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Bloomberg audio Studios Podcasts Radio News.
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Bloomberg Tech is live from the heart
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Narrator/Advertiser
of Silicon Valley with Ed Ludlow in San Francisco.
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Ed Ludlow (Host, Bloomberg Tech)
This is Bloomberg Tech. Coming up, Samsung's quarterly profit surges on memory demand, but not enough for investors after a 150% rally this year. Plus Amazon is back in the bond market looking to raise at least $25 billion to fund spending on AI infrastructure and space. X joins the NASDAQ 100 index as the sell side coverage of Elon Musk Co. Is go for launch. This is what markets look like right now. It is a story about semiconductors and it is pretty ugly out there. It all relates to Samsung's quarterly earnings which were a stock stellar set of numbers. So this is not about what's happening with the fundamentals and fundamentally nothing in the memory chip market has changed Samsung told us supply is still tight. DRAM and NAND pricing is going up. And in terms of line of sight for when that supply dynamic changes, there isn't much visibility beyond the other side of 2027. Overnight this is what Samsung did. We've become very accustomed, particularly in the Korean market to swings both to the upside and side. So the Samsung drop of 9%, that looks dramatic. It was the only, the biggest drop on Samsung since June 23rd. What happened? Let's get to Bloomberg's executive editor Peter lstr. Okay, revenue more than doubled profit. Even better relative to the prior quarter. Let's start with the numbers.
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Peter Elstrom (Bloomberg Executive Editor, Asia Tech)
Yeah, Ed, it's amazing how much time we are now spending talking about Korean chip makers, especially these memory chip makers because they are such a key part of the market right now and they're such a key part of the technology industry. So for Samsung, Samsung is unusual. They report their earnings in two slices. This is the preliminary numbers. We only get two numbers. We get revenue, we get operating profit. As you mentioned, revenue more than doubled. Operating profit was up 19 fold from a year ago. Is a pretty incredible number. They made about $58 billion. It could be one of the most profitable companies. It will be one of the most profitable companies in the world for this quarter. They could contest to perhaps be the most profitable company out there. They're making a lot of money. But as you say, it wasn't enough for invest investors. Even though it beat the analysts estimates by about 6% they were still expecting a little bit more. Maybe they wanted some more guidance going into the future here. But it is a signal that expectations are very high for AI right now. Samsung is playing a key role in this as is SK Hynix. We're going to get more of these numbers. A lot of volatility here, Peter.
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Ed Ludlow (Host, Bloomberg Tech)
This is a stock that prior to the numbers hitting was up 150% year to date. Zoom out. What has the story for Samsung and SK Bin in Korea trading this year and what has been the attitude of markets towards the memory names?
- [05:09]
Peter Elstrom (Bloomberg Executive Editor, Asia Tech)
Yeah, you're making a very good point. Both Samsung and SK Hynix have been on a rocket ride this year. Samsung up 150%. SK Hynix up more than that. A lot of this has to do with bullishness on the market. A lot of it has to do with the rising profits. But you also have these leveraged ETFs that people are trading where they're trying to get 2x or 3x exposure to these companies. That's adding to that volatility at that point. So you have a lot of people who truly believe in the trade. They truly believe this is going to be a seismic buildup that will be very, very important. But you've got a lot of traders bouncing the stocks around a lot. As you mentioned, there's just a lot of volatility here. And what we're seeing now is a lot of the volatility in South Korea is now spilling into other markets. We're seeing it week after week.
- [05:54]
Ed Ludlow (Host, Bloomberg Tech)
Bloomberg's Peter Elstrom who leads our coverage of Asia's technology. Thank you very much. Let's keep the conversation going. Focus on spending. While Samsung's results highlight the strength of demand for memory chips, Bloomberg Intelligence says the next leg of the investment cycle may be driven by governments as much as the big tech spenders. Kun Jen Sobhani writes that south Korea's massive AI investment plan reinforces the case for sovereign AI with roughly 880 billion in planned spending on memory fabs and data centers, helping extend the semiconductor capex cycle beyond the hyperscalers. Joining us now is Kunjan Sabani, Bloomberg Intelligence Senior Semiconductor Analyst. I was so interested in this Bloomberg Intelligence thesis because the same thing happened first with GPUs. Now you're taking it to the memory market. Give me some of your research.
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Kunjan Sobhani (Bloomberg Intelligence Senior Semiconductor Analyst)
Yeah. With the addition of this announced plan, out of which $307 billion are earmarked on AI clusters, data centers, not building factories for memory, this addition now brings the total sovereign spending that we have been tracking close to getting to sort of 30 gigawatts. Now on an average if you take 20 to 30 billion dollars just from the accelerators and the chips going for 1 gigawatt, that's a significant number. So we are seeing this theme playing out across the different regions. This helps a couple of things, right? Reduces your reliance from this purely US hyperscaler and cloud spenders and this group of the customers, the Soviet the governments are very sticky, are very long term and once they dedicate a certain budget allocated to a certain vendor, you have a long term visibility. Not just topping off from quarter to
- [07:35]
Ed Ludlow (Host, Bloomberg Tech)
quarter, there have been swings in some of the chip stocks across compute, memory, logic and memory. To the downside today, the catalyst being Samsung's print. But you go back to June 29th when Korea announced this plan, $880 billion spending catalysts to the upside right now. What is the trajectory near term for government spending or at least government support for this industry? Locale by locale,
- [08:04]
Kunjan Sobhani (Bloomberg Intelligence Senior Semiconductor Analyst)
most of the regions that we Track are seeing significant tailwinds. In fact an announcement like this actually pressures the other regions. If you're aware, Europe right now is going through their sort of Chips Act 2.0 and focus on semiconductor where we expect expect their numbers that they have announced to actually rise up because there has been a lot of critique that they're not spending enough. So when one regions increases the urgency of spending, the other regions sort of keep on piling on.
- [08:31]
Ed Ludlow (Host, Bloomberg Tech)
Kunjan memory is a historically cyclical, historically boom and bust cycle commoditized technology. You are tracking more closely the server design top to tail the entirety of the data center, not just the compute. What are you seeing in this part of the cycle for memory? Are you seeing something that's different to historical norms?
- [08:58]
Kunjan Sobhani (Bloomberg Intelligence Senior Semiconductor Analyst)
For the most part we are seeing say similar historical cycles repeat this time around. But a few things I want to point out that we are seeing different. We are now seeing an advent out of an HBM and a lot of focus from the incumbents like Nvidia, but also from the newcomers like Qualcomm and Cerebras. We're going away from hbm. This could help sort of slow down the peaks and troughs of this memory cycle. Also we are seeing a significant new vectors like the AIPCs. Right. So we are now expecting nands which typically in the past many years have not been considered the sexy or the high growth like HBM could come back in focus given what's what are we seeing with AI PCs and local edge
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Ed Ludlow (Host, Bloomberg Tech)
AI running so conjunct Barney who leads our semiconductor coverage at Bloomberg Intelligence. Thank you. Let's get to the equity strategist view. Our next guest says the story is still intact, but after a record run for chip stocks, the group has become more volatile and investors are increasingly questioning the pace and payoff of AI related capex Joining us now is Angela Kocaf, a senior global investment strategist at Edward Jones. It's an interesting morning where after a massive sell off in Korea, Samsung in particular, we now see very significant declines in US based memory and logic. What is your interpretation of why the market has responded to the Samsung numbers in that way?
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Angela Kocaf (Senior Global Investment Strategist, Edward Jones)
Yeah, some key takeaways I think are first of all the numbers look good, they're strong, the bar is high and then positioning seems to be crowded. So as investors question and wonder what comes after the strongest quarter for semiconductors on record, we are seeing a bit some signs of fatigue. End user demand is becoming more price sensitive and the market is penalizing companies that ramp up capex Too aggressively. So I think it is a matter of expectations and some healthy skepticism rather than a break in fundamentals.
- [10:59]
Ed Ludlow (Host, Bloomberg Tech)
The stocks or Philadelphia Semiconductor index is down more than 6% at one point in the session, down 7%. That's become quite normal to see the stocks go up or down to that level on any given day in the last month. But on aggregate and longer term, we've talked about a melt up longer term performance and upside in semiconductors. Where are we now? Where have we netted out?
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Angela Kocaf (Senior Global Investment Strategist, Edward Jones)
Yeah, I think as you point out, the increased volatility in the space is a sign that that theme is maturing a little bit. Many investors recognize this long term secular tailwinds from air spending. But at the same time we're not in the very early innings of that. Also not at the tail end in our view as well. So as we look at the earnings number, in a couple of weeks we're going to be hearing a lot of updates from these companies and the tech sector and semiconductors is going to be the one leading growth, revenue growth among all 11 sectors. Also we expect more than 60% earnings growth. So that shows that again the bar is high. But still we have that fundamental support. At the same time, as investors still want to participate and maintain exposure to AI and tech, we think they should be looking for, for differentiated sources of return and we think pairing the exposure with some cyclical exposure is the right strategy at this point in time.
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Ed Ludlow (Host, Bloomberg Tech)
What does that material look like? One of the big stories of this week was Morgan Stanley and Mike Wilson saying their expectation is a rotation out of chips into hyperscalers. Like to lots of people, that's kind of materially the same story. The way on the program we've tried to, I guess split it up, is the capital expenditure deployers and the capital expenditure recipients.
- [12:50]
Angela Kocaf (Senior Global Investment Strategist, Edward Jones)
Yes. Since a lot of the investor concerns are about spending and they have been penalizing the hyperscalers. At some point the hyperscalers could start to slow down the pace of spending, which might be the trigger for that rotation to happen given some of the underperformance and relatively low valuations for the hyperscalers and the Magnificent Seven. I don't think it's a stretch to say that potentially we could see some of that rotation, especially after a parabolic move in semis and the concentration that has been coming with that. And of course the Korean market is a great example of that. So we're paying attention to the growth, not only the level but also the growth rate. That second derivative which could be peaking in the Second quarter.
- [13:38]
Ed Ludlow (Host, Bloomberg Tech)
Hey, Andrew, I'm going to bring that chart back that the team made because I think it's worth lingering on by 2030, capital expenditure for just five names. Amazon, Microsoft, Google, Metta, Oracle to go through 1 trillion. Right. We're trying to make sense of why the market's down so severely on a really strong set of Samsung numbers with little data but the knowledge that nothing's fundamentally changed. Supply is tight, demand still there. Why, like if that's the trajectory of spending, why are we so concerned?
- [14:14]
Angela Kocaf (Senior Global Investment Strategist, Edward Jones)
Yeah, I think investors are still cognizant of history that the sector, the industry tends to be a cyclical one. So it remains to be seen whether we've kind of eliminated those mini cycles with all this demand. But I would be more concerned if investors were not worried at all or dismissing some of these risks, whether it's going to be a return on all of this investment. So maybe it's part of that natural process of two steps forward, one step back for, for that trade. But I think there still remains plenty of opportunity, both within tech, that rotation within the parts of tech, but also beyond tech as well.
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Ed Ludlow (Host, Bloomberg Tech)
Angelo Cockpits of Edward Jones, thank you very much. Now coming up, Amazon is back in the bond market looking to raise at least 25 billion per Bloomberg's reporting details next. This is Bloomberg Tech. Let's turn to Today's big number, $25 billion. That's how much Amazon is looking to raise in its latest U.S. bond sale. According to sources, the offering could ultimately grow even larger depending on investor demand. The sale comes as Amazon ramps up spending on infrastructure. The company's marketing debt, as many as eight tranches with proceeds intended for general corporate purposes, including debt repayment, acquisitions and capital expenditures. Bloomberg Intelligence says the company's capex is likely to top its current 200 billion. Guidance for this year and next year could approach 300 billion as demand for AI continues to outplace supply. Robert Schiffman of Bloomberg Intelligence here with the react. Now, capital expenditures can also go up because it's more expensive to do things right. You build a data center, you have construction labor inflation as we talked about through the show, memory price inflation. But you're specifically looking at the weighted cost of capital. Why the corporate bond market works well and now you're looking at the pro forma cash amount. Give me your thesis.
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Robert Schiffman (Bloomberg Intelligence)
Well, first of all, 25 billion. It's not that big of a number, right? These guys have already.
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Ed Ludlow (Host, Bloomberg Tech)
We just said it was the big number.
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Robert Schiffman (Bloomberg Intelligence)
Well, it's getting bigger.
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Jordan Fitzgerald (Sell Side Analyst)
Okay.
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Robert Schiffman (Bloomberg Intelligence)
It's probably going to be more.
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Ed Ludlow (Host, Bloomberg Tech)
That's why I ask you about the pro forma cash.
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Robert Schiffman (Bloomberg Intelligence)
They have raised almost 70 billion across currencies this year already.
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Ed Ludlow (Host, Bloomberg Tech)
Right.
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Robert Schiffman (Bloomberg Intelligence)
And their cash number is up above 150 billion. This clearly implies that spending is going up. It's going up for a variety of reasons. One, the cost of everything that they're buying is going up. Two is the amount of stuff they need to buy is also going up and they are trying to frontload as much as they can. Three, they're also making investments in others like OpenAI and Anthropic and they're feeding the ecosystem similar to, similar to what Nvidia is doing. So I don't think we should be surprised by these numbers. And I just think they're going to continue getting bigger and bigger.
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Ed Ludlow (Host, Bloomberg Tech)
You know, bondholders and Amazon bondholders. Happy to be one. Right. I get that corporate credit is not my, my strongest suit. All I can do is look at what Andy Jesse said at the last earnings call. Capital expenditure growth outpaces revenue growth until such time that the thing you've actually deployed the capex on does something for you in return. You build a data center and until it runs workloads, it doesn't generate revenue. They're trying to manage that.
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Robert Schiffman (Bloomberg Intelligence)
Yeah.
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Ed Ludlow (Host, Bloomberg Tech)
You think they're doing a good job?
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Robert Schiffman (Bloomberg Intelligence)
I actually think they are. I think investors need to be patient. It's historically not a patient market, whether bond market or stock market, but the amount of spending that you're going to see over the next couple of years is going to far exceed the amount of cash that's coming in. So people are going to constantly question whether or not there's ever going to be a return. And you quite frankly, even if you see very, very strong cloud numbers or if you see some AI monetization, it's still on a relative scale. It's not going to be anywhere close to what their capital spending is. So what has to happen? I think bond market has to hold up. Right. Yields can't go through the roof. They need to have access to cheap, low cost capital. They do and they're taking down as much of that as they can. They need to show that they're monetizing and continuing to show really strong double digit growth across their AI and cloud businesses. And then three, they need to continue to convince the rating agencies that none of this matters.
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Ed Ludlow (Host, Bloomberg Tech)
So let me ask you this, and we just have 15 seconds. Why is Amazon the creme de la creme of issuers?
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Robert Schiffman (Bloomberg Intelligence)
Well, because of all the debt that they've issued leverage is still really low. It's well below this two and a half times target that the rating agencies have. So they have room to borrow a lot more and they generate a ton of cash flow from their other core profitable businesses and they can help finance long term growth with short term borrowing.
- [18:56]
Ed Ludlow (Host, Bloomberg Tech)
Robert Schiffman of Bloomberg Intelligence, thank you very much. Let's go back to the equity market for a second and take a look at shares of Revision on track for its worst day since November 2024, the EV maker said it will sell 75 million shares to fund equity contributions related to a U.S. department of Energy loan. Now Goldman Sachs is leading the share sale, according to a filing with the sec. With the offering, Rivian's able to capitalize on a run up in the stock in recent days, fueled in part by strong quarterly delivery results and the intercept of its new lower cost R2 line of SUVs. That's the confusion. Last night the stock closed at a very high level. Now we're down 14% at one point in session. On track for our worst day since February 2024. So the market factoring dilution now coming up. Space X joins the NASDAQ 100 index as sell side coverage of Elon Musk's company kicks off. We've got the details next. This is Bloomberg Tech.
- [19:56]
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- [20:04]
Bailey Lipschultz (Bloomberg, Post IPO Analyst)
Here.
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Narrator/Advertiser
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- [20:26]
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Ed Ludlow (Host, Bloomberg Tech)
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- [22:12]
Ed Ludlow (Host, Bloomberg Tech)
Space X joins the NASDAQ 100 index today and as it does, at least six brokers have launched coverage of the stock with buy ratings offering investors insight into the valuation beyond being a musk driven moonshot. Let's discuss with Bloomberg's Bailey Lipschultz on the post IPO side and then Jordan Fitzgerald yield on the sell side. Both of those stories are post IPO mechanics. Let's start with inclusion in NASDAQ 100 index. We knew it was coming. It was an accelerated timeline for them to do so. Now what happens?
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Jordan Fitzgerald (Sell Side Analyst)
Well, now it's part of it. So the main thing to keep in mind is that because it's not fully distributed, so small float, it accounts for a smaller percentage. So it's a relatively low float in terms of the makeup for the NASDAQ 100 more akin to a Palo Alto networks. But what that really means is if you're buying the QS, you are now allocating a little more than 1% of that cash directly to SpaceX. So there is a bit of a fundamental floor, if you will, from that regard. But the main thing is stocks down more than 5%. A lot of the index funds who track this had already gotten in ahead of this, as I mentioned isn't a simple terms.
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Ed Ludlow (Host, Bloomberg Tech)
They were mandated to either buy SpaceX to represent its weighting on the index in their own funds, or sell some other stuff for it to catch up. Now, how should I put this? Are we surprised that there are so many bullish names on the sell side on Space X now that they're allowed to initiate coverage?
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Bailey Lipschultz (Bloomberg, Post IPO Analyst)
Jordan I mean personally I can't say I'm surprised. We've gotten a whole slew of bullish ratings on Space X as this quiet period has ended. Most notably, we've got our street high price target at Raymond James. That's $800 for its price target and they expect revenue to multiply by 20 times by 20.
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Ed Ludlow (Host, Bloomberg Tech)
This is the state of play. 28 buys 5 holds 1 sell. I think based on the latest terminal
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Bailey Lipschultz (Bloomberg, Post IPO Analyst)
data, that that's what I'm seeing as well. And that sell was preexisting. We didn't get that today. And really all, all of the, all of the analysts who work at banks and that covered the IPO are getting to make their comments today and they've just been overwhelmingly positive.
- [24:17]
Ed Ludlow (Host, Bloomberg Tech)
Is there any kind of theme, like, you know, in some cases in the price target, some of the firms will assign a very low dollar value to the space bit of the business. For many, it's an AI company.
- [24:29]
Bailey Lipschultz (Bloomberg, Post IPO Analyst)
I mean, everyone looking at Space X kind of use it, no pun intended, as a moonshot. They think that this company is going to change the world. And they don't really have a limited view of its capacity, capacity to do so. They view space as one part of Musk's grand vision for his, his rewriting of the future. But they kind of use Space X as a, as a launchpad to get to that vision and for Musk to add on whatever he sees as part of that future onto the company and not just a satellite business or a rocket launch business.
- [24:58]
Ed Ludlow (Host, Bloomberg Tech)
If you didn't audit of mine and Bailey's email traffic of the last month. A lot of it is just us sending references in the prospectus back and forth to each other. But that was what the prospectus was about, right? The future. I'm looking at shares 151,75 a share. So pretty close to where that, that debut trade was. Is there anything out in the markets we need to know about to this point? Like, with respect, is your job kind of done now?
- [25:21]
Ryan Forselica (Bloomberg Reporter)
Well, no, I think it is.
- [25:23]
Jordan Fitzgerald (Sell Side Analyst)
And I think the big question now, Ed, is when we do get to earnings, that gets ready to unlock a number of shares. So it's no longer going to be a question of what fundamental catalyst is there. Much like when Tesla reports, you know, auto sales, it doesn't matter as much for the stock. The big question is will Elon Musk talk up some of these ambitions and then the massive unlock tied to that event and then the potential further unlock if the shares continue to trade about 30% above that opens up more capacity, more liquidity. Those are the events structurally that do matter.
- [25:54]
Ed Ludlow (Host, Bloomberg Tech)
From an ECM, estimated earnings August 17th. But you know, in the Air Jordan, what do we watch for next on the sell side? Just more initiation coverage.
- [26:03]
Bailey Lipschultz (Bloomberg, Post IPO Analyst)
I mean, if you're me. I'm watching for any mention of the two together. We got RBC boosting the price target on Tesla today based on the potential for a merger between.
- [26:13]
Ryan Forselica (Bloomberg Reporter)
That's right.
- [26:14]
Bailey Lipschultz (Bloomberg, Post IPO Analyst)
That's all anyone wants to talk about, all anyone wants to hear about. And they really do see it as 25 to 30% accretive to the stock. Just this, this potential for the merge.
- [26:24]
Ryan Forselica (Bloomberg Reporter)
Right.
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Ed Ludlow (Host, Bloomberg Tech)
Regular viewers of Bloomberg Tech know we discussed the idea of a Tesla and Space X merger. No new reporting on it though. Bloomberg's Bailey Lipschultz and Jordan Fitzgerald, thank you both very much. Coming up in the program, we've got even more from a Space X investor and why he sees this stock as more than just a Musk led Moonshot shares not having the best day ever. They are down now five and a half percent near to where the debut trade was. Half time in the program, by the way, spoiler. I'm in New York City this week. There's a lot going on. This is Bloomberg Tech. Welcome back to Bloomberg Tech. Let's go over to ankara, Turkey, where NATO's leaders are currently meeting and just signed defense deals worth at least $50 billion. According to a NATO official. The deal includes investments in space and surveillance. Bloomberg Surveillance co host Annmarie Horden is live from Ankara, joins us for more
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Annmarie Horden (Bloomberg Surveillance Co-host)
AMH future without well at following on from last year's Naito summit. This year is really, as Margaret, the NATO's Secretary General put it, as a reindustrialization of the defense sector between Trans Atlantic partners. So basically that is why you're going to see a lot of deals announced on the sidelines. These countries have to get to the 5% of GDP targets. Three and a half percent percent of that has to go to hardware, ammunitions and they're one and a half percent of that. Port, bridges, roads, anything that really is able to help support the industrial base. And when you look at these deals, you can really take away two points. On one level the United States isn't going anywhere with its industrial base. They're still relying on things like the Triton surveillance system. And you see European countries wanting to get their hands on that. But in other parts you actually see a push towards trying to use local European defense contractors like Saab instead of instead of Boeing. So you see basically a two prong approach when it comes to these European countries that are trying to meet the demands of naito, especially at point certain a time when the US right now is under a six month review of its defense posture within the European Union.
- [28:42]
Ed Ludlow (Host, Bloomberg Tech)
Bloomberg's Annmarie Horden live at NATO. Thank you very much indeed.
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Ryan Forselica (Bloomberg Reporter)
Recap.
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Ed Ludlow (Host, Bloomberg Tech)
This is where markets stand. So the NASDAQ 100 and the Philadelphia Semiconductor Index. This looks bad, this looks ugly. But in both cases, we're on track for our biggest drop since June 23rd. It's become, in the case of the SOX and semiconductors sectors, very normal to see a move of 5.8percent in that range to both the upside and downside. It's called volatility. But there is a bigger question about investor attitude to the trade, particularly of chips. Bloomberg writing the Magnificent Seven is losing its luster, too. Investors have crowned a new set of stocks as the favored investment, funneling money into companies building out the AI boom. The turning tides show the air is here to stay, but those investing in it are penalized. Bloomberg's Ryan for Celica has the reporting again. I just want to acknowledge it's kind of noisy out there today, right? Particularly post Samsung. But you've taken a look at the Max 7 and then you're looking at how the market's treating the Mag 7 relative to everything else. What's the reporting? Yeah, good morning.
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Ryan Forselica (Bloomberg Reporter)
Thanks for having me. So the Mag 77 had become something of an afterthought within the market following years where they were really the primary leaders. Like you said, the nature of the AI trade has really been evolving and we're no longer focusing on your Microsoft or Alphabets or Amazons or Metas. Now the real focus is on where the current bottleneck is within AI infrastructure at the moment, that is in the memory and storage space. So companies like Micron, like Sandisk, like Western Digital, these stocks have seen absolutely enormous gains this year while Microsoft is down, I think, more than 20%. We've seen a lot of struggling among the companies that were for a long time really sort of at the top of the leaderboard.
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Ed Ludlow (Host, Bloomberg Tech)
Is that within the max seven, some differentiation.
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Commercial Announcer
Mm.
- [30:41]
Ryan Forselica (Bloomberg Reporter)
So Alphabet has done pretty well this year. All, all of the Max 7 stocks are underperforming the Nasdaq 100. But in the group, Alphabet's hold on pretty well. I think there continues to be a lot of optimism surrounding its position with AI, not only with Gemini, its AI model, but also its chips business, with YouTube, with Waymo, all these sort of things working in concert with each other. There's a lot more skepticism about Microfaunt Microsoft, in contrast, like I said, that stock is down more than 20%. I think it's just had its worst monthly performance since December 2000. So the dot com era, there's a lot of skepticism there. All these companies are spending very aggressively on AI and so far it really seems like a mixed bag as far as what kind of return are they getting from this, what's the timeline for that return and in the meantime, what is this really doing to their cash flow, their cash balances? Some companies are raising equity or tapping the debt markets. There's just a lot more stuff skittishness around those kinds of things. Even if there's continues to be a lot of long term optimism that eventually all this infrastructure in Capex will pay off.
- [31:44]
Ed Ludlow (Host, Bloomberg Tech)
Ryan, very quickly we reflect in the show today on the short term pressure for chip stocks. But in your piece you make the point that zoom out, year to date, chip stocks have had a great run.
- [31:56]
Ryan Forselica (Bloomberg Reporter)
Yeah, chips are coming up their best ever quarterly gain. They remain extremely strong for this year. They've been incredibly volatile, especially if you look at them relative to software stocks. Basically if one of them is rising, the other one is falling and vice versa. But overall chips remain very strong this year, but with a lot of elevated volatility pretty much.
- [32:15]
Ed Ludlow (Host, Bloomberg Tech)
Ryan for Seneca, thank you very much. Benefiting from this shift towards AI in parts in Space X and the broker calls coming out today, we just went through them with Jordan. Right. As well as the idea of the NASDAQ 100 including conclusion are kind of setting a price floor for a stock that could be headed for the stars, according to our next guest. Joel Schulman is the founder, managing director and CIO of shares. The firm's X O V R ETF had approximately $246 million in SpaceX exposure ahead of the IPO. Now things have changed since.
- [32:49]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Yeah, we're up to about 370 million. Actually SpaceX gave us about 130 million dollars of profit. Coincide with your numbers. 84 million of that was in June alone, which gave us a 5.3% return. Contributed about 75% of our performance for that month when the market was generally down, down as much as 2.7%.
- [33:10]
Ed Ludlow (Host, Bloomberg Tech)
We get to the back story here. So you were able to include Space X in an ETF product when it was still a private company.
- [33:17]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Right. So we got, we were the first one to do this. We started, we rebranded, relaunched, repositioned X O VR in August 2024. So the first one to do this, we bought our first position, space X in December 2024. We bought in something called an SPV,
- [33:34]
Ed Ludlow (Host, Bloomberg Tech)
a special purpose vehicle the Bloomberg Tech audience knows about. So we're going to get to it, keep going.
- [33:39]
Joel Schulman (Founder, Managing Director and CIO, Shares)
So we got into a position, we repositioned it later on into something called a 00, no management fee, no carry. We increased our stake several times. We actually increased it twice during the second quarter, 2026, which gave us about a 14% position going into the IPO. And one of the things we did is we had a shareholder protection plan which prevented a big run up of flows in the week preceding the ipo. You've probably talked about it before in your show. Many ETFs have had massive inflows preceding big events. We kept that money out, probably turned away More than $1 billion in our estimates, maybe several billion dollars to make sure we had a good weight for our shareholders going into the event.
- [34:22]
Ed Ludlow (Host, Bloomberg Tech)
The reason, you know, if you're talking about Space X today, in part, is NASDAQ 100 inclusion. That was accelerated. And we went through earlier in the show about the mechanics of that. Right. You're a fund manager in the world that tracks the queues for that index. You need to take some action, make sure Space X and it's waiting on the index is represented in your fight. How did that impact you, if at all?
- [34:42]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Well, so we're seeing it today, the market, you know, the Space X is a little down today.
- [34:46]
Ed Ludlow (Host, Bloomberg Tech)
Little down 5ish percent.
- [34:48]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Yeah. So, but we think, you know, long term, we think it's a bullish sign. I mean, we've got to remember the NASDAQ. NASDAQ has about 800 billion behind it. Passive money that represents, at a 1% weight, about $8 billion. We've got to remember the, the Space X has been trading about 19 billion per day. It's not all coming in today in terms of the 8 billion, but it's a start. And then we've got to remember that 400 billion, I'm sorry, 400 billion is accused along. Four billion of that will be coming in. So this is all coupled with the, the Russell's, the MSCI and so forth. 25 billion, a passive money coming in that's going to help boost the stock for a period of time.
- [35:26]
Ed Ludlow (Host, Bloomberg Tech)
So I'm grateful to have you here in the studio with me today. There was a time, time maybe just for a hot second where you were kind of out there alone.
- [35:33]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Oh yeah.
- [35:33]
Ed Ludlow (Host, Bloomberg Tech)
I'm trying to work out how to describe this, but you were the only ETF for a period of time that had Space X. That's true. Right then everyone correct did. I've been trying to look at what's happened since. So SpaceX went public in June. Overall, I think the fund has seen outflows a little bit.
- [35:51]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Not. We've lost about 200 million. Some of the other funds that had Space X, one in particular that got in in late March, I think they're down 30% in terms of returns alone and they lost more than half their funds. Another ETF lost three quarters. We've lost about 200 million. We're not taking it for granted. I mean we're, we're not a space only ETF where we have the entrepreneur 30 total return index which is a 21 year track record and that has one of the strongest, if not the
- [36:22]
Ed Ludlow (Host, Bloomberg Tech)
strongest, I'm looking at the holdings. Space X is up there, right?
- [36:24]
Joel Schulman (Founder, Managing Director and CIO, Shares)
It's the top holding 1718, then Nvidia, then Nvidia and then we have other stocks like Astero Labs which was very strong for us. It's up 400%, AppLovin and other things.
- [36:34]
Ed Ludlow (Host, Bloomberg Tech)
I appreciate the transparency on the flows and also the origin story, you know, covered a lot of some of the concern about spv.
- [36:41]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Right.
- [36:41]
Ed Ludlow (Host, Bloomberg Tech)
What are you really buying into? And in the end what did you really get? Now with Space X, the data shows it. Let's get to your thesis, right? You know, you are bullish on Space X, right? Which part of Space X?
- [36:52]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Well, I mean as you know, there's a three engine empire, right? You've got the launch where they dominate 90% and even the competitors are using them now. So they've got 10,000 satellites in space. They dominate this market. They've got a clear moat in that area. Their costs have gone down from 54,000 down to about 2,000 per kilogram. We look at NASA which over the last 30, 40 years is gone up from, you know, 54,000 up to 58,000. So they're the cost leader. Elon Musk is very much like a modern day Rockefeller where he's very focused on costs. Then you've got Starlink and you've got Starlink, which, you know, his leapfrog telecom cash cow, clearly the crown jewel within the trifecta of the three engine empire. They've got. A lot of people may not realize they've got a five pricing tier model where they charge the lowest price for domestic defense and then they have maritime and then they have, they have aviation, which is the strongest piece. It's five times, 313 times more for aviation using the same satellite that they use for domestic. So when you have a 5 pricing to your model, that's really unique. And we think going to be extraordinary. Then of course we've got the wildcard which is, is where you have the optionality on the data centers in the sky.
- [38:08]
Ed Ludlow (Host, Bloomberg Tech)
We talked a lot about the new cloud business. Yeah. If they played a pretty good short term game.
- [38:13]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Yeah. If they, if they pull this off, you know this, this justifies evaluation in them some. If they pull this off where they can actually get data centers in the sky and they can get energy 24 7, you know, powering solar at 5 to 10 times.
- [38:26]
Ed Ludlow (Host, Bloomberg Tech)
So just, just really quick, we're going to hit a break pretty soon. Just reflect where does this Space X IPO ranking your career in the markets?
- [38:32]
Joel Schulman (Founder, Managing Director and CIO, Shares)
Well, for my career it's number one. Right. My career, it repositioned our fund, our thesis and it put a spotlight on our VC lens where we get companies the same way the VC select companies, publicly trade companies. We got into Nvidia back in 2005. We've held it 21 years. We see Space X as a long term hold, not unlike that.
- [38:53]
Ed Ludlow (Host, Bloomberg Tech)
Joe Schulman from It's great to have you here in New York City next to me. Thank you very much. Coming up, going to talk to Vanessa Larko. She joins us to talk about her new venture firm uncovering early value in a seed precede and what's happening with valuations in private markets right now.
- [39:09]
Ryan Forselica (Bloomberg Reporter)
That's next.
- [39:09]
Ed Ludlow (Host, Bloomberg Tech)
This is Bloomberg Tech.
- [39:17]
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Ed Ludlow (Host, Bloomberg Tech)
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- [42:07]
Ed Ludlow (Host, Bloomberg Tech)
The biggest debates in venture capital right now are about pricing, valuations, competition and where value in AI will ultimately, ultimately accrue, even at the very earliest stages. Joining us now is Vanessa Larco, co founder of Premise, a venture firm investing in startups at the pre seed and seed stage. And before launching Premise, she spent nearly a decade as a general partner at any Vanessa, welcome back to Bloomberg Tech. Let's, let's start with the big idea, right? You know I've written a lot this year so far of what's the point of calling a seed round a seed round? The numbers are getting bigger, the entities are getting smaller. You know there are founders who are just a trio of people commanding a very large debut. Check where you guys are making a big conviction call on those people. Just reflect on the state of that market right now.
- [42:58]
Vanessa Larco (Co-founder, Premise Venture Firm)
Yes, it's very competitive and yes, there are these eye popping seed rounds that everyone writes about, right, the billion dollar seed round. But the truth is that those are not the majority of the rounds that are getting done. There's still a lot of value that can be created at the earliest stages. We basically see it in three buckets, you know, at the earliest Stages you have founders who maybe dropped out of school, maybe they are two, three, four years out of school, but they have a great idea, they have a very enthusiastic initial user base. We think there's a lot of opportunity there. You can get those at your typical pre seed seed prices. There's like the middle bucket which our founders, maybe they went through a combinator, maybe they've already raised a small round and you see incredible traction at the earliest stages. Right. Those are more expensive than they've historically been, but they're still within the buy box of seed. And then you have yes, those repeat founders, the teams that's been out of DeepMind that do get those eye popping valuations. But the truth is a lot of that is de risked because there's also eye popping acquisitions of those teams. So the risk reward actually does net out in those cases. The reason though, they make red headlines.
- [44:10]
Ed Ludlow (Host, Bloomberg Tech)
The risk reward or the potential exit would factor, I imagine into the term sheet. But for like bucket number one, how do you do the math on the term sheet? Like how are you modeling for future revenues? Or like does there need to be a future revenue at that point point? Like even a business model, there has
- [44:28]
Vanessa Larco (Co-founder, Premise Venture Firm)
to be a semblance of a business model. What we're looking for at the earliest stages are the founders, though it is very much a bet on the founders and what markets they want to build in. The product that they pitch us very rarely ends up being the thing that takes off and raises the next round of capital. What we're underwriting is what do or what is the probability that this team can figure out a great product for their initial customer base in a market that we think is expanding rapidly. And if there's a high probability of that they get a higher price point. And if there's, you know, kind of you have to really squint to see if the market can expand or if there's room for a new product, then the valuation reflects that as well. But it's the founder we're underwriting, the founders.
- [45:14]
Ed Ludlow (Host, Bloomberg Tech)
You're a founder of Premise. Why make that decision? You know, after a long period of time to leave a big firm and go it alone. What does that allow you to do that you couldn't do otherwise at any rate?
- [45:26]
Vanessa Larco (Co-founder, Premise Venture Firm)
Well, the good news is I'm not alone. I have a co founder who she left Lightspeed and so we joined together. But it's the same story that our founders tell us. It's I was working in a big organization, I saw a lot of opportunities, I wanted to move fast and be nimble. I wanted to try things out and for whatever reasons, there wasn't enough space or time or priorities to to go down that path. So at some point you get enough conviction in your ideas and what you want to build that you kind of have to launch like there's no other path for you.
- [46:00]
Ed Ludlow (Host, Bloomberg Tech)
Vanessa Larco, founder of Promise Premise, formerly of any A back on Bloomberg Tech walking us what's happening at the earliest stages of venture funding. Thank you very much. Let's get through some of the other big tech headlines out there with Bloomberg's Yohira and hi you hire hi Ed.
- [46:15]
Bailey Lipschultz (Bloomberg, Post IPO Analyst)
It's time now for talking tech. First up, Chinese AI firms like Tencent, Alibaba and Huawei are opting out of Nvidia in favor of local AI suppliers. The Bloomberg intelligence survey reveals executives in the country say they'll allocate 46% of their budget for AI accelerators to domestic products over the next 12 months. That's up from 30% today. Plus, Nvidia is facing another challenge out of China. Reuters is reporting Deepsea has plans to develop its own chip to power AI systems. They'll be designed for the inference stage where AI models of course, learn to generate responses to users questions. And Sentience, a semiconductor and AI software company backed by giants like intel and Microsoft, is planning to go public. The California based startup has raised $311 million from investors to date, tapping investors growing enthusiasm for chip technology.
- [47:15]
Ed Ludlow (Host, Bloomberg Tech)
Ed okay, thank you Hira. Now coming up, the biggest names in tech and media are gathering for their annual summer getaway in the exclusive Sun Valley Resort in Idaho. Stay tuned to the details. Next next. This is Bloomberg Tech. It's the time of the year where billionaires let loose. Sun Valley Resort in Idaho is hosting its annual summer camp exclusively for Those in the 3 comma club. Jeff Bezos, Sam Altman, Dario Amaday are among the tech leaders expected to attend the invite only retreat. Bloomberg's Michelle Davis joins us from Sand Valley. On the ground. For the Bloomberg Tech audience that might not be familiar, this is the Allen and Co TMT conference. Super private, super exclusive, and it's all historically been about deals set the scene for us.
- [48:15]
Michelle Davis (Bloomberg Reporter, Sun Valley Conference)
So as you said, this is is a conference that has historically been about deals. It's a conference that really got its roots more than 40 years ago with the media and cable industry. And in recent years, of course, tech and AI especially have become an increasing focus. I think what's really interesting about this year though is we're on the heels of Paramount Warner Brothers, you know, closing in on their $110 billion deal. That's going to close soon. And once it does, it's really recent setting the chessboard here in media. And we're finally at the point where it feels like the floodgates are going to open and we're going to see a lot more M and A in the media industry that we hadn't seen as much in past years. So it feels like that's going to be a bigger focus here than it had been in recent years. Just last week, Comcast announced that it is going to separate NBC Universal from its cable unit. That's seen as, from analysts, as a bit of a for sale sign on both of those units.
- [49:09]
Vanessa Larco (Co-founder, Premise Venture Firm)
Units.
- [49:09]
Michelle Davis (Bloomberg Reporter, Sun Valley Conference)
Fox, as you remember, has announced that it's buying Roku, the streaming platform for $22 billion. And Netflix still pretty much, we're sure wants a to buy a streaming asset. So I mean a studio. So we'll see what folks will be doing here.
- [49:24]
Ed Ludlow (Host, Bloomberg Tech)
The mountains of Idaho is a great place to walk your dog, to have a hike, to ride a bike. I've seen the tech CEOs and billionaires do it so many times every year. The key names are behind a deal there. I remember Elon Musk and Twitter, Microsoft and Activision with the Warner Brothers Paramount deal are the key names there.
- [49:42]
Michelle Davis (Bloomberg Reporter, Sun Valley Conference)
We're expecting the key names to be here. A lot of the invite list looks exactly like it's looked for the past 20 years. It's, it's Tim Cook, it's Jeff Bezos, it's Mark Zuckerberg. But there are going to be some new names as well. The incoming CEO from Apple, John Ternus, is expected to be here. Josh d', Amaro, who has been coming years past, will be here for his for the first time in his capacity as CEO of Disney. And of course, there's always the special guests who, you know, be professors and and politicians who give speeches during the official programing that kicks off tomorrow.
- [50:15]
Ed Ludlow (Host, Bloomberg Tech)
We will speak to Bloomberg's Michelle Davis throughout the week. Thank you very much. That does it. For this edition of Bloomberg Tech. One hour from now, tune in to a live and interactive Q and A livestream. Bring all of your burning Microsoft and Xbox questions to me and Bloomberg's video game industry reporter Jason Schreier. We're going to be talking all Things Video Games 1pm Eastern on bloomberg.com it's been a massive show. There is so much happening in markets right now, a lot of it driven by the chip sector and memory in particular, recap on the podcast. A lot of good and interesting conversations. The pod is on Apple, Spotify and I heart thank you for very much for joining us. From New York City, this is Bloomberg Tech.
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