WEBVTT - OpenAI Finalizes $110 Billion Funding at $730 Billion Value 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.560 or watch us live on YouTube. 0:00:24.200 --> 0:00:27.880 All right, more just monster numbers being thrown about in 0:00:27.920 --> 0:00:30.920 this AI game. Open AI heid erase one hundred and 0:00:30.960 --> 0:00:35.160 ten billion dollars in new investment at a seven hundred 0:00:35.200 --> 0:00:41.360 and thirty million dollar pre money valuation. Extraordinary, straordinary amounts 0:00:41.400 --> 0:00:44.160 of money being raised. All the big names are involved here. 0:00:44.680 --> 0:00:45.400 I need a little help. 0:00:45.400 --> 0:00:46.320 We all need a little. 0:00:46.080 --> 0:00:48.479 Help here, Caroline Hyde be tech co anker joints us 0:00:48.479 --> 0:00:52.120 Here in our Bloomberg Interactive Broker studio. The hits keep coming, Caroline, 0:00:52.159 --> 0:00:54.680 I mean the investments keep coming, and from big names. 0:00:54.720 --> 0:00:55.279 We all know. 0:00:56.320 --> 0:00:57.480 What do you make of it? 0:00:57.480 --> 0:01:00.800 It makes for an interesting relationship of Open Air Microsoft 0:01:00.840 --> 0:01:04.080 going forward, because this is Amazon coming in, which already 0:01:04.200 --> 0:01:07.480 has a very strong relationship with anthropic Remember, and we've 0:01:07.480 --> 0:01:10.760 seen a lot of crossover of big strategic investors and 0:01:10.840 --> 0:01:15.199 venture capitalism putting money into both key frontier labs. What's 0:01:15.240 --> 0:01:17.520 interesting in this agreement is not only the whopping scale 0:01:17.520 --> 0:01:19.560 of money. Fifty billion is going to be coming from Amazon, 0:01:19.560 --> 0:01:21.480 and we don't quite know if that is Thure cash 0:01:21.560 --> 0:01:23.840 or actually whether it's more in cloud costs that just 0:01:23.840 --> 0:01:26.560 get sucked up by Amazon instead, or indeed whether it's 0:01:26.560 --> 0:01:27.520 GPUs and chips. 0:01:27.840 --> 0:01:30.399 But we also think that thirty billions coming. 0:01:30.280 --> 0:01:32.720 From in video, so the deepening tie continues there and 0:01:32.760 --> 0:01:34.800 clearly therefore some gpusm in video are going to be 0:01:34.840 --> 0:01:38.200 intertwined in open AI's compute needs as well as Amazon 0:01:38.319 --> 0:01:41.360 Zone Tranium chips and the likes. But we're also seeing 0:01:41.720 --> 0:01:44.280 well as well as Massiyoshi Son being a big player 0:01:44.280 --> 0:01:46.679 in all of this, Microsoft being less of a player. 0:01:46.720 --> 0:01:49.400 And remember open ai first got its big chunk of 0:01:49.480 --> 0:01:50.600 change from Microsoft. 0:01:50.680 --> 0:01:52.520 Microsoft was the key backer of. 0:01:52.520 --> 0:01:54.760 The company, had exclusive rights to a lot of open 0:01:54.800 --> 0:01:58.960 AI's technology within the Azure platform. Well, now the frontier 0:01:59.000 --> 0:02:01.440 offering coming from open an that's basically the new offering 0:02:01.480 --> 0:02:03.640 to help build agents, which is all anyone can talk 0:02:03.640 --> 0:02:06.280 about at the moment, that's going to be exclusive on AWS. 0:02:06.560 --> 0:02:06.880 Oh wow. 0:02:06.880 --> 0:02:07.800 So all of this is just. 0:02:07.760 --> 0:02:12.640 An interesting rearrangement of technology partners and just how people 0:02:12.639 --> 0:02:13.640 are deepening their ties. 0:02:13.840 --> 0:02:16.400 I like your word rearrangement because we have open aico. 0:02:16.480 --> 0:02:19.560 Sam Altmann saying that he doesn't think his company's fundraising 0:02:19.800 --> 0:02:23.040 is looking called circular as long as revenue keeps going. 0:02:23.080 --> 0:02:25.160 And I feel like this is a conversation we've been having. 0:02:25.400 --> 0:02:29.000 It's like the self funding loop and is it risky? 0:02:29.080 --> 0:02:30.679 But he's saying it's not circular. 0:02:30.960 --> 0:02:32.560 Well, and Video has had to try and prove this 0:02:32.560 --> 0:02:33.480 point time and time again. 0:02:33.520 --> 0:02:36.600 And Video has been putting money into neo clouds like 0:02:36.639 --> 0:02:39.320 core Weave, which had its numbers today, putting money into 0:02:39.520 --> 0:02:41.760 the likes of an Anthropic and an open AI, which 0:02:41.840 --> 0:02:43.000 ultimately all want. 0:02:42.919 --> 0:02:44.000 Chips from in video. 0:02:44.320 --> 0:02:47.560 But many would say, look, it's not just circular financing, 0:02:47.680 --> 0:02:51.160 is actually strategic financing, because how better to understand how 0:02:51.200 --> 0:02:53.840 your technology works best is if you partner this closely 0:02:53.880 --> 0:02:55.400 and you can understand the way in which. 0:02:55.200 --> 0:02:57.600 Your GPUs, your CPUs be used in the future. 0:02:57.680 --> 0:03:00.400 So for the cynics among us, yes, it looks like 0:03:00.440 --> 0:03:02.280 the same big players are all moving money from one 0:03:02.280 --> 0:03:04.119 place to the other within each other. 0:03:04.520 --> 0:03:06.840 But for perhaps the more practical it's. 0:03:06.680 --> 0:03:09.520 That well who heals has the cash pile to be 0:03:09.639 --> 0:03:13.359 able to continue to build the flywheel effect to a 0:03:13.400 --> 0:03:16.079 generative AI here at the moment, and open ai has 0:03:16.120 --> 0:03:18.480 an enormous amount of compute needs. That's what they keep 0:03:18.480 --> 0:03:20.560 saying time and time against Sarah Friar as a CFO. 0:03:20.639 --> 0:03:22.720 Sam Altman is the CEO saying the thing that's holding 0:03:22.720 --> 0:03:24.520 back our revenue. And remember they guided us to a 0:03:24.560 --> 0:03:27.720 new kind of revenue stratosphere of to URN eighty billion 0:03:27.760 --> 0:03:28.400 by next year. 0:03:29.000 --> 0:03:31.720 The way they get there is by computer increasing, not 0:03:31.880 --> 0:03:32.400 anything else. 0:03:32.440 --> 0:03:35.720 They've got all the parts they need to build revenue 0:03:35.840 --> 0:03:37.920 from the twelve billion that they raise that they made 0:03:38.040 --> 0:03:40.520 in twenty twenty five. But what they really need is 0:03:40.560 --> 0:03:43.680 the galvanization of infrastructure, and that comes from power and 0:03:43.720 --> 0:03:44.840 that comes from compute. 0:03:44.960 --> 0:03:48.520 I mean, open AI says, chat GPT has more than 0:03:48.600 --> 0:03:52.680 nine hundred million weekly active users, more than fifty million 0:03:52.800 --> 0:03:57.480 consumer subscribers and more than nine million paying business users 0:03:57.800 --> 0:03:59.280 that rely upon chet GPT. 0:04:00.240 --> 0:04:01.000 That's deployment. 0:04:01.000 --> 0:04:03.600 That Are they the biggest yet, I'm not even sure 0:04:03.600 --> 0:04:05.320 how we define the market better. Are they the biggest 0:04:05.320 --> 0:04:06.600 in consumer? 0:04:06.680 --> 0:04:07.080 For sure? 0:04:07.320 --> 0:04:08.800 Like in terms of like this is the size and 0:04:08.840 --> 0:04:12.120 scale of people using the problem is is of course 0:04:12.160 --> 0:04:15.800 Google how are you measuring Google? Many would say, like, 0:04:16.160 --> 0:04:18.479 is it the person who my mum who goes onto 0:04:18.520 --> 0:04:20.640 Google Search and gets an AI overview? Or is it 0:04:20.680 --> 0:04:23.120 someone who downloads the Gemini app and uses it in 0:04:23.160 --> 0:04:24.440 a distinct kind of model. 0:04:24.520 --> 0:04:26.839 So there's two ways in which you can compare and contrast. 0:04:27.080 --> 0:04:30.200 But certainly open Ai has beaten out Anthropic from a 0:04:30.520 --> 0:04:33.720 how many people are using their standalone application, nine hundred 0:04:33.720 --> 0:04:34.760 million is a huge amount. 0:04:35.000 --> 0:04:36.560 But from an enterprise. 0:04:36.160 --> 0:04:39.000 Perspective, many would say Anthropic has led the charge there, 0:04:39.000 --> 0:04:41.240 and that's why open ai has really been doubling down 0:04:41.279 --> 0:04:44.400 on this agentic focus and AWS is going to be 0:04:44.400 --> 0:04:46.040 call to that, putting it in within Bedrock. 0:04:46.400 --> 0:04:49.480 There's also a headline from Anthropic they're refusing to Pentagon's 0:04:49.520 --> 0:04:52.560 lead as contract terms. They want to limit surveillance and 0:04:52.560 --> 0:04:56.000 autonomous weapons. Are those reasonable asks for a company supplying 0:04:56.040 --> 0:04:57.440 AI to the military. 0:04:57.520 --> 0:04:58.400 The military would say no. 0:04:58.680 --> 0:05:00.760 The military would say locking mar and has no power 0:05:00.800 --> 0:05:03.240 over us to dictate how we use the weapons. We 0:05:03.320 --> 0:05:05.560 just purchased them and us and there are laws that 0:05:05.600 --> 0:05:08.640 we have to abide by, and there's humanitarian things that 0:05:08.680 --> 0:05:11.320 we sign up for, and the way in which we 0:05:11.360 --> 0:05:14.800 police war worldwide. However, from anthropics perspective, and if you'd 0:05:14.880 --> 0:05:17.080 been keeping up with out Dario Amide, the CEO has 0:05:17.080 --> 0:05:19.839 been writing of late. He put out a big piece 0:05:19.960 --> 0:05:22.680 thought leadership piece in January talking about the adolescence of 0:05:22.720 --> 0:05:26.800 technology and his worries and concerns about geopolitics, the use 0:05:26.880 --> 0:05:29.440 of generator of AI for surveillance, the use of generative 0:05:29.440 --> 0:05:33.240 A biotech and warfare. So no wonder he's still thinking 0:05:33.240 --> 0:05:36.240 along these worklines. He's given us all the breadcrumbs to 0:05:36.279 --> 0:05:38.640 know that this is how it feels. They just earlier 0:05:38.680 --> 0:05:40.320 in the week, remember sort of put out this odd 0:05:40.360 --> 0:05:43.400 statement saying they're stepping back to from some of their 0:05:43.920 --> 0:05:48.159 safety as a core mission purpose. But within that statement 0:05:48.200 --> 0:05:50.120 they really made clear it's because the government doesn't care. 0:05:50.320 --> 0:05:53.640 The government has not been increasing their focus on AI 0:05:53.680 --> 0:05:55.200 ethics in the way that they thought they would. 0:05:55.480 --> 0:05:58.320 Stay with US war from Bloomberg Intelligence coming up, care 0:05:58.360 --> 0:05:58.640 for this. 0:06:02.480 --> 0:06:06.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:06.240 --> 0:06:09.359 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:09.360 --> 0:06:12.679 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:12.720 --> 0:06:15.839 you get your podcasts, or watch us live on YouTube. 0:06:16.480 --> 0:06:17.800 Dell technology shares. 0:06:18.360 --> 0:06:20.800 They jumped pretty big here after the company gave an 0:06:20.800 --> 0:06:25.040 outlook for sales of its artificial intelligence service that exceeded estimates. 0:06:25.080 --> 0:06:27.719 As John said, stocks up nineteen point four percent today. 0:06:27.800 --> 0:06:30.320 Not bad for a big, big company. Ninety seven billion 0:06:30.360 --> 0:06:32.440 dollars in market cap. Would you know Joins is here 0:06:32.480 --> 0:06:36.520 senior technolog channels for Bloomberg Intelligence. That's a serious print 0:06:36.560 --> 0:06:38.760 for Dell. What's what's going on there? 0:06:38.880 --> 0:06:41.800 I mean John just said, look, you're having these massive 0:06:41.800 --> 0:06:47.920 investments by from OAI right open OAI. So essentially all 0:06:47.960 --> 0:06:50.800 of these data center deployments are really starting to materialize, 0:06:50.839 --> 0:06:53.520 un tell us starting to benefit from it, and. 0:06:53.600 --> 0:06:56.479 They're entering a year with a forty three billion dollar backlog. 0:06:56.560 --> 0:06:59.680 Does that give investors real visitibility? Or is the backlog 0:07:00.160 --> 0:07:05.080 vulnerable to supply chain constraints and maybe pricing resets. 0:07:05.160 --> 0:07:09.120 Well, that's a fantastic question. Right on the pricing reset, 0:07:09.120 --> 0:07:11.560 I don't think so. I think there's a little bit 0:07:11.600 --> 0:07:14.480 of a leverage on Dells side because and videos holding 0:07:14.520 --> 0:07:18.640 the cars with the GPU chips, right, But in terms 0:07:18.720 --> 0:07:22.440 of the supply environment, Dell does the supply chain very 0:07:22.520 --> 0:07:26.840 very well, and the revenue guidance not only for the 0:07:26.880 --> 0:07:32.240 AI server side but also traditional servers NPCs. They're managing 0:07:32.280 --> 0:07:34.200 it a lot better than we thought, so they should 0:07:34.200 --> 0:07:36.560 be fine on the supply side for the rest of 0:07:36.600 --> 0:07:36.880 the year. 0:07:37.160 --> 0:07:41.400 How big is the AI related product revenue for Dell 0:07:41.760 --> 0:07:44.000 and how's that grown and what do you expect it 0:07:44.040 --> 0:07:44.280 to go to? 0:07:44.400 --> 0:07:48.040 Well, if we think about just the AI server piece 0:07:48.120 --> 0:07:52.000 by itself, it is twenty five billion for this year, 0:07:52.560 --> 0:07:55.000 doubling to fifty billion. I mean, we're talking about incredible 0:07:55.040 --> 0:07:58.239 numbers doubling to fifty billion next year. We've also seen 0:07:58.880 --> 0:08:02.400 that sort of momentum from super Micro as well that 0:08:02.440 --> 0:08:05.640 they reported a couple of several weeks ago. But on 0:08:05.720 --> 0:08:10.080 the AI PC front, they just started to pick up steam. 0:08:10.080 --> 0:08:13.679 Still small portion of the business, but you know, quite frankly, 0:08:14.120 --> 0:08:16.320 every PC is eventually going to be an AI So 0:08:16.400 --> 0:08:17.440 what's an AI PC? 0:08:18.000 --> 0:08:19.360 What is that practicality? 0:08:19.400 --> 0:08:24.240 Yeah, you know, I'll tell you. In practicality, very little 0:08:24.320 --> 0:08:29.200 for you and I right, it's a chip that can 0:08:29.240 --> 0:08:32.640 handle a lot more processes, uh, and do it a 0:08:32.679 --> 0:08:33.280 lot faster. 0:08:33.800 --> 0:08:33.959 Right. 0:08:34.360 --> 0:08:37.080 I've been actually been playing around with cloud code as 0:08:37.120 --> 0:08:40.560 part of my work, and essentially what I'm doing is 0:08:41.559 --> 0:08:44.800 trying to use some of the processing that's on the 0:08:44.840 --> 0:08:47.680 on the PC. What I suspect is is that as 0:08:47.960 --> 0:08:52.679 corporates try to bring in AI into their workflow, they 0:08:52.720 --> 0:08:55.880 are going to look specifically for aipcs going forward. 0:08:56.400 --> 0:09:00.720 The company says memory chips memoryship prices are right thing rapidly. 0:09:00.800 --> 0:09:04.720 Do you think that the margins and those segments will 0:09:04.720 --> 0:09:09.400 be sustainable if the component prices also keep climbing. 0:09:09.480 --> 0:09:11.840 Yeah, So I think this is one of the reasons 0:09:11.840 --> 0:09:16.840 why the stock is up so much. Right, the sentiment 0:09:16.880 --> 0:09:20.120 going into the print was really really negative, primarily because 0:09:20.320 --> 0:09:25.760 of the component and memory pricing HPQ. HP said on 0:09:26.440 --> 0:09:29.800 just the other day that the memory pricing doubled over 0:09:29.840 --> 0:09:33.160 the past month, the round pricing alone, right, so that 0:09:33.200 --> 0:09:37.920 eight away margins. We actually did the math memory pricing 0:09:38.160 --> 0:09:41.120 plus a higher mix of AI servers. That's eating away 0:09:41.160 --> 0:09:45.200 one hundred, one hundred basis points of gross margin. And 0:09:45.840 --> 0:09:48.560 the thing is is that just a relative scale of 0:09:48.600 --> 0:09:52.160 the AI server revenues is helping to lift EPs altogether. 0:09:52.440 --> 0:09:55.520 So talk to us about the shortage of chips out there. 0:09:55.600 --> 0:09:57.280 So we hear from a lot of your companies and 0:09:57.320 --> 0:09:59.760 other companies in the tech stack, What is it? 0:10:00.000 --> 0:10:00.440 Why is it? 0:10:01.080 --> 0:10:02.320 How does it get fixed? 0:10:02.400 --> 0:10:07.040 We can blame AI on everything, yes, Right, So essentially 0:10:07.640 --> 0:10:12.360 AI servers take they use HBM high bandwidth memory that 0:10:12.360 --> 0:10:14.680 that's stacked, and it's sucking up a lot of the 0:10:14.679 --> 0:10:17.720 memory capacity that's out there. If we come off of 0:10:17.760 --> 0:10:21.680 the COVID period. Essentially, the memory makers, whether it's Microns, 0:10:22.120 --> 0:10:25.160 skhih Nicks or Samsung, they were hesitant to building out 0:10:25.200 --> 0:10:27.360 more capacity because they just didn't know if this AI 0:10:27.440 --> 0:10:29.480 thing was going to be real. And now it's starting 0:10:29.520 --> 0:10:32.520 to catch up to them. It's causing this domino effect 0:10:32.559 --> 0:10:38.480 of everything else, servers, smartphones, PCs, They're just scrambling for 0:10:38.520 --> 0:10:39.280 supply right now. 0:10:40.080 --> 0:10:43.280 How do you read the buybacks around ten billion dollars? 0:10:43.360 --> 0:10:46.200 Is that confidence in future cash flow or more like, 0:10:46.840 --> 0:10:48.680 oh no, the stock is still undervalued. 0:10:48.920 --> 0:10:51.960 Well, you know when the stock was at one twenty, 0:10:52.080 --> 0:10:55.120 I'm sure, Michael Delta the stock was undervalued and I 0:10:55.200 --> 0:10:57.800 wanted to read a lot more confidence not only in 0:10:57.880 --> 0:11:01.520 the business outlook, but also in cash generation. Right, we 0:11:01.960 --> 0:11:05.120 are hearing mixed things on the cash generation front from 0:11:05.120 --> 0:11:06.240 from my hardware companies. 0:11:06.240 --> 0:11:09.880 At least, did I d C takedown I d C 0:11:10.080 --> 0:11:13.040 is the the third party independent data provider for pretty 0:11:13.080 --> 0:11:15.480 much the whole technology industry. Did they take down their 0:11:15.520 --> 0:11:16.680 forecast for PCs? 0:11:16.800 --> 0:11:18.040 Was it took them long enough? 0:11:18.240 --> 0:11:18.440 Yeah? 0:11:19.360 --> 0:11:25.439 No, No, we had minus seven percent unit declines. 0:11:25.600 --> 0:11:27.760 Is that because there's enough chips to make the PCs? 0:11:27.800 --> 0:11:32.120 It's it's twofold, right, not enough chips? And number two, 0:11:33.000 --> 0:11:37.440 PCs are very very elastic, right from a demand supply 0:11:37.559 --> 0:11:41.000 demand perspective. And essentially what they did was they cut 0:11:41.000 --> 0:11:43.680 their forecast from minus three percent to minus eleven percent 0:11:44.080 --> 0:11:46.560 on the PC side, and they also cut their forecast 0:11:46.600 --> 0:11:49.880 the smartphones to minus thirteen percent. Right, there's a couple 0:11:49.920 --> 0:11:52.640 of things going on. The PC makers are going to 0:11:52.679 --> 0:11:56.720 focus more on the high margin businesses, right, so it 0:11:56.880 --> 0:12:01.760 leaves the lower end PCs at alert, so they're not 0:12:01.800 --> 0:12:05.000 going to start supplying those. And also the low end 0:12:05.000 --> 0:12:08.080 market tends to be a lot more price sensitive, so 0:12:08.280 --> 0:12:09.920 they're probably not going to upgrade. 0:12:10.440 --> 0:12:12.640 And then we have server and networking margins. I think 0:12:12.679 --> 0:12:17.080 those came above expectations. Is THELL gaining pricing power in 0:12:17.200 --> 0:12:20.560 AI hardware or is it just because maybe they're executing 0:12:20.600 --> 0:12:22.719 better than their peers? How do you read that? 0:12:22.840 --> 0:12:25.280 Yeah, so there's a couple of things going on as well. 0:12:26.160 --> 0:12:29.600 The first thing is is that they're raising prices right, 0:12:30.679 --> 0:12:33.480 and the term sheets are getting shorter. Instead of like, 0:12:33.720 --> 0:12:38.160 you know, three months, it's two weeks, so that that's 0:12:38.160 --> 0:12:43.120 happening as well, it's less price elastic. And then on 0:12:43.160 --> 0:12:45.240 top of that, from a margin perspective, as you we 0:12:45.240 --> 0:12:49.440 were talking about earlier, storage has a higher margin overall, 0:12:49.920 --> 0:12:52.800 and the storage business actually is doing very very well. 0:12:53.080 --> 0:12:55.240 Quite frankly, stay with us. 0:12:55.440 --> 0:12:57.800 More from Bloomberg Intelligence coming up after this. 0:13:01.679 --> 0:13:05.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:05.440 --> 0:13:08.559 weekdays at ten am Eastern on Apple, Cocklay and Android 0:13:08.559 --> 0:13:11.880 Auto with the Bloomberg Business App. Listen on demand wherever 0:13:11.920 --> 0:13:15.040 you get your podcasts, or watch us live on YouTube. 0:13:15.840 --> 0:13:19.280 Got big earning Saturday, Core Weave, and it wasn't good 0:13:19.280 --> 0:13:21.080 because a stock fell by the most and more than 0:13:21.160 --> 0:13:24.160 six months. That's after the company reported a better than 0:13:24.200 --> 0:13:27.720 expected loss and boosted capital expenditure. So this s burred 0:13:27.840 --> 0:13:31.760 some concerns that the company is overspending on infrastructure. And 0:13:31.960 --> 0:13:34.959 who else can talk to us about this better than 0:13:35.000 --> 0:13:38.720 ANAA Grana. He's Bloomberg Intelligence technology analyst. All the way 0:13:38.720 --> 0:13:42.480 from Chicago. So ANAURAG revenue exploded to one point nine 0:13:42.480 --> 0:13:45.840 billion last year, but losses widen. Is this a classic 0:13:46.320 --> 0:13:48.720 gross at any cost when it comes to the AI 0:13:48.800 --> 0:13:51.120 story or is it something a little more concerning. 0:13:52.679 --> 0:13:54.720 Yeah, I mean that's what the CEO is saying that Listen, 0:13:54.760 --> 0:13:57.360 we have so much back orders of you know, sixty 0:13:57.360 --> 0:13:59.480 plus billion dollars in orders, and we really need to 0:13:59.480 --> 0:14:01.520 fill it and we're going to go spend as much 0:14:01.520 --> 0:14:04.720 as we can. And today it seems investors are not 0:14:04.880 --> 0:14:07.480 liking it. But you know, I think what happened was 0:14:07.600 --> 0:14:10.360 they gave a bit of a outlook of what the 0:14:10.400 --> 0:14:12.760 expenses are going to be and they missed on that. 0:14:12.840 --> 0:14:15.760 And I think people are extremely no, I wouldn't say extremely, 0:14:15.800 --> 0:14:19.160 but somewhat concerned that, you know, whether they have the 0:14:19.240 --> 0:14:22.640 capital down the road to keep on continuing this particular flow. 0:14:22.800 --> 0:14:25.120 I think that's really what it comes down to, is 0:14:25.400 --> 0:14:28.400 where is the profitability going to come and at what point? 0:14:29.040 --> 0:14:31.560 Because as we know, some of these businesses, you have 0:14:31.640 --> 0:14:34.480 to invest upfront and then realize the profit later. 0:14:34.920 --> 0:14:37.240 Yeah, you got to back up for me and explain 0:14:37.320 --> 0:14:39.520 the basis, what in gun's name is a neo cloud. 0:14:41.480 --> 0:14:43.600 Yeah, well that's just the nomenclature. But at the end 0:14:43.640 --> 0:14:45.640 of the day, this is just a cloud. At the end, 0:14:45.720 --> 0:14:47.520 you know, you are. What you do is you open 0:14:47.520 --> 0:14:50.680 a data center, you buy GPUs from Nvidia, and then 0:14:50.720 --> 0:14:52.840 you rent it out to people. It's a very simple 0:14:52.880 --> 0:14:55.920 business model, nothing so complicated about it. But what happens 0:14:56.000 --> 0:14:58.960 is you need to put that upfront capital to create 0:14:58.960 --> 0:15:01.280 that data center. Then you need to buy the chips 0:15:01.320 --> 0:15:03.640 and put it in there, and then after that is 0:15:03.640 --> 0:15:06.520 what you start realizing the revenue when people use it. 0:15:07.000 --> 0:15:09.440 We have enough evidence that the backlog of that is 0:15:09.560 --> 0:15:13.080 absolutely stellar. Right now, there is so much demand. These 0:15:13.080 --> 0:15:16.320 guys are running around and trying to you know, put 0:15:16.360 --> 0:15:19.240 the data centers together and then go out and service that. 0:15:19.480 --> 0:15:22.120 So there is a mismatch between how much you're putting 0:15:22.160 --> 0:15:25.080 in terms of cost versus what's coming in as revenue. 0:15:25.160 --> 0:15:28.080 Well, can you explain a little for what's how interwoven 0:15:28.160 --> 0:15:30.760 are they with Nvidia at this point and what's the 0:15:30.800 --> 0:15:31.680 significance of that. 0:15:33.120 --> 0:15:35.200 Well, think of this as Nvidia is selling the chips, 0:15:35.200 --> 0:15:38.440 they are really the distribution arm for the services around it, 0:15:38.640 --> 0:15:41.360 and Video is a shareholder in cod viave and this 0:15:41.400 --> 0:15:43.600 is a pure play you could say, in Vidia Shop 0:15:43.640 --> 0:15:47.160 where it's basically going out and renting their chips out there. 0:15:47.360 --> 0:15:50.040 Now it is and again this is not so much 0:15:50.040 --> 0:15:52.640 in Vidia trying to just you know, give them capital 0:15:52.680 --> 0:15:53.480 to stay in business. 0:15:53.680 --> 0:15:55.040 They actually have orders from. 0:15:54.920 --> 0:15:57.880 Everybody we know, whether it's Microsoft or Meta or a 0:15:57.920 --> 0:16:00.640 bunch of a lot of enterprises as well well. So 0:16:00.800 --> 0:16:03.160 I mean, core Weve has real orders that it needs 0:16:03.160 --> 0:16:05.920 to fulfill. The question again, as I said, is how 0:16:05.960 --> 0:16:08.800 much you have to put up front for those chips 0:16:08.800 --> 0:16:12.160 and services versus how much you're going to realize as revenue. 0:16:12.520 --> 0:16:15.479 And seventy seven percent of revenue came from just two customers, 0:16:15.480 --> 0:16:19.760 with Microsoft accounting for nearly two thirds. How big of 0:16:19.760 --> 0:16:22.280 a red flag is that, or if it's even a 0:16:22.320 --> 0:16:24.440 red flag for IPO investments. 0:16:25.200 --> 0:16:26.920 Yeah, to me, it's not a red flag. It is 0:16:26.960 --> 0:16:29.280 a concentration issue. I get that. But at the end 0:16:29.320 --> 0:16:31.240 of the day, I think Microsoft is good enough in 0:16:31.320 --> 0:16:33.240 terms of you know, they will pay the bill to 0:16:33.280 --> 0:16:35.600 code if they have promised some revenue, so I'm not 0:16:35.640 --> 0:16:39.080 concerned about that part. But Codevieve is now seeing a 0:16:39.120 --> 0:16:42.120 lot more demand from other vendors. That's also not an issue. 0:16:42.200 --> 0:16:44.280 As I said, this is not a demand issue. The 0:16:44.400 --> 0:16:47.080 question at hand is because one of the things code 0:16:47.080 --> 0:16:48.800 Weave has to do is it has to go out 0:16:49.160 --> 0:16:52.440 borrow money, issue some bonds, and then go out and 0:16:52.480 --> 0:16:53.720 create new data centers. 0:16:53.840 --> 0:16:55.320 So it's a financing question. 0:16:55.600 --> 0:16:57.480 How much the rate of that is going to be, 0:16:57.640 --> 0:16:59.800 how much they're going to charge for these services. So 0:17:00.160 --> 0:17:02.520 I mean it's it's pretty much a most of a 0:17:02.560 --> 0:17:04.399 cost overrun story at this point. 0:17:04.920 --> 0:17:07.159 Do they give much clarity on when this is all 0:17:07.200 --> 0:17:07.880 going to pay off? 0:17:09.280 --> 0:17:11.960 They basically said, listen, long term margins are very good. 0:17:12.040 --> 0:17:14.880 They are expecting margins to improve in the second half 0:17:14.920 --> 0:17:18.080 of twenty twenty six. But you know, they gave some 0:17:18.200 --> 0:17:22.240 guidance for operating income or adjusted operating income for four 0:17:22.320 --> 0:17:24.960 Q and they came below that. So the big question 0:17:25.040 --> 0:17:27.000 for the analyst is, you know, you're telling me that 0:17:27.040 --> 0:17:29.399 it's going to improve in the second half of twenty 0:17:29.440 --> 0:17:31.560 twenty six. You know, whatever, it doesn't happen. So I 0:17:31.560 --> 0:17:34.760 think there are some doubts around that capabilities as this point. 0:17:34.920 --> 0:17:35.160 And. 0:17:37.080 --> 0:17:39.800 So the company could ask for a valuation north of 0:17:39.800 --> 0:17:42.320 thirty five billion dollars in this market. Do you think 0:17:42.359 --> 0:17:45.480 that's justified by the fundamentals or do you think it's 0:17:45.880 --> 0:17:48.200 kind of driven by AI momentum. 0:17:49.200 --> 0:17:51.520 And I think the question always happens is, you know, 0:17:51.560 --> 0:17:55.200 one week, the entire AI infrastructure world is very happy 0:17:55.240 --> 0:17:57.080 and you know, bubbly, and then the next week people 0:17:57.119 --> 0:17:59.879 start getting concerns. The question what the code weave has 0:17:59.880 --> 0:18:01.880 to show right now is they have to go out 0:18:01.920 --> 0:18:03.720 and raise some debt. 0:18:03.880 --> 0:18:05.840 I mean, you know that's tied to their. 0:18:05.800 --> 0:18:08.560 Contracts, and we'll see what's the cost of that debt, 0:18:08.640 --> 0:18:11.879 because that's going to dictate how the next funding is 0:18:11.920 --> 0:18:13.600 going to be on the you know, I call it 0:18:13.640 --> 0:18:16.000 not so much funding ground but more so a debt 0:18:16.080 --> 0:18:18.240 raised round and how that's going to go about. 0:18:20.520 --> 0:18:22.879 Stay with us more from Bloomberg Intelligence coming. 0:18:22.840 --> 0:18:23.560 Up here for this. 0:18:26.680 --> 0:18:30.359 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:30.440 --> 0:18:33.560 weekdays at ten am Eastern on Apple, Coarclay and Android 0:18:33.560 --> 0:18:36.880 Auto with the Bloomberg Business app. Listen on demand wherever 0:18:36.920 --> 0:18:40.040 you get your podcasts, or watch us live on YouTube. 0:18:40.760 --> 0:18:43.879 Let's get dig into deeper this little deal there in 0:18:43.880 --> 0:18:46.480 the media space, Warner Brothers, Discovery again, the news being 0:18:46.480 --> 0:18:47.520 Netflix walking away. 0:18:47.560 --> 0:18:49.560 So now paramounts guidance. 0:18:49.640 --> 0:18:50.440 It's their deal. 0:18:50.600 --> 0:18:51.160 Good for them. 0:18:51.359 --> 0:18:54.040 And let's check in with Keitha Ranganath and she covers 0:18:54.080 --> 0:18:57.760 all the media stocks for Bloomberg Intelligence. Keith, we got 0:18:57.920 --> 0:19:01.560 Netflix stock trading higher. I guess the the shareholders like 0:19:01.640 --> 0:19:03.080 them kind of passing on this deal. 0:19:04.320 --> 0:19:08.040 Yeah, big relief rally, Paul, you know, I mean this 0:19:08.320 --> 0:19:11.199 was always kind of muddying the narrative. I mean we've 0:19:11.240 --> 0:19:14.560 spoken about this multiple times. Netflix is such a clean, 0:19:14.800 --> 0:19:19.120 organic growth story and them just pursuing Warner Brothers Discovery, 0:19:19.119 --> 0:19:21.800 I mean just kind of added so much of uncertainty. 0:19:21.880 --> 0:19:24.320