Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and v Low in Sent Francesco.
Speaker 2: This is Bloomberg Tech Technology stocks full, bonds full, and
Speaker 2: oil surges. As the war in Iran shows no signs
Speaker 2: of the escalation, investor concerns rise as the possibility of
Speaker 2: disruption to energy markets, supply chains, and a jump in
Speaker 2: inflation loom large.
Speaker 3: Correct, Let's take a look at those markets energy in particular,
Speaker 3: I mean extraordinary moves that we're seeing in oil.
Speaker 4: Oil is currently having the.
Speaker 3: Biggest move since twenty twenty two.
Speaker 4: At one point since twenty twenty it's the highest is
Speaker 4: twenty twenty four.
Speaker 3: That has implications for the Nasdaq down almost two percent
Speaker 3: and the S and P five hundred down almost two percent.
Speaker 3: Why because the Federal Reserve cannot cut.
Speaker 4: Into this inflationary environment. Is the way that the market
Speaker 4: is anticipating. Bitcoin is off by some one point.
Speaker 2: Seven percent, then as that one hundred is off session loads.
Speaker 2: But that is what we're looking at right There is
Speaker 2: targeted drone and missile activity as a threat to energy
Speaker 2: infrastructure in the Middle East. New York Crew WTI up
Speaker 2: eight percent seventy seven dollars a barrel, but also brent
Speaker 2: the global benchmark, surging to eighty five dollars first time
Speaker 2: in a long time. US tenure yield had been above
Speaker 2: four point one percent and on track for its biggest
Speaker 2: two day advance since April of last year.
Speaker 5: We've come off that little bit.
Speaker 2: We are very focused on what is happening in the
Speaker 2: Strait of Horn moves right. There are boats that are
Speaker 2: stuck and cannot carry oil. As a result, the producers
Speaker 2: like Iraq have stopped producing. By the way, America relies
Speaker 2: a lot on Iraqi oil in terms of the refiners.
Speaker 2: So we're going to look at that. There is specific
Speaker 2: tech action. So let's get to that action when Bloomberg
Speaker 2: equalties reporter Ryan.
Speaker 5: For the SELECA.
Speaker 2: There's a lot to unpick here right at one point,
Speaker 2: and as that one hundred was on track for its
Speaker 2: biggest drops since October, certainly since November when we got
Speaker 2: that strong jobs print. There is inflation concern, but broadly,
Speaker 2: where is the risk of sort of mentality and sentiment
Speaker 2: you're seeing, Ryan.
Speaker 5: Good morning, Thanks for having me.
Speaker 6: So one thing I would just notice that all of
Speaker 6: this recent news, all this rise in political uncertainty, comes
Speaker 6: at a time when investors were already showing signs of
Speaker 6: being cautious about tech. We have seen concerns about how
Speaker 6: much money is being spent on AI. We have seen
Speaker 6: concerns about AI related disruptions. So if you add a
Speaker 6: new wrinkle on top of that, I think you already
Speaker 6: had investors predisposed to sell and sell pretty broadly.
Speaker 3: Ryan more broadly, dwell a little bit more on what's
Speaker 3: happening in terms of the software perspective, and what's happening
Speaker 3: in certain names Mongo dB, and I hate to bring
Speaker 3: it back to what the market was treading water on
Speaker 3: or trying to digest before this geopolitical upheaval, but we
Speaker 3: have to go back to what's happened in terms of
Speaker 3: Mongo DB's extraordinary sell off, despite the numbers not being
Speaker 3: quite as ugly as many would have anticipated.
Speaker 6: Right, So this occurs against the backdrop of people being
Speaker 6: very cautious that AI services are going to diminish the
Speaker 6: growth prospects for legacy software companies offer some kind of replacement,
Speaker 6: diminish their pricing power, their margins. Marco DB's results kind
Speaker 6: of fit into that narrative where they weren't necessarily bad,
Speaker 6: but the upside was a little bit smaller than people
Speaker 6: had expected it or relative to past quarters, the outlook
Speaker 6: was not dramatically higher. All these sort of concerns is
Speaker 6: feed into this broader environment right now where people are
Speaker 6: very concerned about AI. When you have results like this,
Speaker 6: it just sort of add to the concern by not
Speaker 6: really diminishing them. You know, like I said, people were
Speaker 6: already predisposed to sell, and you're really seeing that in
Speaker 6: a stock like Mango right now.
Speaker 2: Right also massive underperformance in chip stocks, which we're going
Speaker 2: to explain a little bit later on in the show Bloomers.
Speaker 5: Ryan for Selca, thank you very much.
Speaker 2: Let's talk a bit more broadly about what's happening in markets,
Speaker 2: Brian White, it's pi Ersanla, cohead of Technology Investment Banking.
Speaker 2: We're going to have a different conversation probably to the
Speaker 2: one that we thought we might be having. Caroline made
Speaker 2: a really interesting observation at desk this morning. You look
Speaker 2: at a name like Palenteer for example, still down significantly.
Speaker 2: There was a big run up yesterday, cyber stocks under pressure.
Speaker 2: How those are areas that you might think in this scenario,
Speaker 2: if this environment a war in Iran might go to
Speaker 2: the upside, it's an area that you look at software
Speaker 2: go from there.
Speaker 7: Please, Yeah, I mean I think that it's still going
Speaker 7: to be the bride spart in this market. I think
Speaker 7: the challenge that we have right now is that this
Speaker 7: increasingly looks like a prolonged conflict, and so investors are
Speaker 7: selling off right now. They're panicking in regards to what
Speaker 7: continues to go on. This doesn't appear to be kind
Speaker 7: of the limited engagements that we've seen traditionally, and so
Speaker 7: thus when you're looking, you know broadly and you step back.
Speaker 7: I still think if you want to be in cyber
Speaker 7: or you want to be in defense, those are going
Speaker 7: to be bride sparks. But right now everything's risk off.
Speaker 2: Co Head of Tech IV five percent of I've read
Speaker 2: your CV. If you don't mind, and you know you
Speaker 2: know the apparatus of government, well, yes, how important is
Speaker 2: that that that kicks in in a market environment like this.
Speaker 2: You understand the understandable, you know what a policy maker
Speaker 2: may or not do in a war environment.
Speaker 7: I think it's helpful because you can put things in context.
Speaker 7: I mean Fundamentally, what we look to do is advise
Speaker 7: clients on how to navigate this termoril. And having the
Speaker 7: experience to see how government thinks through these issues, particularly
Speaker 7: during conflict like this, is critical because we're not just
Speaker 7: dealing with the AI disruption, We're dealing with geopolitical disruption,
Speaker 7: and clients are wondering, how do I raise capital in
Speaker 7: this environment? Should I think about M and A on
Speaker 7: the buy side or the south side. This is where
Speaker 7: people are going to be thinking about what moves should
Speaker 7: I make to take advantage of the uncertainty in this environment, because,
Speaker 7: as we know, people that are able to do smart
Speaker 7: moves right now often of the long term winners because
Speaker 7: they don't sit back risk off, and that experience is
Speaker 7: helpful when I'm advising clients.
Speaker 3: How much is that experience applicable to the current administration though.
Speaker 7: Well, I think it's traditionally the levers of government remain
Speaker 7: pretty stable. There is obviously some political influence that goes
Speaker 7: on over the years. You know, one thing that we
Speaker 7: should all take a great regard in is just the
Speaker 7: experience of the military that is there, the decision apparatus
Speaker 7: and what has been in place to make these informed decisions.
Speaker 7: I think as we're increasingly seeing this is going to
Speaker 7: be a prolonged conflict, it is going to require a
Speaker 7: lot of you know, deft policy making, particularly as we
Speaker 7: engage with the Middle East that is in a bit
Speaker 7: of turmoil. I don't think when we woke up on
Speaker 7: Saturday morning, people nearly suspected how wide this would appear
Speaker 7: to be. And so people are going to be looking
Speaker 7: for some off ramps soon and the market impact of
Speaker 7: that is unknown, and that is what people are reacting
Speaker 7: to right now.
Speaker 3: So without wanting to be just knee jerk and thinking
Speaker 3: through if this could be a longer term conflict, if
Speaker 3: there's inflationary pressure there, what does it mean in terms
Speaker 3: of the influence that AI has been having on the
Speaker 3: market thus far.
Speaker 4: Do you just stay in the winners that have been working.
Speaker 3: And yes, maybe overallocate a little bit more, even to
Speaker 3: defense TEP.
Speaker 7: I think defense will be a bright spot. And then
Speaker 7: even before ARA, defense looked like an area where there
Speaker 7: was going to be tremendous innovation. I mean, what we're
Speaker 7: continuing to see is that people are looking for new technology,
Speaker 7: new approaches. We have a increased geopolitical conflict in this world,
Speaker 7: So being in defense is a good place to be,
Speaker 7: and that was pre Iran, and as it relates to AI,
Speaker 7: I think there will remain some bright sparts, particularly in infrastructure,
Speaker 7: particularly in cyber. Those are going to be good places
Speaker 7: to be, and over time, I think people will gain
Speaker 7: more confidence as we see earnings come out. I mean,
Speaker 7: don't forget we've still got a couple more weeks of
Speaker 7: earnings to go. This week, we're going to have news
Speaker 7: out of a couple of the technology conferences, and hopefully
Speaker 7: that will start to calm this market down a little
Speaker 7: bit more and people will realize that this is a
Speaker 7: bit of a selloff that is not applicable to all.
Speaker 2: Just really quick and trying to keep this on the news.
Speaker 2: DHS is warning right, which seems inevitable about the threat
Speaker 2: to citizens in this country and response cyber. Just give
Speaker 2: me more on cyber and why it's not getting more
Speaker 2: traction in this environment.
Speaker 7: Yeah, I would say two things first and foremost, we've
Speaker 7: always known that Iran via it's proxies like hesbalah Is
Speaker 7: may have the capacity to do something in the American homeland.
Speaker 7: So I think that's partially what we're hearing from the administration.
Speaker 7: I think more saliently though, is that people need to
Speaker 7: invest in cyber right now. The attack surface for both
Speaker 7: the private sector as well as the public surf sector
Speaker 7: could not be any higher in terms of their threat environment.
Speaker 7: So everybody should be paying more attention to what they
Speaker 7: need to do because where the Iranian cyber capability is
Speaker 7: quite strong.
Speaker 2: Ry Pipersander, great to have you here on Bloomberg Tech.
Speaker 2: I want to get to what happened in Career overnight
Speaker 2: shares of Samsung and sk Heinex both falling by around
Speaker 2: fifteen percent. There was a holiday in the Korean markets
Speaker 2: on Monday, so this was the first session since the
Speaker 2: war in Iran and the events of the weekend. But
Speaker 2: remember that the costs fee, the main index in Career,
Speaker 2: has been a massive outperformer year to date, led by Samsung.
Speaker 5: And sk Heinex.
Speaker 2: It's just a market reaction as sentiment reaction, particularly with
Speaker 2: the energy infrastructure concern in those two names. But was
Speaker 2: a big move, and maybe that's transferred character chip names
Speaker 2: in the US in this session.
Speaker 3: Suddenly extraordinary sell off over there. Meanwhile, coming up, well,
Speaker 3: look at some extraordinary moves from Sam Altman calling open
Speaker 3: a eyes Pentagon deal roll out sloppy.
Speaker 4: That's next, there's a bluebir tech.
Speaker 2: Open Ai is facing backlash over its new Pentagon deal,
Speaker 2: and CEO Sam Altman is admitting the rollout was mishandled.
Speaker 2: In a post, Altman said the company shouldn't have rushed
Speaker 2: the announcement, saying it looked quite opportunistic and sloppy. Here
Speaker 2: of the latest is Bloomberg's AI reporter Rachel Metz. It's
Speaker 2: one where you probably need to explain to us what
Speaker 2: the deal is and how it came about. But a
Speaker 2: very public statement by open ai CEO about how it
Speaker 2: was done.
Speaker 8: Yeah, I mean this was all part of this really
Speaker 8: rush situation that happened over several days. We had Anthropic
Speaker 8: scoring off against the Pentagon, the Pentagon saying we're not
Speaker 8: going to be using Anthropics AI models anymore and making
Speaker 8: some even further declarations than that about how companies perhaps
Speaker 8: could even use Anthropics models if they work with the government,
Speaker 8: and then open Ai very quickly swooped in and said
Speaker 8: we have a deal with the government. So I think
Speaker 8: that caught a lot of people, maybe not so much
Speaker 8: off guard, but it certainly left a lot of people upset,
Speaker 8: including some people at open Ai who were posting about
Speaker 8: it publicly on social media.
Speaker 3: A lot of people were painting the streets outside open
Speaker 3: Ai and well fears and concerns, Rachel. This has prompted
Speaker 3: a backlash that is actually impacting downloads of chat GPT
Speaker 3: and certainly has been pushing those to be getting into
Speaker 3: Anthropics offering Claude instead. It would feel like the numbers
Speaker 3: stack out in that way, Rachel. But talk us through
Speaker 3: ultimately what has been changed in terms of their agreement
Speaker 3: with the Pentagon, if anything.
Speaker 8: I mean, it sounds like open Ai has basically done
Speaker 8: a little bit more back up and forth with the
Speaker 8: Pentagon to make sure that the redlines that Opening Eyes
Speaker 8: says are in place regarding their software not being used
Speaker 8: for surveillance will be kept in place.
Speaker 2: Rachel, Sorry, do we have any understanding of how big
Speaker 2: a piece of open aised business this is?
Speaker 5: Like?
Speaker 2: Is this something like severely critical to them or is
Speaker 2: it still the case that you know, CHATGBT subscriber as
Speaker 2: an enterprise is really what they're most concerned about.
Speaker 8: I mean, at this point, I don't think that this
Speaker 8: is like an overarching piece of their business. I thinkause
Speaker 8: is a smaller piece, but as we've seen with the
Speaker 8: disagreement between Anthropic and the Pentagon, just having this kind
Speaker 8: of connection can really telegraph a lot about your business
Speaker 8: and it could lead to other things, other ripple effects
Speaker 8: and other kinds of business, either happening or not happening
Speaker 8: now or in the future.
Speaker 4: Rachel Mattz, thank you so much.
Speaker 3: An ongoing narrative that involves geopolitics the same times as
Speaker 3: generator of AI. Let's take a look at those tech
Speaker 3: markets in the eye of a geopolitical storm that is
Speaker 3: Middle Eastern conflict. We're currently seeing one point seven percent
Speaker 3: lower on the Nasdaq one hundred. We had fallen more
Speaker 3: than two percent. In fact, only thirteen names are on
Speaker 3: the green on the Nasdaq one hundred as we speak.
Speaker 3: New York Crude is where the action lies.
Speaker 4: We're up more than eight percent ed.
Speaker 3: We're seeing this inflationary tension mean that people think the
Speaker 3: Federal Reserve cannot cut into the situation.
Speaker 4: Therefore that has a.
Speaker 3: Long term impact on the value of stocks.
Speaker 2: Right now well way off session lows, but at one
Speaker 2: point we're on track for the biggest drop on the
Speaker 2: NASZAG one hundred since October when the President was really
Speaker 2: escalating the tariff tension with China. That's how markets are
Speaker 2: weighing in here. We're also tracking shares of Nvidia, one
Speaker 2: of the top stories on the Bloomberg terminal and on
Speaker 2: dot com, down one point six percent. The US is
Speaker 2: weighing new limits on Nvidia's AI chip sales to China,
Speaker 2: including a potential cap of seventy five thousand of its
Speaker 2: h two hundred accelerators to any one, single Chinese company.
Speaker 2: That's according to sources. Bloomberg's Ian King is here to
Speaker 2: explain it. When that regulatory filing hit at earnings, they
Speaker 2: were pretty clear that they have no idea whether China
Speaker 2: would even let the chips in. But what we're reporting
Speaker 2: is on the US side putting a cap on the export,
Speaker 2: the cap level and the strategy behind it.
Speaker 5: What do we know?
Speaker 9: Yeah, I mean, the understanding had been that the US
Speaker 9: side was more amenable to this happening, right, and that
Speaker 9: China was kind of the roadblock. But now what we're
Speaker 9: reporting is that there are more restrictions, more kind of
Speaker 9: fine print details being piled upon it, and that obviously
Speaker 9: makes situation more difficult than the likelihood of major shipments
Speaker 9: and major business less likely.
Speaker 3: And that's why many ways in video and Jensen didn't
Speaker 3: include any China business and therefoward looking guidance.
Speaker 4: So do we just take it from here that China
Speaker 4: doesn't want.
Speaker 3: Even h two hundreds and where we are in terms
Speaker 3: of a potentially crafted blackwell offering.
Speaker 2: Yeah.
Speaker 9: I mean the way that in Videa's leadership are phrases
Speaker 9: is like, look, you'll know the Chinese have given us
Speaker 9: permission when you see the Chinese companies make orders. We
Speaker 9: haven't seen them make the big orders yet. That doesn't
Speaker 9: look positive. It doesn't look hopeful for the way things
Speaker 9: are progressing.
Speaker 2: Going back to the basics of what Caroline just said
Speaker 2: that the forecast for sales is seventy eight billion dollars
Speaker 2: plus or minus two percent in the quarter, does not
Speaker 2: include any China. But when you did your earnings piece
Speaker 2: the next day, a lot of the analysts were like, well,
Speaker 2: China is then therefore potential upside in the event they
Speaker 2: are allowed to do it.
Speaker 5: Jensen's modeling for that or not, it.
Speaker 9: Doesn't appear to be. I mean they're being prudent right now.
Speaker 9: I mean, the potential upside came from the detail that
Speaker 9: we got during earnings, which is, hey, we got a
Speaker 9: few licenses, so Wall Street was like, oh, great crack
Speaker 9: of light, here we go. And then now we get
Speaker 9: this and obviously we still haven't seen any movement from
Speaker 9: the China side either.
Speaker 3: Now, China used to be a significant era of revenue.
Speaker 4: What was it almost twenty percent one point.
Speaker 3: For a video numbers or thereabouts.
Speaker 4: Where's the Middle East at.
Speaker 3: Can I just ask something to throw a curve ball
Speaker 3: into the mix of the current Gyo political situation?
Speaker 9: Well, that's a very good question. Obviously, in video cares
Speaker 9: very much about what's called sovereign AI, which is, you know,
Speaker 9: come trees, attempts to try and build their own infrastructure.
Speaker 9: We've seen that in Saudi Arabia, we've seen that in
Speaker 9: the UAE, and these are areas where there's a lot
Speaker 9: of cash and there's a lot of investment in this
Speaker 9: future economy being made. So any threat to that would
Speaker 9: obviously be a threat to this whole system.
Speaker 3: Well, certainly in video is one of the key legs
Speaker 3: to the downside in a points perspective. Today, in King
Speaker 3: we're always so thrilled to have his expertise.
Speaker 4: And it's nice to be sat next to him as well.
Speaker 3: I Meanwhile, let's take a quick look on what's happening
Speaker 3: with Apple, because if you didn't realize amid the torrent
Speaker 3: of news that you're trying to digestiday, the company is
Speaker 3: actually introducing refreshed MacBook pros and airs with an M
Speaker 3: five chip. The company also raising the prices of those
Speaker 3: products amid an industry wide memory crunch. Other products announced
Speaker 3: include two new external monitors.
Speaker 4: As you see shows down nine.
Speaker 3: Tex percent, so actually better performing than the rest of
Speaker 3: the market ed.
Speaker 4: Welcome back to Bloomberg Tech. We're in the Middle East.
Speaker 3: We take a look at what's happening in the markets
Speaker 3: amid a US is really focus on Iran. We've got
Speaker 3: the Nastaq one hundred off by one point six percent,
Speaker 3: Micron leading you on the points perspective to the downside,
Speaker 3: so two it is in video, we're seeing the S
Speaker 3: and P five hundred off by one and a half percent.
Speaker 4: Bitcoin is acting like a risk asset today.
Speaker 3: We're back lower, but it's still elevated versus where it
Speaker 3: was on the weekend.
Speaker 4: Sixty eight eight hundred is where we trade.
Speaker 3: Move on to individual names because it is important.
Speaker 4: To see where the impact.
Speaker 3: Of tension and ongoing war in the Middle East, where
Speaker 3: it has and what it does to assets owned by Amazon.
Speaker 3: For example, AWS warning of prolonged disruptions to its services
Speaker 3: after drone strikes damage three of its data centers in
Speaker 3: the Middle East. They say the companies said drones had
Speaker 3: directly struck two facilities in the UAE in damaged infrastructure
Speaker 3: near other facilities in Bahrain Palanteer.
Speaker 4: The sentiment shift today.
Speaker 3: Is so negative that even companies that are meant to
Speaker 3: benefit from the focus on defense and defense tech are
Speaker 3: on the lower side. We're off by one point four
Speaker 3: percent after a rally yesterday. More analysts are going positive
Speaker 3: on Palenteer, of course, software that's used by the government
Speaker 3: very much in the defense perspective, and we're seeing twenty
Speaker 3: out of thirty one analysts now saying by.
Speaker 4: The stockhead we're great.
Speaker 2: Shares of defense firms have joined the market sell off,
Speaker 2: even as the conflict in Iran rearforce is their critical role,
Speaker 2: the critical role of the US primes. Let's bring a
Speaker 2: Bloomberg Intelligence senior analysts Wayne Sanders for more. You've been
Speaker 2: keeping the react and the research up to date over
Speaker 2: the last two or three days. You have this scenario
Speaker 2: where if this conflict losts weeks or more, you look
Speaker 2: at the air strike capabilities the United States has and
Speaker 2: who might benefit. We showed some of those names on
Speaker 2: the screen just there. But give us your latest research please.
Speaker 10: Yeah, absolutely, thank you so much for having me on.
Speaker 10: When you think about this conflicts so far, a lot
Speaker 10: of the munitions experts right you're looking at RTX, you're
Speaker 10: looking at Lockheed in Northrope, are really the ones that
Speaker 10: are set really to benefit off off of part of
Speaker 10: this because they're going to have to replenish what they've got.
Speaker 10: The problem is that as we continue to expand a
Speaker 10: lot of the munitions right now, especially if if you're
Speaker 10: looking at your AIM nine x's and your am rams,
Speaker 10: which your aircraft missile shots, as well as your Tomahawks
Speaker 10: that are coming from your naval vessels, which comes from
Speaker 10: our TX, these are the ones right now that are
Speaker 10: going to be critical also in further contingencies that we
Speaker 10: would look down the road twenty twenty seven and beyond.
Speaker 10: So we want to make sure that there's a balance
Speaker 10: between both that we are using them effectively now and
Speaker 10: having the ability to replenish in the future when.
Speaker 3: We turn to you, because not only are we lucky
Speaker 3: enough to have you as a senior defense research analysts
Speaker 3: here with us of BlueBag Intelligence, but your past experience
Speaker 3: with the officer of the under Sectary of Defense up
Speaker 3: until twenty twenty four, the fact that you were so
Speaker 3: ingrained with the Department of the Army as well.
Speaker 4: Therefore, are we well placed when you're looking out to
Speaker 4: twenty twenty.
Speaker 3: Seven and the likes and then here and now, are
Speaker 3: we using the right strategic assets?
Speaker 5: Yeah?
Speaker 10: No, great question. And so the bottom line I try
Speaker 10: to tell a lot of people is the US military
Speaker 10: does a very good job of making sure that they
Speaker 10: have contingency plans in place. They wargain these all the
Speaker 10: time to say, Okay, these types of conflict scenario that
Speaker 10: we would be looking at would require this amount of munitions,
Speaker 10: it would require these amount of aircraft, it would require
Speaker 10: these amount of targets that we would want to be
Speaker 10: able to hit. When you put all those into place,
Speaker 10: I guarantee you that there is not a way where
Speaker 10: the President of the United States got a briefing from
Speaker 10: the Pentagon that says, hey, we're going to run out
Speaker 10: of missiles in a specific period of time if we
Speaker 10: were to go into Iran, So they have those contingencies
Speaker 10: in place, they know what they're doing from that. Given
Speaker 10: the fact that we have air superiority as well, means
Speaker 10: that we have plenty of resupply capability in the area
Speaker 10: as well.
Speaker 2: So I want to talk about what's happening on the ground.
Speaker 2: Our colleagues of Bloomberg News and Bloomberg Economics have basically
Speaker 2: done the missile math for the United States. This has
Speaker 2: been focused on the Patriot missile system right four million
Speaker 2: dollar missiles, whereas Iran has deployed lower cost twenty thousand
Speaker 2: dollar drones. There is evidence that the US is also
Speaker 2: looking at drone strategy. What are you seeing in the
Speaker 2: data that's being published.
Speaker 10: Yeah, we're doing a lot right now. The US is
Speaker 10: doing a lot, especially on counter drone technology as part
Speaker 10: of the Pentagon's Replicator two point zero initiative. There are
Speaker 10: a lot of companies out there right now BA working
Speaker 10: on apkws as well.
Speaker 5: That's been something that's been used.
Speaker 10: In Ukraine as well from a counter drone capability. And
Speaker 10: then you're also you start looking at things like directed energy,
Speaker 10: high powered microwaves and high energy lasers. Those are further
Speaker 10: further out right. They are not right now at the
Speaker 10: point of full rate production scalability. But it starts to
Speaker 10: ask the question, like you guys are talking about, is
Speaker 10: you have to be able to look at the magazine
Speaker 10: depth how much it costs for us to be able
Speaker 10: to shoot those things down? And they've got to be
Speaker 10: alternate technologies that are out there that can help us
Speaker 10: be able to do that a lot cheaper.
Speaker 5: You look at it.
Speaker 10: On munition side of the house, we reverse engineered, the
Speaker 10: United States reverse engineered a Shahi drone specifically to create
Speaker 10: the Lucas drone. So from a strike perspective, you're now
Speaker 10: looking at instead of a one and a half million
Speaker 10: dollars Tomahawk missile, you could actually use a thirty five
Speaker 10: thousand dollars unmanned one way attack drone. Which this is
Speaker 10: the first operational employment that has been out there is
Speaker 10: during this time, and I.
Speaker 3: Ran Ryan Sander's a Blue May intelligence analyst as well
Speaker 3: as retard Colonel.
Speaker 4: We so appreciate your time today.
Speaker 3: Look, demand for defense tech may be set to rise,
Speaker 3: but the spike in oil, the gas prices, the closure
Speaker 3: of key shipping routes. Well, they're raising concerns about how
Speaker 3: those products reach markets. Tara Murphytosi is here with our
Speaker 3: CEO of Gavini. Look, it's a software provider for defense
Speaker 3: tech supply chains. You have the inside track on resilience
Speaker 3: right now. You sit there in Washington, Tara, and I
Speaker 3: asked you put out a note really thinking about an
Speaker 3: availability crisis that we currently have. Spell out that reality
Speaker 3: that we have in acquisition right now.
Speaker 11: The reality is that I think you can see from
Speaker 11: the weekend, the demand for American military power is continuing
Speaker 11: to increase, and so much of the conversation, including what
Speaker 11: we just heard from Wayne's great summary, is focused on
Speaker 11: production of new systems.
Speaker 4: That's incredibly important.
Speaker 11: But when you also look at what the United States
Speaker 11: is bringing to bear in the Middle East right now
Speaker 11: F fifteen's, F twenty two's, some of these systems are
Speaker 11: sustainment challenges as well, and so there's a production need
Speaker 11: in the United States. There's also an availability of parts
Speaker 11: and legacy systems that is equally important.
Speaker 3: We're not in any sort of real immediate crisis, though,
Speaker 3: when it comes to this Iranian focus and battle that currently.
Speaker 4: Rages, We're not.
Speaker 11: I would say that the United States today is capable,
Speaker 11: including not just from a military capability perspective, but a
Speaker 11: capacity perspective, of executing any military operation that it deems appropriate.
Speaker 11: We are not in immediate danger of running out of
Speaker 11: stock of munitions. We are when you look at longer
Speaker 11: term trends in a situation where if we are firing
Speaker 11: one year's worth of missile production in one week time,
Speaker 11: then things start to really become questionable in terms of
Speaker 11: overall sustainability.
Speaker 5: Tara.
Speaker 2: One of the most read stories on the Bloomberg is
Speaker 2: about Russia seeing the war in Iran is putting pressure
Speaker 2: on its own air defense systems in the context of Ukraine.
Speaker 5: Very interesting.
Speaker 2: Earlier in programming we spoke CFSFCFO about how Ukraine fits
Speaker 2: into the Iran dynamic.
Speaker 5: Just listen to this.
Speaker 12: Some of the experience from Ukraine is developed quite quickly
Speaker 12: into the use. Some of this will take time and
Speaker 12: the experience is still coming. So I'm expecting now the
Speaker 12: focus in AI particularly is so massive, as well as
Speaker 12: all the other technologies like for example, three D printing
Speaker 12: of the missile et cetera. What we can use within
Speaker 12: the US and European.
Speaker 2: Startups exactly the same topics you've been discussing, right, the
Speaker 2: lessons that should have been learned from Ukraine in predictive
Speaker 2: preparedness versus like in the US military apparatus at least
Speaker 2: this cultural just in time.
Speaker 5: System.
Speaker 2: Essentially, how do you see that learning from Ukraine and
Speaker 2: what we're seeing in Iran?
Speaker 4: I think you put it perfectly ed.
Speaker 11: I don't think the learning has been absorbed enough. And
Speaker 11: we know that AI the era is upon us, and
Speaker 11: what we need to do as a US military, as
Speaker 11: a US national security apparatus is better harness it for
Speaker 11: US national security aims and overall American interests. Your point
Speaker 11: about being able to look ahead here is such a
Speaker 11: good example of where AI can be powerful. You know,
Speaker 11: we were just talking about the impact of this war
Speaker 11: with Iran or this great military crisis with Iran and
Speaker 11: on the primes, and yet one great example of how
Speaker 11: Gavini uses AI in this context is to demonstrate that
Speaker 11: when you look past the primes, the sub tier suppliers
Speaker 11: of critical parts for those munitions are shared, and so
Speaker 11: you end up with these bottlenecks and choke points in
Speaker 11: the supply chains for military systems that used to be
Speaker 11: completely invisible to decision makers. That's not true today with
Speaker 11: what you can do with AI and data, and so
Speaker 11: the next step is we understand those dynamics.
Speaker 4: What are we doing about it.
Speaker 11: From a prepositioning and stockpile management perspective.
Speaker 2: Tara Murphy, do TCO of Gueni, thank you very much.
Speaker 2: So coming up in the program, Coherent CEO Dumandison joins
Speaker 2: us to talk about his company's new strategic partnership with
Speaker 2: Nvidia that includes a two billion dollar investment.
Speaker 5: That's next. This is Spoonmberg Tech.
Speaker 2: Vidia has agreed to invest four billion dollars in the
Speaker 2: photonics firms Coherent Momentum. The two equally sized bets by
Speaker 2: the AI leader should ensure demand for advanced optical components
Speaker 2: used in data centers. Let's discuss the Coherent CEO J Anderson.
Speaker 2: I think a reasonable place to start is to understand
Speaker 2: the role that a laser has in the server design
Speaker 2: and in the data center.
Speaker 5: More Broady House servers talked to.
Speaker 2: One another because the market reaction is quite clear to
Speaker 2: how investors feel about this, But where does the technology
Speaker 2: fit in?
Speaker 5: Yeah, it's a good question.
Speaker 13: First of all, thank you for having me and I
Speaker 13: appreciate it. Yeah, the way you can think about it
Speaker 13: is a laser is really ultimately it's photonics. It's really
Speaker 13: about light, and it's about using light to transmit data
Speaker 13: in the data center. And there's a good portion of
Speaker 13: the data center already today where all of the communication.
Speaker 5: Of the data is happening with light.
Speaker 13: And the reason that light gets used rather than, for instance,
Speaker 13: an electrical signal is light is the absolute fastest, most
Speaker 13: power efficient way to transmit data. And so good portion
Speaker 13: of the data center already runs one hundred percent on
Speaker 13: photonics optical connections. But as we move forward building new
Speaker 13: data centers, as we see a massive ramp in the
Speaker 13: amount of data flowing through these data centers, more and
Speaker 13: more of the data center connections will be based on
Speaker 13: light on optical forts.
Speaker 2: So in this arrangement you'll take the funds for R
Speaker 2: and D purposes, But inside of it there is a
Speaker 2: purchase opportunity for Nvidia if it has done a lot
Speaker 2: on silicon photonics. They've told me about it quite a while.
Speaker 2: Now what's new in it for them? You know, what
Speaker 2: is it that they're able to now do that they
Speaker 2: couldn't do?
Speaker 13: Themselves, Well, they're relying on us to bring the photonics
Speaker 13: expertise right. So in Vidia for US has been a
Speaker 13: long term partner actually over twenty years as a customer
Speaker 13: and a partner through their Melanax acquisition, So we've had
Speaker 13: long history with Nvidian and really what we're doing is
Speaker 13: working together to use photonics to advance the architecture of
Speaker 13: data centers, to find new innovation within data centers. And
Speaker 13: the key thing that photonics or optic springs is incredibly
Speaker 13: power efficient data transmission because again there's no more.
Speaker 5: Place transferring virra election exactly.
Speaker 13: So as you increase the data rates, as you increase
Speaker 13: the amount of data that's being transmitted, you have to
Speaker 13: if you're using electrical today, eventually you'll hit a physics
Speaker 13: limit and you'll be kind of forced to.
Speaker 5: Switch to optical.
Speaker 13: And so we'll see more and more of the connections
Speaker 13: within the data center moved to optical. And that's really
Speaker 13: where we come in. We're a global expert in photonics
Speaker 13: in optical communication.
Speaker 4: And the market is forward looking.
Speaker 3: They understood the copper to optical vibe for a few months,
Speaker 3: if not years, and your shares have shown that. But
Speaker 3: what's interesting is Momentum CEO was speaking at an event
Speaker 3: yesterday Michael, and he was talking about even with scaling
Speaker 3: of their supply, they're still way back, they're falling further
Speaker 3: behind where demand is. Is that something similar for you
Speaker 3: as one?
Speaker 13: Well, demand There's no doubt demand is incredibly strong and
Speaker 13: that is both in the near term and in the
Speaker 13: long term. And the forecasts that we're seeing from our customers,
Speaker 13: not just in Nvidia but large hyperscalers, cloud service providers
Speaker 13: are just exceptionally strong. And so what we are doing
Speaker 13: about that is we are rapidly expanding our capacity. I mean,
Speaker 13: we are building capacity as fast as we can. Yeah,
Speaker 13: I was going to say, just as one example, ed
Speaker 13: you asked about the lasers.
Speaker 5: Let's take the lasers we want to.
Speaker 13: So if you look at the lasers, we're doubling our
Speaker 13: capacity this year, right, So we're coming out with twice
Speaker 13: as much indium phosphide that's the key material underneath the lasers,
Speaker 13: but twice as much indian phosphide production. So we are
Speaker 13: ramping our capacity as fast as possible. But back to
Speaker 13: as we see more and more of the data center
Speaker 13: converge from electrical to optical. You've got kind of two
Speaker 13: big secular growth trends underneath us, and number one the
Speaker 13: data center growth, but number two this conversion of electrical
Speaker 13: toptical and so that just generates an incredible amount of demand.
Speaker 13: So we're trying to stay ahead of that. We're ramping capacity.
Speaker 13: This in Vidia partnership is part of that. That investment
Speaker 13: that they made into Coherent is will help us ramp
Speaker 13: capacity faster and make sure that we've got the right capacity.
Speaker 5: In paste where right.
Speaker 2: We had the co founder's mesh on the show recently
Speaker 2: SpaceX alum who did lasers at SpaceX, and they came
Speaker 2: to market with a very simple argument. Output of these
Speaker 2: systems at scale was done in China. There isn't a
Speaker 2: facility in the United States. There isn't the capacity here.
Speaker 2: Is that part of your game plan or you dispute.
Speaker 13: That laser Absolutely, lasers. Some of the key technology that
Speaker 13: we're developing and ramping is here in the US.
Speaker 4: Right.
Speaker 13: So we have a long history of US manufacturing. We
Speaker 13: were founded as a US manufacturing company. We've got over
Speaker 13: twenty manufacturing sites across thirteen different states. But one of
Speaker 13: the key technologies that we're ramping on behalf of Nvidia
Speaker 13: and other customers. Is that laser technology that's happening in Sherman, Texas, right,
Speaker 13: And that's a great facility we've had. We've supported customers
Speaker 13: out of that facility for years. But that's where we're
Speaker 13: going to be part of where we're going to be
Speaker 13: doubling capacity.
Speaker 3: What you need from like a raw material perspective, what
Speaker 3: is it that makes us manufacturing ever more capable.
Speaker 4: I'm sure you're discussing this from government all the time.
Speaker 13: Yeah. So one of the key inputs is it's the
Speaker 13: Indian phosphide substrates themselves, and so we have a very
Speaker 13: diversified supply chain. We've just like in videas securing you know,
Speaker 13: capacity rights to our capacity. We're doing the same thing
Speaker 13: with our suppliers. So we're making sure that we've got
Speaker 13: all the key input capacity or input supply secured. But look,
Speaker 13: it's we believe that these key optical technologies like lasers,
Speaker 13: we absolutely want to see that manufactured in the US. Now,
Speaker 13: we have other sites as well. We're a global company
Speaker 13: and so we are ramping at multiple sites. But that's
Speaker 13: one of our key facilities is Sherman Texas.
Speaker 3: Jim, it's great having you on.
Speaker 4: Is a rather busy week.
Speaker 3: John Anderson, Coherent CEO, always talk, he lass