Speaker 1: From Marhart.
Speaker 2: We're Innovation, Money and Power Collie in Silicon Valley, NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: I'm Caroline Heidet Bloomberg's Weld head quarters in.
Speaker 4: New York, and I'm Ed Ludlow in San Francisco. This
Speaker 4: is Bloomberg Technology.
Speaker 5: Coming up.
Speaker 3: We'll get the read on the state of the e
Speaker 3: commerce consumer as we break down the early from Walmart
Speaker 3: for strong online.
Speaker 4: Growth plus the largest maker of computer networking equipment making
Speaker 4: headway in AI and security technology.
Speaker 6: We break down Cisco's results.
Speaker 3: Meanwhile, Adien eraising twenty billion dollars of market value in
Speaker 3: one day alone after posting the slowest revenue growth since
Speaker 3: that European payments giants IPO.
Speaker 4: Here in the US, two names that we're watching in
Speaker 4: the yearnings context. The first the AI story Cisco benefiting
Speaker 4: booking five hundred million dollars of sales already on its
Speaker 4: AI products. Growth slowing, but the street seems to light
Speaker 4: the forecast. We're going to get details from our editors
Speaker 4: in the next block. Walmart now down one point six
Speaker 4: percent second consecutive quarter where the outlook's been raised. But
Speaker 4: here's the one for me. E Commerce sales in the
Speaker 4: quarter jumped twenty four percent. This is an e commerce
Speaker 4: story of Walmart. So let's get more details. Bringing Bloomberg's
Speaker 4: Brendan Case, who covers Walmart for US out of Dallas.
Speaker 4: Brendan just run us through the top line of these earnings.
Speaker 7: Yeah, so the big picture for Walmart is that they
Speaker 7: easily surpassed Wall Streets estimates for the second quarter. Little
Speaker 7: bit light on the third quarter forecast, so I think
Speaker 7: that's probably why shares are down. Another reason is that
Speaker 7: there's just been so much enthusiasm about Walmart this year
Speaker 7: that anything less than perfect is going to hurt their share.
Speaker 7: Dropping down to e commerce though, that was a real
Speaker 7: bright spot, up twenty four percent, and that's the second
Speaker 7: grade quarter of really strong.
Speaker 6: Growth in that regard.
Speaker 7: So definitely a big, a big point of pride for
Speaker 7: Walmart there.
Speaker 3: Yeah, Brandon just talked to us about what they're doing
Speaker 3: right here. Is it that they're gaining market share, Is
Speaker 3: it they're able to claw more e commerce box of
Speaker 3: their own customer already, or they're peeling it away from Amazon.
Speaker 7: So there's a couple a couple of different things to
Speaker 7: sort of unpack there, and one of them is something
Speaker 7: that doesn't have anything to do with with placing orders
Speaker 7: for groceries. It's advertising, which is included in their e
Speaker 7: commerce business. Walmart has a big, multi billion dollar advertising
Speaker 7: business that in all respects except for one, is you know,
Speaker 7: big and successful. The one way in which it isn't
Speaker 7: is that it still dramatically trails Amazon. So, you know,
Speaker 7: boosting that business is a big priority for Walmart. They're
Speaker 7: doing it, but they still have a long way to go.
Speaker 7: And then if you sort of twitch to the shopper side,
Speaker 7: what you're seeing a couple interesting trends there. You're seeing
Speaker 7: strong growth in drive up, you know, people going to
Speaker 7: the store to pick up online orders. But you're also
Speaker 7: seeing growth which actually surpassed driver up this quarter, in delivery,
Speaker 7: So you're getting more and more customers who are tapping
Speaker 7: into the delivery options that Walmart offers.
Speaker 4: Brendan, you and I wrote a story almost a year
Speaker 4: ago now together about how Walmart does have nearly as
Speaker 4: many shelf pickers for online orders as it does you
Speaker 4: know people working in physical stores. Do we get any
Speaker 4: sense from the call about structurally how Walmart's adjusting its
Speaker 4: business for this kind of surge and e commerce demand
Speaker 4: that you outline twenty four percent jump in the quarter.
Speaker 7: Yeah, they give a bit of an update on their
Speaker 7: supply chain efforts, and so what they're trying to do
Speaker 7: is they've got a lot more automation going to their
Speaker 7: big distribution centers. The other thing they're doing is they're
Speaker 7: starting to build out what they call fulfillment centers, which
Speaker 7: are inside stores but not visible to customers. And what
Speaker 7: they're designed to do is get a lot of the
Speaker 7: product pickers out of the aisles and have a dedicated
Speaker 7: part of the store that is designed to send stuff
Speaker 7: out to customers. What you're going to see in the
Speaker 7: coming years as that ramps up is just a bigger
Speaker 7: and bigger capability.
Speaker 1: To do that delivery.
Speaker 7: It looks based on the second quarter results like there
Speaker 7: is a lot of demand for that, but time will tell.
Speaker 3: Brendan great analysis. We thank you so much, Brendan, case
Speaker 3: of course of Bloomberg. Meanwhile, we want to dig into
Speaker 3: some of the advertising flare that Brendan was just outlining
Speaker 3: there and ultimately how Walmart is digging up its e
Speaker 3: commerce proess. Alistair Macleanforman's with a CEO of Tigametrics is
Speaker 3: the leading optimization platform for marketplace brands ten million dollars
Speaker 3: plus in total annual ad sales optimized. And I know,
Speaker 3: you know Walmart intimately Alistair what in the playbook.
Speaker 5: Is really working for them?
Speaker 3: How are they managing to lure over new brands for example.
Speaker 8: Well, they're brilliant results.
Speaker 9: Walmart's certainly gaining share and taken metrics, we're using AI
Speaker 9: to optimize for the largest share of brands selling on.
Speaker 8: Walmart dot com.
Speaker 9: We've got billions of dollars of data, so we knew
Speaker 9: these results would be good. The marketplace seller volume is accelerating.
Speaker 9: They're building a flywheel of selection of thousands of brands,
Speaker 9: and they're turning into a technology powerhouse. They're investing in
Speaker 9: the APIs building a lot of tech to enable AI
Speaker 9: companies just like us to go even faster. And I
Speaker 9: think that's a big part of it, the technology.
Speaker 4: You know, we kick off the show, right Carrie Bloomberg Technology,
Speaker 4: and we start talking about Walmart and some of the
Speaker 4: audience out there going Walmart, what are you talking about?
Speaker 4: But e commerce advertising? And Alistairs just brought in AI. Alistair,
Speaker 4: what's your read on how competent Walmart is in those
Speaker 4: fields relative to Amazon, because in the context of ADS
Speaker 4: or AI, we've been talking about Amazon for a while. Walmart,
Speaker 4: it's a newer conversation.
Speaker 8: Well, are doing very very well. They're investing a ton.
Speaker 9: Seth de Laire is the cro over at Walmart and
Speaker 9: the Walmart Connects segment, that's the Walmart ADS business is
Speaker 9: really growing leaps and bounds in terms of the technology
Speaker 9: and the investment, and you know, they're really moving very quickly,
Speaker 9: very very quickly.
Speaker 4: It's interesting as well, Carrie, consumers in this equation, why
Speaker 4: e commerce jump in the corrider twenty four percent is
Speaker 4: a big move?
Speaker 3: Yeah, and I mean tell us the read on data
Speaker 3: there alistair as to whether, well some of your underlying
Speaker 3: thoughts on whether the consumer is resilient at this moment,
Speaker 3: whether it's just Walmart has got all the right price
Speaker 3: points for any type of consumer in this moment, because
Speaker 3: all of us are trying to read these tea leaves. Yes,
Speaker 3: the numbers look great, but both Target and Walmart sounded
Speaker 3: pretty conservative and indeed a little cautious about the consumer
Speaker 3: right now.
Speaker 2: Yeah.
Speaker 9: I think one of the most interesting things of the
Speaker 9: data we see is the change in the Walmart consumer.
Speaker 9: I think there's this stigma that maybe Walmart is all
Speaker 9: about older shoppers or traditional shoppers, but the growth in
Speaker 9: the modern, younger consumer that's opening up their wallets. They've
Speaker 9: got one of the fastest growing apps on the mobile
Speaker 9: side of things, and there's a really really big play
Speaker 9: around omni channel. The fact that Walmart dot Com can
Speaker 9: really do things that other marketplaces cannot is really really powerful,
Speaker 9: and they can connect the dots between.
Speaker 8: Online and offline, and that's what every brand wants. That
Speaker 8: omni channel player.
Speaker 3: Just remind us how international allmarts as well, because for me,
Speaker 3: it's a purely American name, but no, it's in India,
Speaker 3: it's in Mexico. Were seeing strength. I mean, we will
Speaker 3: as UK three voices here. We all knew it for
Speaker 3: having had Asda at one point.
Speaker 8: Yes, absolutely.
Speaker 1: You know.
Speaker 9: There's of course the flip cart asset they have in India.
Speaker 8: I think what is very very interesting from an international
Speaker 8: perspective is their focus.
Speaker 10: On recruiting and acquiring those marketplace sellers from overseas to
Speaker 10: sell into Warmlot dot com. That was one of the
Speaker 10: biggest drive of Amazon's success in its marketplace the flywheel
Speaker 10: of sellers. So we're seeing Walmart doing a lot globally
Speaker 10: attracting brands from overseas, very very similar to the Amazon playbook,
Speaker 10: and it is suddenly working.
Speaker 4: Alista, if you're an advertiser, why is Walmart an attractive
Speaker 4: option relative to any other e commerce name?
Speaker 8: Well, I can tell you.
Speaker 9: The data that we have is the return on ad
Speaker 9: spend or row ASS, which is the primary metric that
Speaker 9: advertisers use to determine their ROI. Those results on Walmart
Speaker 9: and the Walmart Connect platform are fantastic. It is very
Speaker 9: very profitable to sell and advertise on Walmart dot com
Speaker 9: and really that's what's attracting.
Speaker 8: More and more of sellers coming over.
Speaker 9: It's less competitive, it's more of a greenfield. And as
Speaker 9: I said, the ROI, the row as on ads fund
Speaker 9: is really fasting class and we expect that to continue.
Speaker 4: All right, Alistair MacLean Foreman have taken metrics new name
Speaker 4: to the show. Thank you for joining us here on
Speaker 4: Bloomberg Technology and our Speaking of Walmart, China's Internet regulator
Speaker 4: are reaching out to foreign firms, including the retail giant.
Speaker 4: They plan to discuss ways to navigate Beijing's new data
Speaker 4: security rules in an effort to reassure multinationals worried about
Speaker 4: their ability to operate in China under these latest regulations.
Speaker 3: Earning still thinking fast setstick into Cisco now shares moving
Speaker 3: higher after delivering results that actually pointed to some resiliency
Speaker 3: there and demand. CEO Chuck Robins really focusing on the
Speaker 3: company's AI potential. Who'd have thought it, saying, quote, this
Speaker 3: is a huge opportunity for Cisco. We are laser focused
Speaker 3: on leading and winning in this space.
Speaker 5: Let's get more on the results. Nick Turner's with us,
Speaker 5: and Nick, I.
Speaker 3: Mean, how do they profit, how do they capitalize on
Speaker 3: this AI moment?
Speaker 1: Well, it's still pretty early days.
Speaker 11: I mean they did point to five hundred million dollars
Speaker 11: in sales from AI products. I mean we're talking about
Speaker 11: stuff that sort of helps things speed through the process
Speaker 11: of training large language models and general of AI. So
Speaker 11: just we've been focused a lot on the kind of
Speaker 11: chips that people need to run that from Nvidia and others.
Speaker 1: But obviously network's part of that.
Speaker 11: Networking is part of that equation as well, and they
Speaker 11: expect to sort of be a big player in the space.
Speaker 3: Let's geek out for a moment, because Ed, you're a
Speaker 3: manner gets excited about networking gear, aren't you.
Speaker 4: Yeah, Like you know, Cisco's like the old school name
Speaker 4: is so they can Valley write down in San Jose.
Speaker 4: But the logic's really clear, as all of the hyperscalers
Speaker 4: cloud providers want to offer more compute, they need more
Speaker 4: networking gear for the data centers, and so Cisco like
Speaker 4: sweeps in, like we got it, guys, We're the biggest
Speaker 4: networking gear player.
Speaker 6: No worries.
Speaker 4: And what was interesting though, Nick, is that you look
Speaker 4: at the forecast for the rest of the year, it
Speaker 4: didn't really have much to do with AI. They're kind
Speaker 4: of coming out of a period they were playing catch
Speaker 4: up anyway from the pandemic.
Speaker 11: No, yeah, I mean if you look at their sales
Speaker 11: forecast itself, it looks pretty bad. It's a really terrible
Speaker 11: comparison with the last year of the year they just
Speaker 11: ended because they had this huge backlog that built up
Speaker 11: when there was no supplies available, so sales surged eleven
Speaker 11: percent and now this year they're only going to grow
Speaker 11: at two percent or so. So it's obviously a big comdown.
Speaker 11: But the executives have been like, look, we knew kind
Speaker 11: of this was going to happen, and if you look
Speaker 11: at sort of growth in a more longer term perspective,
Speaker 11: it's not a huge issue.
Speaker 4: We're just entering the first quarter of FIS school twenty
Speaker 4: twenty four, so we just finished FIST school twenty twenty three.
Speaker 6: To a point, Chuck.
Speaker 4: Robbins talks a lot about recurring revenue. Just explain of
Speaker 4: recurring revenue and what Cisco's doing to make money elsewhere.
Speaker 11: Well, so, traditionally, as you said, this was the massive
Speaker 11: networking gear company that could kind of do no wrong
Speaker 11: in the old days of Silicon value, and they would
Speaker 11: sell these systems everybody needed them, you know, big hardware,
Speaker 11: expensive hardware, and maybe they would sell you some software
Speaker 11: with that. The problem is is that it does tend
Speaker 11: to be lumpy, as they say, in terms of the sales,
Speaker 11: like you'll have a lot of sales one quarter and
Speaker 11: then less the next. They're trying to get people more
Speaker 11: on a subscription model, so you're paying a certain amount
Speaker 11: each quarter, and it's just it's more reliable.
Speaker 3: Where are analysts on the view of Cisco. Where is
Speaker 3: a sentiment more broadly on this particular name.
Speaker 5: What's the run up been like.
Speaker 11: Well, I think people have been pretty excited about sort
Speaker 11: of the last year or so and just you know,
Speaker 11: optimistic that this is a you know, if you look
Speaker 11: at a year or a year or you know, the
Speaker 11: past five years or so, it's been a little bit
Speaker 11: inconsistent in general in terms of growth. I think they
Speaker 11: obviously Cisco had this moment in the last year where
Speaker 11: they really were able to you know, turn the engines
Speaker 11: on full throttle, and I think people are more optimistic
Speaker 11: than might be expected about the coming year, even though
Speaker 11: sales are decelerating.
Speaker 4: The final component we wrote about was security as a
Speaker 4: sort of standalone mark of Cisco. Really quick, Nick, what
Speaker 4: did they say about security?
Speaker 11: It was one of those you know, there's three things
Speaker 11: they sort of called out AI, data center security, and
Speaker 11: obviously those are all three huge buzzy things that people
Speaker 11: want to see you growing in, and they said they've
Speaker 11: kind of made progress in all of them. I you know,
Speaker 11: I mean, I don't know if they were quite as
Speaker 11: specific on security in terms of how much progress lately,
Speaker 11: but it's definitely going to be a key thing for them.
Speaker 5: Nick. Great to catch up with you.
Speaker 3: Thank you one of their shunning lights today in terms
Speaker 3: of earnings, all things Cisco mean while coming.
Speaker 5: Up look good all things lobal.
Speaker 3: Smartphone market there is heading for the worst year in
Speaker 3: a decade.
Speaker 5: We'll discuss why. Next to speaking of smartphones.
Speaker 3: Look Apple a big tug on the broader NASDAC and
Speaker 3: as that one hundred today, it's really pulling.
Speaker 5: Down from a points perspective. Disappointing earnings report.
Speaker 3: Goes back a week or so, but really the pressure
Speaker 3: is off this company now to liver it's latest version
Speaker 3: of the iPhone. There's plenty of juicy content on the
Speaker 3: Bloomberg about this about how well in about six weeks time,
Speaker 3: we've got to be eyeing up what the tech gine
Speaker 3: is going to be doing, having reported its third straightcord
Speaker 3: declining sales. We've got some analyst expectations out there, shares
Speaker 3: expected to rise ahead of the event.
Speaker 5: Citing historical data.
Speaker 3: But look tell you what's also not rising ed check
Speaker 3: out what's happening in the world of crypto. I just
Speaker 3: want to shine a light and that really just before
Speaker 3: the show, we took another leg lower on the world
Speaker 3: of bitcoin. And this is more about market sentiment. This
Speaker 3: is more about bomb markets, selling off yields, driving higher
Speaker 3: the dollar in focus.
Speaker 6: Yeah, rate concerns the top story. This is Bloomberg.
Speaker 4: Let's get your daily dose of talking tech. First up,
Speaker 4: Global smartphone shipments ahead for their worst year in over
Speaker 4: a decade. Shipments expected to drop six percent year over year,
Speaker 4: according to the latest Counterpoint Research estimate. That's due to
Speaker 4: a disappointing demand, particularly in the US, but a deteriorating
Speaker 4: Chinese economy plus a smartphone sales dwindle. The top three
Speaker 4: US wireless carrier carriers have lost billions in revenue. AT
Speaker 4: and T, T Mobile, and Verizon have collectively lost nearly
Speaker 4: five billion dollars in equipment sales over the past twelve
Speaker 4: months compared to the previous year.
Speaker 6: And it's not just smartphones.
Speaker 4: The world's biggest PC maker, Lenovo, missed profit estimates for
Speaker 4: the second quarter, underscoring the depth of the global electronics
Speaker 4: market downturn.
Speaker 3: Caroline, I mean, let's just talk about missing expectations for
Speaker 3: a moment. Ed We're going to pivot away to Europe
Speaker 3: because Adian wiping out more than thirteen billion, in fact,
Speaker 3: I think it's twenty in the end market value falling
Speaker 3: over as you'll see thirty almost forty percent in a
Speaker 3: training day after missing first half revenue estimates. For more
Speaker 3: on the Dutch payment processing company and on the competition
Speaker 3: that's probably rife over here in the US, bloombergs Henry
Speaker 3: Wren is joining us as well as Sarah Jacob is
Speaker 3: brilliant to have you both with us, And I mean,
Speaker 3: first and foremost, Sarah, you cover the company from a
Speaker 3: real focal point over there in Amsterdam.
Speaker 5: What did you make of these numbers?
Speaker 3: Why was it such a shock this sort of focus
Speaker 3: for growth instead of profitability and obvious with everyone else.
Speaker 12: Yes, that's right.
Speaker 13: So Adune reported earnings for the first half that bes
Speaker 13: testaments on both revenue and margins. It boasted its slowest
Speaker 13: net revenue growth since it was listed, and the company
Speaker 13: attributed this to a weaker economic climate with higher interest rates, inflation,
Speaker 13: and particularly increased price competition in North America. The other
Speaker 13: thing with Adian is that they continue to hire, and
Speaker 13: they had about five hundred and fifty employees or so
Speaker 13: in the first half, and that too has weighed on
Speaker 13: margins the first half.
Speaker 4: Henry, let's bring the shares up and talk about this
Speaker 4: big drop. What's the Street saying because forty percent drop
Speaker 4: essentially biggest drop on record.
Speaker 1: Yeah, definitely.
Speaker 14: So when you think about a growth stock like and
Speaker 14: the scariest moment that you can have is when the
Speaker 14: three things that it's no longer a growth stock. So
Speaker 14: we saw these kind of things happening with Mata before
Speaker 14: the Facebook parent when it's flagship at Apps hit the bump,
Speaker 14: and we see this kind of thing is happening with
Speaker 14: Alien for sure as well, because we saw North American
Speaker 14: revenue the growth actually halved during the first half. Now,
Speaker 14: so the issue is because we have seen several quotas
Speaker 14: so adding and missed earnings sessments, but it's the first
Speaker 14: time that we've seen seen its IPO that it missed
Speaker 14: processing revenue estimates, processing volume estimate as well. And it's
Speaker 14: not just a myss, it's a miss of eight percent.
Speaker 14: So the question is whether the company can revive its growth.
Speaker 14: We know the company has reiterated its medium term guidance,
Speaker 14: but there is now some concerns on whether the company
Speaker 14: can achieve it's growth trajectory anymore given the competition, especially
Speaker 14: in the US.
Speaker 3: And Sarah dwell on that for a moment, they have
Speaker 3: spoken out about this being this hiring, this focus on
Speaker 3: growth still, which is at honest with basically everyone else
Speaker 3: in the market. It's the longer term potential here. But
Speaker 3: is this a cultural focus that they've got at the moment,
Speaker 3: the fact they want to be hiring in this market.
Speaker 3: How do you think they managed to convince investors?
Speaker 13: Well, Adian has been very vocal about the fact that
Speaker 13: they are in an investment mode. They're preparing the company
Speaker 13: for the next growth phase. I mean they are. They
Speaker 13: listed only a few years back. So they hired about
Speaker 13: two hundred employees last year and they expect to hire
Speaker 13: a similar amount this year. So as I said, about
Speaker 13: five hundred and fifty fifty one employees in the first
Speaker 13: half itself. So the company has has said that this
Speaker 13: is their focus, although they did mention that they will
Speaker 13: slow down hiring from next year.
Speaker 14: So yes, it is.
Speaker 13: It is in contrast with a lot of their peers
Speaker 13: who have announced job cuts in the past year or so.
Speaker 4: All right, Bloomberg's Henry Rahn and Sarah Jacobut in Amsterdam,
Speaker 4: thank you so much, carry team coverage. But the reason
Speaker 4: I love this story is we're talking about a European
Speaker 4: tech name that's quite big.
Speaker 6: You read Henry's street rap.
Speaker 4: What they're worried about is that it's not competing against
Speaker 4: the big US names for merchants attention.
Speaker 3: And whether or not they're just not willing to fight
Speaker 3: on a price perspective at the moment, whether or not
Speaker 3: it's there, are they actually losing customers, customers that just
Speaker 3: are using them a little bit less, they're not, of course,
Speaker 3: in this economic environment, as willing to be.
Speaker 5: Paying up for their higher priced products.
Speaker 3: It's really interesting as to also how the competition coalesces,
Speaker 3: of course, all eyes and what is the still private
Speaker 3: juggernaut that is Stripe and how much they managed to
Speaker 3: take in terms of market share.
Speaker 4: Yeah, but a commitment to hiring while the US peers
Speaker 4: are trimming jobs was quite interesting. Welcome back to Bloomberg Technology,
Speaker 4: Ed love loow here in San Francisco.
Speaker 5: And I'm Karenine hiding New York.
Speaker 3: Let'stig into the mark it halfway through this trading day
Speaker 3: and actually, well then as that one hundred, the bigger
Speaker 3: benchmark of the mighty powers of technology, actually you sort
Speaker 3: of trading flat. We've seen the Nasdaq more broadly, the
Speaker 3: benchmark under pressure today. Sentiment has been changing. We're worrying about, well,
Speaker 3: the backup in yeals, the tenure yield is up six
Speaker 3: call it five to six basis points at the moment
Speaker 3: on the ten uere we really have seen this sudden
Speaker 3: shift higher in terms of longer term rates.
Speaker 5: How far they're going much higher? And indeed, well.
Speaker 3: That signals about the Federal Reserve because well, this resilient
Speaker 3: US economy means perhaps they have to keep those rates
Speaker 3: higher for longer.
Speaker 5: What does that mean for risk assets?
Speaker 3: Well, what it means so this risk asset, which is bitcoin,
Speaker 3: is down for the day. In fact, we're breaking through
Speaker 3: that level that we've sustained for the last couple of weeks.
Speaker 3: The fact that we're now sub twenty eight thousand, we've
Speaker 3: really been in this trading range and now we break
Speaker 3: to the lowest in two months for bitcoin overall. Moving
Speaker 3: on to some individual names, because the reason the NASA
Speaker 3: one hundred is perhaps just managing to poke into the
Speaker 3: green is one individual mover that I'll finish on. But first,
Speaker 3: Apple a tug lower in terms of points on some
Speaker 3: of the main benchmarks by a percentage point.
Speaker 6: Ok.
Speaker 3: We're all worrying about really how they can stimulate and
Speaker 3: drive forward growth, particularly of iPhone sales after their recent
Speaker 3: earnings disappointed. New Bank China light on well this particular player,
Speaker 3: of course, over in Latin America a key fintech focus
Speaker 3: on new banking, of course, were by five percent. Why
Speaker 3: will the founder, the co founder and the CEO is
Speaker 3: actually selling out some of his steak about three percent,
Speaker 3: So we dive lower on this particular company. Cisco up
Speaker 3: more than four percent. Ed this we outlined already the
Speaker 3: numbers looking good. AI already half a billion dollars worth
Speaker 3: of sales ed.
Speaker 4: Yeah, Cisco really a story about the corporate world down
Speaker 4: the chain investing in AI.
Speaker 6: But what about the labor market? Let me bring you
Speaker 6: this one.
Speaker 4: A new survey finds that many Americans say automation could
Speaker 4: easily replace their jobs. Younger workers, particularly black people and
Speaker 4: Hispanic Americans, feel most threatened by AI in the workplace
Speaker 4: compared to white counterparts. Some three quarters of those polled
Speaker 4: expect increased use of automation and AI to lead to
Speaker 4: more unemployment, with women more inclined to see that than men.
Speaker 4: That said, the pole also found that most Americans believe
Speaker 4: the increased use of the technology will generally be a
Speaker 4: good thing for workers. So some slight contradiction in that
Speaker 4: data set.
Speaker 3: Yeah, wow, I mean it just outlines though, doesn't it
Speaker 3: end that there are anxieties deep but there are also
Speaker 3: so many opportunities.
Speaker 5: When it comes to artificial intelligence.
Speaker 3: And in fact, we've got the perfect guest to talk
Speaker 3: around that anun mentionals with us.
Speaker 5: The CEO of Arthur.
Speaker 3: It's a company that focuses on ensuring that these AI
Speaker 3: systems that many people are worrying about are actually well managed,
Speaker 3: that they're deployed responsibly. And you've got this new tool
Speaker 3: right that's helped and compare the plethora or large language
Speaker 3: models that are out there and see whether they fit
Speaker 3: your business case in particular, and just talk us through well,
Speaker 3: ultimately this anxiety that lays deep that we're just talking about,
Speaker 3: whether you think it's well vindicated, Well, I.
Speaker 15: Think you know, it's very understandable, the anxiety, and when
Speaker 15: you interact with chat, GPT or some of these other systems,
Speaker 15: you really kind of it's breathtaking, right, how human like
Speaker 15: the responses are.
Speaker 1: But fortunately, look, AI has.
Speaker 15: Been being deployed and you know, just a lot in
Speaker 15: the last five years and accelerating every year and unemployments
Speaker 15: still historically low, and there's like, there's very very little
Speaker 15: evidence that AI is taking jobs. It is evolving jobs,
Speaker 15: it's evolving jobs quickly, but there's not mass job loss
Speaker 15: coming from it that's been observed anywhere.
Speaker 6: So we go back to the Cisco story.
Speaker 4: What we know is that companies are investing either way,
Speaker 4: they're thinking about the use of large language models. The
Speaker 4: way that I see Arthur bench your product is like
Speaker 4: when I'm buying a new laptop, right, I go into
Speaker 4: a grid side by side, I compare processing power, I
Speaker 4: compare the memory, I compare operating system. You're basically offering
Speaker 4: the equivalent for companies to choose the best LM for them.
Speaker 1: Yeah. Absolutely.
Speaker 15: I think the important thing is that you're allowed you
Speaker 15: can you can test it on exactly what you want
Speaker 15: to do with it, right, And so the way you
Speaker 15: use your laptop is different from maybe the way you know,
Speaker 15: the way my high schooler does or the way my
Speaker 15: father does, and so you want to know how this
Speaker 15: is going to perform for me.
Speaker 1: And so I have like my own kind of proprietary data.
Speaker 15: That I want to feed into the LM, and I
Speaker 15: want to ask it certain types of questions, put certain
Speaker 15: types of prompts in that, and there's a lot of
Speaker 15: really nuanced differences that can't be reduced down to just
Speaker 15: a single number on a leaderboard.
Speaker 1: And so that's where Arthur Bench comes in. Allows people
Speaker 1: to really test.
Speaker 15: Like the kinds of prompts that their users are providing
Speaker 15: with their data and see how it performs.
Speaker 4: No l l M Caroline Large language model, it's just
Speaker 4: become a blanket term. But there's such variation between so
Speaker 4: that the multiple billions of parameters large language model and
Speaker 4: something for everyone out there.
Speaker 3: Yeah, and I mean, I'll go back to when you
Speaker 3: and I first started doing the show together as November
Speaker 3: and what came out the gate but chat GPT that
Speaker 3: really seemed to set the world alight. And and to
Speaker 3: that point, you know, when you're looking at the nuances
Speaker 3: within the large language models, how are we seeing them
Speaker 3: differentiated in particular? For example, it feels like anthrop make
Speaker 3: us on a bit of a role recently with Claude two.
Speaker 1: Yeah, Cloud two has been been great in our testing.
Speaker 15: It's doing a good job of not you know, not
Speaker 15: answering questions when it should be answering questions and not
Speaker 15: answering when it doesn't know the answer, and so there's
Speaker 15: you know, that can be very important.
Speaker 1: Yeah. Cloud two definitely performs suppressively.
Speaker 15: You know, there's also we see big differences in terms
Speaker 15: of the way they hedge, for instance, and so some
Speaker 15: of the models are much more likely to not want
Speaker 15: to answer a question and to to say, hey, I'm.
Speaker 1: An ll M, I shouldn't be answering this, or it's
Speaker 1: not my place.
Speaker 15: And so depending on the application, that may be appropriate
Speaker 15: or it may be a big drawback. And so that's
Speaker 15: that's why those are some of the differences that we
Speaker 15: that are testing our tool can tease out for people.
Speaker 4: Adam, how do we democratize AI technology access to it
Speaker 4: so that we look like lower the threshold right where
Speaker 4: you don't need to have control of all the Nvidio
Speaker 4: H one, hundreds or billions of dollars for the training.
Speaker 6: How does that happen?
Speaker 15: Yeah, absolutely, it's a big concern right now access to
Speaker 15: that hardware, both the expense and just the availability of it.
Speaker 15: I think fortunately these systems will become more efficient over time,
Speaker 15: and you know there are other vendors who are starting
Speaker 15: to make hardware more capacity coming online it's going to
Speaker 15: take a little while until that happens. But the nice
Speaker 15: thing with open source models is you can get a
Speaker 15: pre trained model that you can either just use or modify.
Speaker 15: And so you know what Facebook's done with Lama V
Speaker 15: two and a number of other people have done with
Speaker 15: the open release of these models, that's really put them
Speaker 15: in the hands of a lot of people who might
Speaker 15: not have had access to them before.
Speaker 4: Can often make money with this business model, particularly if
Speaker 4: we move towards an increasingly open sourced world.
Speaker 1: Yeah.
Speaker 15: Absolutely, Look, there are things that we do that are proprietary,
Speaker 15: like our ability to detect and block hallucinations, and so
Speaker 15: not everything we do is open source, but in this case,
Speaker 15: we just felt it was really important because this is
Speaker 15: sort of feeling confident that you're making the right choice
Speaker 15: about your system and that you that you're that you
Speaker 15: can put it out in production when trust that it
Speaker 15: goes well is a major impediment for a lot of people,
Speaker 15: and we really saw it slowing down people in the
Speaker 15: process of the point. And ultimately what's good for us
Speaker 15: is for as many people as possible to put these
Speaker 15: systems into production so that we can protect and monitor
Speaker 15: them and so Uh, the reason we open source this
Speaker 15: is just to sort of accelerate people's ability to deploy
Speaker 15: these these tools in a in a responsible way in
Speaker 15: an enterprise.
Speaker 3: Ultimately, though your own business of Arthur is about making
Speaker 3: money and you're backed by what index ventures include Capital,
Speaker 3: gray Craft and the like. I'm interested is to the
Speaker 3: groundswell of hype and reality. How much are you seeing
Speaker 3: companies coming to you wanting to get your services, wanting
Speaker 3: to understand where they put their money to work in
Speaker 3: AI l LMS.
Speaker 1: Yeah, it's been.
Speaker 15: It's been unlike anything I've ever seen in my career,
Speaker 15: and I think it's because, you know, chat GPTD is.
Speaker 1: Just so accessible. Anyone can go in and play a
Speaker 1: round and.
Speaker 15: See the the just the power of it, and so
Speaker 15: it's become a bordit levelation to it and everything from
Speaker 15: fortun one hundreds down to every single startup where boards
Speaker 15: are asking the CEO and the CIO what is our
Speaker 15: generative AI strategy and how is it going to transform
Speaker 15: our business? And so that that that sense of urgency
Speaker 15: has cascaded through the organization and so we're seeing all
Speaker 15: sorts of project teams mobilizing and working on you know
Speaker 15: ways to transform some of the key leverage points in
Speaker 15: their business using l MS, and it's been it's just
Speaker 15: been breathtaking to see. And so that's what we you know,
Speaker 15: we we come in a lot of times they call
Speaker 15: us to help them.
Speaker 1: Because it's you know, there is a lot of little
Speaker 1: details that are that collectively are a little bit daunting
Speaker 1: when you're trying to stand up one of these systems.
Speaker 1: Even though ultimately it's pretty accessible.
Speaker 15: Technology, there's certainly a learning curve and we help a
Speaker 15: lot of our customers with that as well as solving
Speaker 15: some of the common deployment challenges around you know, hallucinations
Speaker 15: and prompt injection and leaking sensitive data, things like that.
Speaker 4: Adam Winshew, author see thank you very much for joining
Speaker 4: us here on Bloomboat Technology Now. After his world tour
Speaker 4: to discus us the latest developments in artificial intelligence, open
Speaker 4: AI CEO Sam Altman reflected on the emotional powers of
Speaker 4: the technology and the need for global regulation. Bloomberger Regional's
Speaker 4: host and executive producer Emily Chang spoke to him for
Speaker 4: the latest episode of the circuit.
Speaker 6: Was the goal more listening or explaining.
Speaker 12: The goal was more listening? It ended up with more
Speaker 12: explaining than we expected. We ended up meaning like many
Speaker 12: many war leaders and talked about the sort of the
Speaker 12: need for global regulation, and that was like more explaining
Speaker 12: the listen was provided. I came back with like one
Speaker 12: hundred handwritten pages of notes.
Speaker 5: I heard that you do handwritten what happens to the
Speaker 5: hand written notes?
Speaker 12: But in this case, like I distilled it into like
Speaker 12: here are the top fifty pieces of like feedback from
Speaker 12: our users and what we need to go off and do.
Speaker 12: But there's like a lot of things when you like
Speaker 12: get people in person, like face to face or over
Speaker 12: a drink or whatever what where people really would just
Speaker 12: like say, you know, here is like my very harsh
Speaker 12: feedback on what you're going wrong. And I don't want
Speaker 12: to be different.
Speaker 5: You didn't go to China or Russia.
Speaker 12: I spoke remotely in China, but not Russia.
Speaker 6: Should we be worried about them.
Speaker 5: And where they are on AD or what they're all doing.
Speaker 12: I'd love to know more precisely where they are. That
Speaker 12: would be hopeful. We have I think very imperfect information there.
Speaker 5: So how has chat gipt changed your own behavior?
Speaker 12: There's like a lot of like little ways and then
Speaker 12: kind of like one big thought. The little ways are,
Speaker 12: you know, like on this trip for example, the translation.
Speaker 1: Was like a lifesaver.
Speaker 12: I also use it if I'm trying to like write
Speaker 12: something which I write a lot to never publish, just
Speaker 12: like for my own thinking, and I find that I
Speaker 12: like write faster and can think more somehow, So it's
Speaker 12: like a great unsticking tool.
Speaker 1: But then the big ways I am, I am, I
Speaker 1: see the path.
Speaker 12: Towards like this, just being like my super assistant for
Speaker 12: all of my cognitive.
Speaker 5: Work super assistant. You know, we've talked about relationships with chatbots.
Speaker 6: Did you see this as something people could.
Speaker 1: Get emotionally attached to?
Speaker 5: And how do you feel about that?
Speaker 12: I think language models in general are something that people
Speaker 12: are getting emotionally attached to, And you know, I have
Speaker 12: like a complex set of thoughts about that. I personally
Speaker 12: find it strange. I don't want it for myself. I
Speaker 12: have a lot of concerns. I don't want to be
Speaker 12: like the kind of like people telling other people what
Speaker 12: they can do with tech. But it seems to me
Speaker 12: like something you need to be careful with.
Speaker 3: Open Ai CEO some album with their own Emily Chang,
Speaker 3: you can watch the rest of the interview on the
Speaker 3: circuit with Emily Chang. She also sat down with Microsoft
Speaker 3: CEO sat In Adella on Bluembergo reginals.
Speaker 5: I meanwhile coming up, look, we're going to be breaking down.
Speaker 3: Synopsis is third quarter earnings the CEO after goose from
Speaker 3: New York, from San Francisco.
Speaker 5: This is Broomberg Technology.
Speaker 6: Let's get to snap.
Speaker 4: This is the chip design software maker reporting third quarter results.
Speaker 4: The top testaments raised guidance AI a big part of performance,
Speaker 4: but also announcing that Sezin Ghazi will assume the role
Speaker 4: of president and CEO effective January first, twenty twenty more
Speaker 4: four for more, let's bring in Art to gus synopsis,
Speaker 4: current but outgoing CEO Art Welcome to Bloombog Technology. It
Speaker 4: was interesting, real growth in China. That's where I want
Speaker 4: to start, and I want to start there because no
Speaker 4: one asked you about it on the earnings call. Why
Speaker 4: and how are you growing in China?
Speaker 16: Well, the other the growth was strongest quarter, partially also
Speaker 16: because it was the post COVID quarter and in general
Speaker 16: China has remained strong for US for the last ten years,
Speaker 16: while simultaneously, of course, having certain restrictions on what we
Speaker 16: can do there. But you know, design of chips continues
Speaker 16: everywhere in the world at a very high speed, and
Speaker 16: that's many different in China.
Speaker 4: You booked so far in the year, I think I'm
Speaker 4: right in saying about five hundred million dollars of AI
Speaker 4: sales as well. What is the main driver of that,
Speaker 4: because you essentially create software that is used in the
Speaker 4: chip design process. What is it that's driving the AI
Speaker 4: specific growth.
Speaker 16: Well, you know already for the last few years, if
Speaker 16: you look at the most advanced, most hard driving chips,
Speaker 16: AI is in the middle of that, right, And actually
Speaker 16: in your own reporting you have so much on AI,
Speaker 16: which is all driving the need for much faster, lower power,
Speaker 16: much higher capacity chips, and so the competitiveness of those
Speaker 16: is absolutely essential. That's another way of saying is they
Speaker 16: are the ones that use the most advanced silicon technologies
Speaker 16: and also the most complex architectures. And this is where
Speaker 16: Synopsis is the leader. We do the most advanced chips,
Speaker 16: or we I should say, we support our customers in
Speaker 16: doing the most advanced chips in the world for our
Speaker 16: entire existence. And here's a wave that is just continued
Speaker 16: to grow.
Speaker 4: Caroline, I express surprise that no one asked about China
Speaker 4: because Art is talking about the cutting edge of chip
Speaker 4: technology in that context, which is in a very hard
Speaker 4: environment right now.
Speaker 3: Yeah, that feels politically charged as well. Art, can you
Speaker 3: just talk us through sort of the restrictions, the concerns
Speaker 3: about allowing your very specific software to be used by China.
Speaker 3: When we're worried about the tensions and the AI races,
Speaker 3: it seems to be deemed.
Speaker 16: Yeah, I didn't say that the most advanced AI chips
Speaker 16: come from China. There are many companies that are investing
Speaker 16: in that. Some of the very large semicroductor companies are
Speaker 16: absolutely driving the state of the art, and some of
Speaker 16: the most advanced startups in the world are driving the
Speaker 16: state of the art. And those are the customers that
Speaker 16: first come to us because they very much rely on
Speaker 16: the ability to differentiate. And you know, if there's one
Speaker 16: word I would put on that, the speed of the
Speaker 16: chip determines everything. And if you look at at the
Speaker 16: wave of opportunity that's now coming in via gen AI,
Speaker 16: all of these algorithms initially take a lot of computation,
Speaker 16: and the faster you can make those, the more opportunities
Speaker 16: there are there and so it's one of those those
Speaker 16: wonderful situations where the demand continually exceeds what our customers
Speaker 16: can deliver. I either race is on, and in that race,
Speaker 16: we are key ingredients to the success.
Speaker 3: But many of your I'm sure peers over in Silicon
Speaker 3: Valley are really nervous about that race, and boys the
Speaker 3: administration worried about that race. What sort of contracts do
Speaker 3: you have with China and are you getting any pushback
Speaker 3: in terms of your ability to.
Speaker 16: Sell that Well, you know, it's actually fairly straightforward. The
Speaker 16: rules of engagement are very clear. We follow those absolutely
Speaker 16: to a t. And the issue is more for China
Speaker 16: itself than for us. It's a certain percentage of our
Speaker 16: business that is growing well over time. But notice also
Speaker 16: that we had a very strong quarter in Korea for example.
Speaker 16: We over the year have done well in all parts
Speaker 16: of the world, and so yeah, if there were no restrictions,
Speaker 16: we could probably sell more to China, but we live
Speaker 16: up to those restrictions. What I want to highlight though,
Speaker 16: is every nation today is investing in chip design. And
Speaker 16: I'm sure you're familiar with the US Chips Act, but
Speaker 16: really what's happening is all other nations have followed up
Speaker 16: with their own Chips Act, and while we're not counting
Speaker 16: at all on these, what is clear is the whole
Speaker 16: world now understand chips are absolutely central to this whole
Speaker 16: new wave of what we call smart everything in the world.
Speaker 4: You've been at this company since the late nineties. I
Speaker 4: know that you're stepping down at the beginning of next year.
Speaker 4: I wanted to get your reaction to the Hour Semi
Speaker 4: and Intel news this week and how you think it
Speaker 4: will impact the m and a landscape in tech and
Speaker 4: in chips in particular.
Speaker 16: Well, I actually have been there since the mid eighties
Speaker 16: because I started the County in mid eighties. No, no problem.
Speaker 16: But it gives a very interesting perspective, right because many
Speaker 16: of these companies that you're reporting on, some of them
Speaker 16: existing existed already at that time, and they all have
Speaker 16: had the same passway, which is how to stay close
Speaker 16: to the leading edge. And Intel is a great example
Speaker 16: of that. Right now, they're substantially investing in their next edge.
Speaker 16: And you may have seen the agreement that we did
Speaker 16: earlier this week, which is very important, where we provide
Speaker 16: many of the building blocks that are necessary for them
Speaker 16: to be successful in the foundry world, and these building
Speaker 16: blocks get specifically designed for their most advanced technology. And
Speaker 16: in general, part of our role is to support all
Speaker 16: the founderies to go to market. And what they need
Speaker 16: is they need the design tools to be ready for them,
Speaker 16: and they need the IP blocks to be ready from them,
Speaker 16: and we provide both of those. We provide those for
Speaker 16: a broad set of foundries, and that race is on too.
Speaker 16: And so this notion of the race forward is actually
Speaker 16: a big positive. You're certainly familiar with fifty years of
Speaker 16: More's law that was an exponential of unseen magnitude. We've
Speaker 16: entered a new one of these, and the new one
Speaker 16: is that multiple chips are going to get together in
Speaker 16: very high proximity, including or stacking them. It's almost like
Speaker 16: moving from building houses to moving hotel to building hotels now.
Speaker 16: And this is all driven by smart everything.
Speaker 3: The focus focus for you, the focus for the person
Speaker 3: who picks up from you in January twenty and twenty four.
Speaker 3: You found in the business co found and back in
Speaker 3: nineteen eighty six, and an amazing time to be handing
Speaker 3: over to secceine me.
Speaker 5: Thank you so much. Ardgius is synopsist CEO.
Speaker 3: So let's add New York City to the list of
Speaker 3: places TikTok access will be banned on government owned This
Speaker 3: comes well in California moves ahead a stronger language in
Speaker 3: its own TikTok van bill. In Meg's technology Alex Birinka
Speaker 3: is ever a busy woman, so it tooks through it.
Speaker 6: Yeah.
Speaker 17: In New York City, that security threat that a lot
Speaker 17: of legislators have talked about has come to the forefront.
Speaker 17: The New York City Cyber Command called it a quote
Speaker 17: threat to the city's technical networks and made the decision
Speaker 17: this week to give the city thirty days to get
Speaker 17: it off of government phones. The state of California that
Speaker 17: was taking a little bit of a longer approach. There's
Speaker 17: a bill that was authored by Senator Bill Dodd, that's
Speaker 17: California SB seventy four. That bill has been approved by
Speaker 17: the Assembly Committee to basically ban it on all government
Speaker 17: phones as well.
Speaker 6: That bill still.
Speaker 17: Has to go to the Appropriations Committee and then to
Speaker 17: Governor Gavin Newsom's desk. But there was one point in
Speaker 17: our reporting from that passage and Assembly committee today that
Speaker 17: I thought was interesting. Dodd said that TikTok has been
Speaker 17: running interference, so while this app is getting banned on
Speaker 17: government devices and states and municipalities more than thirty five
Speaker 17: states in the US, it's still running quote unquote interference
Speaker 17: and trying to convince lawmakers to not just ban TikTok,
Speaker 17: but to widen up the band to all entertainment devices.
Speaker 17: It hasn't quite worked that argument. In TikTok's defense. We're
Speaker 17: still seeing these bands roll on, but California is probably
Speaker 17: the next one that we'll be watching closely.
Speaker 3: All the inside track, Alister, and can we thank you meanwhile?
Speaker 6: That does it?
Speaker 5: From this edition of Bluebog Technology.
Speaker 4: Yeah, just the earning season, Relentless continues to recap everything
Speaker 4: from the show in our podcast apples, Spotify, and the
Speaker 4: Bloomberg platforms for here in SF and out New York.
Speaker 6: This is Bloomberg Technology.