute is still a limitary there to getting 0:13:09.920 --> 0:13:10.440 more revenue. 0:13:10.520 --> 0:13:13.720 Essentially, it is such a great story, basically the most 0:13:13.760 --> 0:13:16.120 read on the terminal throughout the morning screen and all 0:13:16.160 --> 0:13:19.960 about how they've got a genuine friendship, Sir Friar and 0:13:20.200 --> 0:13:23.920 Sam Altman. We appreciate the reporting. Thank you. Now. Elon 0:13:24.040 --> 0:13:26.840 Musk told a jury that there was no contract dictating 0:13:26.880 --> 0:13:29.880 the terms of his early donation to open Ai. Now 0:13:29.960 --> 0:13:33.080 the trial of the AI company's nonprofit status, Musk said 0:13:33.120 --> 0:13:36.360 he was reassured by his fellow founders that open ai 0:13:36.600 --> 0:13:38.640 would continue to operate as a charity. 0:13:38.800 --> 0:13:38.920 Now. 0:13:39.000 --> 0:13:41.720 During his three days of testimony that Tesla boss stressed 0:13:41.760 --> 0:13:45.360 his concerns about AI safety, Open ai co founders Sam 0:13:45.400 --> 0:13:48.160 Altman Greg Rockman, Well, they're set to take the stand 0:13:48.360 --> 0:13:49.480 later in the trial. 0:13:49.760 --> 0:13:54.280 Ed Elon Musk's annual compensation from Tesla was one hundred 0:13:54.320 --> 0:13:57.640 and fifty eight billion dollars last year. That information revealed 0:13:57.679 --> 0:14:00.720 in a regulatory filing from the company late last night, 0:14:01.040 --> 0:14:04.400 about six months after investors signed off on a one 0:14:04.520 --> 0:14:08.080 trillion dollar stock award for the Billionaire and compensation plan. 0:14:08.320 --> 0:14:11.000 The finally also offered new insight into the overlap between 0:14:11.040 --> 0:14:13.800 his companies, showing that Tesla made more than half a 0:14:13.840 --> 0:14:17.360 billion dollars in revenue last year from selling products to 0:14:17.559 --> 0:14:22.520 other Musk run companies, in particular XAI. Another top story, 0:14:22.560 --> 0:14:27.200 The Pentagon has struck agreements with Nvidia, Microsoft, Reflection AI, 0:14:27.400 --> 0:14:31.240 and AWS for use of advanced AI tools on classified 0:14:31.280 --> 0:14:34.920 military networks, according to a Defense department's statement and two 0:14:34.960 --> 0:14:37.880 defense officials. This adds on to other tech companies that 0:14:37.920 --> 0:14:41.600 have agreed to similar deals like SpaceX, Open AI, and Google. 0:14:41.640 --> 0:14:45.080 Bloomberg Senior Tech editor Mike Sheppard joins us from Washington, DC. 0:14:45.840 --> 0:14:48.360 I just want to go to basics with this, what 0:14:48.400 --> 0:14:51.640 the deals are for, what the underlying technology we're talking 0:14:51.680 --> 0:14:52.240 about is. 0:14:53.600 --> 0:14:57.440 Well, this takes these companies which already have been providing 0:14:57.480 --> 0:15:01.360 some AI tools to the Pentagon them into the classified 0:15:01.400 --> 0:15:05.480 space along with SpaceX, Open AI, and of course the 0:15:05.520 --> 0:15:08.120 company that didn't get mentioned by the Pentagon, and that 0:15:08.280 --> 0:15:12.280 is Anthropic. Anthropic was really the first to break in 0:15:12.440 --> 0:15:16.360 and until recently they were the only AI provider that 0:15:16.520 --> 0:15:21.080 was allowed and cleared to work in the classified space. 0:15:21.320 --> 0:15:24.440 So this gives the Defense Department a wider range of 0:15:24.520 --> 0:15:27.400 vendors to choose from if in the end they really 0:15:27.440 --> 0:15:30.600 do part ways as they have threatened with Anthropic in 0:15:30.720 --> 0:15:34.160 this dispute. Over terms, the ideas that you would see 0:15:34.280 --> 0:15:39.040 these companies use their products were in both intelligence platforms 0:15:39.080 --> 0:15:43.240 and in combat operations platforms like the Maven system that 0:15:43.280 --> 0:15:45.960 has been used in operations against Iran. 0:15:46.480 --> 0:15:49.480 That anthropic context is important because many are feeling the 0:15:49.480 --> 0:15:52.920 perhaps they're just broadening the circle of AI expertise they 0:15:52.960 --> 0:15:55.520 can lean on in video for example, talk to us 0:15:55.560 --> 0:15:58.800 about how this new agreement expands the use cases for 0:15:58.840 --> 0:15:59.400 the Pentagon. 0:16:00.640 --> 0:16:02.720 Well, in a way, the Pentagon is also thinking about 0:16:02.760 --> 0:16:05.960 some edge deployment of AI, and what that would mean 0:16:06.040 --> 0:16:08.120 is that if they wanted to move a data center 0:16:08.560 --> 0:16:13.200 to a remote location somewhat closer to the battlefield, well, 0:16:13.200 --> 0:16:15.160 that would mean that they are not connected to a 0:16:15.160 --> 0:16:18.120 cloud per se and running a very small data center. 0:16:18.160 --> 0:16:21.360 And I'm speaking of this in more hypothetical terms, but 0:16:21.440 --> 0:16:26.520 if you wanted to bring some of Nvidia's processors remotely 0:16:27.120 --> 0:16:29.080 in a way from a cloud and away from the 0:16:29.120 --> 0:16:31.960 safety of say a large data center in northern Virginia 0:16:32.200 --> 0:16:34.360 or at a large military base in the Middle East 0:16:34.440 --> 0:16:36.880 or elsewhere. This would be a way to do it. 0:16:36.880 --> 0:16:40.160 And of course that the Pentagon wants to expand the 0:16:40.360 --> 0:16:44.200 data centers it runs and provides on its own property, 0:16:44.240 --> 0:16:46.440 and we have reporting on that from earlier in this 0:16:46.760 --> 0:16:49.120 earlier in the year that they intend to do sort 0:16:49.160 --> 0:16:52.720 of facility in Georgia. This would give them more leeway 0:16:52.760 --> 0:16:55.960 to do so on a classified basis as well. So 0:16:56.080 --> 0:16:59.720 for Nvidia, this is an expansion of their interest in 0:17:00.240 --> 0:17:03.800 at work. We saw it at the GtC here, Edwin, 0:17:04.240 --> 0:17:06.760 you were here in October. There was a lot of 0:17:06.760 --> 0:17:09.320 talk about what more n Vidia could do for the government, 0:17:09.560 --> 0:17:12.400 and certainly the Pentagon has been one of the biggest 0:17:12.400 --> 0:17:16.199 buyers of tech services and really a driver historically of 0:17:16.440 --> 0:17:18.680 advances in technology over the years. 0:17:18.920 --> 0:17:22.320 Bluembags Mike Shephard fascinating as always, Thanks for bringing us 0:17:22.520 --> 0:17:26.680 from Washington. Now coming up, Twilio absolutely saws after reporting 0:17:26.720 --> 0:17:30.080 strong first quarter results. CEO Cozy Maship Chandler is going 0:17:30.119 --> 0:17:32.280 to be here with us next. This is bloom Beg Tech. 0:17:38.400 --> 0:17:41.879 Twilio shares taking off after strong first quarter results. The 0:17:41.920 --> 0:17:45.080 company reported its fastest revenue growth in over three years, 0:17:45.320 --> 0:17:48.639 fueled by a massive surge in AI driven demand, joining 0:17:48.720 --> 0:17:52.440 us to discuss what he describes as quote a milestone quarter, 0:17:52.760 --> 0:17:56.479 Twilio CEO Cozmoship Chandler the stocks on track for its 0:17:56.480 --> 0:18:00.600 best day right now since the end October, point since 0:18:00.600 --> 0:18:01.480 May of twenty twenty. 0:18:01.480 --> 0:18:02.800 This doesn't happen every day. 0:18:03.200 --> 0:18:07.199 So in that milestone quarter, what were the milestones that 0:18:07.240 --> 0:18:10.160 you think your company's hit that's got the market thinking like. 0:18:10.160 --> 0:18:13.440 This, Yeah, thanks for having me on. I'd point to 0:18:13.480 --> 0:18:15.639 a handful of things. First off, I would say this 0:18:15.800 --> 0:18:18.199 was one of the best quarters in the company's history. 0:18:18.400 --> 0:18:20.879 And you know, we've been in the process of a 0:18:20.880 --> 0:18:23.560 turnaround for a handful of years, and I think this 0:18:23.720 --> 0:18:27.320 marks a really important inflection point in terms of, you know, 0:18:27.359 --> 0:18:30.960 the history that's unfolded over those couple of years. I think, 0:18:30.960 --> 0:18:33.640 in particular in the quarter, something that was really exciting 0:18:33.720 --> 0:18:37.280 for us was that our voice channel grew up to 0:18:37.440 --> 0:18:42.120 twenty percent. That's the sixth consecutive quarter of accelerated growth 0:18:42.200 --> 0:18:45.159 in a row for us in that channel, and you 0:18:45.160 --> 0:18:47.920 can see a lot of that sort of been catalyzed 0:18:48.000 --> 0:18:51.960 by voice AI workloads that you see from so many 0:18:52.000 --> 0:18:55.160 different kinds of startups, and I think what's exciting about 0:18:55.160 --> 0:18:59.440 that is is that these conversations are being enriched by data, 0:18:59.440 --> 0:19:04.560 which also speakst our strengths, and in particular, these conversations 0:19:04.600 --> 0:19:07.720 are moving from things that used to be human to human, 0:19:07.760 --> 0:19:10.400 and increasingly human to acient to human. 0:19:12.400 --> 0:19:13.360 For lots of people. 0:19:13.560 --> 0:19:16.560 The kind of base level story is messaging demand right, 0:19:16.640 --> 0:19:20.320 going back to Twilio's roots, The more exciting story is 0:19:20.359 --> 0:19:23.800 that Twilio's on this journey where it goes from being 0:19:24.160 --> 0:19:27.679 that messaging and communications offering to being much more of 0:19:27.680 --> 0:19:31.280 an infrastructure layer. You know, you hold yourself to really 0:19:31.359 --> 0:19:35.120 high standards. I know that we've discussed that, But where 0:19:35.119 --> 0:19:37.600 do you think you are on the journey towards that 0:19:37.720 --> 0:19:41.760 kind of much more encompassing platform that you wanted Twilio 0:19:41.840 --> 0:19:42.040 to be. 0:19:43.520 --> 0:19:45.680 Yeah, I mean I would say that we're executing well 0:19:45.840 --> 0:19:49.520 on it. We've got our big customer conference signal next week, 0:19:49.600 --> 0:19:50.720 so I don't want to get too. 0:19:50.560 --> 0:19:52.399 Far ahead of that and front run it. 0:19:52.840 --> 0:19:54.680 But the way that I would characterize it is very 0:19:54.720 --> 0:19:56.800 similar to the way that you described it. Like these 0:19:56.840 --> 0:20:01.840 things tend to start in a channel life messaging like voice, 0:20:02.400 --> 0:20:07.000 our ambition is that many more of these translate into 0:20:07.560 --> 0:20:12.200 cross channel communications, in which there's this channel orchestration layer, 0:20:12.240 --> 0:20:16.399 which means basically that however a customer wants to be reached, 0:20:16.520 --> 0:20:18.679 whenever they want to be reached, whatever the kind of 0:20:18.720 --> 0:20:21.600 context with which they want to be reached, they are 0:20:21.640 --> 0:20:26.639 and that allows for a highly enriched, deeply personalized interaction, 0:20:27.240 --> 0:20:30.080 whether again that's human to human or agent to human. 0:20:30.320 --> 0:20:33.239 And I think at a time when the lms are 0:20:33.320 --> 0:20:37.520 unleashing so much power, being able to add context to 0:20:37.600 --> 0:20:41.040 those conversations is crucial, and that's something that Twilio is 0:20:41.080 --> 0:20:42.040 really able to do. 0:20:42.560 --> 0:20:44.960 Cos MAYA so B to B, but how much she's 0:20:45.000 --> 0:20:46.680 starting to see or B two ce like the whole 0:20:46.680 --> 0:20:49.879 world of vibe coding. I'm having to set up twilios 0:20:49.920 --> 0:20:53.159 to be able to connect my WhatsApps with what I'm writing, 0:20:53.200 --> 0:20:55.600 to be able to basically see the way in which 0:20:55.640 --> 0:20:59.359 I use AI personally. Is everyone suddenly using Twilio in 0:20:59.400 --> 0:21:00.680 a more consumer focused way? 0:21:02.080 --> 0:21:04.720