Markets Brace for Microsoft and Meta Earnings の全文書き起こし

I'm just talking a little bit more about that, Jake, the change in how the market works, but also why it's not a big posative signal right now. 00:03:01 Speaker 4: Yeah, So typically in the past, what we've seen is customers signing monthly but typically more like quarterly contracts. And a lot of that was because the demand was mostly coming from smartphones, PCs, consumer devices and increasingly over the last several years, cloud and now more AI demand. And so because AI demand is really it's growing at a pace that's really unprecedented. And a lot of this is just because memory is far more sorry, AI is far more memory intensive relative to other applications that we've seen in the past, and so because of this, as you're building out these massive data centers, and there's so many of them. Just the customers need assurances that they can get the supply because there's been an under investment in the past in terms of memory capacity. So now that's start. There's kind of a you know, a give and take in terms of supply and demand. The memory makers need to add more capacity, but they can't add it fast enough to meet the demand. 00:04:00 Speaker 3: Jake Silverman of Bloomberg Intelligence covering memory, thank you very much. The AI sell off is taking a toll on Kyosha. The Japanese memory maker, has received its first analyst price target cut in nearly a year, with Philip Securities slashing its target by roughly forty percent. The firm sided lower valuations across memory chip peers, but maintained its by rating, saying Kyosha's long term growth story remains intact as demand for AI storage and nan flash memory continues to build. The money keeps pouring into China's AI race. Moonshot Ai has raised three point five billion dollars at a thirty five billion dollar valuation, according to sources, far surpassing its original fundraising target. After the breakout success of its Kimmi K three model they're not stopping there. The most Bailey Lipschaltz on the IPO and Capital markets beat. We've been reporting about this for some time now, but it's confusing because Moonshot is basically doing this round seems like it's done, and then doing a quick follow on give us all the details we need. 00:05:03 Speaker 5: And it's crazy how fast some of these deals are coming together. So, as you mentioned, three and a half billion out a thirty five billion dollar valuation above what Moonshot was targeting, but it has been out to investors looking to raise another private round at about a fifty billion dollar valuation, So you're already talking going from thirty five to fifty billion pre money, and that's all ahead of an IPO in Hong Kong as soon as the end of this year. So you're looking at a company that was worth closer to ten eleven billion dollars end of last year, earlier this year and targeting again fifty billion dollars pre money in a private round followed by an IPO as soon as the end of this year. The momentum very much alive and well. 00:05:40 Speaker

3: On the other side of the world, we've covered in great detail the release of Kimmy K three the repercussions of that open weight model on markets. You're the IPO guy, you're my IPO guy, and I think, what's really interesting here? This seems very close proximity. So you have the thirty five billion dollar valuation, round fifty billion dollar valuation, and you just told us an IPO wasting the wings? Does that how it normally works in any jurisdiction? Top those things so close together? 00:06:08 Speaker 5: Not normally, And normally we would look at a market that you kind of stagger out these fundraises and they'd be formal and you'd say a Series A through C or D and then go public. But we are not a normal market environment when you look at how closely tied these deals are. The big question comes back to what is moonshot targeting. What are these companies who are raising money actually targeting? What are their capital needs? Are they raising three and a half billion dollars now to maybe make a bit of a sweetheart deal and try to kind of bridge to the next round, or is the question really scaling valuation, bringing in the right investors privately who then can make off pretty darn well. And an IPO later on this year We've seen how quickly some of these IPO windows can open and shut. So the big question coming back to Moonshot or even when we talk here in the US about ananthropic, is there going to be steady investor demand through the end of this year and into next year. What are those valuation expectations look like? And really, at the end of the day, what are the numbers look like? Because these are companies that have high water marks in the private market and they need to deliver in the public markets. 00:07:12 Speaker 3: Bloomberg's baby lipshaltz on one of the most read stories in the private markets, precursors to something in the public markets. 00:07:18 Speaker 2: Maybe thank you very much. 00:07:20 Speaker 3: Coming up, before the hugging Face attack and hack open AI's models access to customer account on a different cloud platform. 00:07:29 Speaker 2: We have the details next. This is Bloomberg Tech. 00:07:39 Speaker 3: The open ai models that hacked the startup hugging Face earlier this month also gained access to a customer account on the cloud platform model. Bloomberg Tech Managing editor Sarah Fry joins us with the details really tricky to follow along, but I suppose that's start with the basics. 00:07:56 Speaker 2: This is different to hugging Face. 00:07:58 Speaker 3: This was a sandbox environment, not the modal platform itself. 00:08:03 Speaker 2: What do we need to know? 00:08:05 Speaker 6: Well, I think what we need to understand here is that this is leading to an increase in the fears over AI agents going beyond what they're asked to do. And this was a big concern with anthropic earlier this year, and these recent incidents are both with open AI. I imagine there's a lot more than this hugging face incident, this modal incident, that we need to learn about, and we need to understand a lot more. We have a lot of more questions, honestly, about how exactly this happened, why models didn't notice, how do we prevent it from happening again, and what might happen if anything in Washington is. 00:08:46 Speaker 2: A response. 00:08:48 Speaker 3: Models saying that this was a sandboxed environment, so even though the models were able to access it, it didn't act outside the bands of that testing environment. We don't really have a conclusion on the open AI hugging face right There was an investigation that was ongoing. I don't know that they've released any sort of conclusive report on that, But just go back to what you mentioned about government, there's something needs to happen next right. 00:09:14 Speaker 6: Right, I mean I think that this is this is one of the things that these the leaders in AI have have been talking about for years now, the idea that you know, an AI may act beyond what a human has intended for it to do and do it in a way that can be harmful to accompany to its customers. On the flip side, you know, AI has become very adept at finding security vulnerability, so it can be help for cybersecurity in that sense. But this is exactly the kind of thing that we're going to need to understand a lot more about, because we just can't create a solution for these problems unless we understand exactly. 00:09:58 Speaker 7: How they happened. 00:10:00 Speaker 3: Bloomberg Sarah Friar, who manages the team covering all things chech out in New York, thank you very much. In vidio, Ceo Jensen One's defending open weight AI systems as US lawmakers weigh the challenge posed by Chinese startup Moonshot ai, whose model rivals those from Enenthropic and open ai it's open weighted model. Huang met with politicians in Washington on Tuesday, saying afterwards that open weight systems are quote really important for the vibrancy of the whole industry. Meanwhile, more than one thousand workers from top AI firms have signed a petition calling on the US government to help quote deliberately pace AI development. The signatories of the letter include the CEO of Anthropic and the chief scientists from Open Ai and Meta Superintelligence Lab. Let's get more Bloomberg's AI editor Seth Figerman's with us. This has been playing out on social media too, as more high profile names become literal signatories to it. Let's start with the idea out like, what is it that this group of those in industry researchers working on AI are trying to affect. 00:11:06 Speaker 2: What is the result that they're looking for. 00:11:09 Speaker 8: Yeah, you know, it's really a moment to step back and take stock of. They're calling for basically a technical and policy framework the governments or an international group could use at some point if necessary, to quote deliberately pace AI development. They're not specifically calling to slow it down, though that seems to be the implication. And you know, the

backstory seems to be both a growing awareness that AI might one day be able to kind of augomate itself, that they're building technology that can kind of conduct its own research and development and start to kind of super charge and accelerate that development in ways that could potentially create runaway Yeah, I progress that we may not be there at the moment. And then, as you were just talking about, it comes days after the first of now two different but related breaches from Opening Eyes Technology you that have raised heightened concerns. 00:12:03 Speaker 3: Let's use Anthropic as a case study. They've they made a social post on Tuesday yesterday explaining their people's participation. You know, they are one of the leading frontier labs working on advancing AI, and they're saying, we're okay with joined this effort to let's call it slow it down. 00:12:23 Speaker 8: You're right, and in some ways I think it's actually borrowing from some of anthropics earlier rhetoric. I mean you might recall that Jack Clark, one of anthropics co founders, you know, had put out a lengthy post weeks or maybe a couple of months ago calling for the idea that maybe we would want to pause button or a mechanism to pause AH development, stopping short of saying we needed it now or it's definitive, but kind of introducing that idea, and I think that thought has been percolating a lot now in recent weeks, whether it's Demos Hasabe is kind of calling for some sort of international framework or a finn Red type organization to and review models, or a more explicit to slow or pause development. Again, there's a lot of ifs ands or butts here, but it seems like the industry is increasingly captivated by this thought that there needs to be some mechanism to slow, pause, or rethink the pace of development to enseth. 00:13:14 Speaker 3: The petition is urging the US government to do something, to take some kind of action in conjunction with something that's happening around the world any way in different jurisdictions. Do we have a sense of what that would look like from the US government? Are we talking about Congress taking action and executive order? 00:13:30 Speaker 2: What's the mechanism? 00:13:31 Speaker 8: Yeah, certainly in that petition they're not spelling it out, but coming you know, weeks after Demis and Sam Altman, I have kind of been advocating for more of an international coalition. I would think of it in that mold, you know. I don't know if that's just the Trump administration lending and support or particular piece of legislation from Congress. But I think it's the idea of the US working with part of an international body to begin to rethink how we govern this technology. 00:13:57 Speaker 3: Being bog Sephigman, who is our AI editor here at Bloomberg News on a really critical important read story. 00:14:04 Speaker 2: Read it. 00:14:04 Speaker 3: Rachel Met Shringafari reporting on the Terminal online. Okay coming up so far reported its second quarter earnings earlier this morning. CEO Anthony Notto's back with us on the show Next. There's lots of questions around growth, the outlook, Neo Banks, tech in finance, and the FED. 00:14:24 Speaker 2: That's next. This is Winburg Tech. 00:14:39 Speaker 9: It's time now for talking tech. I'm your hira Anan. 00:14:42 Speaker 2: First up. 00:14:42 Speaker 9: Executives and investors tied to the AI supply chain. We're among the biggest insider sellers in the second quarter of benefiting from the sharp and volatile rally of tech stocks. Those include executives of companies like Nvidia, Coreweave, and Twilio. Plus the largest US power utility, next Era Energy, is joining forces with Brookfield to build a one hundred billion dollars data center campus in Kentucky. The privately funded efforts will transform a cold war uranium enrichment facility into a data center campus with a generating plants, adding to growing efforts to add new electric capacity. And Canada is scrapping a tax plan that would have forced entertainment companies like Netflix and Disney to pay more after receiving pushback from US officials and Hollywood studios. Streaming platforms above a certain size will still need to reinvest a percentage of their revenues into Canadian and indigenous content. 00:15:39 Speaker 2: Edit. 00:15:40 Speaker 3: Thank you Jahira so far reporting second quarter results before the opening bill, the company posted record revenue one point two billion dollars, but also raise its full year revenue outlook. The bit that's unchanged is the earnings guidance look at shares down eight point four percent right now on track as it stands for its biggest drop since Appril. There had been a deeper decline earlier in the session. Joining us now is Sofi CEO and Tinodo record revenue and the outlook for the balance of this year. It's really interesting, like projects a lot of confidence. Let's just address the stock move and the story of the quarter. You know, maybe the street felt like you needed to take the bottom line with you in your confidence. 00:16:22 Speaker 10: Yeah, I think you're right. The quarter was incredibly strong. 00:16:25 Speaker 11: It was our nineteenth consecutive quarter of more than a rule of forty. It was actually a rule of seventy with forty percent revenue growth to one point two billion dollars and over a billion dollars of cash revenue, and our EBADAM margin was thirty percent and we had a really strong nir income margin. 00:16:41 Speaker 10: I think the street likes the trend in the business today. 00:16:43 Speaker 11: Credits performed well, our new products are getting great adoption. We're seeing the flywheel of being a one stop shop driving success and increased products per member. So really positive story fundamentally in Q two in Q three week, expect that fundamental story to remain intact and continue strong member growth, product growth, and product per member growth with good profitability. We did raise our revenue expectations for

the year and the back half of the year, but we left earnings unchanged, primarily because we want to make sure that we keep investing in the business to maintain these high levels of revenue growth for a longer period of time. And in addition to that, we're also now anticipating two rate increases as opposed to the beginning of the year when we anticipated two rate decreases, and that creates some uncertainty, and so we decided to have a little bit of a cushion as it relates to earnings if something like that unfolds. But we couldn't be more confident in the business and the long term profitability of the business. It's just we're not going to take earnings up in the near term to try to drive market favorability. That will be short term beneficial, but not long term prudent. 00:17:50 Speaker 2: Right, let's talk about the FED. Why not? It's FED Day. 00:17:55 Speaker 3: No one wants to talk to the tech guy on FED Day, Anthony, to be honest with you, and I just want to partake in it like everyone else. 00:18:01 Speaker 2: So you explained it. 00:18:02 Speaker 3: Your assumption reflects one two hikes rather than cuts. You know, put the sort of the numbers and monetary policy joggon to one side. How does that change how you think about the world, about how the economy grows, about the consumer in the back half of this year. 00:18:18 Speaker 11: Yeah, I mean, if the FED is raising rates, that means we have a strong economy and we're trying to maintain stable inflation in an environment which rates going up one to two percent will perform very well on the revenue line, which is why we're still forecasting strong revenue and I think ultimately we'll perform really well on the bottom line. We're already in our guidance in you know, providing guidance of a net income margin on an incremental basis of thirty percent, which is our long term profile where we can get to. So it doesn't really change that much. It just eliminates some of the upside that one may have called today compared to a different environment. I think a stable economy with unemployment below five percent and inflation around two to three percent is a great backdob for our business. And even better backjob for our business is if rates were declining. 00:19:10 Speaker 3: Final question on the economic side, you know, what is the health of your customer look like? And not just the health, but like, what are the behaviors of your customers in this environment. We've gone over in the past, You and I the demographics and who you're serving, So how are they behaving? 00:19:26 Speaker 11: The customer's behavior is very strong. We see very strong levels of spending. We annualize that at about thirty billion dollars of debit spending a year. We're seeing very strong trends in credit, which we reported continuing, we're seeing good inflows into our investment business assets under management standpoint, and we're seeing people take out more products. There definitely is a desire to reduce the cost

of debt. And we saw record levels of origination across our unsecured personal loans, our student loans were financing, and our home equity lines of credit and home equity loans, and that's a secured loan that has a lower interest rate. So and we recently launched small medium business and we see a lot of demand for small medium business. 00:20:08 Speaker 10: Loans as well. 00:20:09 Speaker 11: So from our vantage point, the economy looks very strong. Inflation isn't causing consumers to hold back. We're not seeing an uptick in unemployment. We're not seeing any deviation on the credit side. 00:20:21 Speaker 2: Let's talk about AI. 00:20:22 Speaker 3: When we went through the big bank earnings, there's debate right on how much AI is really reshaping financial services and the investment that's required for so far today, where is AI having an impact, you know, across underwriting, customer service, fraud detection, something that's real right now. 00:20:40 Speaker 11: Yeah, the first thing where it's having an impact is actually on code production. We have a unit of work within our engineering group called a squad, and historically a squad consists of seven people. Today a squad is going to consist of four people that can produce the same amount of code as seven people, So that's a huge productivity sailings from AI capabilities. 00:21:01 Speaker 10: It also helps with testing. On the cost side of. 00:21:04 Speaker 11: The equation, we're using it to automate fraud investigations, We're using it to automate dispute resolutions, We're using it to help with customer service. On the underwriting side, we're not really using it to predict the ability for people to pay, because we underwrite to their actual cash flow based on their actual income and their expenses. I do think that AI is helpful in verifying some potential outliers or finding them that could be fraudulent activity first party fraud where an individual has no intent to repay their obligations. And then on the overall value prop of SOFI side the equation, we've launched something called SOFI Coach, which is a chatbot that's driven all by AI. 00:21:45 Speaker 10: You can ask any question about your financial life and it will help you get your money right. 00:21:49 Speaker 11: You could ask if your REFINANCI your mortgage, where you should invest, how do you lower your costs and your expenses should you be investing more? And it's a super powerful engine based on the data that we uniquely have because we're a one stop shop. We have data across checking and same as accounts, across loans, across mortgages, across investing, across credit cards, and across insurance. So we have not just a great engine of information that can drive great AI solutions, but the data is a huge differentiator and we're seeing really positive effects of that. 00:22:20 Speaker 3: So Fi CEO and you know, a great picture on digital finance in the real world. 00:22:25 Speaker 2: Appreciate that a lot. Thank you very much. 00:22:26 Speaker 3: Coming up oracles, Larry Edison could possibly shell out almost ten billion dollars in fees if the Paramount Warner Brothers merger falls through completely. 00:22:34 Speaker 2: Go more on that next. This is what markets look like right. 00:22:37 Speaker 3: We're kind of treading water to Microsoft and Meta after the bell. There is a FED decision this afternoon, but there is downward pressure. That's that one hundred down for sixth day. This is Bloomberg Tech. Welcome back to Bloomberg Tech. Microsoft and Meta have earnings after the bell, there's a FED decision this afternoon where most economists expect them to hold rates. 00:23:03 Speaker 2: Those are all factors, so is s k. 00:23:05 Speaker 3: Heinex's raising capital expenditures for this year and it's sixfold profit then as that one hundred is down for a sixth straight session, the longest streak of declines since October twenty twenty two, the socks is down three point seven percent, down for a fifth day, matching the losing streak that it saw in December. There's pressure under this market, but the earning story after the bell today, it's a big focus. The market's bracing for a host of information. Let's discuss what to expect. Bloomberg Aquities reporter Ryan Fla Seleka, I'm trying my best. There are so many catalysts in the market, Ryan, we're looking at them now. FED decision today, Microsoft today, Meta today. I think we focus on Microsoft and Meta and capital expenditures. Is that what you're hearing is the focus of this market. 00:23:54 Speaker 12: Yeah, I'd say that is very much the focus of this market. I think, especially after Alphabet reporter last week and really underlined how much skepticism there is out there, how much growing skepticism there is towards all of the spinning that's going on with AI. It's a real question mark for people right now, what is the spending outlook? What is it doing to cash flows? What kind of growth are they seen because of this spending? What is the ROI are these stocks finally getting cheap enough that people are feeling more optimistic about jumping in? These are all going to be very important questions. And these are two of the biggest and most influential companies. So I don't know, maybe I'm bisbiased, but I do feel like that's going to be the real takeaway from today, more so than the FED. 00:24:36 Speaker 3: I said to Santy Noto, the SOFI CEO, a moment ago. You know, on FED days, typically people don't want to speak to me, the Bloomberg tech guy. But it's a fact, you know, just as an illustrative example with Microsoft, right as you growth forty percent, but if you look at expectations for Capex into the next fiscal year, Capex is going to grow more than fifty percent. 00:24:56 Speaker 2: Like that's the kind of trade off. 00:24:58 Speaker 3: This morning, when you got to your desk, what was the impact of sk Heinex's commentary on Capex? What else were you looking at on the equities desks that might be a factor in

this market. 00:25:08 Speaker 12: Well, I would go back to Alphabet last week Alphabet. Alphabet's report was very strong on a lot of metrics. Cloud growth there grew more than eighty percent, and Alphabet is really seen as the leader in AI right now, between Gemini, between its chips, between Cloud, Waimo, YouTube, so on and so forth. Microsoft and Meta don't really have those same kind of leadership qualities. So if Alphabet wasn't able to convince investors that all of the spending it's doing is really paying off, it's going to be a harder hurdle for Microsoft and Meta. Now we are seeing, like you said, ongoing chip weakness, We are seeing open source models coming out. Maybe that's a cheaper way of doing AI. What kind of influence that's going to have on CAPEX outlooks really remains to be seen. So that's certainly playing a factor in here. But I do really think there is a high bar for these companies who convince investors that this spending strategy remains the right one, at least for the stocks. 00:26:04 Speaker 3: Famos, Rym for SELICA busy week for you, Thank you, very much. Indeed, US listed shares a Logitech with down post earnings. The Swiss computer peripheral maker warned a serious incident and one of its suppliers impact its ability to meet future demand. Logitech CEO ha A Favor spoke with Bloomberg earlier. 00:26:23 Speaker 13: We're pleased with the quarter we just delivered, and we can talk about that, but let me talk a little bit about the incident at one of our semiconductor suppliers that happened at the end of June. 00:26:34 Speaker 7: A lot is still unclear. 00:26:37 Speaker 13: We do believe it's absolutely temporary and ring fenced to Q two and Q three, but it is. 00:26:43 Speaker 7: An important supplier. 00:26:45 Speaker 13: They remain closed and we don't have a definitive reopening date. We obviously have a crack team working on mitigation plans at the moment, leveraging existing inventory, leveraging secondary. 00:26:58 Speaker 7: Suppliers, which we do have. 00:27:00 Speaker 13: But as you will well know, the general supply situation for semiconductors at the moment is unusually tight, and we need a lot of them, and we need them right now, Hence the uncertainty in the outlook. But all that said, we're super pleased with our results. Are tenth quarter of growth, also growing market shares, and really great operating income growth forty four percent into quarter versus last year and even without the tear freefund up fourteen percent. 00:27:30 Speaker 7: So this is a company that has taken. 00:27:33 Speaker 13: A lot of blows between tariffs, geopolitics, component shortages, and yet we continue to deliver quarter after quarter, growing the top line, growing the bottom line, growing gross margins. 00:27:44 Speaker 14: Yeah, it's maybe one of the most shall we call it interesting times to be a CEO at a company like YOURSNICA. So it's always so interesting to talk to you. And I know that you had mentioned earlier kind of

when all of this was brewing, the concerns over chip supply, that you would stockpiled chips. 00:27:59 Speaker 2: What was that case? 00:28:00 Speaker 14: So did you end up stockpiling trips? And do you have any left in the reserve that you can kind of tap on when you have these types of disruptions. 00:28:07 Speaker 13: Absolutely, So that's the beauty of a great balance sheet. So we have more than a billion and a half in cash, no debt, so we have been I wouldn't called stockpiling, but we have really healthy levels of inventory. And therefore, again in Q two, despite the closure temporary closure of this supplier. 00:28:24 Speaker 7: We think the impact in Q two will not be very large. About twenty million. 00:28:29 Speaker 3: Those Logitech CEO Hannaka Faber. There's Center Entertainment. The highly anticipated Warner Brozen Paramount merger was put on pause. But if the deal falls through completely, it would have Oracle's co founder Larry Elison on the hook for coughing up nine point eight billion dollars in fees. Joining us is Bloomberg Chris Palmary, the entertainment editor that had the inenviable task of doing the math. I mean, this was a part of the structure of that bid, right, you know, it's no joke. Ten billion dollar even to Larry Ellison. Just explain the reporting on this one. 00:29:05 Speaker 15: Yeah, I had to really dig and read the fine print. I mean, we all knew these fees were out there. Seven billion dollar breakup feet of Warner Brothers if this deal falls apart, and two point eight billion the Paramount already paid to Netflix to go away essentially, But we want to know who was really on the hook for this. Paramount doesn't have a lot of money, It's got a lot of debt, and one of the reasons it's trying to merge is so it could get bigger. 00:29:27 Speaker 2: And of course there are. 00:29:27 Speaker 15: These wealthy, these sovereign wealth funds from Saudi Arabia that are involved, but they're not actually the ones. It's really Larry Ellison and his family trust that are going to have to pay this money if this deal collapses. And here's the really wild part is they're going to do this by paying essentially ten billion dollars to Paramount to buy new shares of Paramount at sixteen dollars to share stocks about eight dollars now, So if they have to cough up that kind of money, it's going to be a painful check to. 00:29:57 Speaker 3: Right, Chris, just quickly explain where we're at with this, right. You know, the deal is on pause because of the intervention of a US judge. 00:30:09 Speaker 2: They were also lawsuits. Just where do we stand? 00:30:12 Speaker 15: Yeah, I mean, for quite a few weeks now, we've all thought that this deal was going to go through, particularly after the Department of Justice gave it the blessing and we saw the EU regulators as well. But the lawsuit this month from twelve state attorney general is also from the Writers' Guild, really puts that into question, forced Paramount to put the deal on hold.

As they worked through this litigation. It could be as late as June. It could be never if if the cases are successful and thwarting this. So it's much a bigger risk now of this deal going through than it was just a couple of weeks ago. 00:30:53 Speaker 3: The most Chris tom Mary screen time editor. I really appreciate it, Thank you very much. Okay, Coming up, Karen McCormick, chief investment officer Berenier, joins us to discuss the impact Moonshotskimmu K three could have on bench capital, on the ecosystem of other AI startups on open Weight. 00:31:11 Speaker 2: Will discuss it all. This is Bloomberg Tech. Moonshots mm K. 00:31:34 Speaker 3: Three model has sent ripples through Silicon Valley and Washington, But the significance, according to our next guest, isn't about Chinese versus USAI supremacy. It's about credible, cheaper alternatives that drive AI adoption. Karen mccormat is the chief investment officer at Barnier firm investing in early to growth stages across the US and Europe. Very interesting perspective. Just bring your ideas on this. You know the impact of kimmunicatory being open weight, how the economics of it add up. It's been constantly discussed for a week now. 00:32:13 Speaker 16: Yeah, I guess it's worth framing a little bit of what we do, and thank you for the introduction. But as you said, we do early growth capital, so we aren't necessarily looking for shoot the lights out ten billion dollar type return businesses. We're looking for growth businesses that get to real profitability and that's what we focus on. So for us, the capital efficiency of the businesses matter quite a bit. That feeds into our European and US thesis, which I can come on to. But I guess the net result for US is that as frontier models become more commoditized or more widely available and cheaper to use, it's very helpful to our portfolio companies in the whole because it means that it's more capital efficient to be able to launch those businesses and to be blunt, it also puts pressure on keeping the cost of the US frontier models down. 00:32:57 Speaker 3: So this ties together your strategy with everything in the news cycle. The conclusion when keemy K three hit is that it was the frontier labs that were at risk, but this was good for AI. Now in Europe, the capital environment's completely different, and those founders run leaner businesses respond to all of that. You know why we're seeing a Chinese startup light Moonshot make some progress. It gets backing, of course, from national funds. But that has been the sort of debate. 00:33:29 Speaker 16: It is an interesting one, and in part it does feed into kind of our European thesis, because we do see often European businesses or even US businesses that aren't specifically value based, have to start to grow and thrive unless available capital. So if you don't have the huge amounts of capital rounds that a lot of the Valley companies are raising, you have to do more with less. And so the thesis in total

is that the more these frontier businesses are becoming commoditized or cheaper or more widely available or open sourced, the better it is for the businesses. And it helps a lot of with our European portfolio where capital isn't as freely available as it might be in the US, and we've genuinely seen higher growth lower costs as a result of using models, and different models are right for different types of activities, so we might still be looking at using a claud or a fable five where it's really important deep tech work that we need to be doing, whereas deep seek or moonshot might do more than a perfectly adequate job for some of the day to day tasks. So we have really seen the cost of launching these businesses start to decline, and even where the businesses are already established. So we have one business called Edited, which is in the traditionally the SaaS space. They've rebuilt their entire software using AI and the development cost has been so much lower and the launch has been so much faster, with the reception from the market being so much better. 00:34:47 Speaker 3: Karen, you're in the camp that agrees AI will be transformational. You just gave the SaaS example. But you say that we're in the messy You say we're in the messy middle. Yeah, what do you mean by that? 00:35:00 Speaker 16: So, I mean we've been through so many different market cycles and Bargee as an entity has been around for thirty years. I've been doing this for twenty years and in the corporate world for thirty We see technology cycles. This isn't new for us. I mean a mobile revolution, move to cloud. Now we're in AI, we're still trying to figure out how things are gonna work, So there are gonna be pain points, and I feel I mean, my own children, for example, are gonna find the job market may be difficult. There are gonna be pain points as we figure out how this works. But I do think it's a net positive all around. And I also would say, I'm I feel like the whole idea of like SaaS apocalypse, like SaaS businesses are all gonna suffer and not be in existence anymore, it really doesn't hold water because what we're seeing is a lot of SaaS businesses are just becoming. They're really just software businesses, and whatever they're using, whether it's cloud computing or AI tools, they will continue to thrive as long as they move with the market. If you're standing still, then you probably have a problem. But I think most of the software businesses are adopting AI very quickly. One of the things I think we are seeing is that AI is moving so fast that what was revolutionary two or three years ago is actually now a bit dated. So you might have had a moat, so to speak, two or three years ago based on your use of AI. But for the CEOs and for the small companies, they're having to move so fast to make sure that that moat is sustainable, and we even see that in the large public markets. I mean, if we think about the constitution of the top ten holdings in the public markets, in the last couple of weeks, those have been churning, and they've been churning because we're looking at businesses on a reactionary basis where we thought they had a solid moat, and then something happens over here and we question whether that moat is really there, and then something happens over here and the guy who took the top ten spot is now moving down again. So I think a lot about it. A lot of it is this market is moving so fast, trying to determine what your mode is and how long that's sustainable for is tricky. 00:36:45 Speaker 3: Karen McCormick, Chief investment Officer, BURNNGIA. We will have you back, and I think next time there's a conversation that we had about European defense tech as well. Absolutely first appearance on the show. Thank you so much. Coming up, Big Tech Faces is next AI test. We're going to break down what to watch from Meta and Microsoft and the chip makers. 00:37:02 Speaker 2: That's next. This is Bloomberg Tech. 00:37:21 Speaker 3: To Blockbus the day for big tech earnings, Meta, Microsoft, qual Common Armal report after the closing bell. Let's start with Meta. Bloomberg's Riley Griffin here, let's start with the basics. You know this is going to be about capital expenditures versus growth. 00:37:34 Speaker 7: Absolutely. 00:37:35 Speaker 17: If you remember last quarter, we saw Meta raise guidance to one hundred and forty five billion dollars up to that amount, and the market didn't react well to that. Meta is struggling to explain to the street how it's going to get a return on its massive AI spending, and so we're looking for steer today on that very question. 00:37:54 Speaker 3: I've been reading your reporting and the team's reporting, and one other question is like return on investment, return on the infrastry ructure. Absolutely, the idea that Meta becomes a cloud computing company, any chance Stuckerberg says something about that. 00:38:06 Speaker 17: I think that's what we're all waiting to see today. Earlier this month, we had reported that Meta was already developing plans to create a cloud infrastructure business, sell some of that computing capacity to other AI companies and so forth. We also have reported that Anthropic is in early talks with Meta for some of that capacity. So if Mark Zuckerberg during the call Leader today confirm some of those details or expands on them, we could see the stock react quickly. 00:38:31 Speaker 3: That would move the needle. Bloombergs Riley Griffin, thank you very much. Indeed, now to the other tech heavyweight reporting after the bell, Microsoft, Bloomberg's Brody Ford on deck. As your growth more than forty percent, capital expenditure is probably going to go up as well. 00:38:45 Speaker 2: Do the math for me on that one. 00:38:48 Speaker 18: The big difference with Microsoft is it's around what are they doing with the compute right? Microsoft has defended approach of we need the compute to shore up our internal products, which are better in a lot run. In many cases,

the street kind of wants them just to see them juicing Azure revenue right, allocating compute to customers getting more near term revenue. I expect that to be a topic that's hit quite a bit on tonight's call. 00:39:15 Speaker 3: You know, I find that so interesting if you compare to last week with Alphabet, there was so much emphasis on Gemini, the different forms of Gemini and the traction they're getting with Microsoft, is it as simple as copilot? Like, how's copilot doing? 00:39:28 Speaker 18: I think you're underlining what the anxiety is and that maybe Copilot actually isn't doing that well. They keep releasing seat numbers that sound impressive fifteen to twenty million, but then you're a member of the Microsoft install base that's not that big. And so as long as the Copilot adoption and monetization figures don't look that impressive, you're gonna hear analysts ask them to just sell the compute to customers directly. 00:39:53 Speaker 3: Microsoft down eighteen percent year today, one of the laggards in the mag seven. 00:39:56 Speaker 2: What else? What else will they say? What else do we look to? 00:40:00 Speaker 18: It's all about that spending, right, It's all about their return on capital, and a lot of it too. Is the SaaS apocalypse spheres right? Microsoft's traditional businesses Are they under threat from AI replacing it? Whether that's companies building their own alternatives or startups. We reported that Starbucks wants to replace some of its Microsoft software. Maybe we see that them asked about tonight. 00:40:24 Speaker 3: Thin that's thirty four bring in his bingo Cob with the SaaS apocalypse, love it, thank you, busy day for you. It's not just software chip makers also in the spotlight. We have arm we have Qualcom, reporting after the Bell BlueBag intelligence is semiconductor around this Conjensivani with us, let's start with ARM. You know, the ARM story has shifted for me so rapidly and so. 00:40:45 Speaker 2: Differently. 00:40:45 Speaker 3: You know, it used to be about design and blueprint, now fabulous chip maker. 00:40:50 Speaker 2: What's the watch for you on ARM? 00:40:53 Speaker 19: Well, unfortunately, look, there's majority of the revenue, royalty revenue still is coming from smartphones, and we know those markets are not doing that well. Most of the downside is priced in, but we have our channel checks suggests that intra quarter androids have been doing worsening. However, the good news for them is because their chips are going through versioning up, they're not going to see a lot of impact. And as you rightly said, the focus for ARM is all about data center now. So as long as the licensing numbers look good and the data center numbers keep looking up and right, I think they'll be mostly immune from the negativity from the handsets. 00:41:26 Speaker 3: Data center is the story that Calcom wants to talk about as well. To be fair, like, there's been evidence across A six and the products that they make themselves, they have had some traction. Christiano Ammon wants to diversify that business. But for you, does it still come down to smartphone? 00:41:43 Speaker 19: Well, it's now a mixed of near term long term investors are believing the story about data center, and that show is showing in the sentiment of the stock. However, there's nothing data center can do for this quarter and next quarter guide, right, they will be highly, highly exposed to that Android weakness I just talked about. Remember September quarter, which is the next quarter Guide is usually high strong because of Apple. Apple is going away mostly this coming quarter, and if Android is not able to pick up that slack, it's not looking very good for the near term for the handset perspective. 00:42:15 Speaker 2: Go back to basics here. 00:42:16 Speaker 3: So you know, for Qualcomm, the Android market, particularly in China, is so important. The CEO, chrisn wanted to sort of diverse, right, so they pushed into automotive. They've had some success there in data center, but looking at the data the smartphone market, particularly Android and particularly China, you know, it's not a good year basically. 00:42:38 Speaker 7: Not at all. 00:42:39 Speaker 19: As I said, every single month, those indicators keep on worsening. We have seen a lower cell through not just in the mid tier, but now bleeding into the high year. This is where Qualcom really makes this business out of that. So again the guide doesn't look like there's not a lot of catalysts for upside. 00:42:55 Speaker 13: There. 00:42:57 Speaker 3: Final bit, Qualcomm the auto motive business. Does that interests us at Bloomberg Intelligence. 00:43:04 Speaker 19: Look, it's a great business. It's running ahead of its peers. The growth little. They keep on getting ahead of the targets that they have been laying out. But again the question comes to it's still a small size of the total revenue, right when the majority of the revenue today is still hand set right, which is going to decline in near term, those pains will exist. 00:43:23 Speaker 3: Congenserbanni, who leads us semiconduct to coverage a Bloomberg Intelligence, Thank you very much. That does it for this edition of Bloomberg Tech. This is what we have on deck today and tomorrow. It's busy because you put it mildly. The FED decision today, Most economists expect the FED to hold rates Microsoft and Meta after the bell tomorrow Thursday, Apple and Amazon. There's a lot in the world of technology that's happening right now, and this is what markets are doing in advance of that. Then, as that one hundred down for a six straight session, its longest losing streak since October twenty twenty two. The pressure is really in the chips recap on the pod. We're having fun. There's a lot to discuss. 00:44:03 Speaker 2: Have a great day. It's just boombog tech.