Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is Bloomberg Tech coming up the biggest AI export
Speaker 2: restriction yet and Tropic disables access to its most advanced
Speaker 2: models for all foreign nationals. The US concern jail breaks
Speaker 2: in the code in video, is seeking to raise at
Speaker 2: least twenty billion dollars from its first corporate bond sales
Speaker 2: since twenty twenty one. We'll have the details. And SpaceX
Speaker 2: shares throttle up on day to trading, adding to a
Speaker 2: blockbuster public market's debut on Friday. And this is what
Speaker 2: markets look like. Hello, Welcome to Bloomberg Tech Monday, June fifteenth.
Speaker 2: There is a big focus on what is happening between
Speaker 2: the US and Iran Later in the show. We'll get
Speaker 2: to that. But SpaceX in its second day of trading
Speaker 2: up eight percent and it's putting a big spotlight on
Speaker 2: the AI trade, on AI infrastructure. Then aw's that one
Speaker 2: hundred's off session highs, but we're again close to records,
Speaker 2: and the narrative is that there is feel good in
Speaker 2: this equity market. Let's get to our top story. A
Speaker 2: major escalation in Washington's approach to AI. The US government
Speaker 2: has ordered Anthropic to block foreign access to its most
Speaker 2: advanced models after officials flagged security vulnerabilities and it's new
Speaker 2: to released Fable five system and Mephos five to two.
Speaker 2: Talks r underway between Anthropic and the Trump administration joining
Speaker 2: us now our AI editor Bloomberg, Seth Figman and in
Speaker 2: DC Bloomberg's Mike Shepard and Shepp I want to start
Speaker 2: with you. This came from the Commerce Department. Explain the
Speaker 2: export restriction and what the government asked of Anthropic.
Speaker 3: Well, this all dropped right as everyone was still so
Speaker 3: focused on the SpaceX ip IPO. Five twenty one pm
Speaker 3: on a Friday, a letter a directive to Anthropic saying, look,
Speaker 3: we are concerned about foreign nationals having access to two
Speaker 3: of your most advanced models, essentially the key products that
Speaker 3: the company would want to pitch as it's heading into
Speaker 3: this nearly trillion dollar IPO. And this really marked a
Speaker 3: huge shot across the bow once again for this AI
Speaker 3: developer from the Trump administration, and in essence it forced
Speaker 3: the company's hand and Thropic had to deny access worldwide
Speaker 3: to these two products Fable five and Mythos five in
Speaker 3: response to the government's move. Now, this in a way
Speaker 3: It really marked not only an unprecedented step for any administration,
Speaker 3: it really marked a break from what the Trump administration
Speaker 3: had laid out just a little more than a week
Speaker 3: ago with that order, that executive order, the President Donald
Speaker 3: Trump sign that was aimed at cybersecurity and AI and
Speaker 3: that it included language that said this does not should
Speaker 3: not be interpreted as establishing a licensing regime. Yet an effect,
Speaker 3: what we are seeing is that the government is blocking
Speaker 3: the release of these models over the kinds of safety concerns,
Speaker 3: in essence, the vetting that the government had wanted to
Speaker 3: see done on a voluntary basis, and yet it is
Speaker 3: setting its foot down now over security concerns and essentially
Speaker 3: holding off the release of these two products.
Speaker 2: Seth this was an action directed at the use of
Speaker 2: the models Fable five me PUS five by foreign nationals,
Speaker 2: but Anthropic made the decision to close off access to everyone.
Speaker 2: What was the explanation that the AI Lab gave.
Speaker 4: Yeah, Well, they're saying access to foreign nationals not just
Speaker 4: in other countries, but those residing in the United States.
Speaker 4: And it seems that Acanthropic made the decision that this
Speaker 4: was unworkable to allow this model to remain on the
Speaker 4: market for those restrictions. So they've pulled up while they
Speaker 4: continue to talk with the government. Now there's a certain
Speaker 4: irony here. You know, two days before this move, Anthropics
Speaker 4: and Dario Medea had come out and said, you know,
Speaker 4: he thinks the government should have the ability to ban
Speaker 4: models that pose certain risks. Two days later, the government
Speaker 4: took a step has effectively caused a model or two
Speaker 4: models to be pulled from the market. But in this case,
Speaker 4: you know, Anthropic is saying it's essentially misguided and the
Speaker 4: risks outlined may not be as severe as the government's right.
Speaker 2: I think they are seth and Frobic saying there's a
Speaker 2: misunderstanding here. The issue that the government laid out is
Speaker 2: something called a jail break in the code. It has
Speaker 2: to do with guardrails that are placed on the models themselves.
Speaker 2: Could you explain to the Bloomberg Tech audience what the
Speaker 2: jail break concern?
Speaker 4: Is important to note that at this point we have
Speaker 4: not seen the research that Anthropic and former White House
Speaker 4: or David Stacks have alluded to that implies that there
Speaker 4: is some kind of jail break former ability. What we
Speaker 4: understand is that it seems to be pretty narrow in nature.
Speaker 4: It may actually be something that enables cyber defenders to
Speaker 4: use the technology to spot and protect against flaws. But
Speaker 4: what Anthropic is saying is, if not some universal jail break,
Speaker 4: some wider flaw that could be breached in a potentially
Speaker 4: damaging way. And it seems to believe that the government
Speaker 4: is either overstaving or misunderstanding the nature of the risk.
Speaker 2: Here, Mike, real quick, what's happened behind the scenes.
Speaker 3: Well, that is what we are trying to find out next,
Speaker 3: of course, and we want to first know what remedial
Speaker 3: steps the company could take at the government's behest, what
Speaker 3: those might look like, how long that might take, and
Speaker 3: whether the company really would follow suit. We don't know
Speaker 3: how long this will unfold or if there will even
Speaker 3: be a legal challenge, And also we have to look
Speaker 3: at the politics of this abroad. The President just arrived
Speaker 3: in Geneva for the summit in Evion with other G
Speaker 3: seven leaders. AI is on the agenda, and now it
Speaker 3: will be a more urgent issue, especially as we see
Speaker 3: economies including the European Union, examining the question of tech
Speaker 3: sovereignty and the concern that they have about perhaps over
Speaker 3: reliance in US technology that may be at risk of
Speaker 3: being taken away from them at a moment's notice.
Speaker 2: Bloombergs Seth Figmann and Bloombergs Mike Shepard in DC, thank
Speaker 2: you very much. The industry weighs in for more in
Speaker 2: the impact across the AI ecosystem. We're joined by Joel Pinot,
Speaker 2: chief AO officer at Cohre, a frontier AI firm focused
Speaker 2: on LMS and AI applications for business customers, and shep
Speaker 2: just set it out pretty clearly. At issue here is
Speaker 2: whether or not the government should be able to say
Speaker 2: you can or you cannot use a particular piece of
Speaker 2: technology because of the concern that was outlined. What is
Speaker 2: Coher's position.
Speaker 5: On that, indeed, And you know co Here's a company
Speaker 5: that's fully focused on developing models and a gentic platform
Speaker 5: for enterprises and government, and so we've been talking to
Speaker 5: that segment of the market for a number of years now.
Speaker 2: What we've been.
Speaker 5: Hearing is that customers want the ability to really control
Speaker 5: their tech stack. They want to make sure that the
Speaker 5: technology runs in a predictable way, that it's stable, that
Speaker 5: it has high guarantees in terms of confidentiality and security,
Speaker 5: so there's a number of companies and governments already who
Speaker 5: are opting for on premise installation where they can control
Speaker 5: the model and they can control all of the software stack.
Speaker 5: Clearly know all the news from the last few days
Speaker 5: is a huge wake up call for others across the industry.
Speaker 5: The fact that models which a few days before were
Speaker 5: presented as some of the most capable in industry suddenly are
Speaker 5: no longer accessible means that there can be a lot
Speaker 5: of volatility in terms of access to the technology, and
Speaker 5: that's got to be a big concern for companies.
Speaker 2: Joelle, This news hit five twenty one pm Eastern Time Friday,
Speaker 2: So I appreciate it's been just a couple of days
Speaker 2: over the weekend, but has Cohed had any inbound right
Speaker 2: If there are entities that can't get access to meet
Speaker 2: those in fable five, maybe they use you.
Speaker 5: I would say, like huge number of inbounds. It's coming
Speaker 5: from business customers who are looking to diversify the set
Speaker 5: of technology that they can rely on, both for the
Speaker 5: core models and we do build our own models and
Speaker 5: for the orchestration and governance platform. A large number of
Speaker 5: inbounds from governments around the world especially outside of US
Speaker 5: and China. Governments are concerned about their own ability to
Speaker 5: access the technology, but also the economic trajectory of companies
Speaker 5: and citizens within their frontiers. And then of course a
Speaker 5: lot of inbound interest from investors who are wondering what
Speaker 5: does that mean. We know there's of course the big
Speaker 5: IPOs coming, a lot of volatility from that point of view,
Speaker 5: and a lot of people who are just trying to
Speaker 5: understand the situation and see what have the news changed
Speaker 5: in terms of what should be their investment strategy.
Speaker 2: I had asked Seth to explain the concept of a
Speaker 2: jail break in the code, right, that is the reported
Speaker 2: issue that the US government had with me FOS in
Speaker 2: Fab five. Explain technically how that works and how you'd
Speaker 2: approach I guess explaining it if it was you that
Speaker 2: was dealing with the Commerce Department on a restriction like this.
Speaker 5: Yeah, And so the concept of a jail break can
Speaker 5: be used pretty loosely, but quite specifically. There's a sense
Speaker 5: in which a particular system has some guardrails around the
Speaker 5: intended use of that system, and a jail break happens
Speaker 5: when someone manages to infiltrate the system in ways that
Speaker 5: weren't intended. So in this specific case, we can imagine,
Speaker 5: you know, from Meethos to Fable, anthropic hasts put in
Speaker 5: some guardrails that circumvent that prevent the ability for the
Speaker 5: model to be used to create cybersecurity attacks. So we
Speaker 5: can presume that the specific jail break that was identified
Speaker 5: is the ability to go around these defenses and in
Speaker 5: fact make the model produce outputs that would that would
Speaker 5: leverage some of the cybersecurity capabilities of the model.
Speaker 2: Something the Center of Anthropics response is that many of
Speaker 2: their own staff wouldn't be able to access this technology
Speaker 2: based on the restriction, right because many of their staff
Speaker 2: are foreign nationals. It also highlights a world dependent right
Speaker 2: now on US technology. You're a Canadian company, I get that,
Speaker 2: But what's your thinking on that issue, the concentration of
Speaker 2: leadership in the field of small group of US companies.
Speaker 2: Maybe you dispute.
Speaker 5: That, No, I don't fully dispute in the sense that,
Speaker 5: like where we sit today, there's literally, you know, four
Speaker 5: countries in the world that have the ability to train
Speaker 5: Foundation model US China, France, Canada. Right now, even in
Speaker 5: those companies in the US, there's a large number of
Speaker 5: foreign nationals. The you know, inbound talent into the US
Speaker 5: has been formidable force for the progress of this technology.
Speaker 5: So this is going to be a big challenge. And
Speaker 5: the other thing that's worth mentioning is, in many ways,
Speaker 5: a lot of the developments in AI of the last
Speaker 5: few years, you know, are at this level of ideas
Speaker 5: and concepts. Sure we have the models, but really the
Speaker 5: recipe for training these models sits in the head of
Speaker 5: a relatively small number of people. But there's, you know,
Speaker 5: a large enough amount of circulation between the various companies
Speaker 5: that we can assume that the capabilities to do that exist,
Speaker 5: not just at asan tropic.
Speaker 2: Joelle Pinot of Cohre, thank you very much for your time.
Speaker 2: What is our top story today? Now coming up, in
Speaker 2: Vidia heads back to the bomb market after a five
Speaker 2: year absence. Why is the AI giant looking to raise
Speaker 2: billions of dollars while it's sitting on a mountain of cash.
Speaker 2: That's what the stock picture looks like. Be right back.
Speaker 2: This is Blimberg Tech. Today's big number twenty billion dollars.
Speaker 2: In Vidia is looking to raise at least that in
Speaker 2: its first bond sales since twenty twenty one. According to
Speaker 2: sources seven trenches maturities from two to thirty years. The
Speaker 2: proceeds will be used for general corporate purposes, including refinancing
Speaker 2: existing debt as in Vidia joins other AI leaders like
Speaker 2: Amazon and Alphabet in raising large amounts of capital to
Speaker 2: fund AI related infrastructure. But why does a company so
Speaker 2: flush with cash need to borrow more? Bloomberg Intelligence reckons
Speaker 2: that it's to focus on funding partners, b I Senior
Speaker 2: Credit and List. Robert Schiffman joins us, Now, when you
Speaker 2: publish the react, that's the bit that jumps out of
Speaker 2: me off the page, right, Why would they do that? Well,
Speaker 2: they have a track record of investing in the kinds
Speaker 2: of startups that rely on their technology. Extrapolate on that thesis.
Speaker 6: Yeah, well, listen, you can never be too rich. It's
Speaker 6: a good problem to have. Quite frankly, in Video does
Speaker 6: have a cash problem. They have too much of it.
Speaker 6: So people are scratching their heads this morning thinking why
Speaker 6: are they raising more? Listen, you take money down when
Speaker 6: it's available. There is so much money chasing after this
Speaker 6: AI build out. They're going to put in the highest
Speaker 6: quality names that they can, and I think in Video
Speaker 6: is just taking opportunity here to basically borrow at effectively
Speaker 6: a zero rate, at least from a whack perspective, to
Speaker 6: give them more financial flexibility. I think they're likely to
Speaker 6: pour money, probably back into street strategic partners like open Ai,
Speaker 6: like Anthropic, and who knows, maybe a SpaceX, which is
Speaker 6: likely to do their own bond deal might come to
Speaker 6: in Vidia for some financing down the line as well.
Speaker 2: There's like the smart cost of capital angle to this.
Speaker 2: The shareholder return story has changed recently with Nvidia. You know,
Speaker 2: I'm a student of your work, right, It's not that
Speaker 2: unusual for companies flush or cash to just say, like, okay,
Speaker 2: this is an interesting thing for the finance or with
Speaker 2: the treasury team to do. Explain the kind of nitty
Speaker 2: gritty of that.
Speaker 6: Well, listen, you know, the weighted average cost of capital
Speaker 6: is what they're looking at. The weighted average cost of
Speaker 6: debt when you have a five trillion dollar equity market
Speaker 6: cap is basically zero. So you could take money, borrow
Speaker 6: it from from bondholders, and use it for equity or
Speaker 6: equity style investments at a little or no cost. I
Speaker 6: think you're going to see more of this. You sell
Speaker 6: a lot of this from Apple over the years.
Speaker 2: We're not used to.
Speaker 6: It now though, because most of these other companies have
Speaker 6: now turned free cashual negative and they need it for
Speaker 6: funding for their AI investments. That's not what Nvidia needs.
Speaker 6: And Video is probably going to generate a couple hundred
Speaker 6: billion dollars of free cashrow over the next year, so
Speaker 6: they're swimming in the money. But again, when people are
Speaker 6: willing to give it away for next to nothing, you're
Speaker 6: going to take it and you're going to give yourself
Speaker 6: that financial flexibility.
Speaker 2: Robert Schiffman, who leads our credit research of Bloomberg Intelligence,
Speaker 2: thank you so much. Let's turn to SpaceX, who shares
Speaker 2: our extending gains for their second day of trading following
Speaker 2: the company's blockbuster public market's debut Friday. The trading offers
Speaker 2: this other glimpse into investors demand for what was one
Speaker 2: of the world's most private companies. And then they did
Speaker 2: the biggest IPO in history. There are some mechanics to
Speaker 2: what's happening in the market next joining us as Stephanie Aliaga,
Speaker 2: JP Morgan Asset Management, Global market strategist. You know, the
Speaker 2: big anxiety in the days leading up to the IPO
Speaker 2: was this great rebalancing of the passive funds. Because nasdak
Speaker 2: Russell Indicas fast tracks SpaceX's inclusion, it's day two. Shares
Speaker 2: are still higher. But how much does the market need
Speaker 2: time to digest before it has to undertake that rebalancing.
Speaker 7: It's a great question, and that's exactly the point. You know,
Speaker 7: this issue of all of this issue and sitting the
Speaker 7: market doesn't happen all at once. You know, relative to
Speaker 7: the size of how much supply of SpaceX there will
Speaker 7: be in the market right now, we're just looking at
Speaker 7: a small fraction of it. Right four and a half
Speaker 7: percent was that first day's volume, and that's going.
Speaker 2: To ramp up over time.
Speaker 7: We think that six month mark is really going to
Speaker 7: be the point where you might see more volatility just
Speaker 7: to give in a greater supply in the markets, and
Speaker 7: then that increasing over time gradually over the over the
Speaker 7: course of the year, particularly given the S and P
Speaker 7: taking a more temperate pace there, but given that longer
Speaker 7: term horizon, I mean, that's key here. You know, this
Speaker 7: is a market where we are looking at a large
Speaker 7: bump in terms of IPO issuance this year. This year
Speaker 7: projected around two hundred and sixty billion dollars, but for
Speaker 7: a market the size of sixty five trillion dollars that
Speaker 7: is less than one percent of the overall market cap
Speaker 7: of the market, a market that is also fifty five
Speaker 7: percent greater than it was in twenty twenty one. So
Speaker 7: we think so long as the market continues to trunk
Speaker 7: along here with robust fundamentals, we just had a really
Speaker 7: solid earning season. This AI capex boom continues to funnel
Speaker 7: earnings growth and revenue growth across the market, and households
Speaker 7: remain in pretty strong buyers retail activity is strong. We
Speaker 7: think that this is a market that can digest this
Speaker 7: increase in issuance and its issuance that we have really
Speaker 7: been strapped for for a number of years.
Speaker 2: I want to go back to something we show them the
Speaker 2: screen a minute ago, and it's basically more of an
Speaker 2: fyi that in the end, they sold more than the
Speaker 2: five hundred and fifty five point six million shares and
Speaker 2: raised more than seventy five billion dollars. Right, this is
Speaker 2: basically an instant exercising of the green shoe, eighty three
Speaker 2: point three million shares raising proceeds of eighty five point
Speaker 2: seven billion. This has been a story that started to
Speaker 2: about a race to IPO, SpaceX and now likely anthropic
Speaker 2: and open AI, and it quickly changed to a story
Speaker 2: about race to capital. Alphabet came in massive equity offering
Speaker 2: in Nvidia, tapping the corporate bond market. Do you see
Speaker 2: a race to capital?
Speaker 7: I think the economics around the AI boom continue to mount. Now,
Speaker 7: obviously these companies are all in different pieces of this
Speaker 7: value chain in are raising capital variety of different reasons,
Speaker 7: but it is something that investors are going to have
Speaker 7: to get used to. I think, you know, we as
Speaker 7: great as the balance sheets of some of these companies are.
Speaker 7: This AI wave is just getting to be that much
Speaker 7: more expensive, and all of the revenues around AI will
Speaker 7: eventually come, but this is going to be a multi
Speaker 7: year phenomenon, and right now we are ramping up to
Speaker 7: spend significantly more around AI infrastructure and all of these
Speaker 7: different pieces of the value chain. I think that points
Speaker 7: to the need for selectivity. Not all that glitters is gold.
Speaker 7: These companies do vary in their financials. We think at large,
Speaker 7: the fundamentals of this market and of the companies you know,
Speaker 7: spending the most and raising issuance in various markets is
Speaker 7: still robust, but you want to make sure in your
Speaker 7: portfolios that you have some proper diversification, just given that
Speaker 7: you know, the leverage and the economics around this AI
Speaker 7: wave are definitely beginning to diverge.
Speaker 2: Stephanie, we've just got thirty seconds. But how closely are
Speaker 2: you tracking private markets because there are competing stories right
Speaker 2: There is also the staying private for longer because you
Speaker 2: can like, how much do you track that?
Speaker 7: Yeah, well, we think that that theme is still very
Speaker 7: much alive and well, I mean, you are going to
Speaker 7: get likely some big, high profile AI names, but the
Speaker 7: IPO markets are still going to be very selective. And
Speaker 7: a lot of the companies building in this AI race,
Speaker 7: whether it is robotics or even semis, but also particularly
Speaker 7: the application layer and building AI for healthcare, AI for logistics,
Speaker 7: all of those companies are in private markets right now.
Speaker 7: And of course not all that glitters is gold. I mean,
Speaker 7: market returns there can be quite volatile too, But when
Speaker 7: these companies eventually reach public markets, a lot of that
Speaker 7: growth has already happened, and that is a reason for
Speaker 7: investors to make sure they're looking beyond just public markets
Speaker 7: and their portfolios.
Speaker 2: Stephanie eliagro JP Organizet Management. Thank you very much. A
Speaker 2: quick update on the Anthropic story. A US official has
Speaker 2: just confirmed that unpropping executives will be meeting at the
Speaker 2: Commerce Department today. Will follow the story as it develops
Speaker 2: and bring you the latest. Now coming up, Fox has
Speaker 2: agreed to buy device and streaming company Roku in a
Speaker 2: deal that would create a new TV juggernaut. We've got
Speaker 2: those details. Next, this is Bloomberg Tech. Fox has agreed
Speaker 2: by Roku in a deal that values the streamer at
Speaker 2: twenty two billion dollars including debt. The tie up will
Speaker 2: create the third largest player in the US television market
Speaker 2: by viewership. Bloomberg Deals. Michelle Davis joins us with the deats.
Speaker 2: Interesting one. I've got a Roku TV somewhere in my house.
Speaker 2: What's this about. What's the strategic play from Fox? Yeah,
Speaker 2: this is a.
Speaker 8: Really interesting deal because Roku is seen as kind of
Speaker 8: the last big aggregator out there that everyone was wondering
Speaker 8: when it would get taken over. The founder for years
Speaker 8: has controlled the company and there's always a question as
Speaker 8: to does it make more sense to aggregate content and
Speaker 8: be the platform on top of which you know, content streams,
Speaker 8: or does it make sense to be a really big
Speaker 8: streamer that generates most of its revenue that way? And
Speaker 8: by buying Roku, Fox is basically saying we want to
Speaker 8: make sure we are that neutral third party platform. Roku
Speaker 8: makes most of its money on advertising, which is an
Speaker 8: area that Fox had kind of fallen behind its competitors
Speaker 8: on in this you know, new streaming central environment, and
Speaker 8: so that's a lot of what the value is going
Speaker 8: to be coming from here for them twenty.
Speaker 2: First century folks down significantly take me into the terms
Speaker 2: like where we're at in the process.
Speaker 8: So the deal, it's a cash and stock deal that
Speaker 8: the shares are down on the news of course, because
Speaker 8: you know, investors don't always love to see a stock deal.
Speaker 8: At this point, the deal values rocud about twenty two
Speaker 8: billion dollars enterprise value, so that's including debt. Of course,
Speaker 8: if Fox shares continue to decline up until the deal closes,
Speaker 8: that will mean that some of the overall value for
Speaker 8: the deal will be a little bit lower than twenty
Speaker 8: two billion dollars. But this really caps off a multi
Speaker 8: month process where Roku had been exploring strategic alternatives. The founder,
Speaker 8: Anthony Wood as if we were just talking about had
Speaker 8: been thinking about, you know, what's next, succession planning and
Speaker 8: Roku and Fox actually have a long history. Fox had
Speaker 8: invested in Roku years ago before the IPO. They sold
Speaker 8: out of their stake at the time that they bought
Speaker 8: to be but by buying Roku, they're kind of the
Speaker 8: two companies are coming back together. The founder will have
Speaker 8: a role on the board of the combined company.
Speaker 2: In books, Michelle Davis, thank you very much. In other
Speaker 2: m and A and US sales Force has agreed to
Speaker 2: by aifirm, Finn for three point six billion dollars. Finn's
Speaker 2: customer service tools will complement Salesforce's agentic capabilities. According to
Speaker 2: the company, AI is a key part of the software
Speaker 2: maker's growth strategy as it works to boost investor confidence.
Speaker 2: Salesforce shares upper percentage point right. M and A has
Speaker 2: been at the heart of the Salesforce story for a
Speaker 2: little while. Now we'll keep tracking it. Coming up. City's
Speaker 2: head of pan Asia Internet Research, Alisha Yapp, joined us
Speaker 2: to break down where China's tech market stands in a
Speaker 2: big global race. It is halftime. People will be right back.
Speaker 2: This is Bloomberg Tech Welcome back to Bloomberg Tech. This
Speaker 2: is what the technology sector looks like. There is a
Speaker 2: big focus on the outcome of what's happening between the
Speaker 2: United States in Iran and some sort of deal. We'll
Speaker 2: get at the details on that in just a moment.
Speaker 2: SpaceX is trading for just the second day as a
Speaker 2: public company, up eight percent, one hundred and seventy three
Speaker 2: dollars fifty five cents a share and rising. We'll keep
Speaker 2: tracking that story. There's a lot of factors going into
Speaker 2: the biggest IPO in history. Let's get out to Geneva.
Speaker 2: Global leaders are arriving in France for the G seven summit,
Speaker 2: and this time the usual geoplogical guest list has tech additions.
Speaker 2: The chief executives of major AI companies Open Ai Andthropic
Speaker 2: Google are all slated to attend the gathering commes just
Speaker 2: days after an unprecedented White House order forced Anthropic to
Speaker 2: block foreign access to its most advanced AI platforms. But
Speaker 2: first on the agenda the US and Iran. The two
Speaker 2: countries reached an interim deal to reopen the Strait of
Speaker 2: Hormuz bliomers. Tyler Kendall joins US Now live from Geneva Tyler.
Speaker 9: Hey, and well, at this point, we're waiting for some
Speaker 9: firmer details from either side about what is in this
Speaker 9: potential memorandum of understanding that we did here from the
Speaker 9: Vice President Jadie Vanced earlier today, who said that they
Speaker 9: are going to try to get that text out before
Speaker 9: this potential signing ceremony happening here in Switzerland on Friday.
Speaker 9: So far, we know that the main pillars of the
Speaker 9: deal are what we've been tracking for weeks, which of
Speaker 9: course includes reopening the strait of her moves. But there
Speaker 9: is still some big questions here about how Iran feels
Speaker 9: its role is going to be connected to this going forward,
Speaker 9: after Iranian state media earlier today seem to indicate that
Speaker 9: Iran wants to continue to impose fees and have some
Speaker 9: sort of grip over the street even after a deal
Speaker 9: is signed. We also have questions about what economic relief
Speaker 9: will look like and ultimately what sort of curves Iran
Speaker 9: will agree to in this deal. Though it is our
Speaker 9: understanding that this is going to be a phased agreement
Speaker 9: where those negotiations come later, and while the conflict in
Speaker 9: Iran is dominating the conversation already here at the G seven.
Speaker 9: As you mentioned, President Trump has some really important meetings
Speaker 9: scheduled for later in the week on Wednesday, where we
Speaker 9: will see this base to based meeting with G seven
Speaker 9: leaders and these big tech CEOs, and that meeting is
Speaker 9: going to be just as much about the potential opportunities
Speaker 9: around AI as well as those potential risks because ed
Speaker 9: Bloomberg News has now confirmed that senior staffers for Anthropic
Speaker 9: are meeting in Washington today with members of the Commerce
Speaker 9: Department after this unprecedented move by the administration to threaten
Speaker 9: that export band.
Speaker 2: Grin Books, Tyler Kendall, n Geneva, thank you very much.
Speaker 2: There's also a massive ways of news across China's tech
Speaker 2: landscape today. Social media powerhouse Jaohongshu is reportedly gearing up
Speaker 2: for a blockbuster Hong Kong Ipo this month, while shares
Speaker 2: of AI model maker GPU's skyrocketed following a major price
Speaker 2: target hike from JP Morgan. But despite all this heavy
Speaker 2: corporate activity, City Group warns that global investors are still
Speaker 2: treating China tech as quote a source of funds, with
Speaker 2: Wall Street dumping local stocks to fund the global AI
Speaker 2: hardware tradeing US now as Alicia, Yeah, head of Pan
Speaker 2: Asia Internet Research at City Group, And let's start with
Speaker 2: that thesis. I find it so interesting. There's a big
Speaker 2: distinction between newsflow and activity China's tech sector and deployment
Speaker 2: of capital or finding capital to deploy elsewhere. Explain what
Speaker 2: you're arguing.
Speaker 10: Yeah, So, I think the reason why we mentioned it
Speaker 10: is because I think the investor interests, especially for those
Speaker 10: you know from the US and Europe so outside of Asia,
Speaker 10: and even for those that we speak to in Asia
Speaker 10: they're based in Asia. The there's so, I mean, people
Speaker 10: have interests, but then somehow we know that they've been
Speaker 10: underway uh China Internet specifically or even too many that
Speaker 10: you know investors that share with us, they're actually uh
Speaker 10: using you know, internet as a source of fun obviously
Speaker 10: to to find the hardware trade in Korea, in Taiwan
Speaker 10: and Japan, partly because I despite Internet, for example, Ali
Speaker 10: Baba by doing their heart full stack of ai uh.
Speaker 10: But then because of their core business are not really
Speaker 10: doing as well are you know, they've been you know,
Speaker 10: investing aggressively on food delivery for example, they've been dragging
Speaker 10: the profit. So a lot of investors give us uh,
Speaker 10: you know, the feedback is that why should I border
Speaker 10: so much of that while I have to deal with
Speaker 10: the core business is not a pure play and I
Speaker 10: mus as well just play directly into some of the
Speaker 10: hardware ings. So that's why this has been you know, happening.
Speaker 10: And we've seen the last few weeks, I mean sorry,
Speaker 10: the last few months. You know, China internet sector has
Speaker 10: not been performing despite the valuation is actually getting quite attractive.
Speaker 2: Right, Alicia. The story of the first half of this
Speaker 2: year was Chinese internet giants and frontier labs moving very
Speaker 2: quickly to try to close the gap with American technology companies.
Speaker 2: Does your research show that that gap is closing, Yes.
Speaker 10: I think indeed, especially for example, take you know Ali
Speaker 10: Baba Kuan model, you know since three point five and
Speaker 10: then three point six, three point seven. Now we're actually
Speaker 10: seeing there's a huge step up in terms of the
Speaker 10: model intelligence. And then same thing for you know the
Speaker 10: independent lab for example Minimax they recover and also I
Speaker 10: think ten Cent the latest model are and three that
Speaker 10: they released at the end of April. This are also
Speaker 10: increasingly closing the gap with the frontier model.
Speaker 2: The story and the data that we track in the
Speaker 2: US is capital expenditures on the hyperscale side, and then
Speaker 2: how real is the agentic AI deployment on the enterprise side.
Speaker 2: Take that story to China, how is that playing out
Speaker 2: in that market?
Speaker 10: So I think from the Kapex point of view, and
Speaker 10: think many of us aware that I think China side
Speaker 10: is not spending as you know, as high as what
Speaker 10: the US hyperskill is indicating. Partly, I think there's a
Speaker 10: lot of cost components. It's cheaper right in China. Partly
Speaker 10: I think there's also some of the assisting capacities that's
Speaker 10: already built up the last few years is actually able
Speaker 10: to support that. And then in terms of the agendic
Speaker 10: right the future agenda workflow, we think that you know,
Speaker 10: you know, Ali Baba's trying in terms of the coin
Speaker 10: versus the assisting you know application for e somebod the
Speaker 10: Talbo or the AMAP. But then I think over time,
Speaker 10: we do hope that Tencent at the end of the
Speaker 10: day could actally come up with their AI agents insidech
Speaker 10: Ad which they are obviously testing on it, and then
Speaker 10: with the next versions of the model if it's intelligent enough,
Speaker 10: because I think they're going to train a lot of
Speaker 10: their proprietary data into the next versions of the model
Speaker 10: and then hopefully that could actually you know, ensure the
Speaker 10: AI agents also working within the Vita ecosystem.
Speaker 2: Another big story overnight from China was a group based
Speaker 2: planning to overhaul the Alipaid super app, but to bring
Speaker 2: in an agentic AI user face you brilliantly set out
Speaker 2: kind of what's happened one aged twenty twenty six, what
Speaker 2: does city think happens in China's tech sector in the
Speaker 2: second half of this year.
Speaker 10: So we hope that for example, you know, company like
Speaker 10: ten Cent or even you know and to someone sense
Speaker 10: some of this super app that if they're actually able
Speaker 10: to bring up the agendic workflow working within the super app,
Speaker 10: which allow a lot of the enterprise that have mini
Speaker 10: programs for example, they're able to use agent within that ecosystem,
Speaker 10: then most of these enterprises would be able to stay
Speaker 10: within that ego system in a way. Then hopefully you know,
Speaker 10: things could take off, especially for the super app environment,
Speaker 10: that they can become the AI power ecosystem that we
Speaker 10: are looking for, and hopefully that could help to re
Speaker 10: rate you know, the leaders like Tencent or Ali Baba.
Speaker 10: Then in that sense to help the entire sector to
Speaker 10: get the fund flow rotation back. Yeah.
Speaker 2: Alicia Yapp, head of pan Asia Internet research at City Group,
Speaker 2: big focus on China tech right now, appreciated. Thank you.
Speaker 2: Now coming up, should we be sticking data centers in
Speaker 2: Earth orbit or should they be under the ocean. We're
Speaker 2: going to speak with Mike Schrope for a founding partner
Speaker 2: of gigasale caps. He might recognize the name former meta cto.
Speaker 2: He has a thesis. This is what the Nazak one
Speaker 2: hundred looks like. We're back nearer toward session highs and
Speaker 2: again of almost three percent, a lot of momentum. The
Speaker 2: index is near record high. Is a big part of
Speaker 2: it is kind of feel good from the SpaceX ipo Friday,
Speaker 2: but also of course what was outlined by Tyler from
Speaker 2: Geneva about a US Iran deal. This is blimberg tech
Speaker 2: check back in on SpaceX shares hire second day of
Speaker 2: trading after a blockbuster public debut Friday. That performs help
Speaker 2: booth confidence in a broader AI rally and it marks
Speaker 2: the start of a shift from two decades of shares
Speaker 2: disappearing from public markets to this new era of stock
Speaker 2: abundance as the likes of Open Ai and Anthropic also
Speaker 2: prepare for IPOs and other companies sell new shares. Bloombos Common,
Speaker 2: Rhinokey has been all over it, and we expect in
Speaker 2: the next days, weeks, and months a bit of volatility
Speaker 2: should we start, would like to hear and now I
Speaker 2: hope you had some of a weekend to digest what
Speaker 2: happened Friday. But right now that the net takeaway is
Speaker 2: what cormen about this IPO.
Speaker 11: The net takeaway is very positive. We see shares up
Speaker 11: a second day here. It was up about eight percent
Speaker 11: the last time I looked at my terminal, extending gains
Speaker 11: from Friday's first day of trading. And this gives the
Speaker 11: company a valuation of about two point two trillion dollars.
Speaker 11: So it's already launched itself into one of the top companies,
Speaker 11: the one of the biggest companies in the stock market.
Speaker 2: So the takeaway was really positive.
Speaker 11: You know, investors into the IPOH there was solid trading,
Speaker 11: nothing went horribly wrong, and that's kind of given investors
Speaker 11: the ability, one just to be very enthusiastic about the
Speaker 11: AI trade. That's supported by what happened over the weekend
Speaker 11: a potential piece deal with Iran, and investors can hopefully
Speaker 11: start to shift their focus towards a FED meeting on Wednesday.
Speaker 2: Com and you and the team are out with the
Speaker 2: big take. And basically there's going to be a lot
Speaker 2: of new equity that hits the market and it's going
Speaker 2: to change the story of like the last two decades.
Speaker 2: Explain that to us, give us the key numbers that
Speaker 2: we need to know.
Speaker 11: Yeah, so this is a really huge deal. Basically, over
Speaker 11: the last few decades, there's been you know, twelve trillion
Speaker 11: shrink you know, equity taken out of the markets as
Speaker 11: company buy backstock, which is a key way that they
Speaker 11: once spend you know money down on their balance sheet
Speaker 11: and you know, return value to shareholders. It's been a
Speaker 11: major support of the stock market and especially these big companies.
Speaker 11: So what's happening now. I mean, we see IPOs like
Speaker 11: SpaceX's record IPO on Friday, as well as equity issuances
Speaker 11: from companies like Alphabet, Meta and Oracle bringing equity back
Speaker 11: into the market, so growing the total number of shares
Speaker 11: that are available in a way that actually it can
Speaker 11: be diluted for stockholders. So one point five trillion dollars
Speaker 11: in shares coming back into the markets this year. That's
Speaker 11: according to a JP Morgan analysis. And really what the
Speaker 11: signal is these companies are saying, one, we can go
Speaker 11: to the equity markets. There's investor, you know, desire demand
Speaker 11: for our shares, and it's a good way to raise
Speaker 11: money to spend on what we need to do to
Speaker 11: build out more capacity, more data centers, to use AI
Speaker 11: in a way that will hopefully be a creative to
Speaker 11: earnings going forward.
Speaker 2: The most common rhinicky thank you very much so. One
Speaker 2: way that Moss games to drive revenues and profit is
Speaker 2: to build out of all bit data centers, a complicated
Speaker 2: and expensive ambition that our next guest says may only
Speaker 2: be achievable by SpaceX. Instead, others should turn to submarine
Speaker 2: data centers to save on things like energy costs. Microver
Speaker 2: Hoped add tens of millions of square feet of cloud
Speaker 2: computing capacity. As the former CTO at Meta, He's now
Speaker 2: the founding partner of Gigascale Capital, a venture firm making
Speaker 2: some early stage bets on those companies that are more
Speaker 2: focused on climate impact. But you put yourself in one
Speaker 2: bucket or another. I guess orbital data center or data
Speaker 2: centers where the ocean is the playground. Present your thesis
Speaker 2: to me.
Speaker 12: Well, I don't think it's an either or. I think
Speaker 12: it's a little bit of all of the above. For space,
Speaker 12: it's very hard and expensive to get there, and I
Speaker 12: think nobody but SpaceX can do it with their vertical
Speaker 12: integration and launch costs at wholesale. Otherwise, economics are just tough.
Speaker 12: You know, I can put a ton of mass in
Speaker 12: the ocean one hundred times cheaper than I can put
Speaker 12: it in orbit. So I think you've got a lot
Speaker 12: of room to go in terms of using huge energy resources.
Speaker 12: We've got ten terot lots of power in the Southern
Speaker 12: Ocean that's completely untapped, unused. We've also got you know,
Speaker 12: I built a lot on land, tens of millions of
Speaker 12: square feet. I don't think we're anywhere close to done
Speaker 12: using solar resources on land. Between solar and batteries, I
Speaker 12: could put together a new power plant in twelve to
Speaker 12: twenty four months, you know, in a pace that's faster
Speaker 12: than gas or launching into orbit. So I think there's
Speaker 12: a lot of different ways to do this. I think
Speaker 12: SpaceX is going to do space based data centers. I'm
Speaker 12: bullish on on land solar plus batteries plus next generation
Speaker 12: and in the ocean with companies like Panhalasa.
Speaker 2: I think we therefore need to kind of understand the
Speaker 2: lasting and ripple effects of SpaceX's IPO, right, which is,
Speaker 2: you know, the prospectus could not be more clear. Here
Speaker 2: is the plan orbital data center. But when you're in
Speaker 2: private markets putting bets on earlier stages, you know, if
Speaker 2: someone comes to you with a deck and it says,
Speaker 2: I too have a plan for orbital data center, do
Speaker 2: you bother? So you just say, well, SpaceX has got
Speaker 2: that covered. There isn't a need to fund this concept,
Speaker 2: this idea, this plan elsewhere.
Speaker 12: I mean, I'm in the business of looking at everything,
Speaker 12: so I'll always take a meeting to understand, to see
Speaker 12: if I've missed something, and I'll update my priors if
Speaker 12: I see new information. Every time I've looked at the math,
Speaker 12: the economics on space based data.
Speaker 2: Centers, it's doable.
Speaker 12: It just like it's extraordinarily expensive because you have to
Speaker 12: pay for launch, you have to pay for radiation hardening,
Speaker 12: you have to pay for radiators large enough to get
Speaker 12: rid of the heat, because these servers produce a lot
Speaker 12: of heat, and once you add up all those costs,
Speaker 12: I just don't see how it's cost competitive with current
Speaker 12: on land or current ocean. You'd have to assume a
Speaker 12: dramatic increase in the price of building stuff on land
Speaker 12: before you want to go into space. Again, unless you're
Speaker 12: SpaceX and you get all of those things that wholesale costs,
Speaker 12: in which case your costs are very different. So I'm
Speaker 12: not wholly no, but I'm skeptical when people pitch me
Speaker 12: on these ideas.
Speaker 2: Mike, if we measure the economics of and we're just
Speaker 2: showing what SpaceX presented the other night, the design the
Speaker 2: economics of the space based data center is a dollar
Speaker 2: per token basis, how does submarine data center compare on paper?
Speaker 12: Well, again, I think you have to look at all
Speaker 12: the assumptions into that, and you know, when I've done
Speaker 12: the modeling in math, if you just sort of do
Speaker 12: some basics on this, it is against about one hundred
Speaker 12: times cheaper currently to put a ton of mass in
Speaker 12: the ocean than it is to put that same ton
Speaker 12: of mass in space. So I think you have a
Speaker 12: huge cost advantage when you look at the ocean, you
Speaker 12: have almost unlimited free cooling in cold seawater. You know,
Speaker 12: in space you can radiate heat, but that requires building
Speaker 12: radiators or rating into a vacuum.
Speaker 2: It's expensive.
Speaker 12: So again, I don't see how the math closes for
Speaker 12: anyone who's but SpaceX, who again has everything at wholesale costs,
Speaker 12: already launching large volumes of starling satellites. So I think
Speaker 12: it's a great business for them. I'm just like not
Speaker 12: clear on how anyone else can compete on costs.
Speaker 2: So our starting assumption is right. Now the world is
Speaker 2: compute constrained, right. You weren't Meta for a long time.
Speaker 2: Meta is going to be one of the big capital
Speaker 2: expenditure deployers. Do you see Meta being open to a
Speaker 2: world of submarine data center as a solution or looking
Speaker 2: at orbital data center as an alternative.
Speaker 12: I think all of these providers, you know, will look
Speaker 12: at these technologies when you show tokens being generated.
Speaker 2: You know, once I'm out a terminal, I.
Speaker 12: Can say, here's a chat experience with a live webcam
Speaker 12: of a little booie bobbing in this southern notion, or
Speaker 12: you know, a feed from the live satellite and saying
Speaker 12: this is where the tokens are getting generated.
Speaker 2: I think everyone's going to perk up and add more attention.
Speaker 12: Until then we're talking about theory because no one's still
Speaker 12: either of these things.
Speaker 2: But I think that you know, at the end of the.
Speaker 12: Day, people want reliability, they want availability, and they want
Speaker 12: okens now. So if you can provide people compute now,
Speaker 12: then they're open to it.
Speaker 2: And reminders of the audience that SpaceX said the earliest
Speaker 2: deployment of orbital data center is twenty twenty eight. Mike Trope,
Speaker 2: founding partner at Gigascale Capital, thank you so much and
Speaker 2: as allys continue to be on SpaceX, we bring you
Speaker 2: some of the biggest investors in the company. Tomorrow, Sequoia
Speaker 2: Capital partner Sean maguire joins us a conversation you don't
Speaker 2: want to miss now coming up, we're going to discuss
Speaker 2: the newest update on the long awaited AI capabilities of
Speaker 2: Apple's Siri paron. This is Bloomberg Tech. Apple's Serie AI
Speaker 2: is catching up to its chatbot competitors, pulling the tech
Speaker 2: company out of an AI slub two years after making
Speaker 2: promises of AI functions. Series newest features center around it's
Speaker 2: so called personal context and on screen awareness technology. Bloombers
Speaker 2: Mark German got the access and joins us. Now this
Speaker 2: is so interesting. So you've had time to to use
Speaker 2: Apple's Serie AI in a way that you can explain
Speaker 2: where we're at with it in power on Over the weekend,
Speaker 2: you detailed the most important parts. What what's it been like?
Speaker 13: Yeah, Seri AI, Apple's revamped Siri. You want to call
Speaker 13: it Serie two point zero, you can do that. Here's
Speaker 13: what I'll say. It fulfills the promise of Siri that
Speaker 13: the company made fifteen years ago when it debuted the
Speaker 13: first version as part of the iPhone for us in
Speaker 13: two thy and eleven.
Speaker 2: It's terrific.
Speaker 13: It's on par probably with recent versions of Chat GPT, Google,
Speaker 13: Gemini and Claude. It's not perfect. There's a lot it
Speaker 13: can't do. You can't do in depth research like you
Speaker 13: can do on chat GPT. You're not going to get
Speaker 13: major PDF summaries of very long documents. You're not going
Speaker 13: to get tax preparation, you're not going to get Excel
Speaker 13: and powerpoints slide decreation. But for ninety five percent of
Speaker 13: people they use chat GPT in Gemini for web AI, search,
Speaker 13: for historical information, for asking questions about anything. It could
Speaker 13: do all of that, plus actually do the things that
Speaker 13: Seria has been supposed to do, like correctly player music
Speaker 13: or correctly navigate your places.
Speaker 2: This is a big win for Apple, just as people
Speaker 2: use chat GBT for the most part. Right now, the
Speaker 2: title of the Power on Apple's new series is just
Speaker 2: good enough to ease AI crisis if I put the
Speaker 2: emphasis in the right place quick.
Speaker 14: It is just good enough because it's not exactly as
Speaker 14: good as the competition, but for ninety five percent of people,
Speaker 14: and to meet the needs of the majority of the
Speaker 14: Apple userbase two billion plus strong, it does that.
Speaker 2: Bloomberg's Mark Gunman a Power on every Sunday. You've got
Speaker 2: to read it and then Mark will be on the
Speaker 2: show give us the details that we need. Thank you
Speaker 2: very much. A quick check on shares of SpaceX, so
Speaker 2: the gains in the second day of trading now up
Speaker 2: to ten percent, giving SpaceX as it stands a market
Speaker 2: cap of around two zero point three to two trillion
Speaker 2: dollars just day two as a public company trading in
Speaker 2: the public markets. But we talked throughout the hour about
Speaker 2: the lasting effect this will have in not just the
Speaker 2: next few weeks, for the next few months and years.
Speaker 2: That does it for this edition of Bloomberg Tech. Those
Speaker 2: conversations really worth recapping. There's a lot happening in capital markets,
Speaker 2: across public equity, across debt, and it's the biggest technology
Speaker 2: companies in the world that are dominating that news flow
Speaker 2: and that market move. Check out the podcast. You know
Speaker 2: where to find it on all the Bloomberg platforms, as
Speaker 2: well as on Apple, Spotify, and iHeart. From San Francisco,
Speaker 2: Day one, This is Bloomberg Tech