Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: All right, let's stay with the tech space and move
Speaker 2: over to Xai, which is Elon Musk's ai startup. It's
Speaker 2: raising more financing than initially planned, and Ed Ludlow, our
Speaker 2: Bloomberg Tech co host, joining us from San Francisco to
Speaker 2: give us a little more context here. Xai is backed
Speaker 2: by a number of big companies, including in Nvidia.
Speaker 3: Tell us how much money it's raising.
Speaker 4: Yes, So it's a very specific mechanism where a special
Speaker 4: purpose vehicle will split between about twelve and a half
Speaker 4: billion dollars of debt and seven and a half billion
Speaker 4: dollars of equity, use the funds to go out and
Speaker 4: buys specifically in video GPUs. Xai then basically rents or
Speaker 4: leases those GPUs from the investment vehicle over a period
Speaker 4: of five years. Is what we've been reporting and is
Speaker 4: our understanding. And as part of that, we have broken
Speaker 4: the news that Nvidia is going to contribute about two
Speaker 4: billion dollars to the equity piece. But basically what it
Speaker 4: means is that the investors own the GPUs, they get
Speaker 4: guaranteed return because Xai has to pay them a fee
Speaker 4: or a rental fee over the course of the term.
Speaker 4: But Xai doesn't take all the debt onto its balance sheet,
Speaker 4: and so this could be a bit of a template,
Speaker 4: you know, for how these mega infrastructure deals go going forward.
Speaker 5: Where is Xai ed in this Ai story here?
Speaker 6: What's the feeling in the inally?
Speaker 4: Yeah, it's very hard to place because Xai and in
Speaker 4: particular Elon Musk move very quickly, and they have two
Speaker 4: specific data enters. One is more complete Colossus one, and
Speaker 4: what we're reporting around this financing is the chips for
Speaker 4: Colossus two, which they started building in March. And so
Speaker 4: from an infrastructure standpoint, Jensen Wong has talked about this,
Speaker 4: saying that he's betting Elon Musk can get to one
Speaker 4: giga what of capacity first, because that's what Elon Musk does.
Speaker 4: On the actual output side, their large language model and GROC.
Speaker 4: We don't have as much evidence or data of the
Speaker 4: user base and usership of GROC like in the enterprise setting,
Speaker 4: for example, we don't know it about how that particular
Speaker 4: software that Xai develops is in a competitive environment against
Speaker 4: like an open Ai or Enthropic, but largely noises from
Speaker 4: Xai themselves, but others in the valley talk about how
Speaker 4: it's somewhere that people really want to work, you know,
Speaker 4: they want to go and work for Elon, and in
Speaker 4: the talent war context, that's you know, a big story.
Speaker 3: Okay, thanks for that context.
Speaker 2: One thing you mentioned when explaining this deal that Xai
Speaker 2: has put together the fundraising is that in Video is
Speaker 2: one of the backers, but the SPV, the special purpose Vehicle,
Speaker 2: is going to then go out and buy in Video chips.
Speaker 2: This all feels kind of circular, incestuous if you want
Speaker 2: to put it in another way, is this going to
Speaker 2: create problems? I mean, are people raising their eyebrows over this?
Speaker 2: That this all feels very like I'm putting money in
Speaker 2: so that you can go then buy some of my
Speaker 2: other stuff.
Speaker 4: So important. Jensen Wang, the in Video CEO, went on
Speaker 4: another network an hour ago and basically confirmed our reporting
Speaker 4: that in Video was going to participate that he wished
Speaker 4: he could have put more money into this what he called,
Speaker 4: you know, fundraising, But he also talked about the idea
Speaker 4: that this mechanism was not traditional venture and it nor
Speaker 4: is it straight vendor vendor financing. The circular part is
Speaker 4: the is the bit that people are most focused on,
Speaker 4: because on page it's in Vidia saying here's two billion dollars,
Speaker 4: which we know Xai is going to use indirectly through
Speaker 4: the SPV to buy two billion dollars worth of Nvidia chips.
Speaker 4: But Jensen Wog did go on to say in that
Speaker 4: interview that if you take, for example, the open ai
Speaker 4: deal announced in the last ten days, that's a one
Speaker 4: hundred billion dollar agreement over many years, and according to
Speaker 4: Nvidia and Jensen Wang, there is no mandatory requirement that
Speaker 4: open Ai used that.
Speaker 6: Money.
Speaker 4: I'm pausing, guys, because we actually have no idea if
Speaker 4: it's cash. We have no idea if it's just equity.
Speaker 4: But according to Gensen Wong, it's not mandatory for open
Speaker 4: Ai to use the proceeds to buy in video gear.
Speaker 4: They are free to go out and do other deals
Speaker 4: like they did with AMD.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch US Live
Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android
Speaker 1: Otto with the Bloomberg Business app, Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 5: A new administration had a lot of industry saying, hey,
Speaker 5: maybe we're gonna get some deregulation in our business with
Speaker 5: this Trump administration. One of those industries is a television
Speaker 5: broadcast industry. There are limits on how many stations you
Speaker 5: can own nationally. A company can own nationally, there's limits
Speaker 5: on how many stations a company can own it in
Speaker 5: a particular market. But there was recently those would be
Speaker 5: loosened and maybe significantly. And actually some couple M and
Speaker 5: A deals have been announced in anticipation of those rules loosing.
Speaker 5: So let's check out with the expert here, Matt Schuttinghelm,
Speaker 5: these immediate litigation analyts for Bloomberg Intelligence.
Speaker 6: He's down there in DC.
Speaker 5: So, Matt, my FCC they meet I think sometime this month.
Speaker 5: Are they going to loosen TV ownership rules?
Speaker 7: Yeah, there was some expectation that the deregulatory actions could
Speaker 7: start as early as this month for the TV broadcasters. Unfortunately,
Speaker 7: for the industry, it doesn't look like October is going
Speaker 7: to be the month for movement on that national ownership cap.
Speaker 7: Brendan Carr, the FCC chairman, put out the agenda for
Speaker 7: the FCC's monthly meeting, and this item was not listed
Speaker 7: on that agenda. Now, he could still add it as
Speaker 7: late as seven days before the meeting, but that's unlikely.
Speaker 7: Typically these things are announced three weeks before, so I
Speaker 7: still expect the FCC to move pretty quickly on this.
Speaker 7: The FCC took comments on this earlier in the summer.
Speaker 7: It really should should be a pretty simple order to
Speaker 7: write up to ease that thirty nine percent US ownership limit.
Speaker 7: It's just a matter of getting it done. And also
Speaker 7: the FCC is, you know, eighty percent of the employees
Speaker 7: are off right now because we have a government shutdown
Speaker 7: which could be impacting things.
Speaker 2: Okay, So which companies, first of all, are most affected
Speaker 2: by this. Paul mentioned that there was some deal making
Speaker 2: and anticipation of this. We know that next Our Media
Speaker 2: made a bid for Tegna. It was a six point
Speaker 2: two billion dollars all cash deal. Is that the most
Speaker 2: glaring example of companies that are directly affected.
Speaker 7: That's the biggest one Scarlett Sinclair is also a big
Speaker 7: name in this space. Scripts Gray Media also big owners
Speaker 7: of TV stations. But the one you pointed to, the
Speaker 7: Next Star TEG deal is the biggest one. Is six
Speaker 7: point two billion dollar deal announced in August. And as
Speaker 7: we as we said, currently the LAG limits you to
Speaker 7: basically reaching thirty nine percent of US households. That deal
Speaker 7: would let Nextstar reach seventy eighty percent of US households.
Speaker 7: So the deal only can move ahead if this rule
Speaker 7: is changed. If the rule is eased by the FCC,
Speaker 7: there's no way the FCC can approve the deal without
Speaker 7: a change in that rule making first. And so that's
Speaker 7: what we're really waiting for is action on to ease
Speaker 7: those rules. And then we're inevitably going to have a
Speaker 7: court fight on that question because there are wrong arguments
Speaker 7: on both sides of that one. One side says, look,
Speaker 7: the FCC might like to do that, but this is
Speaker 7: Congress's role to ease that thirty nine percent US cap.
Speaker 7: The FCC can't do it itself. I think there's going
Speaker 7: to be a tough fight on that. The FCC probably
Speaker 7: can win it, but it's coming.
Speaker 5: It just seems kind of silly in digital world here
Speaker 5: that there are ownership caps for traditional broadcasters which are
Speaker 5: fighting for their lives in the world.
Speaker 6: Of cord cutting. I mean, the economics seem like, why wouldn't.
Speaker 8: You do it?
Speaker 7: That's exactly the case that the National Association of Broadcasters
Speaker 7: have been pushing with the FCC really for many years,
Speaker 7: but they've really raised the volume on that argument recently,
Speaker 7: and it's really resonating with Republicans at the FCC. I
Speaker 7: think Brendan Carr, the FCC Chairman, is really sympathetic to
Speaker 7: that argument that look, in this world of all forms
Speaker 7: of new media online, all the ways that can get
Speaker 7: media today, and most of those are largely unregulated, that
Speaker 7: the traditional TV broadcast industry would face these these strict
Speaker 7: limits on how many stations they can own in local
Speaker 7: markets in each you know, in Chicago, in New York,
Speaker 7: in DC, and a national cap. Both of those don't
Speaker 7: really make as much sense, according to NAB and I
Speaker 7: think that that argument is really resonating with Republicans. Republicans
Speaker 7: have a majority at the FCC, so they're likely to
Speaker 7: do their best to move ahead to ease these rules
Speaker 7: if they can.
Speaker 2: That's for traditional broadcasting, then you've got the streamers right. Skydance,
Speaker 2: which is of course the owner of Paramount Global is
Speaker 2: or was reportedly planning to make a bit for Warner
Speaker 2: Brothers Discovery that actually hasn't come through yet, but that
Speaker 2: is something that is outside the FCC's jurisdiction. The SEC
Speaker 2: plays no part in any of this.
Speaker 7: Well, so it's it's a debated point that some have
Speaker 7: pushed to say, Look, maybe the FCC should be regulating
Speaker 7: those over the top video providers like YouTube TV, like
Speaker 7: these streamers. Again, the problem though, is that the FCC
Speaker 7: is confined by a law that was written in nineteen
Speaker 7: thirty four and then updated in nineteen ninety six, and
Speaker 7: it's often a struggle for the FCC to extend its
Speaker 7: authority to online providers. And so the Obama FCC was
Speaker 7: actually ready to move ahead with a rulemaking to do
Speaker 7: just that, but it never went anywhere. And I think
Speaker 7: the reason is when you read the law, it's really
Speaker 7: a stretch to say that the FCC can reach those
Speaker 7: new online providers the way it has traditionally regulated broadcasters.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand, hover
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: One of the big movers of late, of course, is Dell,
Speaker 2: and that's because of its AI server business. That part
Speaker 2: of the business has really taken off, and we want
Speaker 2: to bring in now Wujin Ho Bloomberg Intelligence senior technology
Speaker 2: analysts on the highlights from Dell's investor day and Ujin
Speaker 2: One of the things that Dell did was kind of
Speaker 2: layout a vision as Ed Ludlow was telling us an outlook,
Speaker 2: a plan for the next couple of years, which I
Speaker 2: find remarkable given that this is such a fast moving
Speaker 2: industry that you know, companies need to update their guidance
Speaker 2: every quarter, and this company is talking about it's guidance
Speaker 2: out to twenty thirty.
Speaker 9: Yeah.
Speaker 10: Hey, Scarlet, so I know how you ended the last
Speaker 10: segment with Kyle Bunga. I'm going to start this segment
Speaker 10: with to get you got to get a Dell, right,
Speaker 10: So look, this is this is a very seasoned management team.
Speaker 10: They have a tendency to give out three to four
Speaker 10: year guidance plans. I think the surprise here is what's
Speaker 10: driving that seventy nine percent growth outlook for from twenty
Speaker 10: twenty six to twenty twenty twenty thirty, And it's going
Speaker 10: to be AI servers, right, And one of the things
Speaker 10: that they said at the analyst day that AI servers
Speaker 10: are going to grow at a twenty to twenty five
Speaker 10: percent compounded rate. I think there was some skepticism there
Speaker 10: heading into the print in terms of is there an
Speaker 10: AI bubble? And by laying out a twenty to twenty
Speaker 10: five percent AI server growth going through twenty thirty off
Speaker 10: of already high numbers, shows that there is some durability
Speaker 10: to the aserver demand.
Speaker 5: All right, I'm looking at the ANR function for Dell Technologies.
Speaker 6: Twenty three buys on the wall street.
Speaker 5: Six holds and no cells. So it looks like the
Speaker 5: streets buying off on what on the message here? So
Speaker 5: when you get an analyst meaning together, it's a big
Speaker 5: day for a company. They put a lot of time
Speaker 5: and effort in putting getting their senior management together, putting
Speaker 5: together presentations, presenting a vision here.
Speaker 6: What were some of the two or three.
Speaker 5: Takeaways from you from this Investor Day yesterday.
Speaker 10: Yeah, So the one highlight here is the a server demand,
Speaker 10: their durability of a sever demand. But more importantly, and
Speaker 10: we talk about this all the time, you know, Paul,
Speaker 10: It's about earnings and cash flow, right And at the
Speaker 10: end of the day, we're talking about EPs growth about
Speaker 10: fifteen percent, and how do we get to that fifteen percent?
Speaker 10: We're talking about eight percent of the sales growth dropping
Speaker 10: down to the bottom line. But given all of that
Speaker 10: cash generation that they're given, all that cash generation, there's
Speaker 10: going to be a fair amount of capital returns through buybacks,
Speaker 10: So you're going to get a lift on EPs there.
Speaker 10: So share olders aren't going to be happy from an
Speaker 10: EPs standpoint, and we're already seeing that from evaluation standpoint,
Speaker 10: because it is lifting from an eight to ten times
Speaker 10: PE to about fifteen times growth, which makes it into
Speaker 10: a one times.
Speaker 2: Peg Wogin another story that we're tracking here and that
Speaker 2: I've been fascinated by, is this idea of legacy tech
Speaker 2: companies finding their feet in this AI wave, whether it's Oracle,
Speaker 2: whether it's Dell, and now.
Speaker 3: Cisco as well.
Speaker 2: Cisco is releasing a new chip and networking system to
Speaker 2: connect AI data centers, and this is a move that
Speaker 2: pretty much puts it in more direct competition with Broadcom.
Speaker 2: How big of an opportunity is this for Cisco? And
Speaker 2: should Broadcome be worried?
Speaker 10: Yeah, so we published and react this morning, and essentially
Speaker 10: I don't think Broadcom should be fully worried. There's a
Speaker 10: couple of things that I'll say, Right, Cisco is actually
Speaker 10: one of the biggest chip networking chip manufacturers globally, but
Speaker 10: more for their legacy enterprise IT chips. Right, they produce
Speaker 10: their own chips that powers their own networking gear. They're
Speaker 10: fairly newer to the game in the networking chip side.
Speaker 10: From a revenue standpoint, it's really not a big driver,
Speaker 10: but it may be able to push more boxes. A
Speaker 10: couple of things that I'll say, They did about one
Speaker 10: billion dollars in AI back end revenue, but to put
Speaker 10: that into context, you know they're doing about fifty five
Speaker 10: to fifty six billion dollars in total sales. So you know,
Speaker 10: from from an overall percentage of AI as an overall
Speaker 10: percentage of sales, it's still about two to three percent
Speaker 10: of total sales. Are they going to challenge Broadcom? I
Speaker 10: doubt it, but I do think there'll be a second
Speaker 10: source to the cloud providers versus Broadcom.
Speaker 6: Which in your coverage area.
Speaker 5: What's your best AI play, because I'm sure you get
Speaker 5: that call from clients all the time.
Speaker 10: You know, I mean I have a handful. Dell was one,
Speaker 10: you know. Hp is another one to take a look
Speaker 10: out for. They have an analyst day next week. But
Speaker 10: from from a networking standpoint, Arista has actually been one
Speaker 10: of the high flyers from from a from from a
Speaker 10: networking standpoint, so I will look at Arista and people
Speaker 10: have been taking the AI networking angle and using Arista
Speaker 10: as one of the tools.
Speaker 3: I like that Arisa.
Speaker 2: I haven't heard that one come up yet, you know,
Speaker 2: HPE or HPQ Just to clarify, oh, HPE.
Speaker 10: So think of it as a mini Dell and a
Speaker 10: mini Cisco in one.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 5: Let's get back to the market here, the auto business
Speaker 5: in particular, BMW took some guidance down here today's citing
Speaker 5: week demand out of China.
Speaker 6: That can't be good.
Speaker 5: So let's get the latest on what's happening in the
Speaker 5: global auto space. Here, Steve Man joins his Bloomberg Intelligence
Speaker 5: Global autos and Industrials research analysts. So let's start with
Speaker 5: the BMW news here, Steve, BMW cuts annual guidance on
Speaker 5: week China sales and tariff costs.
Speaker 6: What's going on there?
Speaker 8: Yeah, it seems like it never It seems like it's
Speaker 8: a never ending cycle here. What's happening to BMW in
Speaker 8: China is not new, It's not new to them. Everybody,
Speaker 8: every foreign automaker is actually facing the pressure there. It's
Speaker 8: a hyper competitive market. Pricing has been spiraling down, and
Speaker 8: you know, the the automakers, the local automakers there are
Speaker 8: actually gaining a lot of traction with the consumer. Consumers
Speaker 8: there are you know, tech savvy. They're looking for tech
Speaker 8: heavy vehicles. And even though the foreign automakers are you know,
Speaker 8: redesigning the screens to make it look jazzy, colorful, but
Speaker 8: it's still I think lacks the capabilities that the consumer
Speaker 8: wants over there.
Speaker 2: Are there any foreign automakers that are holding on to
Speaker 2: market share.
Speaker 9: Not really, I mean relatively speaking.
Speaker 8: I think the Japanese are a little bit better, but
Speaker 8: they are still losing market share, you know, like companies
Speaker 8: like Ford has you know, dwindled down the operation to
Speaker 8: a minimum over there. Even other European automakers like Pugio Citron,
Speaker 8: you know, they've essentially exited that market. So you know,
Speaker 8: the Chinese local automakers like by D and j Ly
Speaker 8: are really coming out with really attractive product and at
Speaker 8: prices that are you know, hard to beat.
Speaker 2: Yeah, I remember a long time ago it seemed like
Speaker 2: every Chinese government official was in a black Audi. Audi
Speaker 2: was like the car, the foreign car in China. Those
Speaker 2: are those days are long gone, aren't they?
Speaker 9: Those days are long gone. You know, when chi Jin
Speaker 9: Pain came in and.
Speaker 8: Started cracking down on corruption, those types of exhibition of
Speaker 8: wealth is pretty much disappeared. And you know, then the
Speaker 8: consumer there are actually getting more sophisticated, right, They're looking
Speaker 8: for value for money.
Speaker 9: And over the past couple of.
Speaker 8: Decades, you know, the low automakers have actually learned quite
Speaker 8: a bit from the foreign automakers setting up shops there
Speaker 8: and They've learned a lot about product design, They've learned
Speaker 8: about a lot about manufacturing, and obviously the local automakers
Speaker 8: there have an advantage, right they understand the consumer over
Speaker 8: there and what they want, really want.
Speaker 5: Switch Gears, Steve Ta Tesla. They've launched their cheaper version.
Speaker 5: I guess it's under forty thousand dollars. What's your reaction,
Speaker 5: what's the market's reaction?
Speaker 8: Yeah, I think the market is somewhat disappointed because Elon
Speaker 8: Musk has projected, you know, for the last few years
Speaker 8: that they would introduce a vehicle that's twenty five thousand
Speaker 8: dollars or maybe even cheaper. Obviously there's inflation, but I
Speaker 8: think the market is expecting something more price competitive. But
Speaker 8: in any case, it is a cheaper model. It's about,
Speaker 8: you know, six seven thousand dollars cheaper than the higher
Speaker 8: the next variant up for the Model Y Model three.
Speaker 9: Really look, it's I don't.
Speaker 8: Think it's going to make a huge impact on Tesla sales,
Speaker 8: given that a lot of sales being pulled forward right
Speaker 8: just before the end of the seventy five hundred EV
Speaker 8: tax credit. But it does create a more intense competitive
Speaker 8: market in the US. Look these vehicles are actually directly
Speaker 8: competing with the likes of the Chevy Equinox EV from
Speaker 8: GM and the Ford Monkey. So you know, I think,
Speaker 8: you know, we got cheaper vehicles coming in in a
Speaker 8: softening market, so it's going to be interesting to see.
Speaker 2: Wait, so the Ford and the Chevy cars, those models
Speaker 2: you cited, those are the cheapest on the market right now.
Speaker 3: What do they retail for right now?
Speaker 8: Yeah, they're around thirty three thirty four to thirty five thousand.
Speaker 3: Okay, which is the same five thousand then?
Speaker 9: Uh no, well not yet. I think we'll have to see.
Speaker 8: It looks like, you know, GM will is expected to
Speaker 8: launch the Chevy Bolt if you remember, Chevy Bolt is
Speaker 8: you know, one of the most popular.
Speaker 9: GM EV's, and it's like a relaunch pop.
Speaker 8: Yeah, it's a relaunch redesign with new battery, a lower
Speaker 8: cost structor. Now, I don't think that vehicles are going
Speaker 8: to get down to twenty five thousands. It looks like
Speaker 8: it's going to be below thirty thousand.
Speaker 6: So what I mean, are you an EV person?
Speaker 2: No, because I don't have a garage, and so if
Speaker 2: I don't have a garage, how am I going to
Speaker 2: charge this vehicle point.
Speaker 6: You know, I want the hybrid route for the most
Speaker 6: recent I like the.
Speaker 2: Idea of a hybrid route, but apparently those I don't
Speaker 2: know the car parts, but it's easy to steal, and
Speaker 2: therefore you can be lauch you know. Thanks.
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You
Speaker 1: can also want us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal
Speaker 7: MHM