Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Business Week Inside from the reporters and
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Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well,
Speaker 3: this past week felt like NonStop news from the world
Speaker 3: of artificial intelligence. Among the headlines, TSMC posted a thirty
Speaker 3: four percent surge in November sales, reflecting a sustained growth
Speaker 3: from AI demand despite concerns that data center building will slow.
Speaker 3: Reddit launched an AI powered chatbot. Amazon announced it's building
Speaker 3: a MEGAAI supercomputer with Anthropic Apple is working on an
Speaker 3: AI chip with Broadcom, and Donald Trump's appointment of venture
Speaker 3: capitalist David Sachs as the AI cryptos are is seen
Speaker 3: as a big win for big tech.
Speaker 4: Are you done?
Speaker 5: No?
Speaker 4: Oh, You're not done? Okay, keep going please.
Speaker 3: Trump's pick to run the FDC, the Federal Drake Commission,
Speaker 3: Andrew Ferguson, wants to, among other things, promote innovation in
Speaker 3: the AI market.
Speaker 4: You're done now right?
Speaker 5: No?
Speaker 6: Oh?
Speaker 3: Okay, and then there's Alphabet hitting new records in terms
Speaker 3: of a share price due to excitement over major development
Speaker 3: and quantum computing through the use of its Willow quantum ship.
Speaker 4: Okay.
Speaker 3: Yeah, there's an AI angle there.
Speaker 7: Okay.
Speaker 4: The bottom line here a lot of AI related stories
Speaker 4: and happenings. It's like top of mind. It's a huge
Speaker 4: theme of what we talked about this week. It's kind
Speaker 4: of a thread under everything right now. So for the
Speaker 4: next two hours, we highlight some of our recent chats. No,
Speaker 4: not with chat bots. Sometimes we talked about that, Yeah,
Speaker 4: speak for yourself. Conversations in and around AI, though, including
Speaker 4: one with the author of a new book about the
Speaker 4: company at the center of it all, in Vidia, that's
Speaker 4: in our next hour.
Speaker 3: Coming up this hour. Some thoughts also on how AI
Speaker 3: is reshaping the tech sector and which companies stand to game.
Speaker 3: We're going to talk about that with the president of IDC,
Speaker 3: Crawford del Prett.
Speaker 4: Plus, tech giants excited about AI are pouring ever bigger
Speaker 4: sums of money into energy intensive data centers to power it,
Speaker 4: and yet not everyone is so excited. That includes one
Speaker 4: Blackstone funded data center developer that's getting a major resistance
Speaker 4: in one Georgia neighborhood.
Speaker 3: All of that to come. We begin, though, with Cisco Systems.
Speaker 3: It's the biggest maker of computer networking equipment, a bell
Speaker 3: weather for corporate technology spending. Last month when it reported earnings,
Speaker 3: Cisco's CFO saying Cisco is seeing a strong rebound in
Speaker 3: spending by corporations across all sectors and geographies. It's also
Speaker 3: benefiting from spending on the machinery needed to support AI computing.
Speaker 4: In October, Cisco expanded its data center infrastructure portfolio to
Speaker 4: sustain GPU intensive AI workloads with Nvidia Accelerated Computing, with
Speaker 4: the hope it will help Cisco customers accelerate their AI adoption.
Speaker 4: After earning, some analyst raised price targets on Cisco's stock,
Speaker 4: citing AI traction. So there was a lot that we
Speaker 4: wanted to talk about with frankeutsutis, executive vice president and
Speaker 4: chief People, Policy and Purpose Officer at Cisco Systems. We
Speaker 4: kicked it off asking about the impact on business dynamics
Speaker 4: following the US election.
Speaker 7: What I find is that as a company, we have
Speaker 7: worked with all administrations and we build strong partnerships and
Speaker 7: relationships in the broader community with governments, and so actually
Speaker 7: we're meeting with a Trump advisor to just do some
Speaker 7: planning and to understand a little bit of the priorities
Speaker 7: in the next year as well. It's so interesting because
Speaker 7: this year there were sixty elections around the globe, and
Speaker 7: so I think around the world you have people stepping
Speaker 7: into new administrations and we're absolutely doing that and planning
Speaker 7: for that as well.
Speaker 3: What did you could I just ask you to follow?
Speaker 3: What did you feel like we're the priorities you got
Speaker 3: or what can you share with us?
Speaker 7: Yeah, you know, I think right now we're learning, and
Speaker 7: of course we're waiting. I think there probably is some
Speaker 7: planning from a tariff perspective and to understand, okay, what
Speaker 7: does that really look like. I think there's some conversations
Speaker 7: from a tax perspective as well. And then, as you know,
Speaker 7: there are other really important policy issues, whether we're talking
Speaker 7: about security or AI and I think we'll have to
Speaker 7: wait to see where that sits from a priority perspective
Speaker 7: as well.
Speaker 4: When you think about your supply chain and the potential
Speaker 4: for tariffs, what are the conversations that you're having around that,
Speaker 4: How could you be affected?
Speaker 7: Yeah, I think always from a supply chain perspective, and
Speaker 7: this came out of COVID. There's a level of agility
Speaker 7: and planning that is going on now that is like
Speaker 7: ten x what all companies were doing before. And I
Speaker 7: think we've learned that. And on the tariff side, kind
Speaker 7: of understanding what do the numbers look like where and
Speaker 7: what impact does that have from a cost perspective to
Speaker 7: Cisco and potentially to our customers.
Speaker 3: Is it going to cost more?
Speaker 7: Because you could, it could, And I think at this
Speaker 7: moment we just have to wait and see and probably
Speaker 7: not get too excited or nervous one way or another.
Speaker 7: Let's wait and se and then we'll react.
Speaker 4: But is it worth thinking about changing your supply chain
Speaker 4: in the sense of finding different suppliers, moving manufacturing facilities,
Speaker 4: or having suppliers move manufacturing facilities as a result of
Speaker 4: these tariffs.
Speaker 7: You know what I would say, tim, is we have
Speaker 7: been building redundancy even before the worry about tariffs. And
Speaker 7: I think right now you have to be so fluid
Speaker 7: whether you're responding to a disaster that occurs in a
Speaker 7: particular location, whether there are suppliers shortages. I think this
Speaker 7: is the new name of the game. And so I
Speaker 7: would say there's a ton of planning going on against
Speaker 7: a ton of different scenarios.
Speaker 3: I got to ask you only because it's so front
Speaker 3: and center for all of us, and we're looking at
Speaker 3: what happened to the United Healthcare CEO. You are in
Speaker 3: charge of overseeing your people almost you know, more than
Speaker 3: ninety thousand around the globe. I am curious about some
Speaker 3: of the conversations and you know, some of what we've
Speaker 3: had maybe with friends, family are peers here. People are
Speaker 3: frustrated and not justifying anything, but I think people are
Speaker 3: trying to figure out how to be heard. So I'm
Speaker 3: just curious how you guys are thinking about that. Are
Speaker 3: your executives scared?
Speaker 7: I think the first thing that I would say is
Speaker 7: that there was a tremendous amount of shock and sadness
Speaker 7: for Brian and the family, and I think we start there.
Speaker 7: But to your point, the next conversation with our employees
Speaker 7: is always worry about security, and I think those are
Speaker 7: conversations that we've also had a lot of. And then
Speaker 7: the secondary piece. I do think it's important for us
Speaker 7: always to have conversations about those pain points, and I
Speaker 7: think we're always looking at what is going on from
Speaker 7: a broader health perspective, well being, healthcare, and so I
Speaker 7: think the most important thing that we can do is
Speaker 7: drive conversations so that when we talk to companies, we're
Speaker 7: really clear on the priorities and what we're hearing from
Speaker 7: our people.
Speaker 4: When you say talk to the companies, you mean in
Speaker 4: your role as chief people officer correct overseeing benefits at
Speaker 4: the company, getting feedback from employees about their own healthcare.
Speaker 4: I'll give us some examples how you've made changes in
Speaker 4: recent years to plans in that sense and what employees
Speaker 4: have said.
Speaker 7: Yeah, you know, it's so interesting when I go back
Speaker 7: about a decade, I think about the fact that at
Speaker 7: that moment we were realizing our employees have very different
Speaker 7: wants and priorities, and so as an example, that was
Speaker 7: the time where we started realizing, hey, there's a subset
Speaker 7: of our employees that want more benefits around elderly care.
Speaker 7: And we talk a lot about the Sandwich generation, right, Yeah,
Speaker 7: and so it's a real thing. Yeah, you know, our
Speaker 7: belief at Cisco is that you have to be assessing
Speaker 7: your benefits on a regular basis. And the nice thing
Speaker 7: is with some of the breakthroughs around things like can't
Speaker 7: your treatments. It has allowed us to try different benefits
Speaker 7: for our people. One of the things that I think
Speaker 7: Tim was so important to us several years ago was
Speaker 7: just introducing elements like second opinion support for our people.
Speaker 7: When something comes up, when something happens, that's the moment
Speaker 7: that you need support.
Speaker 4: Of course, how has the conversation around corporate and executive
Speaker 4: security changed in the wake of this tragedy. I've read
Speaker 4: reports that you have not you, but corporate security offices.
Speaker 4: Phones are just ringing off the hook, calling private security
Speaker 4: consultants and security officials and the like.
Speaker 7: Yeah, I would say that on a pretty regular basis,
Speaker 7: we're always assessing security for employees around the globe. I
Speaker 7: just think that's a good practice to have. But when
Speaker 7: you have a tragedy happen like what occurred last week,
Speaker 7: I think it does remind people how important it is
Speaker 7: to think about this, to think about those executives that
Speaker 7: are a bit more visible and what needs to be done.
Speaker 3: Of course, I want to ask you about the business environment.
Speaker 3: It was tap you. You guys did report about a
Speaker 3: month ago. We talked about it coming into it. Tell
Speaker 3: us about the business environment. Is there a little bit
Speaker 3: of like wait and see in terms of how the
Speaker 3: policies all play out or how are you guys seeing it.
Speaker 3: I think you gave, you know, an upbeat forecast or
Speaker 3: conservative annual forecast, but an upbeat outlook for the current period.
Speaker 3: So how much visibility do you feel comfortable around?
Speaker 7: Yeah, you know, I think it's really natural that there's
Speaker 7: going to be an element from a policy perspective that
Speaker 7: is wait and see. Okay, But I do think that
Speaker 7: when I look at some of our technologies, when you're
Speaker 7: talking about security as an example, and against the backdrop
Speaker 7: of a very dynamic cybersecurity world, that's something that our
Speaker 7: customers continue to prioritize, and that's something that's going to
Speaker 7: be separate from any change from an administration perspective. I
Speaker 7: also think as it relates to AI, our customers are
Speaker 7: getting more and more prepared. I would say on the
Speaker 7: web scale side, they're in it, they're working. On the
Speaker 7: enterprise side, I think it's probably the prioritization of use
Speaker 7: cases for the future. I don't know if you saw this,
Speaker 7: but we just put out our new AI Readiness Report,
Speaker 7: and what was so interesting was that we did one
Speaker 7: last year and What was consistent across the two years
Speaker 7: was the pressure that companies and IT individuals are feeling
Speaker 7: around AI readiness.
Speaker 3: But where we didn't.
Speaker 7: See any improvement is around having the talent for the
Speaker 7: AI play.
Speaker 3: Which is really fascinating.
Speaker 7: No, and especially because eighty five percent of the participants
Speaker 7: said that they feel pressure to have a plan within
Speaker 7: the next eighteen months, and so it just tells us
Speaker 7: there's a lot of practical work that needs to be done.
Speaker 7: From a Cisco perspective, our focus is on AI infrastructure
Speaker 7: and that's something that will create a lot of demand.
Speaker 7: From a network perspective, just goodness as we move forward.
Speaker 7: But I would say internally, there's a lot of work
Speaker 7: that we're doing with our people, and our hope is
Speaker 7: that we can share this more broadly with our customers
Speaker 7: as well.
Speaker 4: Are you having any issues finding employees right now?
Speaker 7: So I would say there's always a shortage for great talent.
Speaker 6: That's how it feels.
Speaker 7: And so whats the forward or there's certain categories. I
Speaker 7: would say there's certain categories, okay, So I would say absolutely,
Speaker 7: from an AI talent perspective, people are building skills right now,
Speaker 7: and so what's really fascinating is we start with a
Speaker 7: huge funnel of talent, and what we're finding is that
Speaker 7: a small percentage of that funnel has the AI skills
Speaker 7: that we're looking for. What that means on a positive
Speaker 7: side is that companies like Cisco have to build that
Speaker 7: talent internally and it's going to create a lot of
Speaker 7: opportunities for our people.
Speaker 3: Feels like we're companies are going to be very involved
Speaker 3: right and making sure their employees have the skills. Two
Speaker 3: quick things I want to get to. First of all,
Speaker 3: can we tell.
Speaker 5: That you're getting ready to go?
Speaker 1: Sure?
Speaker 3: Okay, what you guys are?
Speaker 5: Sorry?
Speaker 3: Sorry that there you just but your global company and
Speaker 3: you are getting ready to go to Africa. We talked
Speaker 3: a little bit about offline about India. What is going
Speaker 3: on in those markets that you think is really important
Speaker 3: for the Bloomberg audience to know.
Speaker 7: Yeah, I'll start with Africa for just a moment. I
Speaker 7: think what we see there is that the demographics and
Speaker 7: the number of young people embracing technology creates a tremendous opportunity.
Speaker 7: And so from a Cisco perspective, there's a lot of
Speaker 7: work that we're doing around key topics like cyber resilience.
Speaker 7: We did a report several months ago that basically showed
Speaker 7: that the number of cyber attacks on the African continent
Speaker 7: continue to increase and in fact it actually impacted GDP
Speaker 7: by about ten percent. And so you see tremendous opportunities
Speaker 7: around policy around skills. We see a shortage of security
Speaker 7: skills around the world, but on the African continent opportunities
Speaker 7: too in that only ninety percent of cyber professionals on
Speaker 7: the continent or women, and so there's huge opportunities there.
Speaker 7: So a big part of my visit in addition to
Speaker 7: the digital projects, is looking at how we can drive
Speaker 7: digital skilling on the continent. And then I would say
Speaker 7: from an Africa perspective, there's tremendous opportunity and growth and
Speaker 7: it's exciting to see. I think it gives us an
Speaker 7: opportunity from a Cisco perspective to be even bolder within
Speaker 7: the country to really look at the AI opportunity there
Speaker 7: as well. I'll probably be in India early in the
Speaker 7: new year and just kind of planning seconds. Yeah, we
Speaker 7: plan to do a lot more around side.
Speaker 3: There's a lot going on, yes already already around the world.
Speaker 3: I know we ran out of time good luck, good
Speaker 3: luck with your travels. I know we'll be checking in again,
Speaker 3: but so appreciate it as always. Fran Casudas. She's executive
Speaker 3: vice president, chief People, Policy and Purpose Officer at Cisco Systems.
Speaker 3: Joining us right here.
Speaker 2: You're listening to the Bloomberg Business Week Podcast. Catch us
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Speaker 3: This past week, Broadcom shares jumped after the Information reported
Speaker 3: that it's working with Apple on a server chip specially
Speaker 3: designed for AI. We also got earnings from the company.
Speaker 3: Check all of that out online or on the Bloomberg terminal. Meantime,
Speaker 3: Google debut Gemini two point zero, a new version of
Speaker 3: its flagship AI model that's set to be twice as fast.
Speaker 3: Shares of Google's parent Alphabet hit a record this past week,
Speaker 3: fueled in part by that news.
Speaker 4: Earlier this month, HPE reached a record high after reporting
Speaker 4: better than expected quarterly revenue, driven by a sixteen percent
Speaker 4: increase in AI system sales and a thirty two percent
Speaker 4: jump in server sales used to power AI work demand
Speaker 4: for high powered computing to run AI workloads has led
Speaker 4: to a boom for hardware makers, including companies like HPE, Dell,
Speaker 4: and super micro Computer.
Speaker 3: So to help give us an idea which companies stand
Speaker 3: to benefit from all this spending is Crawford del Pratt.
Speaker 3: He is president of the Global market intelligence firm IDC,
Speaker 3: of course short for the International Data Corporation, and he
Speaker 3: caught up with Tim and Bloomberg's Jess meant.
Speaker 6: IDC overall we forecast, wait for it, thirty seven percent
Speaker 6: growth in servers and storage this year in dollars. Okay,
Speaker 6: So what's driving that? It's an architectural shift to AI, right,
Speaker 6: and we are seeing that service providers and then ultimately
Speaker 6: enterprises will need to upgrade their infrastructure to support these
Speaker 6: new what we call AI workloads.
Speaker 8: So especially because when you hear AI, always think of
Speaker 8: maybe companies like an Nvidia, maybe not as sexy as
Speaker 8: a name quite like this, But when it comes to you,
Speaker 8: especially sort of the IT spending side of things with
Speaker 8: HPE as well as some of its other competitors, who
Speaker 8: do you think can really benefit from this? Beyonce, when
Speaker 8: we're talking about other type of chip type semiconductor type stocks.
Speaker 6: Yeah, So when you start looking at what's happening with
Speaker 6: AI is that you have to upgrade your overall infrastructure.
Speaker 6: So that means that companies like HPE are benefiting, companies
Speaker 6: like Dell are benefiting. You're seeing also ultimately you'll see
Speaker 6: the software stack associated with managing your infrastructure. Ultimately your
Speaker 6: applications will benefit. But that's gonna that's going to take
Speaker 6: a longer period of time. But in the near term,
Speaker 6: you know, beyond the Nvidia, you're seeing that the entire
Speaker 6: infrastructure stack needs to get grinded. Now for let's just
Speaker 6: get back to HPE for a second. What's also happening
Speaker 6: at HPE is that a number of years ago they
Speaker 6: went on a diversification strategy. They bought a company called
Speaker 6: Uruba Networks and a Ruben Networks expanded their footprint in
Speaker 6: the enterprise. So last quarter, HPE, you know, had a
Speaker 6: tougher reaction from Wall Street because they saw the gross
Speaker 6: margins dip. They saw them dip again, but that was
Speaker 6: really related to a slow down and a stall in
Speaker 6: the enterprise infrastructure space. In a Ruba networks, what'll we
Speaker 6: call the edge of the network, the wireless and wireless infrastructure,
Speaker 6: and as that infrastructure now is working, it's inventory. HP
Speaker 6: saw a sequential increase in that business, even though it's
Speaker 6: still down twenty percent year over year. Sequentially, that business
Speaker 6: is starting to stabilize and their gross margins will start
Speaker 6: to have started the stabilized as well, although like I said,
Speaker 6: they were down about four hundred BIPs. Now, I think
Speaker 6: going forward, what you're seeing at the company is and
Speaker 6: you're seeing this in other companies as well, like Dell,
Speaker 6: the demand is just sustained for infrastructure and the demand
Speaker 6: for nhp's case, hpe s case, the demand for infrastructure
Speaker 6: around the network will likely increase. And don't forget they
Speaker 6: announced that they have the air intent required Juniper Networks
Speaker 6: that will add their ability to get the service provider
Speaker 6: side of the network and they expect to close that
Speaker 6: deal sometime in early twenty five. So it's a very
Speaker 6: interesting story. Is this company is really reinventing itself and
Speaker 6: is seeing the benefit of that reinvention in their numbers.
Speaker 4: What's it trying to leave behind?
Speaker 6: So what it's trying to leave behind is running on
Speaker 6: that X eighty six Intel treadmill of commoditization, right, I mean,
Speaker 6: so you know, HPE SAP back a number of years
Speaker 6: ago and said, where are the largest profit pools that
Speaker 6: we can prosecute in the enterprise? Networking hit the top
Speaker 6: of the list. That's why they went after Arouba Software.
Speaker 6: That's why they brought out things like es Morale Storage.
Speaker 6: That's why they and by the way, Dell Body MC
Speaker 6: Right in the case of HPE, they brought out Electra,
Speaker 6: which is their new storage platform. Now they're looking at
Speaker 6: at networking and saying, huh, well, there's also this service
Speaker 6: provider networking, this really high capacity, high bandwidth networking. Juniper
Speaker 6: adds that that's so what they're trying to do is
Speaker 6: they're they're basically the gravitational force of commoditization is what
Speaker 6: they're leading. They're trying to leave behind Another stock.
Speaker 8: I wanted to point out that a lot of tension
Speaker 8: is given to is super Micro SMCI. Now, at a
Speaker 8: certain point, it was one of the worst performing stocks
Speaker 8: in the S and P five hundred this year just
Speaker 8: because of those questions surrounding its accounting practices. Though if
Speaker 8: you look here to date, it's recovered some of those
Speaker 8: losses and it's actually help around forty five percent.
Speaker 5: You were talking about.
Speaker 8: Kind of the exposure when it comes to service providers,
Speaker 8: thinking about like Meta Salesforce, Microsoft SMCI doesn't exactly have
Speaker 8: the same kind of broad reach that some of its
Speaker 8: competitors do when it comes to a company like this.
Speaker 8: How do you make of this and its stock performance
Speaker 8: so far?
Speaker 6: Yeah, So when you look at super Micro, it's a
Speaker 6: fascinating company because where an HPE or a Dell or
Speaker 6: Lenovo sells a broad range of products that address the
Speaker 6: needs of many many different kinds of enterprises and also
Speaker 6: service providers, Certainly super Micro has a range of products,
Speaker 6: but really what they do is a significant amount of
Speaker 6: engineering and innovation really for what we call ultra dense
Speaker 6: service provider applications. And so you know you're a hyperscaler,
Speaker 6: so you're a Microsoft, or you're a or you're a Meta,
Speaker 6: or you're a Google. Super Micro is going to do
Speaker 6: that really really tight engineering between the component suppliers as
Speaker 6: well as the actual physical box and bring that box
Speaker 6: out and allow you to have very dense environment. The
Speaker 6: down side of that is that they don't have the
Speaker 6: same distribution channel, They don't have the same reach that
Speaker 6: you would see at a Lenovo we're in a Dell.
Speaker 6: So the concentration of customers is very, very high.
Speaker 4: Oh, it's incredible. You go to this, well, the concentration
Speaker 4: of customers, the concentration of who they're buying from both Okay, yeah, yeah,
Speaker 4: because they see that on both, it's like it's pretty remarkable.
Speaker 4: I mean, they're a huge customer of Nvidia. Yeah, oh absolutely,
Speaker 4: it's like they're one of the top customers there.
Speaker 6: So so think about the AI and actually this this
Speaker 6: is a great metamor think about the AI kind of
Speaker 6: market right now as an upside down triangle. At the
Speaker 6: top of the triangle where the service providers and that's
Speaker 6: where the majority of your demand is coming. Okay, that's
Speaker 6: the animal. It's eating all the Nvidia processors right now.
Speaker 4: So that's the Microsoft's and the Amazon's.
Speaker 6: Hyperscarers, the Microsofts, the Amazons, the salesforces, the de metas,
Speaker 6: and as that triangle comes down, it gets narrow or
Speaker 6: narrow because the enterprise customers haven't really stepped up and
Speaker 6: bought into generative AI in the same way within their
Speaker 6: data center.
Speaker 4: Is that but if they do it, wouldn't they just
Speaker 4: go to a hyperscaler. Well, that's just it rather than
Speaker 4: doing it on prem potentially.
Speaker 6: But what we see is we see a lot of customers.
Speaker 6: I'm not saying this is a customer, but a customer
Speaker 6: like a a JP Morgan or someone like that, but
Speaker 6: significant an investment in custom applications, and those custom applications
Speaker 6: they want to be able to take those data stores
Speaker 6: that they're creating in their custom applications. Those are in
Speaker 6: their own data centers, and they will ultimately want to
Speaker 6: train their own large language models and have their custom
Speaker 6: applications be able to use those large language models to
Speaker 6: be able to get generative AI answers to serve their
Speaker 6: customers and their employees in new ways. That is when
Speaker 6: the bottom of the pyramid starts to get wider, because
Speaker 6: then enterprises start buying into this technology. But we're not
Speaker 6: there yet. Where we are is the top is what's
Speaker 6: consuming the vast majority of these processors. And what's interesting
Speaker 6: about generative AI is that usually with these compute architectures,
Speaker 6: it becomes a law of diminishing returns, where the performance
Speaker 6: starts to tap out no matter how much capacity you
Speaker 6: throw at it. We haven't seen that yet. With gener AI.
Speaker 6: You can keep throwing processing capacity at it and the
Speaker 6: system gets more and more and more capable, and you
Speaker 6: can also get significant speed gains.
Speaker 8: Yeah, one of my favorite functions in the terminal is
Speaker 8: s PLC so you to see the supply chains. I'm
Speaker 8: sure this is what timmy have been looking at the customerlier,
Speaker 8: but just for our radio listeners so that they know
Speaker 8: so you can get engauge there. So super Micro has
Speaker 8: been in the S and P five hundred for less
Speaker 8: than a year. It got added, Yeah, it got added
Speaker 8: to turn the end of the first quarterback in March.
Speaker 8: So I mean, what do you make of kind of
Speaker 8: like what's next here after it's trying to get over
Speaker 8: this hurdle with the accounting issues.
Speaker 6: Yeah again, you know, and I d see you know,
Speaker 6: we we we don't pick stocks, but I but I
Speaker 6: will tell you that from a from a performance standpoint,
Speaker 6: there is such a significant amount of eng hearing and
Speaker 6: so much as a significant amount of demand within that company.
Speaker 6: I believe that in the long term they are going
Speaker 6: to benefit continue to benefit from this AI boom, particularly
Speaker 6: as service providers continue to invest. So you know, take that,
Speaker 6: take that with what you will. But I don't see
Speaker 6: a world where super Micro is not continuing to participate
Speaker 6: in this market.
Speaker 4: Okay, Crawford, I'm going to go off script a little bit, sure,
Speaker 4: because I want to get your take on this. You're
Speaker 4: in Boston, that's where you're absolutely okay. You spend a
Speaker 4: lot of time in the Bay Area. Have you taken
Speaker 4: a Weimo.
Speaker 6: I have not taken a weaimo, but I have crossed
Speaker 6: the street in front of one.
Speaker 4: And it didn't hit you didn't. It didn't hit You're
Speaker 4: That's what I like to see. Yeah, here's why I ask.
Speaker 4: I was out in San Francisco a few weeks ago. Now,
Speaker 4: anyone can take these weaymos. You don't have to be
Speaker 4: on a list anymore. I down the media further, right,
Speaker 4: I don't. I mean it was I was only able
Speaker 4: to go within San Francisco. That's all I needed to do.
Speaker 4: I know they're training them, Yeah, they're they're training them
Speaker 4: to go to the airport. Now you can't get on
Speaker 4: the highway with them. Yet it blew my mind. It
Speaker 4: was incredible. I was a skeptic. I'm totally sold now
Speaker 4: for this one twenty eight minute trip.
Speaker 9: What are the.
Speaker 4: Companies that you cover play in that space? Like, if
Speaker 4: we're working to a world where these are all going
Speaker 4: to be these are going to be all over. How
Speaker 4: do the companies that you cover benefit.
Speaker 6: Boy, there's number there's a number of ways. And it
Speaker 6: also blew my mind. One of my team members sent
Speaker 6: me a video of her in a wamo and the
Speaker 6: thing bananas. It's driving itself. It's driving itself around a
Speaker 6: lot of ways. So companies like so think of a
Speaker 6: driverless vehicle as a little data center, a little smart
Speaker 6: connected node on the network. It has its own network
Speaker 6: inside of it, and it's obviously consuming a lot of
Speaker 6: processing power from the network. But what's different about a
Speaker 6: self driving vehicle is the amount of processing it needs
Speaker 6: to do. We call this compute at the edge of
Speaker 6: the network because it has to decide very very rapidly.
Speaker 6: Is that a human, is that a mailbox? Is that
Speaker 6: a dog? Is that a shadow? And it has to
Speaker 6: be able. It can't compute that at the core of
Speaker 6: the network. It's got a computer at the edge. So
Speaker 6: the kinds of companies that benefit from that is surprise
Speaker 6: in Nvidia, where you know they've been a key partner
Speaker 6: to FSD so full self driving at Tesla for quite
Speaker 6: some time. Also, over time, maybe companies. People don't think
Speaker 6: as much about Samsung, so they are going to be
Speaker 6: making a lot of the semiconductor content as well as
Speaker 6: the LED technology where you see these cars are become
Speaker 6: big curve displays over time.
Speaker 4: I do envision a world where we see auto accidents
Speaker 4: just plummet as a result of technology such as this.
Speaker 4: Am I am I dreaming? Or is that something that
Speaker 4: happens in our lifetime?
Speaker 6: No, I don't think you're dreaming. I think it does
Speaker 6: fall in the category of the old Paul Sappho from
Speaker 6: Stanford Free so don't confuse a clear view with a
Speaker 6: short distance.
Speaker 4: He's a futurist.
Speaker 6: Yeah, he's he's he's a futurist. And I think we
Speaker 6: are going to get there, but I think we're going
Speaker 6: to go through kind of an icky period. And that
Speaker 6: period is where the self driving cars don't make mistakes,
Speaker 6: but the humans do. And I think that's going to
Speaker 6: have really tough situation, a tough impact on things like insurance,
Speaker 6: and it's going to make it, you know, potentially more expensive.
Speaker 6: And that may actually get to a point where people
Speaker 6: start to say, do I want to be the person
Speaker 6: not using self driving because it's costs a lot for
Speaker 6: me to get in this vehicle and use this vehicle,
Speaker 6: because the risk that I may be distracted by doing something,
Speaker 6: looking at a phone, having a bad day, whatever, the
Speaker 6: car never never has that. So I think eventually we
Speaker 6: will get there, but it's going to take us probably
Speaker 6: longer than people think, because roads are complicated, and they're
Speaker 6: complicated all over the world, and all I mean self
Speaker 6: driving in Rome. You know, it gives me, It gives me,
Speaker 6: it gives me, gives me a headache. But I think
Speaker 6: that we are very close to being able to see
Speaker 6: it on highways, being able to see it on UH
Speaker 6: in a lot of US cities and in a lot
Speaker 6: of North American cities, and I think we're probably fat.
Speaker 6: It's probably closer than people think. I think it's you know,
Speaker 6: probably in the next in the next five years, you're
Speaker 6: probably going to start to see more and more modes,
Speaker 6: more and more companies bringing out the kind of technology
Speaker 6: the Tesla can bring out, where you know, you've got
Speaker 6: one hand on the steering wheel, but really, if you
Speaker 6: want to go pretty full sell driving, you can.
Speaker 8: I've actually never been in AWEIMO or.
Speaker 5: Anything like that.
Speaker 4: You're not the only one, are only a few cities
Speaker 4: where they do this. They do it in Austin, they
Speaker 4: do it in Phoenix, there was a story about Miami.
Speaker 4: Of course San Francisco, Yeah, in San Francisco.
Speaker 8: So when you're thinking about legislation coming out of Washington,
Speaker 8: obviously we have a new administration coming in, but kind
Speaker 8: of realistically over the course of years, because this will
Speaker 8: take a while. As you were mentioning, what do you
Speaker 8: think would need to happen, because also you were talking
Speaker 8: about the complications of roads and depending on what type
Speaker 8: of city you're in.
Speaker 6: Yeah, so there's going to be a lot of legislation
Speaker 6: that's going to need to be addressed here, which is
Speaker 6: why I think it's going to take a long time,
Speaker 6: much longer than the five years I mentioned for full
Speaker 6: self driving. But the kind of assist where you know,
Speaker 6: what Tesla has today is really only what Tesla has
Speaker 6: where you have won a little couple fingers on the
Speaker 6: steering wheel and the car is doing the vast majority
Speaker 6: of the driving. That's going to go to multiple manufacturers.
Speaker 4: What I was in, what I was in was full
Speaker 4: self driving. I mean I wasn't even in the Yeah.
Speaker 6: Yeah, So what you were in is going to take
Speaker 6: a lot longer from alegislation standpoint, where we're going to
Speaker 6: have to see again, this is going to get complicated
Speaker 6: because our state's comfortable with it is the federal government
Speaker 6: going across you know, if you want to go across
Speaker 6: state lines, states have to have agreements, and if states
Speaker 6: don't have agreements, then it becomes a federal issue. And
Speaker 6: I think that could take, you know, a lot longer
Speaker 6: than the technology could take it.
Speaker 4: It's also hard from a rules perspective, and I mean
Speaker 4: rules in the sense of like rules of the road.
Speaker 4: For example, I had to drive recently and I was
Speaker 4: driving my car in New York City and there was
Speaker 4: a car double parked in front of me, so I
Speaker 4: couldn't get around it. In order to get around it,
Speaker 4: I had to actually go over a double yellow line.
Speaker 4: There were no cars coming right. But what I did
Speaker 4: was not considered following the rules in the sense of
Speaker 4: like if a computer, like I don't know if a
Speaker 4: computer would actually do that. If I were in a
Speaker 4: self driving car, would I have just sat.
Speaker 6: Would you have just sat there and been frustrated because
Speaker 6: you it's an obvious solution that's not going to harm
Speaker 6: any right, and you know, it's the kind of thing
Speaker 6: you could do potentially. And now those kinds of things,
Speaker 6: you know, can be those kinds of canations can be
Speaker 6: programmed in, but probably not for a long time. I'll
Speaker 6: give you another example. What about the example where people
Speaker 6: start to figure out where the vulnerabilities are in these vehicles.
Speaker 6: So if you want to see that, you know, I'm
Speaker 6: making this up, but if you want to see the
Speaker 6: vehicle behave in maybe a strange way, come up very
Speaker 6: close to the back corner of it, or you know,
Speaker 6: you need to figure out sort of bad actors, not
Speaker 6: necessarily bad actors, but just people that try to figure
Speaker 6: out where the vulnerabilities are so that they can get
Speaker 6: around them faster potentially, or you know, potentially you know,
Speaker 6: try to gain the system in some way when you're
Speaker 6: a driver and you're and you're driving sort of against
Speaker 6: if you will, a full sell driving vehicle.
Speaker 8: Looks like Alphabet's robotaxi service is going to launch in
Speaker 8: Miami in twenty twenty six, So maybe that's more.
Speaker 6: Of the cropping up.
Speaker 4: I'm just waiting for New York.
Speaker 5: That's right.
Speaker 8: How how complicated is that?
Speaker 5: Like will never see that? I mean, you start.
Speaker 6: Getting outo some of those boroughs. You start getting downtown,
Speaker 6: it starts to get a little bit complicated. But I
Speaker 6: would say I don't think New York is meaningfully more complicated.
Speaker 6: San Francisco can be pretty complicated as well.
Speaker 4: Yeah, I'm talking to you a friend who works Intact
Speaker 4: and he was saying, New York's tough because there aren't
Speaker 4: very many legal places to pull over where San Francisco
Speaker 4: there are a lot of driveways that people can pull
Speaker 4: into to get into one of these things. But yeah,
Speaker 4: it could be complicated here. See Crawford, always love it
Speaker 4: when you stop by. Thanks for sticking us.
Speaker 6: For you both. Thanks so much for the time.
Speaker 4: Crawford Del Pratt, President at IDC.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 3: The rise in artificial intelligence is turbo charging demand for
Speaker 3: bigger data centers. This is transforming the land that they're
Speaker 3: being built on and taxing a region's energy grids. In April,
Speaker 3: Goldman Sax estimated that data centers in the United States
Speaker 3: are projected to use eight percent of total power by
Speaker 3: twenty thirty, up from three percent in twenty twenty two.
Speaker 4: These data centers have the capacity to consume it combined
Speaker 4: five hundred and eight tarawatt hours of electricity per year
Speaker 4: if they were to run constantly. Okay, so what does
Speaker 4: that mean. That's greater than the total annual electricity production
Speaker 4: in for Italy or Australia. Needless to say, data centers, well, yeah,
Speaker 4: they're power intensive.
Speaker 3: That's some great context and perspective. Meantime, developers are meeting
Speaker 3: resistance at every turn from locals and property owners over
Speaker 3: how to accommodate the unprecedented power needs in their communities.
Speaker 3: One example is QTS. It's the data center developer that
Speaker 3: asset management giant Blackstone bankrolls. They are building QTS ten
Speaker 3: bunkers over six hundred acres of land in Georgia that'll
Speaker 3: house thousands of computers for companies such as Microsoft.
Speaker 4: The complex is expected to consume as much electricity is
Speaker 4: about a million US households, leaving utility Georgia power rushing
Speaker 4: to build the infrastructure to meet demand. Some of that
Speaker 4: infrastructure falls on the land of homeowners upset with high
Speaker 4: voltage wires on their front lawns. Writing all about it
Speaker 4: is Josh Saul, Bloomberg News Energy and climate disasters reporter
Speaker 4: who joined Katie Griefeld in me.
Speaker 10: What my colleague Dawn and I found was not that
Speaker 10: people were so upset about the data center itself. I mean,
Speaker 10: it's enormous. It's almost as big as Central Park, big
Speaker 10: as Disneyland. But what people are really angry about is
Speaker 10: the power lines necessary to electrify this data center, to
Speaker 10: run all those servers, to run the cooling, to run everything.
Speaker 10: Those are cutting through people's lawns. Basically, people feel like
Speaker 10: cutting through their lives. This is a quiet wooded area.
Speaker 10: People love watching the birds come in and rest on
Speaker 10: the lakes and etc. So people are really upset that
Speaker 10: the power company has to build these lines in order
Speaker 10: to power the data center. And this is something we're
Speaker 10: seeing across the country.
Speaker 1: And this is a simple question, but I assume that's
Speaker 1: a non negotiable that to power the data centers, there
Speaker 1: needs to be these big, ugly things. They can't put
Speaker 1: them underground or something I was going to ask the
Speaker 1: same thing. Okay, good run the same wavelength.
Speaker 10: Without the transmission lines, it's just a big empty Walmart.
Speaker 10: You can't do anything without the power. Putting them underground
Speaker 10: is really expensive. That's basically it turned out to be
Speaker 10: a non starter. Some in the community, including the local church, asked, hey,
Speaker 10: can we bury these but it would raise the costs
Speaker 10: and created some other issues beyond what the power company
Speaker 10: and QTS were willing to deal with.
Speaker 1: I have to imagine it would be disruptive too, if
Speaker 1: you have to, you know, dig it up.
Speaker 4: Yeah, they do it here in New York City. That's
Speaker 4: a lot of the power lines and most neighborhoods are aried. Yeah,
Speaker 4: but yeah, what happens in New York City is not
Speaker 4: necessarily what happens around the country.
Speaker 10: Right, So it's as much power as a million homes
Speaker 10: just for this one one data center.
Speaker 4: That's one data center.
Speaker 10: That's one huge data center. Yeah, one point four gigawatts
Speaker 10: for people watching this area. You want to get start
Speaker 10: to get used to the terms of megawats and gigawats. Okay,
Speaker 10: what's a giga gigawats a thousand megawa? What's a megaway
Speaker 10: megawatt is one megawhy let's let's move on here. Okay,
Speaker 10: a huge amount of power.
Speaker 6: And what that.
Speaker 10: Creates is issues with the local power generation. So you
Speaker 10: know the power company in the state Southern they have
Speaker 10: goals to shut off coal plants, to build fewer gas plants.
Speaker 10: Those are things that you do to get your carbon
Speaker 10: emissions down and hopefully have less climate change. But when
Speaker 10: you have when you keep adding more and more demand
Speaker 10: to the grid, you have to add more supply to
Speaker 10: the grid. And as one utility exec put it to me,
Speaker 10: that's just basic physics.
Speaker 4: Where does Blackstone come in here.
Speaker 10: Blackstone owns the data center developer QTS. They bought them
Speaker 10: a couple of years ago and QTS is now a
Speaker 10: major part of their major part of their portfolio. QTS
Speaker 10: builds data centers across the country. They have a footprint
Speaker 10: fifty billion dollars worth of data centers and they have
Speaker 10: plans for another fifty billion dollars of data centers in
Speaker 10: their pipeline.
Speaker 1: That's really interesting, and I mean, Blackstone isn't alone in this,
Speaker 1: but Blackstone is going particularly big.
Speaker 9: It sounds like that's right.
Speaker 10: Blackstone is a big player in this and along with
Speaker 10: all the big tech firms which are also building their
Speaker 10: own data centers to run their own operations.
Speaker 1: I mean, you think about this fight that's happening in Fayetteville, Georgia.
Speaker 1: It doesn't feel like this is going away, that this
Speaker 1: problem is only going to get bigger. You think about
Speaker 1: how Wall Street in particular is going all in on
Speaker 1: AI playing out in Georgia right now. But I have
Speaker 1: to imagine that something similar is happening across the US exactly.
Speaker 10: It feels like, it feels to me like all of
Speaker 10: our systems are set up to build more and more
Speaker 10: of these things and to power them. You have the
Speaker 10: tech firms that are in this AI race and want
Speaker 10: the data centers because they need that compute power. You
Speaker 10: have private developers like QTS that are incentivized to build
Speaker 10: lots of these things. And then you have power companies
Speaker 10: which their mandate these are regulated utilities, but their mandate
Speaker 10: is to provide power to customers in their area. So
Speaker 10: when a big new power demand shows up, their job
Speaker 10: is to provide power to that and build the power
Speaker 10: lines to it with a threat of eminent domain behind them.
Speaker 10: So it kind of feels like just everything is set
Speaker 10: up to get as many of these onto the ground
Speaker 10: as possible.
Speaker 4: What do we know about what happens when a high
Speaker 4: power line like this goes on someone's property or goes
Speaker 4: through their property, Like, does it change the value of
Speaker 4: a home? Does it make noise constantly? Are you hearing
Speaker 4: buzzing those sorts of things?
Speaker 10: It doesn't make noise. It certainly affects people's appreciation or
Speaker 10: love for their own home. You know, we talked to
Speaker 10: lots of people who are like, you know, I moved
Speaker 10: to I moved to Georgia because I wanted to take
Speaker 10: care of my mom, and we bought this place. It
Speaker 10: was going to be kind of our It felt like
Speaker 10: our little paradise, and now it feels like that paradise
Speaker 10: is crumbling. So people certainly don't like looking at power
Speaker 10: lines and then more in you know, more brass tacks here.
Speaker 10: Appraisers we talked to said that big transmission lines can
Speaker 10: cut the value of a home by ten to thirty percent,
Speaker 10: depending on how big the line is, how close it
Speaker 10: is the house, how expensive the house is, or and
Speaker 10: the rural character is to the home and to the property.
Speaker 10: So to have you know, these are some of these
Speaker 10: are nicer homes. They're in an area with where that
Speaker 10: rural character is important. Some of them could be seeing
Speaker 10: big drops in their value.
Speaker 1: To approach this like an economist, though, I mean you
Speaker 1: have to imagine that more people are going to move
Speaker 1: to some of these towns, that that's going to bring
Speaker 1: in more business, there will be more spending in the
Speaker 1: local economy. I mean, are there any benefits here.
Speaker 10: It's not so much people because these data centers don't
Speaker 10: actually have many employees. You have some construction jobs on
Speaker 10: the front end, but you have sort of the stereotypical
Speaker 10: guy with the silver ponytail when by himself when the
Speaker 10: data center actually opens. But in terms of benefits, big
Speaker 10: tax benefits, a lot of you know, QTS is going
Speaker 10: to pay a lot, you know, different number, you know,
Speaker 10: a huge, huge amount of money over time. Already the
Speaker 10: school local school district has separately received enough money and
Speaker 10: tax benefits to you know, retain seven teachers, half dozen teachers.
Speaker 10: So certainly, I mean it's economic development. That's why these
Speaker 10: local boards of commerce are saying like, please come here,
Speaker 10: and they sort of like actually sought out and wanted
Speaker 10: QTS to come there.
Speaker 4: You've been You've been writing about and reporting on this
Speaker 4: space for quite a while at this point. Every time
Speaker 4: I see like a new big story from you, it
Speaker 4: has to do with AI and data centers. What is
Speaker 4: it about this area that makes it appealing to this
Speaker 4: company QTS? And what are the other areas that that
Speaker 4: people should think about when thinking, Okay, well is my
Speaker 4: community next for one of.
Speaker 10: These Yeah, this area is attractive because they have a
Speaker 10: big stable power company. Georgia Power is owned by Southern
Speaker 10: and that's a you know, a great company for these
Speaker 10: developers to work with. And the developers were able to
Speaker 10: find a plot of land and talk to the power
Speaker 10: company about having having electricity provided. As far as where
Speaker 10: else they're coming, I mean it's almost like where else
Speaker 10: are they not coming? You know, you have Northern Virginia's
Speaker 10: Data Center Alley, massive amounts of data center development there.
Speaker 10: There's also you know, Arizona, but they're really coming up
Speaker 10: in just large parts lots and lots of the US
Speaker 10: and also around the world.
Speaker 4: I would think of like, you know, relatively cheap electricity,
Speaker 4: but that's tough to kind of come by in a
Speaker 4: stable way, right.
Speaker 10: We actually heard more about We actually heard more about
Speaker 10: cheap electricity. When I was writing about bitcoin miners and
Speaker 10: their search for power, the hyperscalers have so much money
Speaker 10: and the race for AI is so big that they
Speaker 10: actually are more concerned about stable and large amounts of power,
Speaker 10: with the price being secondary.
Speaker 4: That's interesting. One thing that I think about with a
Speaker 4: story like this, Josh, is how fast innovation happens, and
Speaker 4: the way that things change so quickly when computers become
Speaker 4: more powerful. And I wonder if they're overbuilding when it
Speaker 4: comes to this stuff, given that they're able to make
Speaker 4: these GPUs more and more powerful with every iteration, like
Speaker 4: do they need data centers that suck this much power
Speaker 4: and that are this big?
Speaker 10: One complaint I hear is that the is not some
Speaker 10: kind of you know, more central or more organized planning,
Speaker 10: you know. So it's not that, you know, data centers
Speaker 10: aren't being built in one specific area for one specific purpose.
Speaker 10: But certainly the tech companies are pretty sure that they
Speaker 10: need a lot of these are building them rapidly for
Speaker 10: that reason.
Speaker 4: It's today's big Take. It's one of the most read
Speaker 4: stories on the Bloomberg terminal. Josh Saul is at Bloomberg
Speaker 4: News Energy and Climate disasters reporter. He wrote the story
Speaker 4: along with Don Lim who covers private equity here at Bloomberg.
Speaker 4: Josh joining us here in the Bloomberg Interactive Brokers Studio.
Speaker 4: Check out Josh's story and more from Bloomberg The Big
Speaker 4: Take on the Bloomberg Terminal, and at Bloomberg dot com
Speaker 4: Slash Big Take.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Applecarplay and then brout Auto with a Bloomberg Business
Speaker 2: act or watch us live on YouTube.
Speaker 3: Plenty Ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, as our focus on artificial intelligence continues,
Speaker 3: including a conversation with the former US Navy fighter pilot
Speaker 3: who built Amazon's global air network. She joins us to
Speaker 3: talk about the new technologies Amazon is rolling out this
Speaker 3: holiday season, also the role of AI, and yes, what
Speaker 3: it was like flying fighter jets.
Speaker 4: First up this hour, we begin with the one struggling
Speaker 4: upstart that's become the three trillion dollar king of AI.
Speaker 4: It's the world's second most valuable company at least currently
Speaker 4: it's like recently been neck and neck with Apple. Apple
Speaker 4: recently pulled ahead. But look in videos right there it
Speaker 4: is they just go back and forth, right, yeah, look
Speaker 4: safe to say no name is more associated with the
Speaker 4: aieuphoria over the last couple of years than video.
Speaker 3: Absolutely, and video shares, by the way, are up about
Speaker 3: nine hundred percent since the start of twenty twenty three.
Speaker 3: It's come a long way from when it was founded
Speaker 3: out of Denny's in Silicon Valley more than thirty years ago.
Speaker 4: Writing about in Video's journey is Take Kim, senior tech
Speaker 4: writer for Barons, a former columnist for Bloomberg Opinion, and
Speaker 4: he's the author of the new book The Nvidia Way,
Speaker 4: Jensen Wang and the Making of a Tech Giant.
Speaker 9: It all started with three D graphics, and then program
Speaker 9: Mobile GPUs, and then Kuda, and now with the tensor
Speaker 9: cores and AI chips and Jensen Huang, who's the co
Speaker 9: founder and CEO, every single major computer shift in computer
Speaker 9: chips and three D graphics, he's learned to position in
Speaker 9: video to take advantage of it. I compare him in
Speaker 9: the book to read Hastings with Netflix. Hastings had this
Speaker 9: intuitive sense as someday we're just going to watch video
Speaker 9: over the Internet, but the technology wasn't ready yet, so
Speaker 9: he started the DVB by rental business and just stayed
Speaker 9: around and invested in the technologies. And when the internet
Speaker 9: infrastructure was broad band got good enough for consumers and
Speaker 9: the video streaming technology was there, he jumped on it
Speaker 9: and was the first mover and dominated that market. Jensen
Speaker 9: and Vidia did that like with three four different markets.
Speaker 9: Like every single time he positions the company, he doesn't
Speaker 9: know exactly when it's going to take off, like maybe
Speaker 9: it's five years from now, maybe seven years from now,
Speaker 9: but he positions a company in this tremendous amount of
Speaker 9: capital and R and D, and this the software ecosystem
Speaker 9: is actually huge competitive advantage that he invested in.
Speaker 4: Well, let's talk about him as a leader, him as
Speaker 4: a visionary. What did you you spend some time with
Speaker 4: him during the writing of this book, you interviewed him
Speaker 4: earlier this year. What would you say it is about
Speaker 4: his personality, his leadership style, the way he conducts himself
Speaker 4: that has created this culture ad in video that has
Speaker 4: allowed it allowed it to not just succeed but dominate.
Speaker 9: I would say there are three pillars, and the n
Speaker 9: video way is basically the Jensen a way, because I
Speaker 9: mean he's there from the beginning and create this.
Speaker 4: Remember there's a Netflix way too.
Speaker 9: Oh well, but this is like, this is Jenson's way.
Speaker 9: I would say three pillars are insane work ethic, talent, cultivation,
Speaker 9: and speed and velocity. So I'll just talk through each
Speaker 9: three work ethic. No one works harder than Jensen. I
Speaker 9: mean he is reading one hundred emails from his employees
Speaker 9: every day. He works all week. Maybe Elon Musk is
Speaker 9: up there. Sorry, sorry, but I'd even argue compared to
Speaker 9: you On, maybe Jensen works more. Like he says he
Speaker 9: can't when he goes to the movie theater, he can't
Speaker 9: remember the movie because he's constantly thinking about work all day.
Speaker 9: He like lives in breezes work and work is relaxing.
Speaker 9: Like he drinks a Highland Parks Scotch Lane at night
Speaker 9: and Sunday and he's going through emails and like peppering
Speaker 9: his employees do this, do that, and that's his life.
Speaker 9: So even at the beginning, like I have these stories
Speaker 9: when I talk to these early employees, like they're working
Speaker 9: past midnight, waking up at four or five in the morning. Yeah,
Speaker 9: and this is a time when Intel was about to
Speaker 9: crush them, and I had this one employee telling me, well,
Speaker 9: Jensen just inspired me to work even harder. So even
Speaker 9: though like I should go back to bed, and I
Speaker 9: really want to go back to bed, I'm going to
Speaker 9: get to work early and work even harder. So work ethic.
Speaker 9: No one, No one's going to be Gensen tumtrt worth.
Speaker 9: He just he's a work ofhol and will outwork anywhere
Speaker 9: in terms of talent cultivation. He knows that the only
Speaker 9: way you win in this in technology is hiring the
Speaker 9: best people. So he's constantly recruiting, you know, he's every
Speaker 9: time he interviews or talks to someone, he goes, who
Speaker 9: have you worked with in the past that were rock stars?
Speaker 9: And he pockets that knowledge and then three years later
Speaker 9: he's like recruiting that person, constantly badgering them and sometimes
Speaker 9: they say no. In the beginning, it's like no, no, no,
Speaker 9: I don't want to leave my cozy company. But he
Speaker 9: usually gets the people and then they stay for twenty
Speaker 9: five thirty years. And the reason is partly in video
Speaker 9: wins and everyone wants to stay on the winning team.
Speaker 9: But second it's just there's this great culture inside video
Speaker 9: that even though there's thirty thousand people. I write a
Speaker 9: lot about this in the book. I think large parts
Speaker 9: of corporate America and technology industry suffer from dysfunction, from
Speaker 9: internal politics where you're spending half your day trying to
Speaker 9: please your boss's instead of doing what's right for the
Speaker 9: customer and for the company itself. And video costs this
Speaker 9: missions the boss. Make sure you're making decisions where you're
Speaker 9: fulfilling the company's mission, not you know, all the Game
Speaker 9: of Thrones type internal in fighting. The other big part
Speaker 9: is when I talk to the video boys that leave
Speaker 9: in video, they can't adjust to the new companies when
Speaker 9: they go to Google, Microsoft, Apple, because because there is
Speaker 9: so much endless meetings, internal paralysis. Like one person says,
Speaker 9: it's like swimming through quicksand and I think they.
Speaker 4: Should just retire and count their money.
Speaker 9: Yeah.
Speaker 3: Yeah, but a lot of it didn't just need to
Speaker 3: talk about we talk about company culture. We work with
Speaker 3: a company that's got a very distinct culture as well.
Speaker 3: And but it makes me think and Video wasn't just oh,
Speaker 3: we were at the right place at the right time.
Speaker 3: It sounds like has been constantly checking where does this
Speaker 3: market go? Because if you think about the timing of
Speaker 3: a like just how it all happened. This wasn't just accidental.
Speaker 3: Oh I got it.
Speaker 9: Right, No, not at all. I mean he was investing
Speaker 9: in Kuda, which is the reason why in Vidia is
Speaker 9: kind of doing really well in AI, the ecosystem Kuda.
Speaker 9: He invested that in two thousand and six, and then
Speaker 9: when deep learning took off in twenty thirteen, Yeah, he
Speaker 9: was like, we need to invest in AI software libraries,
Speaker 9: and we need to go to campuses and expread the
Speaker 9: religion of Kuda.
Speaker 4: Explain what Kuda is.
Speaker 9: Kuda is a programming platform for parallel computing, which is
Speaker 9: what Nvidia GPUs do basically. In videas, they call it
Speaker 9: accelerate computing, but it's basically just parallel computing where each
Speaker 9: GPU has thousands of tiny little processors, and most computer
Speaker 9: PCs run on CPUs which have four to eight processors normally,
Speaker 9: So in Vidia's kind of computing architecture is based on
Speaker 9: this parallel you know, tiny processor mentality, and Jensen from
Speaker 9: the beginning, even in nineteen ninety three, saw this as
Speaker 9: the future of computing, like you're going to break apart
Speaker 9: all the workloads into tiny little processes and they're going
Speaker 9: to work on GPUs and he saw that from the
Speaker 9: beginning that this is the way the world of computing
Speaker 9: is going to go. So when AI took off.
Speaker 3: In the video was sixteen years.
Speaker 9: So that's amazing, Like, how.
Speaker 3: Does you kind of keep going keep going because he.
Speaker 9: Made like I said about Netflix, he knows where the
Speaker 9: future is going to go. Yeah, and he will keep
Speaker 9: in that.
Speaker 6: I mean.
Speaker 9: The amazing thing about Kuda is all these I talked about.
Speaker 9: I have a chapter in the book about Starboard Value,
Speaker 9: which is a very famous activist hed. Yeah, they were
Speaker 9: board members and Video were worried when Starboard took a
Speaker 9: big position that they were going to, you know, clamp
Speaker 9: down on Kuda because Wall Street was all over Jensen
Speaker 9: for investing so much in Kudah. It was taking die
Speaker 9: space on the chip, it was crushing their gross margins
Speaker 9: for years, and he kept doing it because he was
Speaker 9: convicted this would be the future. And you know, luckily
Speaker 9: for Nvidia, Starboard didn't go activists. They they kind of
Speaker 9: pressured Nvidia. They did, and Video did a big stock
Speaker 9: buy back. The stock went up for twenty percent and
Speaker 9: the very peared and star wars like, I'll take that gain.
Speaker 9: Then Jess Smith told me that he was like, hmm,
Speaker 9: I should have never sold in video He met with Jensen.
Speaker 9: He was impressed by Jensen.
Speaker 3: Seriously.
Speaker 9: Yeah, he took the short term gain and you know
Speaker 9: that's history. But yeah, Jensen does that all the time.
Speaker 9: I mean the two key technologies for video game GPUs
Speaker 9: that the reason why gamers spend up to sixteen dollars
Speaker 9: to play video games on computer is DLSS, which is
Speaker 9: this AI upscaling technology, and raytracing, which helps the GPUs
Speaker 9: do do lighting better. Like it's amazing. He invested in
Speaker 9: ray tracing for ten years before it was commercialized, Like
Speaker 9: ten years. Most companies will invest it for two three
Speaker 9: years and then give up. The LSS took six years, right,
Speaker 9: So this is this is a company where he tells
Speaker 9: me like he's paranoid about getting disrupted by small he's
Speaker 9: a student of history and all that stuff where coming
Speaker 9: for him. Yes, every company is coming for him, and
Speaker 9: he knows that they're going to come up from underneath.
Speaker 9: And companies get complacent, and that's the thing. He is
Speaker 9: paranoi about being complacent, so he will he knows that
Speaker 9: if one thing he said, if you don't invest your
Speaker 9: debt in technology, he.
Speaker 4: Knows that that's This is capitalism. This is like the
Speaker 4: way that efficient markets work. If something is incredibly successful,
Speaker 4: you're going to have other players try to enter the market.
Speaker 4: Who's coming after in Vidia? How big of a barrier
Speaker 4: or a moat do they have?
Speaker 9: So most Wall Street analysts investors are worried about the
Speaker 9: big hyperscalers. So the Microsoft Azures, the Google Clouds, Amazon,
Speaker 9: so all of them are making their own versions of aichips.
Speaker 4: Yeah, we had an Amazon story just a couple of
Speaker 4: weeks ago about the effort in Austin, Texas, right that
Speaker 4: they're doing there to try to take on in video.
Speaker 9: And empirically, it makes sense. These are huge companies that
Speaker 9: can invest billions of dollars in R and D. But
Speaker 9: I'm not worried about the hyperscalers at all. The problem
Speaker 9: is why, because Google has amazing technology for TPUs, but
Speaker 9: no one uses it because everyone's afraid of getting locked
Speaker 9: in and the performance is as good. So when I
Speaker 9: talk to startup AI startups, they're like, I'm not going
Speaker 9: to lock myself into Google. I mean, Google has your
Speaker 9: reputation of like building stuff and then giving up and
Speaker 9: moving on. I mean we've seen that time at Google.
Speaker 9: Studia is a great example with the cloud video game streaming,
Speaker 9: and no one wants to get locked into one vendor.
Speaker 9: And with Nvidia you get the best performance. So also
Speaker 9: the most important thing is Nvidia with Kuda has been
Speaker 9: optimized for over fifteen years, so if you ever have
Speaker 9: a problem, you could look up and say, oh, this
Speaker 9: is how to fix it. And they ironed out all
Speaker 9: the bugs. And if you're an AI startup, you have
Speaker 9: one hundred problems. You're working on one. CEO told me,
Speaker 9: I don't want another problem where if you port your
Speaker 9: software to a different AI chip platform you always have problems.
Speaker 9: It's like going from XA six to power PC back
Speaker 9: in the day. So you don't want that problem. And
Speaker 9: then the other their problem is one of the biggest
Speaker 9: competitive vantages is they accelerate product cycles. So back in
Speaker 9: the nineteen nineties, the way they drove all their comparison
Speaker 9: at business was the typical video game chick took eighteen
Speaker 9: months to design and ship, and they're like, forget that,
Speaker 9: We're gonna do every six months. And because they're so
Speaker 9: the work ethic and relentless execution. It drove all the
Speaker 9: comparison at business. So last October it took them two
Speaker 9: years to make a major GPU chip platform, and they're like,
Speaker 9: forget that, We're gonna do that every year. So why
Speaker 9: would you switch to a different platform to save a
Speaker 9: little money on the hardware side when Jensen is gonna
Speaker 9: come out with a better AIGPU platform every twelve months.
Speaker 9: That's thirty times fast. Hard to compete with that, Yeah,
Speaker 9: you can't. And the technical risk is a huge thing
Speaker 9: because if you poort your stuff over it might not work,
Speaker 9: there might be bugs, and you don't want to risk that.
Speaker 9: Like time to market if you're an AI startup right
Speaker 9: now is everything, and the fastest time to market is
Speaker 9: by using video.
Speaker 3: And yet, as you're right, Jensen's always looking ahead, what's next?
Speaker 3: He sounds like he's constantly churning and looking at where,
Speaker 3: whether it's five years from now, ten years from now.
Speaker 3: As you talk about the things that he was investing
Speaker 3: in for a really long time, including these AI chips,
Speaker 3: so where is he looking next?
Speaker 9: So I've listened to hundreds of hours of the speeches
Speaker 9: the last few years. The Internet's an amazing thing. I've
Speaker 9: talked to him directly, and I know the two most
Speaker 9: important things he's most excited about. Number one is digital biology.
Speaker 9: This area is just perfect for the AI computation power
Speaker 9: that's just going going up exponentially, so making drugs exactly.
Speaker 9: It's drug discovery, molecule.
Speaker 3: Similar medicine, stuff like that.
Speaker 9: All that stuff. And I've talked to a drug startup,
Speaker 9: a drug startup. I talked to the head of Bristol
Speaker 9: Meyers squib Digital and they're seeing vast productivity gains by
Speaker 9: using Nvidia AI service systems. And it makes sense. All
Speaker 9: these companies, especially to big companies, have decades of clinical
Speaker 9: data that they could put into these AI GPU systems.
Speaker 9: And the thing that really is really critical that's leading
Speaker 9: to innovation is that you're getting these AIGPU clusters that
Speaker 9: are scaling from sixteen thousand GPUs and now to one
Speaker 9: hundred thousands, and now they're building one million. You know
Speaker 9: that it's just a matter of time. So this vast
Speaker 9: amount of computing power can access and digest all that data,
Speaker 9: figure out all the commutations, and simulate all the biological interactions,
Speaker 9: and you could figure out drugs that could cure disease,
Speaker 9: be very specific.
Speaker 4: It does seem like in Nvidia is inextricably bound to
Speaker 4: Jensen and Jensen too and video. What's the succession plan?
Speaker 9: I cust First of all, he doesn't I him giving
Speaker 9: up in video anytime soon. This is his life, this
Speaker 9: is this is what he enjoys. So I'm complete, one
Speaker 9: hundred percent convicted that he's not planning to lead anytime soon.
Speaker 9: I mean, this is the love of his life, he says,
Speaker 9: I love the video all the time.
Speaker 4: Everybody gets older, everybody gets older.
Speaker 3: But how much of the company is him? Like we
Speaker 3: talk about this when you've got an individual so identified
Speaker 3: with a company that, if God forbid, you know, are
Speaker 3: there individuals I mean, after Tim Cook they were able
Speaker 3: to figure out their way forward after Steve Jobs. I mean,
Speaker 3: I'm just forgiving I'm sorry, sorry Tim after Steve Jobs.
Speaker 9: But you know what I'm saying, Yeah, I mean, I
Speaker 9: think that's the critical question. He talks about how he
Speaker 9: kind of configured and structured in video to be a
Speaker 9: race car that he could steer perfectly. It's like perfectly
Speaker 9: matches his way of managing the company. I think that's
Speaker 9: the big that's a question for every big company right
Speaker 9: like this, this the assessing CEO. Who it is matters.
Speaker 9: I mean, you get a John Scully who almost drove
Speaker 9: people a business, or do you get a Satie Nadella
Speaker 9: who just took Microsoft to new heights. I mean that's
Speaker 9: a question for every company.
Speaker 3: One question we really want to know. Did you get
Speaker 3: to see the closet where all the leather jackets are?
Speaker 6: No?
Speaker 3: Come on, but you know it's such a part of him, right, yes,
Speaker 3: like yeah, no questions or anything came up.
Speaker 9: I did not focus on the leather jackets. I probably
Speaker 9: should have. I did not ask about that.
Speaker 4: But Part two.
Speaker 3: Future column Future columns, great dive, deep dive about a
Speaker 3: company that we talk about I feel like on a
Speaker 3: daily basis and really has kind of changed certainly the
Speaker 3: investment narrative.
Speaker 5: In a big way.
Speaker 4: Take him senior technology writer for Barons, a former columnist
Speaker 4: for Bloomberg Opinion. The new book It is out today,
Speaker 4: The Video Way Jensen Wong and Making of a Tech Giant.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday. He's starting a two PM's You're don Applecar
Speaker 2: Play and Android Auto with the Bloomberg Business Ad. You
Speaker 2: can also listen live on Amazon Alexa from our flagship
Speaker 2: New York station, Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: This year, Amazon unveiled its next generation of fulfillment centers,
Speaker 3: ones that will be powered by AI and will have
Speaker 3: ten times more robotics. The company known for its automated
Speaker 3: warehouses and use of technology, has seven hundred and fifty
Speaker 3: thousand industrial mobile robots in use today.
Speaker 4: It's not just robots. Amazon now using Jenerative AI to
Speaker 4: develop models for demand forecasting, and it's starting to roll
Speaker 4: out their AI powered vision assisted package retrieval to help
Speaker 4: delivery workers.
Speaker 3: Sarah Roose is involved in all of this. She's vice
Speaker 3: president of Global Operations at Amazon and also a former
Speaker 3: US Navy Fighter jet pilot. And yeah, Tim and I
Speaker 3: wanted to start there with her.
Speaker 5: Well, I've been with Amazon approaching fourteen years. Started out
Speaker 5: as an operations manager in Lexington, Kentucky in our fulfillment operations.
Speaker 5: Spent time in Kentucky, Texas, spent three years in the UK,
Speaker 5: which was an amazing experience. We turned to the US
Speaker 5: in twenty seventeen and led a team that built out
Speaker 5: our hair haul network. So we have a fleet of
Speaker 5: Boeing seven sixty seven seven three sevens.
Speaker 3: You really do have your own airlines, well kind of.
Speaker 5: That's something like that, and a lot of them in
Speaker 5: Kentucky around We have our main air hub at the
Speaker 5: Cincinnati Northern Kentucky Airport. They process over thirty flights a day,
Speaker 5: hundreds of thousands of packages daily.
Speaker 4: I didn't hear any stories about fighter jets.
Speaker 9: I'll get you, I'll get you after sure.
Speaker 6: Yeah.
Speaker 5: So spent six years building out the air haul network
Speaker 5: in the US, Europe, and India, and then a year
Speaker 5: and a half ago I took on the leadership of
Speaker 5: our global workplace Health and Safety team. So we have
Speaker 5: a workforce today of over in laian employees globally across
Speaker 5: six continents. Prior to Amazon, yes, I was a Navy
Speaker 5: F eighteen Super Hornet fighter pilot. So if you've seen
Speaker 5: the movie Top Gun, Maverick the jet and the main
Speaker 5: part of that movie, that's that's what I had the
Speaker 5: privilege of flying. Definitely a childhood dream.
Speaker 4: Do you still fly now?
Speaker 5: Not currently. I do have a commercial pilot's license, but
Speaker 5: Amazon can seemed busy on a day to day basis.
Speaker 4: What do you find a lot of your colleagues from
Speaker 4: the Armed services are doing now who were pilots.
Speaker 5: Then, Many fly for the airlines, Many went into business.
Speaker 5: I have several fellow aviators that are in business now
Speaker 5: as well, and many have joined companies like Amazon. In fact,
Speaker 5: Amazon's very veteran friendly. We've hired over forty thousand veterans
Speaker 5: over the last several years. So it tracks people that
Speaker 5: are accustomed to working with large teams of people and
Speaker 5: familiar with operational type of environments.
Speaker 3: Well, I was going to ask you, Sarah, like, what
Speaker 3: about that experience that you just has, I don't know,
Speaker 3: helped you tremendously in the job that you do at Amazon,
Speaker 3: And you've done multiple jobs and made your way through,
Speaker 3: So give us an idea of like how that carried over.
Speaker 5: Yeah, I actually get that question quite a bit, And
Speaker 5: I know it's great because it is something that people
Speaker 5: are curious about because it doesn't necessarily seem like a
Speaker 5: common path.
Speaker 3: But I think about that Fighter jet like, yes, this coordination,
Speaker 3: but a lot is what you do on your own right.
Speaker 5: It is a lot of decision making, for sure, but
Speaker 5: it also takes a team.
Speaker 9: You know.
Speaker 5: Jet pilot is merely an extension of the team that
Speaker 5: helps ensure that jet is up and ready to go,
Speaker 5: the folks on the flight deck of an aircraft carrier,
Speaker 5: the folks that ensure that aircraft carrier runs safely.
Speaker 4: You know.
Speaker 5: So it is definitely a team effort, and so taking
Speaker 5: a lot of that teamwork in that team environment into
Speaker 5: the operational workspace is one thing.
Speaker 10: You know.
Speaker 5: I think decision making a bias for action, being proactive
Speaker 5: about things, looking ahead. These are some of the traits
Speaker 5: I think that translate pretty well. And yeah, I think
Speaker 5: that it's a combination of thinking big and also diving deep.
Speaker 5: Over any given day, we are going to move on.
Speaker 3: I promise, Yeah, it's okay.
Speaker 4: We have plenty of times.
Speaker 3: Well, we just your backgrounds are like pretty fascinating tense
Speaker 3: moments that you.
Speaker 5: Had flying, yes, landing on a moving ship at night
Speaker 5: in bad weather, and you know, landing at one hundred
Speaker 5: and thirty five knots and going to zero in less
Speaker 5: than two seconds. And you know, we call it trapping
Speaker 5: aboard an aircraft carrier. That that's just a lot thought, right, yes, yes,
Speaker 5: a carrier, yes, And so it takes a lot of
Speaker 5: training and concentration and precision to do that. Well and
Speaker 5: do that safely, so SOPs to you.
Speaker 3: They're probably like, yeah, I got this.
Speaker 5: Well it does help to put things into context.
Speaker 3: Yeah, exactly.
Speaker 4: All right, a little more on flying.
Speaker 3: I don't know, no, I don't know, no, no, no, sorry,
Speaker 3: were I can talk about flying all day?
Speaker 9: So good?
Speaker 4: Yeah, but you know it is. But it is actually
Speaker 4: interesting though, what what you've done at Amazon in terms
Speaker 4: of building out that logistics network. It like used to
Speaker 4: be a unique thing to sort of, you know, get
Speaker 4: to an airport and see a prime air yeahane, But
Speaker 4: what a little over a decade ago the team over
Speaker 4: at Amazon started building out its own fleet. I think
Speaker 4: you worked with Atlas Air Is that right?
Speaker 5: That was one of our carriers.
Speaker 4: Yes, And now what's the relationship now is it? Does
Speaker 4: Amazon own its own planes? Does it contract out its planes?
Speaker 4: How does that work?
Speaker 5: Well, we have a combination of we own some aircraft
Speaker 5: and we lease out other aircraft that they're all operated
Speaker 5: on our behalf by air carriers. So the pilots aren't
Speaker 5: actually Amazon employees, but they fly our branded aircraft. But
Speaker 5: going back to your point about seeing a primary aircraft
Speaker 5: is kind of a unique thing. I think back to
Speaker 5: when I joined Amazon. At twenty eleven, our operations basically
Speaker 5: ended at the dock door of our fulfillment centers, and
Speaker 5: so over time, especially in twenty thirteen, we recognized in
Speaker 5: order to keep up with our own growth, we really
Speaker 5: had to start build building out our mile last mile
Speaker 5: transportation network. So it wasn't long after twenty thirteen that
Speaker 5: you started seeing branded trailers out on our interstates. You
Speaker 5: started seeing branded final mile delivery vehicles out on our roads.
Speaker 5: We built out sorts centers, delivery stations, and you started
Speaker 5: seeing branded aircraft out there at various airports throughout the country,
Speaker 5: including JFK here as well, not too far from US.
Speaker 3: So does that just continue in terms of the build out, Like,
Speaker 3: I'm curious, what's the next iteration or next stage of that.
Speaker 5: Well, we worked to also make for an efficient operation
Speaker 5: as well. So I think about something that we as
Speaker 5: a network have done differently this year as we had
Speaker 5: versus years past, to regionalize our network. And I'm talking holistically,
Speaker 5: not specific to air but if I think about if
Speaker 5: customers here in New York City and places in order,
Speaker 5: over seventy six percent of customer orders are fulfilled within region,
Speaker 5: which means within a couple hundred miles of each other.
Speaker 5: And what that allows for is it means fewer touches,
Speaker 5: which means less on transportation costs. We work to keep
Speaker 5: those prizes low for our customers. And how we've done
Speaker 5: that is basically, we're just more sophisticated with the placement
Speaker 5: of our most common and most popular products. So we're
Speaker 5: a bit smarter in how we place that that product.
Speaker 4: Right Like, if I'm ordering diapers on Amazon, which I
Speaker 4: do all the time, it turns out that they're being
Speaker 4: shipped oftentimes from Staten Island rather than from a few
Speaker 4: years ago, they would actually be showed.
Speaker 5: They could have been Kentucky, they could have been sent
Speaker 5: from anywhere Pennsylvania. We're working hard to make sure that
Speaker 5: we're getting them closer to our customers.
Speaker 3: So building out that kind of localized distribution network makes
Speaker 3: complete sense in terms of time, I'm assuming money saved
Speaker 3: and access, right Like, it just makes sense.
Speaker 5: Yes, Like the shorter transportation distances, so that reduces the
Speaker 5: cost or reduces the number of touches that need to
Speaker 5: be placed on the package to process. And of course
Speaker 5: we still have some unique items, so not every item
Speaker 5: is located near every customer. So that's why we still
Speaker 5: have an air air network to ensure that two day delivery,
Speaker 5: especially if there's something very unique, maybe located in California,
Speaker 5: and we want to get it to you within two
Speaker 5: days here in New York.
Speaker 3: I know we've ten, we're gonna have another chunk of time.
Speaker 3: Are people opening up and saying, yeah, I'm okay with
Speaker 3: a two day delivery. It's not like I have to
Speaker 3: have it this afternoon anymore. Are you seeing increasingly people
Speaker 3: do that? Like I know in my household, we now
Speaker 3: are maybe starting a bucket and maybe letting the week
Speaker 3: go or even a couple of weeks before we kind
Speaker 3: of hit the buy button and so on and so forth.
Speaker 3: It's not like everybody's like, I gotta have this now.
Speaker 3: Everybody ten multiple.
Speaker 4: Order unless unless which happens, which.
Speaker 3: You gotta do. Are you running around the corner and
Speaker 3: pick them by? But are you thirty seconds and then
Speaker 3: we'll come back and talk more. Are you increasingly seeing
Speaker 3: people comfortable like waiting?
Speaker 5: It is such a personal preference, And that's why when
Speaker 5: a customer checks out, they have multiple options. You've probably
Speaker 5: noticed that one. Yeah, so if you would like it
Speaker 5: next day and that's an option, get it next day.
Speaker 5: Sometimes you'll see order within the next two hours and
Speaker 5: you'll get up by four pm this afternoon. Sometimes it
Speaker 5: might be a two day delivery, or for folks that
Speaker 5: do want to consolidate their orders, they can specify the
Speaker 5: day delivery and we work to consolidate into one shipment.
Speaker 4: I want to talk a little bit about the next
Speaker 4: stage of innovation and how you're thinking about delivery, because
Speaker 4: you talked about just this incredible build up that's happened
Speaker 4: over the past twenty years at Amazon. When it comes
Speaker 4: to aviation, when it comes to last mile, when it
Speaker 4: comes to your own brand. I mean, we see we
Speaker 4: have Rivians all over our neighborhoods delivering Amazon packages in
Speaker 4: addition to the Dodge rams. But it seems like more Rivians. Now,
Speaker 4: what's the next area of innovation? What makes it more efficient?
Speaker 5: Oh? Well, actually, speaking of Rivian, we just announced last
Speaker 5: week we have over twenty thousand electric Ribvian vehicles on
Speaker 5: the road. So when we think about sustainability and the
Speaker 5: efforts that we're leaning into there, we're continued to invest
Speaker 5: and lean in on the electric vehicle technology. So if
Speaker 5: I think about innovation to answer your question specifically, I
Speaker 5: think about the innovation that we're doing on behalf of
Speaker 5: our customers and to also help our customers with their
Speaker 5: shopping experience. So we have a new AI power tool
Speaker 5: called Rufus on our storefront and so people can use
Speaker 5: it to maybe get more information about a certain product,
Speaker 5: or maybe they need some help with some sizing, or
Speaker 5: maybe like me, I need some gift ideas for my nephew.
Speaker 5: Whatever the case may be, they can use that tool
Speaker 5: to help them out. And so that's really exciting to
Speaker 5: lean into that and there's more to come in that space.
Speaker 5: And we're also leaning in on AI within our operations
Speaker 5: as well. So we have a tool, for example, that
Speaker 5: our employees can use called Dragonfly, and from the palm
Speaker 5: of our employees' hands, they can enter any kind of
Speaker 5: safety suggestion, operational suggestion and it goes directly to their
Speaker 5: manager for action. And that's just one of many tools
Speaker 5: in the toolkit that our employees can use.
Speaker 3: Are they using it?
Speaker 7: Oh?
Speaker 5: Yes, And it's awesome and the amount of feedback that
Speaker 5: we get and the ideas that are generated. And the
Speaker 5: really cool thing is one suggestion from an employee may
Speaker 5: not just be for that particular site, but it could
Speaker 5: impact operations across the network. So we're seeing some really
Speaker 5: great ideas coming from our frontline workforce, which is which
Speaker 5: is awesome, and it's a great tool that is one
Speaker 5: of many, Like I mentioned the toolkit for us to
Speaker 5: maintain that direct dialogue with our teams.
Speaker 3: Where else do you think of AI? Like, I do
Speaker 3: feel like we're scratching the surface and just beginning to
Speaker 3: play around with it, either on a corporate or personal level. Right,
Speaker 3: But it's it's just I think we're all trying to
Speaker 3: figure out how do you think about? Okay, this is
Speaker 3: how AI is going to change. I mean, you guys
Speaker 3: are such a massive world globally, Like, how do you
Speaker 3: think about all?
Speaker 5: Right?
Speaker 3: I see AI doing this for us at Amazon someday.
Speaker 5: Well, we have a bit of a glimpse into the
Speaker 5: future of AI automation and robotics with the site that
Speaker 5: we just launched in Streepoint Shreeport, Louisiana. We call it
Speaker 5: Shive one for short, and I was just down there
Speaker 5: a couple of weeks ago, and it is the most
Speaker 5: automated site we have anywhere in the world. We've incorporated
Speaker 5: robotics AI automation. We as Amazon have been using AI
Speaker 5: and machine learning for several years actually, but it's now
Speaker 5: really kind of coming all together. And so when I
Speaker 5: think about the site in shreport that we launched, we
Speaker 5: now have autonomous robotic drives that move carts full of
Speaker 5: packages from one point to another.
Speaker 4: How's that different from a Kiva robot, like, because you
Speaker 4: guys have been doing those.
Speaker 5: Yeah, the Kiva robots, the traditional robotic drives that we use,
Speaker 5: they run off of basically a grid. So think of
Speaker 5: they are basically are guided by technology that uses what's
Speaker 5: called fiducials. So think of it like a two D
Speaker 5: barcode on the floor and it's going from one point
Speaker 5: to another. Whereas Proteus is automous, it doesn't rely on
Speaker 5: a grid. It knows it needs to go from one
Speaker 5: station all the way to a doctor without any type
Speaker 5: of grid. But there's a lot of safety features involved,
Speaker 5: so it goes yes. So when it senses a person,
Speaker 5: it'll make some noise. It has a looks like a
Speaker 5: smiley face, and so it can looks like it can
Speaker 5: kind of see the person and it smiles and helps
Speaker 5: ensure that you know, it stops and yields to people,
Speaker 5: and we actually use similar technology on our traditional robotics
Speaker 5: floors are texts that help to maintain the robotic drives.
Speaker 5: They actually have a vest that they put on when
Speaker 5: they go out onto the robotic floor and it stops
Speaker 5: all robotic drives within six feet. So it's pretty cool
Speaker 5: watching that because it looks like the person has a
Speaker 5: superpower stopping those robots, which is which is a huge
Speaker 5: safety a great safety feature that is definitely you know,
Speaker 5: necessary to help ensure that we're keeping that area safe.
Speaker 4: What about when it comes to robotics and automation in
Speaker 4: the picking process, where you still have people actually you know,
Speaker 4: going and fulfilling those orders putting them in boxes.
Speaker 5: Right, So we've incorporated robotic arms into some of our
Speaker 5: processes as well. So if we think of some of
Speaker 5: the repetitive motion or working to engineer that out, because
Speaker 5: the repetitive motion can lead to ergonomic injuries, which is
Speaker 5: one of it is the most common injury type across
Speaker 5: the industry, So not just at Amazon, but think of
Speaker 5: warehousing and logistics in general. So if we can engineer
Speaker 5: that out, we're doing that. However, the site and shreetport,
Speaker 5: we still employed twenty five hundred employees, but thirty percent
Speaker 5: of those jobs are more technical than the jobs that
Speaker 5: we've had traditionally, Meaning what so to think of You know,
Speaker 5: we need folks to maintain our robotics and automation, so
Speaker 5: it takes some technical certifications in order to do that,
Speaker 5: and our teams can gain those certifications through a program
Speaker 5: called Career Choice at Amazon and so at no cost
Speaker 5: our employees. So it's a it's a great benefit that's available.
Speaker 3: The question that has to be asked when if we're
Speaker 3: talking about AI and robotics kind of merging together. We
Speaker 3: were out on the West Coast at an investment event
Speaker 3: and I was involved in a panel that was about AI,
Speaker 3: and the question that everybody says was a, I going
Speaker 3: to take my job, So help me understand. There's got
Speaker 3: to be efficiencies when you're dealing with robotics and so
Speaker 3: on and so forth. But what is the thinking about
Speaker 3: will it take some jobs? Will it create some jobs?
Speaker 3: Give us your insight on that.
Speaker 5: We call it a collaborative environment, and there's a balance
Speaker 5: for sure. But again, when I go back to when
Speaker 5: I started in twenty eleven, we didn't have robotic drives,
Speaker 5: or robots in general across our network, and we had
Speaker 5: fifty thousand employees total across the globe. Fast forward to
Speaker 5: twenty twenty four and we have over a million employees
Speaker 5: across the globe, and we've incorporated robotics in our sites
Speaker 5: across the US and in other countries including Europe. I
Speaker 5: was just in Japan a few weeks ago. We used
Speaker 5: robotics in Japan were I look at this holiday season,
Speaker 5: we're hiring two hundred and fifty thousand employees.
Speaker 3: So we have said the same as last year.
Speaker 5: It's on park with what we hire to as we
Speaker 5: go into the holiday season, and we continue that throughout
Speaker 5: the year, and so there are plenty of jobs available
Speaker 5: to include more technical jobs for folks that are interested
Speaker 5: in that more technical part of the work experience.
Speaker 4: Do you think given technological upgrades that we've seen in
Speaker 4: recent years, we've sort of peaked when it comes to
Speaker 4: humans in fulfillment center jobs. Like you know, if we
Speaker 4: think about it from an efficiency perspective, you don't need
Speaker 4: as many people now, and even next year you'll need
Speaker 4: fewer and fewer people. Not that they's taking their jobs
Speaker 4: by any means, but efficiency.
Speaker 5: When I think of efficiencies. I actually think more of
Speaker 5: our logistics network as a whole. So we talked earlier
Speaker 5: about regionalization. That's really where we're seeing the efficiencies of
Speaker 5: removing additional touches. That doesn't mean removing people, it just
Speaker 5: removes some of the inefficiencies that we have in our network.
Speaker 5: And we're continued to still grow. We're launching buildings new
Speaker 5: operations just about every month, multiple per month in some cases.
Speaker 5: In fact, this year, we just launched our first Amazon
Speaker 5: operation in Hawaii and it complements the air operation that
Speaker 5: we have there as well, So we have an Amazon
Speaker 5: delivery station outside of Honolu, which is pretty exciting.
Speaker 4: Any update on drones, It's been more than ten years
Speaker 4: since Jeff Bezos was on sixty Minutes Sunday after Thanksgiving
Speaker 4: Monday before Cyber Monday. I remember covering that it was
Speaker 4: great marketing, by the way, but still I haven't never
Speaker 4: had anything delivered with a drone.
Speaker 5: Yeah, we're continuing to invest in that program, and I
Speaker 5: am excited to say that we are actually operating drones
Speaker 5: for customer fulfillment outside of Phoenix, Tallis in Arizona.
Speaker 4: To be is it scalable?
Speaker 5: I think over time, it will be you know, there's
Speaker 5: obviously a lot of regulations.
Speaker 3: So TAM's going to get his diapers in Brooklyn High
Speaker 3: a drone from Amazon.
Speaker 5: It may take some time, but I'm optimistic.
Speaker 4: Actually, gone are my daughter's diapers?
Speaker 5: You were going to go there?
Speaker 4: I take it back.
Speaker 3: I take it back at your daughter's diapers now, But
Speaker 3: I do wonder, like Ken, is it scalable in a
Speaker 3: city that's so dense.
Speaker 5: Yeah, we're continuing to iterate on the drone design itself.
Speaker 5: It's all design in house. We're working with the regulators,
Speaker 5: of course, because drone delivery in general is a relatively
Speaker 5: new space and so there's been a lot of innovation,
Speaker 5: invention and iteration over the last several years. But it's
Speaker 5: exciting and I'm excited about it.
Speaker 4: Okay, Cyber Monday, we promised, we promised. How are things
Speaker 4: looking so far?
Speaker 5: They're they're looking strong. We had a record breaking Black Friday.
Speaker 5: Of course, Cyber Monday isn't over yet. In fact, deals
Speaker 5: are still dropping. But I was just at a fulfillment
Speaker 5: center in New Jersey this morning and despite the amount
Speaker 5: of volume, they're processing hundreds of thousands packages at one site.
Speaker 5: It's very calm, home organized. We spend the entire year
Speaker 5: preparing for this this season, and it's people. It's really
Speaker 5: fun for the teams as well. I personally have experienced
Speaker 5: our holiday season in fulfillment centers. So it's been a
Speaker 5: great day and overall a great weekend for the for
Speaker 5: the teams and more so for our customs.
Speaker 3: When is it the most stressfulst two weeks before one
Speaker 3: week before Christmas? When does it just get? Like when
Speaker 3: I get those start getting all those emails, like if
Speaker 3: you want to buy by now or you want to
Speaker 3: buy now, Like, when does it get Is it the
Speaker 3: toughest point for you?
Speaker 5: I want to I want to equate it with stressful,
Speaker 5: because it's always a controlled operation, in the safe operation.
Speaker 5: I think it's really more so if if folks are
Speaker 5: like me who have a tendency to procrastinate to the
Speaker 5: last minute, it's just hard to purchase maybe those those
Speaker 5: last minute gifts. You know, there does come a point
Speaker 5: where there's a cutoff period for the Christmas delivery, So
Speaker 5: it's really just keeping an eye on those those cut
Speaker 5: off periods.
Speaker 3: I got to ask you, Sarah, I think Tim and
Speaker 3: I both think about this. You because your VP of
Speaker 3: Level Operations and you've talked about kind of just everything
Speaker 3: around the world, how would you describe the global economy
Speaker 3: right now?
Speaker 5: Well, what I what I can speak to and what
Speaker 5: I can say is what we are seeing in terms
Speaker 5: of trends is that our customers, and I would use
Speaker 5: that broadly, are looking to save money, they're looking for
Speaker 5: a bast selection, and they're looking for fast deliveries. And
Speaker 5: so we see that across the US, across the globe,
Speaker 5: and because we focus on our customer, that's what we
Speaker 5: continue to do ensure that the best experience for our
Speaker 5: Amazon customers.
Speaker 4: Do you also handle grocery delivery and whole foods and stuff?
Speaker 5: There's grocery whole food. It's separate, but we have visibility.
Speaker 4: On it because that's a completely different animal.
Speaker 5: It is, and that's growing space for sure.
Speaker 4: Interesting. Yeah, very cool.
Speaker 3: It's your favorite plane to fly in nowadays? Is it
Speaker 3: just like.
Speaker 5: A Well, I'll always buias to the S eighteen super Hornet,
Speaker 5: So if I have the chance to fly out again,
Speaker 5: that would be great. But you know, in general, the
Speaker 5: thing about aviation is first and foremost is safety. And
Speaker 5: I think that's one thing that one of many things
Speaker 5: that the aviation industry does in general is do safety
Speaker 5: really well. And we've taken a lot of those practices
Speaker 5: from aviation and applied them to safety at Amazon, which
Speaker 5: have proven over the last especially the last year and
Speaker 5: a half to be very succesful.
Speaker 3: Think about right the standards you have to have for
Speaker 3: flying people.
Speaker 5: Absolutely around the world.
Speaker 3: Absolutely, Sarahoz, thank you so much.
Speaker 5: Thank you for having her.
Speaker 3: What a pleasure, VPA of Global Operations at Amazon, joining
Speaker 3: us right here in our interactive brokers studio.
Speaker 5: This is Business Week.
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