WEBVTT - Anthropic Preps for Blockbuster Public Listing 0:00:00.040 --> 0:00:15.040 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live 0:00:15.160 --> 0:00:18.840 from the heart of Silicon Valley with Ed Lavow in 0:00:19.040 --> 0:00:19.880 San Francisco. 0:00:23.520 --> 0:00:26.560 This is Bloomberg Tech coming up, Bloomberg reports, and Thropic 0:00:26.680 --> 0:00:30.400 expects to match or top the size of SpaceX's record 0:00:30.400 --> 0:00:33.800 setting IPO. Plus sources say Braad Comms in talks to 0:00:33.880 --> 0:00:36.440 raise more than sixty billion dollars in debt for an 0:00:36.479 --> 0:00:40.240 AI chip financing deal that will benefit Anthropic and others. 0:00:40.680 --> 0:00:43.680 And all eyes on Nvidia reporting earnings next week, a 0:00:43.720 --> 0:00:46.760 lot of pressure on it. Let's get right to our 0:00:46.760 --> 0:00:49.520 top story. And Thropics aiming for an IPO that could 0:00:49.520 --> 0:00:52.800 make history. The company expects to match or even top 0:00:52.880 --> 0:00:56.640 SpaceX's record setting debut, which in the first instance raised 0:00:56.640 --> 0:00:59.840 seventy five billion dollars. That's according to sources. The maker 0:00:59.880 --> 0:01:02.880 of Claude could fall publicly as soon as the end 0:01:02.920 --> 0:01:06.400 of this month. Bloomberg Sherening Gafari leads coverage of Anthropic, 0:01:06.640 --> 0:01:09.440 and Bloomberg's Leanna Baker leads the deal's team here at Bloomberg. 0:01:09.480 --> 0:01:11.240 Both join us with more straining. 0:01:11.280 --> 0:01:13.400 Gonna start with you the basic details of what we're 0:01:13.400 --> 0:01:14.080 reporting here. 0:01:15.880 --> 0:01:20.440 Sure so we know that Anthropic is expecting to have 0:01:20.480 --> 0:01:24.399 an IPO that could matter exceed the size of SpaceX's 0:01:24.440 --> 0:01:29.240 record setting IPO quite recently. We also know we found 0:01:29.240 --> 0:01:32.959 out a few more details about their losses that their 0:01:33.160 --> 0:01:39.200 net losses in twenty twenty five were nearly forty two billion, 0:01:39.280 --> 0:01:43.640 and that's a fivefold increase from twenty twenty four. So 0:01:43.720 --> 0:01:46.040 that's going to be one of the key questions going 0:01:46.080 --> 0:01:50.720 into this, Right, there's this large IPO planned, a lot 0:01:50.720 --> 0:01:54.240 of excitement around the AI demand, but also questions around 0:01:54.240 --> 0:01:57.080 the very high cost needed to sustain this business. 0:01:57.920 --> 0:02:00.960 Leanna, there's a process happening here. In our report, we 0:02:01.000 --> 0:02:03.640 say that CFO Krishna Rao is kind of leading these 0:02:04.320 --> 0:02:08.320 earlier investor meetings. There's a confidential filing, a public filing 0:02:08.320 --> 0:02:10.959 will follow. This is your team's bread and butter, right, 0:02:11.000 --> 0:02:13.520 take us inside what we know is happening behind the scenes. 0:02:14.200 --> 0:02:17.960 Sure, so the story mentioned the CFO who's speaking with investors. 0:02:18.160 --> 0:02:21.200 It didn't mention the armies of investment bankers who are 0:02:21.240 --> 0:02:24.440 also there in the room or even behind the scenes 0:02:24.800 --> 0:02:28.040 trying to start to do early book building of who 0:02:28.120 --> 0:02:30.560 will be the investors that get in on this deal. 0:02:30.919 --> 0:02:34.400 These fees eventually do get paid to the banks, and 0:02:34.440 --> 0:02:37.480 it all comes down to how much does this IPO 0:02:37.639 --> 0:02:41.880 raise and at what valuation? That's another question. So you 0:02:41.960 --> 0:02:44.600 mentioned that Anthropic had been valued at nine hundred and 0:02:44.639 --> 0:02:47.680 sixty five billion, So in an IPO, do they get 0:02:47.680 --> 0:02:49.320 to one trillions, they get to one and a half 0:02:49.320 --> 0:02:52.120 two tres So those are all things that the bankers 0:02:52.200 --> 0:02:56.000 and the lawyers and the company. They have to figure 0:02:56.040 --> 0:02:58.560 this out, to figure out the support from investors. At 0:02:58.600 --> 0:03:02.560 what valuation you can support this deal. But it's really 0:03:02.600 --> 0:03:05.679 exciting for the IPO market, which always opens after Labor Day, 0:03:05.919 --> 0:03:08.560 and we'll be following when this S one finally hits 0:03:08.600 --> 0:03:10.760 and we'll get a look at all the financials for 0:03:10.800 --> 0:03:11.400 the first time. 0:03:11.720 --> 0:03:15.320 Right, Anthropic should have a lot of cash on its 0:03:15.320 --> 0:03:17.720 balance sheet, and so the question is why do a 0:03:17.760 --> 0:03:21.200 big IPO and sharene You spoke on stage right with 0:03:21.280 --> 0:03:25.200 Danielle m Oday, the president co founder of Anthropic in June, 0:03:25.680 --> 0:03:28.360 and you just put this question very directly. 0:03:27.960 --> 0:03:31.560 Why an ipo. What was the response at that time. 0:03:32.919 --> 0:03:36.480 Yeah, an IPO offers a repeatable process to raise large 0:03:36.480 --> 0:03:38.920 amounts of capital. Again, if you think about the incredibly 0:03:38.960 --> 0:03:41.960 high cost of compute to train a new AI model 0:03:42.240 --> 0:03:44.600 at the cutting edge these days can cost billions of 0:03:44.640 --> 0:03:49.000 dollars just for one model alone potentially, So you know, 0:03:49.120 --> 0:03:50.800 that's just sort of the state of play right now. 0:03:50.840 --> 0:03:53.320 So her answer was that we need to be able 0:03:53.360 --> 0:03:56.320 to raise money when we need. An IPO provides. 0:03:55.920 --> 0:03:59.760 That process, Leanna, I do want to get into the. 0:04:01.360 --> 0:04:04.200 I went back and checked my calendar from the time 0:04:04.440 --> 0:04:08.480 SpaceX flipped its S one public to IPO day was 0:04:08.520 --> 0:04:11.240 about twenty three days, and, like you know, I have 0:04:11.280 --> 0:04:12.840 a bit of shell shock from that period of time. 0:04:12.880 --> 0:04:14.600 I'm sure you and the team do as well of 0:04:14.760 --> 0:04:18.360 how it transpired, but it happened very quickly. So we're 0:04:18.400 --> 0:04:21.640 reporting that Anthropic might flip its S one public by 0:04:21.640 --> 0:04:25.000 the end of this month September. What happens, how does 0:04:25.040 --> 0:04:25.520 it happen? 0:04:26.560 --> 0:04:30.120 Sure? So you mentioned that Anthropic is already on file confidentially, 0:04:30.240 --> 0:04:32.680 so all they have to do is get their ducks 0:04:32.680 --> 0:04:36.120 in a row to make this public with the SEC 0:04:36.640 --> 0:04:38.800 and if they want to get on the road show, 0:04:39.160 --> 0:04:42.479 to get on the road after this labor day period. 0:04:43.520 --> 0:04:46.200 You know, analysts are saying this filing could hit as 0:04:46.200 --> 0:04:48.200 soon as next week. We have a report in on 0:04:48.240 --> 0:04:50.880 a specific timing. We said it could be within a 0:04:50.920 --> 0:04:53.680 few weeks, but it wouldn't be crazy to see this 0:04:54.000 --> 0:04:57.040 next week because as you mentioned, you have ten fifteen 0:04:57.120 --> 0:05:00.600 days maximum twenty three days, you know it. This all 0:05:00.680 --> 0:05:05.720 happens very fast, and IPOs are all about the market conditions. 0:05:05.760 --> 0:05:09.159 So SpaceX, sure it's trading a little below you know, 0:05:09.200 --> 0:05:13.159 its price, but it's still a massive company that went public. 0:05:13.200 --> 0:05:16.200 It's trading okay. It wasn't a total disaster. So if 0:05:16.240 --> 0:05:18.480 you're another company waiting in the wings to go public, 0:05:18.520 --> 0:05:20.799 you see that and you say, well, maybe we should 0:05:20.839 --> 0:05:23.119 strike when the iron's hot, and then don't forget. Also, 0:05:23.200 --> 0:05:26.719 open Ai is also keeping an eye on this, so 0:05:26.839 --> 0:05:28.880 Anthropic has that to think about too. 0:05:29.720 --> 0:05:32.599 The top line of our report, Anthropic is seeking to 0:05:32.720 --> 0:05:35.560 match or top what SpaceX raised and on a valuation 0:05:35.680 --> 0:05:38.400 basis two in the weeks to come. I'd also point 0:05:38.440 --> 0:05:40.880 out SpaceX just in the last ten minutes when above 0:05:40.920 --> 0:05:42.800 one hundred and thirty five dollars a share. 0:05:42.720 --> 0:05:43.640 It's IPO price. 0:05:43.800 --> 0:05:47.760 Bloombergshering Gafari covers Anthropiclyana leads the team on Blueberg deals. 0:05:47.760 --> 0:05:50.560 Thank you so much. As Entropic prepares for its IPO. 0:05:50.720 --> 0:05:53.440 The company is also addressing a key concern for its 0:05:53.440 --> 0:05:57.680 biggest customers, data privacy. According to a Bloomberg source, and 0:05:57.760 --> 0:06:01.360 Thropic plans to give businesses more control over where their 0:06:01.480 --> 0:06:05.400 data is stored when using its AI models, particularly its 0:06:05.440 --> 0:06:09.120 frontier models. Bloomberg Tech Managing ed as as Sarah Friars 0:06:09.160 --> 0:06:14.360 with us really important piece of reporting because Anthropic has 0:06:14.360 --> 0:06:17.800 been given so much credit for its commercial progress, but 0:06:17.880 --> 0:06:20.640 this was a key concerned customers had explain what we're 0:06:20.680 --> 0:06:22.080 detailing in that report. 0:06:22.279 --> 0:06:26.800 Well, Customers were concerned about Entropic retaining their data for 0:06:26.839 --> 0:06:29.760 a few reasons, but probably most of all because then 0:06:29.880 --> 0:06:32.960 Anthropic has their data and can train on it. Of course, 0:06:32.960 --> 0:06:35.880 Thenthropics said that it would not do that. They said 0:06:35.880 --> 0:06:38.799 they wanted to retain the data in order to guard 0:06:38.800 --> 0:06:42.200 against cybersecurity threats after some of the concerns earlier this 0:06:42.279 --> 0:06:47.000 year about potential breaches of customers there. They said, you know, 0:06:47.040 --> 0:06:49.400 we'll retain the data for a while to make sure 0:06:49.480 --> 0:06:53.080 that everything is fine. But of course that was not 0:06:53.160 --> 0:06:56.280 a popular plan with its customers, and it's deciding to 0:06:56.320 --> 0:06:57.360 give back more control. 0:06:58.480 --> 0:07:02.200 And Thropic declined to comment on our report, but it 0:07:02.279 --> 0:07:05.719 ties very closely to like what's happened in recent weeks 0:07:05.720 --> 0:07:10.280 and months, models acting outside of the instructions they've been given, 0:07:10.760 --> 0:07:12.640 and the focus on the race with open ai has 0:07:12.680 --> 0:07:16.720 been about enterprise right and arr what else do we 0:07:16.760 --> 0:07:18.080 need to know from this report. 0:07:18.040 --> 0:07:20.960 Well, Nthropic really does need those enterprise customers. It's so 0:07:21.080 --> 0:07:25.160 foundational to the success of that IPO and they're a 0:07:25.240 --> 0:07:26.640 leader right now in the market. 0:07:26.680 --> 0:07:27.720 But there are a lot. 0:07:27.520 --> 0:07:31.080 Of companies that are that are learning from Anthropic success. 0:07:31.120 --> 0:07:35.040 So you have Google, Gemini, you have open Ai they're 0:07:35.080 --> 0:07:37.720 trying and even even SpaceX. You know, they're trying to 0:07:37.800 --> 0:07:42.440 do things to cater to those enterprise customers that Anthropic has. 0:07:42.520 --> 0:07:45.440 It's still a very early market and so they do 0:07:45.560 --> 0:07:47.600 need to think about not just what do they think 0:07:47.760 --> 0:07:51.280 is the right move for cybersecurity, but balancing that against 0:07:51.280 --> 0:07:55.119 what their customers expect and require in order to retain 0:07:55.120 --> 0:07:55.840 those customers. 0:07:56.560 --> 0:07:58.360 BlueBag Tech head as a Sarah for I thank you 0:07:58.400 --> 0:07:58.840 so much. 0:07:58.920 --> 0:08:02.000 Indeed, now coming up broad cooms looking to raise more 0:08:02.200 --> 0:08:04.680 than sixty billion dollars in debt, We're going to break 0:08:04.720 --> 0:08:07.440 down one of the biggest bets yet on aim structure 0:08:07.440 --> 0:08:10.600 has a very complicated structure that the team are going 0:08:10.640 --> 0:08:19.240 to explain to us. This is Bloomberg Tech. Broad Coom's 0:08:19.240 --> 0:08:22.440 lining up another massive bet on AI. Bloomboats learned the 0:08:22.480 --> 0:08:25.200 chip makers in talks to raise more than sixty billion 0:08:25.200 --> 0:08:28.800 dollars in debt to help aanthropic and others secure chips 0:08:28.840 --> 0:08:31.920 and computing power. That's all according to sources. Blimbers Ryan 0:08:31.960 --> 0:08:34.559 Gord part of the team that broke the story. Actually 0:08:34.600 --> 0:08:37.760 this is not as simple as Broadcom going out and 0:08:37.840 --> 0:08:40.920 raising debt for itself. Can you just explain the structure 0:08:40.960 --> 0:08:41.880 of what we've reported. 0:08:43.280 --> 0:08:45.480 Yeah, it's a good point definitely to hit on at 0:08:45.480 --> 0:08:46.960 the start, because I think if you were to look 0:08:47.000 --> 0:08:50.240 at this headline, it could, you know, mean something quite different. 0:08:50.240 --> 0:08:51.959 But to break it down, I think in the most 0:08:52.000 --> 0:08:56.839 simplistic way possible. Broadcom is essentially looking to raise a 0:08:56.880 --> 0:09:00.720 special purpose vehicle that would be financed by others partners. 0:09:01.440 --> 0:09:03.440 We've already seen them sort of hint at this. They 0:09:03.520 --> 0:09:07.280 announced a partnership with blacks and Apollo in June that 0:09:07.400 --> 0:09:10.320 was essentially to finance a one giga what capacity compute 0:09:10.400 --> 0:09:13.400 sort of layer. This is essentially an expansion of that, 0:09:13.559 --> 0:09:16.040 so Borcom would go out and with those partners look 0:09:16.160 --> 0:09:19.680 to raise a chunk of money through debt that would 0:09:19.720 --> 0:09:22.240 essentially sit in a special purpose vehicle that would then 0:09:22.320 --> 0:09:25.080 go out and buy chips that. 0:09:25.440 --> 0:09:26.400 The Borcom makes. 0:09:26.480 --> 0:09:28.920 I think the interesting part of this deal is that 0:09:29.160 --> 0:09:31.080 you know, you have a situation where Boacom is not 0:09:31.160 --> 0:09:35.080 only helping to finance customers buying its chips, but is 0:09:35.120 --> 0:09:38.320 also then supplying them itself, So it's both the customer 0:09:38.640 --> 0:09:41.360 and also the capital provider in a certain way. I 0:09:41.400 --> 0:09:44.320 think what makes this seal more interesting is that Broadcom 0:09:44.559 --> 0:09:48.520 is going to actually effectively guarantee a significant chunk of 0:09:48.559 --> 0:09:51.280 that debt and therefore help to bring down the cost 0:09:51.320 --> 0:09:54.199 and make it safe for four investors who may look 0:09:54.200 --> 0:09:55.760 to participate in this SPV. 0:09:56.640 --> 0:09:59.440 It is somewhat comparable to what we saw from Nvidia 0:09:59.520 --> 0:10:03.199 in those large Wall Street firms, where the compute is 0:10:03.240 --> 0:10:05.760 the collateral in that case, but the firms are just 0:10:05.840 --> 0:10:08.599 to conduit to the capital third party capital. 0:10:08.520 --> 0:10:09.920 Doesn't come off balance sheet. 0:10:10.480 --> 0:10:12.600 I'm reading the details, so it looks like this could 0:10:12.600 --> 0:10:14.959 be up to one hundred billion, right seventy billion in 0:10:15.280 --> 0:10:19.120 senior secure debt thirty billion junior debt just fill in 0:10:19.160 --> 0:10:20.480 some of the other details for us. 0:10:21.720 --> 0:10:24.520 Yeah, so I think there's a there's the junior piece 0:10:24.559 --> 0:10:29.000 would be essentially guaranteed by Blackson and Apollo. The other 0:10:29.040 --> 0:10:31.080 sixty billion piece it could be as much as seventy 0:10:31.120 --> 0:10:34.600 billion we you know, according to sources. I think that's 0:10:34.920 --> 0:10:38.120 that's the key here. These are fluid discussions. Broadcom is 0:10:38.120 --> 0:10:40.760 not necessarily going out and saying it wants to raise 0:10:40.840 --> 0:10:43.559 sixty billion dollars. I just think given the parameters of 0:10:43.640 --> 0:10:46.200 what's been talked about here, it could be anywhere in 0:10:46.200 --> 0:10:47.720 that region. And I think if you put those two 0:10:47.800 --> 0:10:50.240 numbers together, you do give something that's in the region 0:10:50.240 --> 0:10:53.800 of one hundred billion dollars. I think taking a step 0:10:53.880 --> 0:10:56.280 back and just thinking about what this sort of looks 0:10:56.320 --> 0:10:59.800 like from the wider sort of AI infrastructure rollout. These 0:10:59.800 --> 0:11:02.000 are obviously kind of novel structures you just mentioned in 0:11:02.040 --> 0:11:04.760 video deal with the other private capital providers. It's in 0:11:04.800 --> 0:11:06.719 a way to two sides of the same coin. I 0:11:06.720 --> 0:11:08.520 think if you look at that deal, you have you know, 0:11:08.559 --> 0:11:11.760 some of the biggest sort of largest infrastructure financial infrastructure 0:11:11.800 --> 0:11:14.920 fans on Wall Street participating in that one. Here you have, 0:11:15.120 --> 0:11:19.079 you know, essentially private capital helping to you know, helping 0:11:19.120 --> 0:11:24.520 Balcon to sell those chips. I think we've seen this before, right, 0:11:24.600 --> 0:11:28.000 you look at things like aircraft leasing has happened in 0:11:28.040 --> 0:11:31.360 this way you think about data centers now. I think 0:11:31.400 --> 0:11:33.080 this is kind of the evolution of people are thinking 0:11:33.080 --> 0:11:36.240 on the fly with these kinds of structures, and. 0:11:36.600 --> 0:11:38.600 A lot of parts of the markets still have questions 0:11:38.640 --> 0:11:40.480 about it. By the way, from the equity perspective, broughk 0:11:40.480 --> 0:11:43.160 On up a percentage point following the report. Biomas Wrangel, 0:11:43.240 --> 0:11:45.800 thank you very much. That Broadcon deal gets right to 0:11:45.840 --> 0:11:48.839 a bigger concern over hanging the AI trade, the cost 0:11:48.880 --> 0:11:52.280 of funding it all, but record debt, issuants, higher rates, 0:11:52.559 --> 0:11:55.800 growing pushback on data centers, particularly in this country, all 0:11:55.880 --> 0:11:59.400 raising fresh questions about how quickly the build out can 0:11:59.440 --> 0:11:59.920 pay off. 0:12:00.559 --> 0:12:02.320 Delighted to welcome back to the show. 0:12:02.760 --> 0:12:07.920 Erica Klower, founder CIO CEO of Science and Technology Partners. 0:12:09.240 --> 0:12:13.200 Let's start with your interpretation of the reporting about this 0:12:13.320 --> 0:12:15.360 vehicle that Brocom is set up. 0:12:17.200 --> 0:12:19.600 Well, Thanks so much, lovely to see you this morning. 0:12:19.800 --> 0:12:22.160 And you know, this is an extension of what we've 0:12:22.200 --> 0:12:24.839 been seeing for the last several months, which is extraordinary 0:12:24.880 --> 0:12:27.560 levels of debt coming to the market to build out 0:12:27.600 --> 0:12:31.920 the AI infrastructure, and the market is having some indigestion 0:12:32.080 --> 0:12:34.720 with dealing with all of this debt. Just to wrap 0:12:34.720 --> 0:12:37.480 some numbers around it, it's quite staggering. 0:12:37.520 --> 0:12:40.720 We've had over two hundred and twenty billion dollars of 0:12:40.760 --> 0:12:43.319 debt issued so far this year, which is up more 0:12:43.360 --> 0:12:45.880 than double from twenty twenty five, and that's just year 0:12:45.920 --> 0:12:48.719 to date, and of course in twenty twenty four the 0:12:48.800 --> 0:12:51.439 levels were just about twenty so this is quite a 0:12:51.440 --> 0:12:56.000 big jump. And not only is the debt quite expensive, 0:12:56.559 --> 0:12:59.480 but there's so much of it so it's difficult to 0:12:59.760 --> 0:13:02.440 find homes for it. All the crepons have gone up, 0:13:02.760 --> 0:13:05.040 and so many of these companies are now having to 0:13:05.040 --> 0:13:08.520 face much higher borrowing costs than they had initially anticipated 0:13:08.559 --> 0:13:09.560 maybe six months ago. 0:13:10.720 --> 0:13:11.920 The reason that I wanted to get you back on 0:13:12.000 --> 0:13:15.520 Spoomberg Tech Science Technology Partners, a long bias fund, just 0:13:15.640 --> 0:13:18.360 zeroed in on the corners of the technology market we 0:13:18.440 --> 0:13:22.440 care about most. You're coming at this at cost of 0:13:22.480 --> 0:13:25.960 capital lens right for lots of people. They go straight 0:13:26.000 --> 0:13:29.400 to the circular financing question. How do you feel about 0:13:29.440 --> 0:13:30.160 that side? 0:13:31.520 --> 0:13:33.960 Well, I think it, of course is a concern because 0:13:34.200 --> 0:13:38.760 to offer financing to a customer and in turn expect 0:13:38.800 --> 0:13:42.199 that they will be buying your products is indeed circular financing, 0:13:42.640 --> 0:13:45.720 and so I think that this is a legitimate concern 0:13:45.800 --> 0:13:48.439 for all investors as they are examining these deals. 0:13:50.400 --> 0:13:53.319 In the United States, particularly ahead of the midterms, there 0:13:53.400 --> 0:13:55.719 is a lot of societal debate about the impact of 0:13:55.800 --> 0:13:59.360 data centers and there is action to push back against 0:13:59.360 --> 0:14:02.880 specific Do you have to model that into your outlook 0:14:02.960 --> 0:14:05.480 for CAPEX for growth of data center. 0:14:06.679 --> 0:14:08.800 I think this is such a good question because this 0:14:08.880 --> 0:14:11.079 gets at the heart of why we're seeing so much 0:14:11.160 --> 0:14:14.920 volatility in the market. It's not only that the cost 0:14:15.320 --> 0:14:19.960 to build out these MEGAAI infrastructure facilities are going to 0:14:20.000 --> 0:14:22.560 be higher because the coupon must be higher in order 0:14:22.600 --> 0:14:25.600 to get it placed, but also one will be carrying 0:14:25.600 --> 0:14:28.920 that more expensive debt, most likely for longer because of 0:14:28.960 --> 0:14:32.080 two key reasons. One you just mentioned, which is that 0:14:32.200 --> 0:14:36.440 in states like Pennsylvania, New York, Texas, there are data 0:14:36.440 --> 0:14:41.160 centers that are infacing whether it's regulatory or community concerns 0:14:41.200 --> 0:14:44.360 that are delaying some of the facility buildouts. There are 0:14:44.400 --> 0:14:48.360 also shortages of workers to build out these facilities, and 0:14:48.600 --> 0:14:52.000 there also are chip shortages, so all of this calls 0:14:52.040 --> 0:14:54.840 into question whether or not even these AI data centers 0:14:54.880 --> 0:14:57.960 will be built on time. And every month that goes 0:14:58.000 --> 0:15:00.480 by is another month of paying this fare very high 0:15:00.960 --> 0:15:05.720 coupon debt that is associated with this buildout ERKA. 0:15:05.800 --> 0:15:10.000 I would really value the long biased fund's action in 0:15:10.040 --> 0:15:12.480 response to what you see in the markets. Right since June, 0:15:12.960 --> 0:15:17.160 we've seen a correction in everything across the stack, memory, computes, 0:15:17.600 --> 0:15:19.280 other parts of the supply chain. 0:15:19.960 --> 0:15:21.120 How do you respond to that? 0:15:22.960 --> 0:15:26.120 So as a long buyased fund, we really look out 0:15:26.160 --> 0:15:28.920 over the next three to five years, and despite these 0:15:29.080 --> 0:15:34.000 very serious and legitimate concerns, we see extraordinary opportunity. We 0:15:34.280 --> 0:15:38.040 still think that we're very early on in AI infrastructure 0:15:38.080 --> 0:15:41.320 build out and more importantly AI uptake, And so far 0:15:41.440 --> 0:15:45.800 this quarter we've seen extraordinary results across many different sectors 0:15:46.080 --> 0:15:49.560 where earnings have come in ahead of expectations directly because 0:15:49.920 --> 0:15:52.480 they're using AI to their advantage, whether it is to 0:15:52.560 --> 0:15:56.160 control costs or advance innovation. And I think that is 0:15:56.320 --> 0:15:59.240 just the start. So what we do is we look 0:15:59.280 --> 0:16:03.440 at where we think that the most innovation will occur 0:16:03.560 --> 0:16:05.760 in the coming years, and we come up on the 0:16:05.800 --> 0:16:09.520 technology side in areas like memory, which have really seen 0:16:09.600 --> 0:16:12.120 a pretty sharp correction in many of those companies. We 0:16:12.200 --> 0:16:14.920 look to add to the companies where we think that 0:16:14.960 --> 0:16:18.040 there are best in class players. We look for optical 0:16:18.080 --> 0:16:22.720 interconnect as a replacement to copper as an extraordinary, extraordinary 0:16:22.760 --> 0:16:25.760 area of opportunity. We look to robotics, we look to 0:16:25.840 --> 0:16:30.280 space exploration. And then there are also incredible innovations right 0:16:30.320 --> 0:16:33.880 now in healthcare where companies are really using technology to 0:16:33.960 --> 0:16:38.840 advance their own discovery. So, for example, in areas like diagnostics, 0:16:38.840 --> 0:16:41.440 we've seen big jumps and we've seen a much more 0:16:41.520 --> 0:16:46.280 favorable regulatory backdrop and reimbursement backdrop for many of those 0:16:46.320 --> 0:16:47.200 companies as well. 0:16:48.800 --> 0:16:51.760 Erica Klod of Science and Technology Partners is great to 0:16:51.800 --> 0:16:54.280 have you back on the program. Thank you for responding 0:16:54.280 --> 0:16:56.520 to what is pretty big story in the markets today. 0:16:56.880 --> 0:16:59.960 Now coming up, Samsung is following in s k Heinig 0:17:00.120 --> 0:17:04.600 his footsteps in returning shareholders' buybacks in what could be 0:17:04.640 --> 0:17:07.600 the largest ever in South Korean history. 0:17:07.840 --> 0:17:09.720 More on that next, this is Bloomberg Tech. 0:17:15.640 --> 0:17:19.399 Software companies are deploying increasingly aggressive strategies to counter a 0:17:19.480 --> 0:17:22.760 crisis of confidence in their outlooks driven by fear that 0:17:22.920 --> 0:17:25.440 AI tools and startups will replace them. 0:17:25.480 --> 0:17:27.280 Some investors, meanwhile, see it is. 0:17:27.200 --> 0:17:30.000 A chance to get the potential survivors of the SaaS 0:17:30.000 --> 0:17:33.080 apocalypse at a discount to the high flying prices of 0:17:33.119 --> 0:17:34.160 the twenty tens. 0:17:34.760 --> 0:17:38.919 And that can be a great opportunity for investors to 0:17:39.040 --> 0:17:42.840 sort among companies that can survive and that maybe might 0:17:42.880 --> 0:17:44.639 not survive, or at least might not survive at the 0:17:44.680 --> 0:17:46.800 value they've been at. And so that's an area that 0:17:46.840 --> 0:17:50.200 I think for the long term investor, is really worth investigating. 0:17:50.320 --> 0:17:53.320 I do think the emphasis is on long term because 0:17:53.320 --> 0:17:56.520 it's hard to imagine that terminal value concerns can be 0:17:56.560 --> 0:17:59.159 alleviated in any one particular earning season. 0:18:00.920 --> 0:18:03.920 Let's discuss the tactics software firms are using with Boombo's 0:18:03.920 --> 0:18:07.680 Brodie Ford, who's published on this this morning, really interesting read. 0:18:08.000 --> 0:18:10.600 Can you just explain the basic tension in the story to. 0:18:10.600 --> 0:18:14.879 Us, software companies have had a pretty terrible year and 0:18:14.920 --> 0:18:17.639 a half. Right investors are convinced they're going to get 0:18:17.640 --> 0:18:22.320 replaced by AI. There's been a massive valuation meltdown, and 0:18:22.400 --> 0:18:26.119 by and large, software companies can't convince the market on 0:18:26.359 --> 0:18:30.480 virtue of their business results that their AI products are 0:18:30.520 --> 0:18:33.879 growing or accelerating revenue, and so they've turned to some 0:18:34.000 --> 0:18:39.240 kind of zany, cosmetic, sometimes aggressive strategies, you know, swapping 0:18:39.280 --> 0:18:43.760 out their leaders, fighting with analysts on earnings calls, renaming 0:18:43.800 --> 0:18:46.320 products to make them sound more like AI. And so 0:18:46.440 --> 0:18:48.560 in this story, we just kind of compile all the 0:18:48.640 --> 0:18:52.160 different novels, zany, whatever you want to call it, strategies 0:18:52.200 --> 0:18:54.760 that they've been trying to use to beat the SaaS apocalypse. 0:18:55.320 --> 0:18:59.000 Okay, so changing business strategy, you're talking up your competence 0:18:59.000 --> 0:19:01.800 in whatever areas different to doing a buy back. Buy 0:19:01.840 --> 0:19:05.000 back is just a very shareholder friendly policy. Yeah, bring 0:19:05.080 --> 0:19:06.680 us to that part of the story. 0:19:07.400 --> 0:19:10.399 Right, Failing all of the strategy we just talked about, 0:19:10.720 --> 0:19:12.480 you do a big buy back and that makes the 0:19:12.520 --> 0:19:16.560 market happy. I think the narliest one we saw was Salesforce, 0:19:16.680 --> 0:19:20.680 which borrowed twenty five billion to buy back twenty five 0:19:20.720 --> 0:19:23.360 billion and it's on stock and now you're paying interest 0:19:23.400 --> 0:19:25.880 for doing a buy back. And I think that one 0:19:26.000 --> 0:19:29.560 raised some eyebrows on Wall Street, but it just shows 0:19:29.600 --> 0:19:32.280 that they're really ready to pull whatever lever they can 0:19:32.440 --> 0:19:34.080 to help boost. 0:19:33.720 --> 0:19:37.320 Morale Bloomberg's brady forward. Thank you very much. 0:19:37.440 --> 0:19:40.439 Indeed, let's take a look at today's big number. Eighty 0:19:40.480 --> 0:19:43.840 billion dollars. That's how much Samsung's planning to return to 0:19:43.920 --> 0:19:47.840 investors this year, joining sk Heinex in sharing some AI 0:19:47.920 --> 0:19:51.080 win for and putting in motion the largest shareholder return 0:19:51.200 --> 0:19:55.160 program in South Korea's history. Bloomberg Executive editor Pieter Elstrom's 0:19:55.160 --> 0:19:57.800 back with us. You know there was reporting on this, 0:19:57.960 --> 0:20:02.120 but Samsung has followed on from sk Heinex's actions earlier. 0:20:01.800 --> 0:20:02.160 In the week. 0:20:04.200 --> 0:20:06.680 Yeah, talk about pulling levers to try to help your 0:20:06.760 --> 0:20:10.080 share price. You're seeing this out of South Korea in spades. 0:20:10.280 --> 0:20:10.480 Yeah. 0:20:10.520 --> 0:20:14.560 So today we got Samsung Electronics talking about returning eighty 0:20:14.600 --> 0:20:18.600 billion dollars in cash to their shareholders. That'll be through 0:20:18.640 --> 0:20:21.760 dividends and through some buybacks. They haven't said exactly how 0:20:21.760 --> 0:20:24.480 they're going to split those numbers, but as you say, 0:20:24.520 --> 0:20:26.840 it's going to be one of the largest buybacks in history, 0:20:27.080 --> 0:20:30.880 the largest ever in South Korea. Comes shortly after sk 0:20:31.000 --> 0:20:33.680 Heinex that it would spend about twenty nine billion dollars 0:20:34.280 --> 0:20:37.760 through November in order to buy back shares. Both of 0:20:37.800 --> 0:20:40.920 these companies are making tremendous amounts of money, and they've 0:20:40.920 --> 0:20:43.800 said that they want to give about fifty percent of 0:20:43.800 --> 0:20:46.399 their free cash flow back to shareholders at this point 0:20:46.600 --> 0:20:48.320 in one form or another, and a lot of that 0:20:48.400 --> 0:20:50.360 is driven by the fact that their shares are down 0:20:50.440 --> 0:20:52.400 quite a bit, so that's interesting. 0:20:52.480 --> 0:20:55.280 In sk Heinex's case, the stock was down fifty percent 0:20:55.320 --> 0:20:57.480 from a June peak, but still up one hundred and 0:20:57.520 --> 0:20:59.760 fifty percent, you'd state, and there was some dilution when 0:20:59.800 --> 0:21:03.919 they to eighty rs. What was Samsung's motivations for why now? 0:21:05.520 --> 0:21:08.320 Samsung's shares are not down quite as much, but they're 0:21:08.359 --> 0:21:10.720 still down a lot. They're down about twenty five percent 0:21:10.800 --> 0:21:14.240 from the peak, and they're making a tremendous amount of cash. 0:21:14.280 --> 0:21:16.000 They're going to make about two hundred and seventy five 0:21:16.040 --> 0:21:20.240 billion dollars an operating profit this year based on analysts estimates, 0:21:20.680 --> 0:21:24.199 huge numbers even for them compared with prior years. And 0:21:24.240 --> 0:21:26.520 they're looking at that share price that's come down quite 0:21:26.560 --> 0:21:28.640