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Ping An Representative
For every six Chinese people, there's a Ping an customer. We have accumulated a massive amount of the customer data, not just on the financial side, but end to end across channels thanks to our AI advancements.
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Bloomberg Tech Host
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Amazon 5 Star Theater Narrator
Ping An Podcast in our latest episode.
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Podcast Advertiser/Announcer
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Bloomberg Tech Host
Integrated and personalized 24.
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Podcast Advertiser/Announcer
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Bloomberg Tech Host
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James Seaford (Bloomberg Intelligence) / Verizon Business Representative
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Bloomberg Tech Host
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Bloomberg Tech Host
Bloomberg audio studios podcasts radio news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech coming up and Crypto anxiety It sends stocks on a wild ride amid volatile trading. We'll have the details. This is OpenAI teams up with Foxconn Design AI Datacenter hardware in the United States and we speak with the CEO cerebras about the US's approval of selling advanced AI chips to the Middle East. All of this coming in the context of deepening market anxiety after we are whipsawed time and time again. Let's just check out what's happened on the markets over the course of the five trading days. What a week it has been. It is off by 4% for the NASDAQ. This is the worst week we've seen for the NASDAQ 100 since April. Since, of course, the first concerns about trade tariffs came into the market. We are seeing significant pressure on some of your biggest winners. Let's move on and see how some of the Nasdaq key points contributors are doing on this day. Nvidia up by 2.7%. Nvidia is now down 8% over the course of five trading days.
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Amazon 5 Star Theater Narrator
4.
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Bloomberg Tech Host
But Oracle on course for its worst week since March 2018. The AI bubble anxiety continues. And we want to dig into all of that and the market reaction this week with Bloomberg's equities reporter Carmen Reineke, who has been across this story day in, day out. Common why are we seeing this ongoing pressure on some of the biggest winners?
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Carmen Reineke (Bloomberg Equities Reporter)
Yeah, it's really interesting and like what a week it's been, right? You know, we have Nvidia with this blowout earnings report and then two down days immediately following it. Really what it seems, what seems to be happening is there are so many macro pressures on the market right now that that's adding a lot of weight and dragging down the major indexes. But at the same time, we're seeing that Nvidia's report, as good as it was, wasn't enough to quell some of these overall fears. Right. And so we're seeing a sell off, we're seeing a very risk off mentality in the markets right now. And one thing that has been kind of interesting is looking at the stocks that are up today. Yes, we're actually seeing Apple out. I mean it usually has lately sort of been opposite of these big names because it doesn't have a huge AI piece of the puzzle. And then we're also seeing Google up, which is still really big optimism after Gemini 3. So it's just interesting to see a little bit of the split that's happening there in the market.
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Bloomberg Tech Host
And much of this, of course, has been built into the worry about, yes, Nvidia has the demand, people starting to dig into accounts receivable, into inventory. But that felt like a desire to try and in retrospect understand why we were seeing a sell off rather than seeing that and then seeing a stock sell off. So can you talk to us about how things are happening in timing wise?
- [04:34]
Carmen Reineke (Bloomberg Equities Reporter)
The timing has been so interesting and I think you're totally right that we, you know, I speak to a lot of investors and people were sort of pulling on different things, but there was no real smoking gun. Great answer as to why, you know, we were seeing this sell off. But we have been seeing the market sort of react more to things around a Fed cut if there's going to be a rate cut in December. So this morning, you know, looked like things were kind of positive. And then around the Williams comments, but then you know, we get mish out and so it just seems like there's a ton of macro and that is really what's moving the market.
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Bloomberg Tech Host
I think one discourse that has been throughout is debt and debt particularly among players like Core weave in the Neo clouds. But Oracle in particular the cds, the credit default swaps of Oracle have become almost like a way in which we show anxiety in the great debt pile out of certain companies. Is it rational? No one thinks Oracle is suddenly going to default but it is being used as some sort of hedge here.
- [05:35]
Carmen Reineke (Bloomberg Equities Reporter)
Yeah, totally. And I mean the stock has just completely fallen off. You know it had that huge jump and then we've erased all of that in. The debt question is a really big thing on investors minds and I think it really plays into the fears of the AI bubble or the debate around it being a bubble. Because if these companies start loading up on debt there is the potential that it could be they could become over levered. That could be a bigger issue down the line. And you know, with everything as circular as it is, even though these companies keep addressing it, you know, Jensen spoke about it in Nvidia's calls. Investors are just not convinced yet. You know they're just seeing the house of cards. They're, they're worried about it.
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Bloomberg Tech Host
They need to see the return on I believe most common. Reineke has been across this story. Have a feeling she'll continue to be so we thank her. Look, let's turn to the world of digital currencies as volatility There too. Bitcoin on track for its worst month since 2022. Look how much it shed 25% of its value in November alone. It's not just bitcoin though. According to data from Coingecko, the total market value for virtual coins has dropped below $3 trillion for the first time since April. James Seaford is with us, Bloomberg Intelligence. You cover alternative investments and talk us through some of the selling pressure. You look at it particularly from the ETF lens, but more broadly is it institutional money that's stepping away ever since that big sell off leverage washout in October?
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James Seaford (Bloomberg Intelligence) / Verizon Business Representative
Yeah, so I absolutely think this is still hangovers a little bit from that October 10th sellout that you just mentioned. There's no way to know for sure it's institutional or retail, but it's, it's, there's some big sellers out there and what I would say is the ETFs have mostly held strong. I mean we, as a, on a percentage basis the amount of outflows we saw from the ETFs was way bigger. In April it was about 6 billion that came out. Right now we're about 5.3, 5.4 billion that have come out of ETFs but it's from a much higher base. So the percentage basis is way smaller. So most of the selling is happening from, you know, the actual spot crypto markets. A lot of people like to look at the ETFs and they think like, oh, they're causing this problem or they're, they're, they're exacerbating things but really they're just a piece of the pie. And right now, like I said, it's only about 5.3 billion that have come out of the ETFs, the US spot products. So for most of this is happening actually to the coins directly.
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Bloomberg Tech Host
It's interesting that many who have been in this space for a very long time don't see this as particularly anxiety inducing moment because they've seen sell off some pressure before. It's a volatile asset class. But when you say exacerbating the situation, how much digital asset treasuries exacerbating the situation. The sudden move we saw for companies to put digital assets on the balance sheet.
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Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Yeah.
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James Seaford (Bloomberg Intelligence) / Verizon Business Representative
So I absolutely do think that the DAX are exacerbating things here. So. Right. I think they were a bit of a flywheel on the way up. Right. They were trading at a bit of a premium. They were issuing stock to buy the underlying currencies, they were issuing debt, preferred stock, convertible debt to buy the underlying currencies. And when the trading at a premium that's spinning in one direction right now, things are spinning the opposite direction. There are some DAX out there that are selling underlying assets, we know some Ethereum ones and things along those lines. So I think this is. And then also there's a lot of traders out there that are doing things where they're hedging the underlying asset and hedging against the actual DAC companies themselves. So that whole interaction is definitely kind of spinning the opposite direction of the way it's been spinning for the last few months. And then also there's a lot of concerns about quantum computing from. There's a blogger who everyone kind of respects in the space has moved up his timelines and a lot of people like to say it's fud, it's not real concern. But people are starting to take this seriously, including the leader and founder of Ethereum, Vitalik. So I think there's a whole bunch of things here that are compounding Obviously you just spoke about it. There's a bunch of risk off in names and just equity risk assets in general. And then I think also maybe this might be. We often see a bit of selling around this time of year, maybe into December, particularly with ETFs for tax loss harvesting. Maybe that's being pulled forward a little bit.
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Bloomberg Tech Host
That's interesting. What I want to go back to is the quantum side of the equation. Look, we know that the situation digital asset Treasuries has been. Case in point is Michael Saylor and what he did with strategy and people worrying that maybe that even falls out of some of the key key benchmarks and that adds to the selling pressure. But quantum is more about cryptography and how that might be broken. Briefly, James, is that what people are worrying about?
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James Seaford (Bloomberg Intelligence) / Verizon Business Representative
Yeah, I mean I won't pretend to be an expert on quantum cryptography or cryptography in general, but essentially the concern is that, that quantum computing would be able to hack the encryptions that basically keep, you know, bitcoin and other cryptocurrencies safe. There are, you know, quantum resistant cryptographies that can be used and are planned to be used in other cryptocurrencies and even proposals for Bitcoin, but they're not instituted yet. So the concern is, is this going to happen faster than most people are expecting? But the industry is on top of it. It's just, you know, it's a genuine concern at this point, as far as I'm concerned.
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Bloomberg Tech Host
As you say, hashtag fud, Fair Uncertainty Doubt. Hadn't heard that acronym in a little while. James Seifert of Bloomberg Intelligence, thanks so much for breaking things down. Let's get an investor perspective for you now. Eric Bailey, executive managing director of the Bailey Group at Steward Partners, joins us now. And fud, Fear Uncertainty, Doubt. Is that what is ripping through the markets?
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Eric Bailey (Bailey Group at Steward Partners)
Clearly, yeah. Yesterday was certainly eye opening with, with the action in the markets and it shows investors are nervous. We've seen it pretty much this whole month. And then yesterday really, really was clear that this sell off has more legs and you know, big parts of the market are in a correction in video now down 17% from its high. You were talking earlier about Oracle, that's down 40% and you're seeing investors are getting more defensive. You're seeing sectors like utilities, pharmaceuticals outperforming the growth parts of the market. And so this could continue right as, as, as we get through the end of the year. You do see rebalancing, tax selling and that could continue as we need a Little more clarity, a little more confidence to come into the market to, to get the growth trade back, back heading up.
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Bloomberg Tech Host
What more clarity could you wish for? We got a relative amount of clarity coming from the world's most valuable company. Jensen Huang doing his best to try and make clear the line of sight he has on future revenues. People questioning maybe the inventory build up now, but we did get a lot of tangible evidence there. We had people such as Michael Burry saying, who are the auditors on Open Air? And yes, there is a lot of anxiety in the private markets, but many have pushed back on that sort of concern. What clarity do you want to see, Eric?
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Eric Bailey (Bailey Group at Steward Partners)
Yeah, no, you bring up great points, I think. Right. It's a valuation issue and right now investors are weighing what's the value of these names. They're not clearly sold that the growth can continue. Even though you look at the analyst community, you look at Nvidia, the average price target is 250. That's a 30 plus percent move from these levels. So you would think at these prices it's pretty attractive. So a lot of this is again, you know, just market reaction going through kind of a correction phase. And I think the buyers will come back in. It's always, it's always unclear when and at what levels. But I do see the buying coming back into the markets.
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Bloomberg Tech Host
Is the element of catch a falling life. But is the Fed the key question if rates are indeed cut in December?
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Eric Bailey (Bailey Group at Steward Partners)
Yeah, the Fed adds a level of confidence to investors and investors clearly want to see the Fed is taking action that's positive for the economy and that right now is clearly with rate cuts. And so rate cut would, in my view, bring in confidence to the markets and should help equities, especially growth equities. Growth equities typically do well as rates come down. And so that would be a big boost next month.
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Bloomberg Tech Host
Some of these particular numbers that I relate to on a weekly basis do look really ugly. As I say nasdaq, nasdaq, worst week since, since April. Nvidia, worst week since about April. And you see a similar thing for Oracle. Worst week in fact since 2018. But looking at a year to date basis, we're still in a pretty great spot, right Eric?
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Eric Bailey (Bailey Group at Steward Partners)
Oh, absolutely, yeah. I mean, the S and P still up north of 10%. Overseas markets have had an incredible year up, you know, across the board, north of 20%. So investors, right, they have to step back and be patient and be calm and actually look at these sell offs as an opportunity because this is where you can make solid returns right. By great companies at lower levels. I mean that's the key to investing and not panicking and not selling when everyone else is selling and take losses and hurt yourself long term.
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Bloomberg Tech Host
Eric, your thesis with AI, do you think it's a bubble or do you think this is the sort of capital expenditure that's necessary to reap the productivity in the future?
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Eric Bailey (Bailey Group at Steward Partners)
You know, the numbers you're seeing committed to this space is certainly eye opening and nervous and it seems like it's a few of the big massive players in that space. And so it does, it does bring concern. On the other hand, without a doubt with these earnings results we've seen, you know, just from in video and you saw from Alphabet and the strength there, clearly I, you have to be invested in it long term. It, it's the growth engine. And so if you want growth, air is the place you want to be.
- [14:41]
Bloomberg Tech Host
Alphabet at a new record high today. Eric Bailey of the Bailey Group at Steward Partners. Thanks for your time. Happy weekend. Coming up, open air. Well, it's partnering up with Hon Hai, also known as Foxconn, to design AI datacenter hardware in the United States. Details next. This is Bloomberg Tech.
- [15:04]
Ping An Representative
For every six Chinese people there's a Ping on customer. We have accumulated a massive amount of the customer data, not just on the financial side, but end to end across channels thanks to our AI advancements.
- [15:16]
Podcast Advertiser/Announcer
This is the technology empowered growth at Ping an podcast.
- [15:19]
Bloomberg Tech Host
In our latest episode, Ping an is utilizing technology to provide integrated and personalized 24.
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Podcast Advertiser/Announcer
7 support for China's rapidly growing elderly population. Now available on Spotify, Apple Podcasts and Ping An's website.
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Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Yeah.
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Bloomberg Tech Host
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- [17:23]
James Seaford (Bloomberg Intelligence) / Verizon Business Representative
To Keep pushing the frontier we need to build these new types of AI infrastructure hardware at scale and I'm excited for that to happen in the US and with Foxconn. Foxconn's experience building complex infrastructure and hardware at massive scale makes them the ideal partner for this, and I'm looking forward to exploring together what this can look like. We'll share insight into emerging hardware needs.
- [17:45]
Bloomberg Tech Host
Across the AI industry and Foxconn will.
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James Seaford (Bloomberg Intelligence) / Verizon Business Representative
Use that to design and prototype new equipment that can be manufactured in America.
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Bloomberg Tech Host
OpenAI CEO Sam Altman joining Foxconn, also known as Hon Hai Tech Day in Taipei remotely to weigh in on the company's partnership with of course Foxconn to design AI datacenter hardware in the United States. States look under the partnership, Foxconn will co design and develop datacenter server racks with Open Air and work to ensure such racks can be manufactured across the United States. Bloomberg Tech's Annabel Drowders she caught up with Hon Hai Chairman Young Lu to discuss the plan and his goal for scaling up compute capacity. Take a listen.
- [18:25]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
A gigawatt per week will be the goal.
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Bloomberg Tech Host
Okay, one gigawatt per week per week.
- [18:31]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
That will be sense goal. But we can start with 1 gigawatt per month.
- [18:36]
Bloomberg Tech Host
So you think you can add 1 gigawatt per month next year?
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Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Starting next the second half of the year.
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Bloomberg Tech Host
Second half of the year. So you think you can add 6 gigawatts next year?
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Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
I'm not sure.
- [18:50]
Bloomberg Tech Host
It really depends on our study and.
- [18:53]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Our new way of doing things. It takes time but eventually we're going to get there.
- [18:58]
Bloomberg Tech Host
Let's talk about then this opportunity in the US because as you said, part of this is about making America. It's very ambitious. What's the capex that you need to also dedicate to the States?
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Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
The capex wise is in maybe 1 to 5 billion to start with, to build the factories, to build R and D centers, but to build the working.
- [19:26]
Ping An Representative
Capital required to build a data center, that's totally different.
- [19:33]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
That requires huge amount of money.
- [19:36]
Bloomberg Tech Host
Yeah.
- [19:37]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
And with that we are going to work with Sabang.
- [19:41]
Bloomberg Tech Host
What are the biggest challenges with with.
- [19:43]
Podcast Advertiser/Announcer
Scaling up in the US Shortage of labor?
- [19:48]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
As I mentioned, it's not a labor cost, is a shortage of labor.
- [19:53]
Bloomberg Tech Host
How do you get around that? What are the conversations and what are the biggest shortfalls that you see?
- [19:59]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
We had to work closely with schools and the government, which we were very familiar when we built factories all over the world. We had to work with local agencies or local government to get their people ready for the kind of job that we required.
- [20:24]
Bloomberg Tech Host
Hon Hai Chairman Young knew there with our own Annabel drillers. Let's break down that agreement between OpenAI and Hon Hai. Bloomberg's editor Seth Fiegeman is here. It's interesting timing, giving the anxiety around capital expenditure and we're hearing about how Hon hai is using SoftBank perhaps for some of that capital expenditure and investment sets, but there doesn't seem to be any purchase agreements here, right?
- [20:47]
Seth Fiegeman (Bloomberg Editor)
That's right. We really don't have any numbers here. I mean, it is another testament to the scale of opening eyes ambition in particular on the infrastructure front, as well as Foxconn's desire to diversify away from its reliance on Apple and really gain momentum on the AI server front. But I think stepping back from it, the really important thing to take away, apart from a lot of the rhetoric around what it means for us manufacturing is what it means for OpenAI as it tries to not just move faster on the infrastructure front, even in the face of anxiety about AI spending, but also begin to build more of a moat or competitive advantage on the infrastructure side. We talk a lot on the show and elsewhere about, you know, how much and how quickly models are being commoditized and whether. But I think what you've seen Altman and OpenAI do is try to assert more ownership over the supply chain for data center build out and chips in a way that could give them a different kind of competitive advantage and lower costs in the long term.
- [21:39]
Bloomberg Tech Host
Again, it's a foreign company investing the United States. One to five billion dollars is what they're thinking of spending to grow Foxconn's US Manufacturing footprint. But here this seems to be about the understanding of inefficiencies within data centers. Right. What can go wrong and how open. I can lend a hand on telling.
- [21:56]
Seth Fiegeman (Bloomberg Editor)
Them that that's right. I mean look, most people are probably more consumed by thinking about the models that we use in the chat bots, but they're talking about a lot of the key components that go into setting up and operating data centers. From the data center server racks to cooling and power equipment to the cabling. These are not the sexiest things, but they are essential. Trying to build out a massive scale of data centers here and abroad.
- [22:19]
Bloomberg Tech Host
Meanwhile, OpenAI is trying to field a ton of questions right now. They are of course under some duress about how they're raising funds in and of themselves to spend on all the data center build out. You had Michael Burry like questioning auditors and it seems as though that we got some clarity from that on FTSE reporting. Seth but how much pressure is Sam Altman and team feeling at this moment?
- [22:40]
Seth Fiegeman (Bloomberg Editor)
Immense. And we're not even mentioning what they feel from Google now, which seems to have built a model that either rivals or out competes anything that OpenAI currently is in the market which gets back to again, they want to have a competitive advantage not just on the model side but on the infrastructure that supports it. And increasingly they're tying themselves to all different corners of the market and all different key players in tech to make it so they're too big to fail.
- [23:01]
Bloomberg Tech Host
Seth Begman yeah, great context. Thanks for bringing it. Happy weekend. Shares of Ubisoft that climbing today in Paris as trading resumed after week long suspension for the gaming company look, it had delayed its second quarter results after auditors found it improperly recorded revenue from a partnership. Ubisoft helped reassure investors today by saying it will pay off debts with funds from an investment it received earlier this year from Tencent Holdings. Meanwhile, Matter is making a big push into AI. We know that. And to assist in that expansion the social media giant is actually adding another business to its portfolio. Power Trading. Hoping to help plant developers by committing to long term energy contracts. Bloomberg's Riley Griffin covers Matter. Extraordinary story. The amount of diversification these companies are having to do to fulfill the energy and requirements for data centers.
- [23:57]
Podcast Advertiser/Announcer
It's, it truly is amazing. And it comes back to this idea that Mark Zuckerberg has pitched as front loading capacity, bringing on the energy they anticipate, the compute they anticipate for that big day that they are gunning towards, which is the idea of super intelligence. But in the interim, you know, Metta anticipates a lot more energy needed and so it is going to enter this power trading market in an effort to ensure that long term capacity.
- [24:26]
Bloomberg Tech Host
There was a great interview you did With Over Parak, who is heading up electricity trading for matter, why is she vindicating this move and what ultimately is she thinking about doing to build this out?
- [24:38]
Podcast Advertiser/Announcer
Yeah, so she said that too few buyers are willing to commit to long term electricity contracts that would justify building new power plants. So really the demands are clashing with the demands of the grid. And Metta is taking matters into its own hands here. By becoming a power trader, it would essentially lock in these long term deals to support its ambitions.
- [25:02]
Bloomberg Tech Host
It's interesting that certain analysts out there, you talk to the managing director of power modeling firm Habitat saying that this is actually a natural extension of tech companies. Investors understanding that, that they're all going to become basically infrastructure companies. Energy company trading companies too.
- [25:18]
Podcast Advertiser/Announcer
Yeah, it's a kind of managing of risk that we've seen in other industries. It allows you to lock in energy and then if you have too much, you can ultimately sell it back. And matter is not alone here. So we've seen Apple, Microsoft, other big players make this attempt to. So Metta isn't alone. And I think that's a reassuring thing to investors. The other very interesting comment we heard from Mark Zuckerberg on the last quarterly earnings call was that they're thinking about managing that kind of risk when it comes to excess compute as well. So we're watching closely to see if they make any moves to diversify into that API business, that cloud business, to sell that to.
- [25:57]
Bloomberg Tech Host
Look, everyone's a hyperscaler, everyone's a cloud provider now everyone's an energy trader. To Bloomberg's Riley Griffin. Fascinating. Thank you very much indeed. Welcome back to Bloomberg Tech. Let's check in on these markets. Let's give you what we did for the week because it's been under pressure for the course of the week. On the day the NASDAQ is actually trading higher, we're up about a tenth of a percent. On the course of the week, though we are lower to the tune of 3%. Let's call it the worst week since April, since the real torrid anxiety around trade tariffs really hit the market. We look at individual movers and when you're thinking under the hood, which are the key players have been dragged to the downside. Today is the day of volatility. As we think about what the Fed does in December, on the weakest anxiety of AI bubble or not, about whether we can afford the capital expenditures. Nvidia is up by 9, 10 of a percent again after stellar number customers after more than 60% growth in terms of revenue yesterday for the fiscal quarter just gone and pointing to the fiscal quarter to come. And yet that line of sight on half a trillion dollars worth of revenue, not enough to cool market anxieties. Instead we're talking about accounts receivables. What they're owed by their customers. What are they owed by Oracle? What is Oracle having to do in terms of debt issuance? That's what the market is questioning. We're up by 6%. It's having its worst week since March 2018. Teen by 6% on the day. Let's talk about all of this. The big tech binge on debt. That's what people are talking about. While in the absence of a leverage underpinning, the buildout has long been used to dismiss bubble concerns. But there has since been a bit of an uptick in borrowing and it's starting to change the narrative the most. Tech equity reporter Ryan Vlastelleker is here. And look, we're not talking that Alphabet or Amazon or Microsoft are suddenly going to go broke here. They have huge cash on hand. But why Oracle CDS in the line of fire?
- [27:47]
Ryan Vlastelica (Tech Equity Reporter) / Mint Mobile Advertiser
Hey, good morning. Thanks for having me. So yeah, Oracle is really sort of the focus when people are starting to pay attention to the debt that is being issued by all of these tech companies. I think the five big spenders on AI, which is Microsoft, Alphabet, Amazon, Meta and Oracle, together they have raised more than 100 billion in debt this year. That is more than 33 times the average over the past decade or so. Oracle in particular, because they are seen as having one of the weaker balance sheets of them, they're going to have negative cash flow this year that's expected to deepen in the coming years as they invest aggressively into their cloud business, which has been a big beneficiary of AI. But if you look at their credit default swaps for the next five years, which is really being used as a kind of proxy for AI risk, those have skyrocketed over the past couple of months and I think they're around 44 basis points in September, they're over 100 now. So this just shows you how people are growing concerned about all of this Capex. When is it going to pay off? What is this doing to the balance sheets of all these big tech companies? And really how should that impact the way we are valuing them?
- [28:51]
Bloomberg Tech Host
Rating companies are keeping an eye and I think Oracle has been put on negative watch in case it does need a downgrade from its debt issuance. But what's interesting thing is there's a lot of Creative financing around this. There was $18 billion issued by Oracle. There was $38 billion of bonds issued for Oracle data Centers, but not by Oracle at all. And then we think about the private credit markets and what Blue Owl's been up to with matter. How much is this actually not being seen at the moment?
- [29:19]
Ryan Vlastelica (Tech Equity Reporter) / Mint Mobile Advertiser
That's a great question. I think this kind of gets to the bigger picture concerns right now about just all of this spending, how it's being done. We've seen so much, these circular financing deals, you've seen this off balance sheet debt, all of these things, it just seems like they add to the risk of the market or people are saying like we don't really know the full picture of all this stuff. We have one of the biggest, most important companies in AI, which is OpenAI. They're private. We don't have as much information about them as we do public companies. When you get all that, it's like this is just more things that our people are uncertain about. Numbers you can't fill in. And that just causes people to think maybe this is more risky than we thought. This is a good opportunity to be taking risk off the table when you see all these things sort of building on each other.
- [30:01]
Bloomberg Tech Host
Ryan Vasilika, always a must read. Some of the most stories throughout the week. We really appreciate it. Let's talk about some of that anxiety in the private markets. Concerns about an AI bubble. They swell there too. Rebecca Lynn, managing director at Canvas prime is one who's saying we are in a bubble. Your head. Tell us a little bit about what's impacting your investing approach and first give us your thesis on why it's obviously an AI bubble.
- [30:25]
Podcast Advertiser/Announcer
Right? Well, I think we can, we can debate whether we're in a bubble or not. You know, for that, for the better part of the day, I definitely think we're in a bubble. But what's more interesting I think to talk about is how we as early stage investors react and how we invest in incredible companies that will be the next, you know, sort of, you know, $5 trillion companies and how we, how we execute on that. No matter where we are in this hype cycle.
- [30:50]
Bloomberg Tech Host
Rebecca, for example, those that would say we're not in a bubble or not in similar to.com is that actually a lot of these companies are very profitable. Nvidia, very profitable, Alphabet, Amazon, all the likes. But OpenAI and the private side, we know that thus far they haven't been profitable because they're having to invest so much. So let's turn on to the private side, what security are you getting from the companies you want to invest in that they are keeping pace with growth trajectory on the bottom line and the top line.
- [31:18]
Podcast Advertiser/Announcer
Very interesting. So what we're doing is we're really having to dig in and the companies we invest in on, on the customers and go in and talk to their core customers and ask questions, questions I haven't had to ask honestly. And since I've been in venture, like let me see all of your contracts for every single deal that you have signed up. Because what we're seeing in private markets is the RR is probably the most overused term in the English language. And so people, people are misused, let's.
- [31:48]
Bloomberg Tech Host
Just say misused annual revenue. That's what you're trying to get the idea that you look at what revenue you've had in the month past and you can extrapolate that out on a 12 month basis.
- [31:58]
Podcast Advertiser/Announcer
Exactly. Or annual recurring revenue. How much have they contracted with with these, with their customers? And when, when a company gives you that number, you really have to peel back the onion. You have to go and talk to the customers, you have to look at the contracts. And in the contracts, oftentimes what they're accounting as annual recurring revenue is not at all. There are things like pilot revenue or you know, very installation revenue, things like that, very ephemeral revenue or the revenue could go away with a 30 day out clause at any point in time. So we really look for companies where customers have, have used, are using the company not just as a trial or an R and D experiment, but are really using that company and count on that company for their day to day operations either in financial services or health care.
- [32:44]
Bloomberg Tech Host
I think back to the lessons learned in FTX and when we all suddenly realized this company that everyone had piled into thinking it was, is a winning formula was actually I think using QuickBooks in terms of its own accounting methodology. How much have investors VCs become so savvy to the cult of a personality to the CEO, to a story that is of growth, but actually really trying to peel that onion as you say you're doing.
- [33:11]
Podcast Advertiser/Announcer
Yeah, I mean it's just what we stay focused on. I tell my team, do the right deal, not the hype deal. And it's hard, it's hard when they bring a company in and you know, people are piling in, you know, $500 million valuations with really no revenue. And they're great, they're great firms. We call them the, the big box firms here in Silicon Valley who have you know, raised hundreds over a billion, $2 billion in to invest. And they just have a fundamentally different problem right now. They, I think they're not doing a lot of the diligence. They can't do that really deep diligence because they simply have too much capital to deploy. And when I talk to, to Mike, my, my brethren over there, that they'll say things like, you know, our job is in part just deploying capital. And so I think sometimes, unfortunately they skip over the part that I think is the most important part of the job, which is diligence and governance on these deals and really diving deep to say, is this a company that can make it for the long term and, and really return a lot of capital or is this a company that might be running on QuickBooks like you said.
- [34:13]
Bloomberg Tech Host
The thing is you're in the Series A and Series B. I think of just the extraordinary numbers that. Look, we were talking about a potential project that Bezos is launching with initial seed funding of $6 billion. You got Mira Marathi raising a company's funding at potentially a $50 billion valuation is what's being reported by Bloomberg when ultimately a seed round was giving her a valuation of 12 billion. Is rate 2 billion on that. What are the numbers that you're seeing to get into these rounds?
- [34:42]
Podcast Advertiser/Announcer
Well, I think first of all what you have to realize is that, you know, the large majority of capital is going into a handful of deals. I think 62% of all the money that went in last year in venture or actually this year is going into eight deals. And so I actually see that as an opportunity. And it's a, it's a feature, not a bug in terms of what I'm doing. And we are seeing deals, we're seeing, you know, Series A's that we were interested in initially with sub 5, sub $10 million of actual revenue going for 500 million plus in valuation. But I think the more interesting thing, I actually walked away from two deals in the last, I would say 30 days that had that profile. But even if you could get comfortable with the valuation, what people really aren't talking about right now are the governance issues. And so in both of the deals I walked away from the founder demanded in the series A complete and total board control, not just in voting shares, but on every major decision that the company could make going forward. And what I've seen, you know, I was around for the dot com bubble and as an operator I've been investing through multiple cycles. And what I've learned is that that is a recipe for disaster in most situations. Valuations and so I'm actually more concerned with the lack of governance going on right now even than the actual valuations and the money going in.
- [36:03]
Bloomberg Tech Host
People not talking about it, but you're talking about it and talking about it on this show. We so appreciate that you do. We love the right deal, not the hype deal. Rebecca Lynn, come back soon, we hope. Managing director at Canvas Prime. Thank you. Coming up, we're going to be speaking with the CEO of Cerebra Assistance, Andrew Feldman. The US Applied proves the selling of advanced chips in the Middle east, how it affects his startup. And we're watching, of course, publicly traded shares to Netflix, Paramount, Comcast. Initial offers have been put on the table for the Warner Brothers discovery. Paramount wants the whole thing. Remember, at 1.3% on Paramount Skydance today, Comcast up almost 2%, but Netflix under pressure. This is Bloomberg Tech.
- [36:48]
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Bloomberg Tech Host
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- [40:16]
Ping An Representative
I think we've begun working with Saudi Arabia. We now have salespeople on the ground in in the Kingdom. It is a new effort for us and it's not as far along as we are in in the UAE and in some other territories. But it's an exciting opportunity and I think the move by this administration to allow our our allies and our partners in the Middle east to gain access to advanced AI compute is a good one and thoughtful and I think having US technology from chips to software to the full stack in the hands of our allies is is good policy.
- [40:54]
Bloomberg Tech Host
Hands of our allies you have CS3 system which he says quickly, easily clustered together you make it the largest AI supercomputers. The allies are in the Middle east. But there's always been worry that it would be a backdoor into China. How do you make sure that your IP is protected? Andrew?
- [41:10]
Ping An Representative
Look, I think we work closely with G42. They're our strategic partner and we have been working with them for, for more than three years now. And they have developed a restricted technology environment, an approach that sort of surrounds the technology with security. I think it is both forward looking and extremely sort of rigorous. We're really confident that, that it will keep, keep the technology both physically from being transported to China as well as used by, by, by Chinese agents. And so we're very confident. We've visited facilities, we've seen the restricted technology environment in action. I think they're doing an extraordinary amount of work to, to earn the President's announcement.
- [42:04]
Bloomberg Tech Host
You do have that relationship with G42. How does the relationship of expansion sales groups on the ground in Saudi Arabia square with that relationship? How many sales do you think you're going to be able to get right away? Andrew?
- [42:16]
Ping An Representative
I think sales in any, any territory take a little bit of time. You have to build relationships, you have to build credibility and legitimacy. But I think our success with G42, the work we're doing with other customers like Metta, like IBM, the work we're doing with large enterprises like Mayo Clinic and Galaxy Smith Klein and the work we're doing with, with leading AI startups like Mistral and Cognition, all of these make entry into new markets a little bit easier. You have examples you can point to. You have large customers that they or partners they can buy from. And I think this is what it means to be expanding quickly in a global environment.
- [42:59]
Bloomberg Tech Host
Is the US government doing enough to help startups such as yours vis a vision Nvidia, which in many ways gets a lot of the, the voice support from the administration briefly of course and.
- [43:11]
Ping An Representative
Sort of, they've, they've gone through this process too. Right. They weren't always a giant company. I think it's taken them 20, 25 years to earn their position at the top. And so you know, we have extraordinary access. We do big business with the Department of Defense with the doe. Actually I was with Jensen and Lisa Su of AMD with, with Secretary Wright. The DOE is, is a, a leading organization for, for US AI policy. It's been, I, I, I think you always want more but, but I'm proud of what we've been able to accomplish with the government.
- [43:56]
Bloomberg Tech Host
Andrew Feldman come System CEO. Appreciate you joining on the day. Canvas Affinity suite of creative tools. Well it's topped 2 million downloads since its launch. Just free software A few weeks ago. The free product offering is part of Canvas increasing effort really to challenge rivals like Adobe. Let's talk about this with Canvas co founder CEO Cliff Obrachi. Cliff, extraordinary level of uptake. Were you expecting that?
- [44:30]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
To be honest. And thanks for having me. First and foremost, we've been absolutely blown away by the level of uptake. It probably really speaks to the creative community screaming out for choice and us delivering on it. But yeah, we're absolutely blown away with the pickup so far.
- [44:46]
Bloomberg Tech Host
Affinity is about professional design in many ways. But how are you seeing being adopted by more broadly? And who is it that really wants to lean into this type of sophistication?
- [44:56]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
So Canva is a design tool and when we launched Canva, there were only professional design tools. So we launched Canva to enable the 90 to 99% of the world who couldn't design to be able to design and express their creativity. And what we did with the acquisition of Affinity, we acquired that company and we just launched it 100% for free.
- [45:17]
Bloomberg Tech Host
Free.
- [45:17]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
And that really gives creative freedom and the ability to create and design to the other 1 to 10% of the organization. So now we have both professional designers and everyone else able to design for free and with ease and not let the tools or cost get in the way of people achieving their goals through visual communication.
- [45:36]
Bloomberg Tech Host
Look, I'm looking at some analysis that was put out, one analyst calling it from a virtual visual suite to a comprehensive creative operating system. They say that launches Canva into beyond the tool for simple graphics and to challenge Adobe's long standing market dominance. Is that what you're doing? You're challenging Adobe here?
- [45:55]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
I think we really just think about how do we help organizations achieve their visual communication goals? How do we? People don't wake up in the morning wanting to create a social media graphic or wanting to create a presentation. They wake up up wanting to achieve a goal. Whether that's a small business trying to raise money, whether that's a large organization trying to win more customers or deploy great marketing content to grow their business and revenue. We're really in the business of helping businesses achieve their goals. And that's quite a complex process in a large organization to create on brand content at scale. And we really have connected all of that complexity through the creative operating system and help business businesses deliver on that promise.
- [46:36]
Bloomberg Tech Host
The promise is being borne out with the statistics and the money that rolls in. Three and a half billion in terms of annual revenue uses 260 million. You've been profitable for eight years. All of this Seems to hint that you're on the path to becoming a public company. Is that right, Cliff?
- [46:50]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Yeah, it's probably imminent in the next couple of years, that's for sure.
- [46:54]
Bloomberg Tech Host
Imminent. And what therefore do you need to streamline before that? How much are you thinking about about your talent? I know you've done a raise where you're able to offer liquidity to those that have been working with you, but how are you able to get the right talent in the door and retain them at this moment?
- [47:10]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
I mean, Canva is one of the fastest growing companies in the world right now and so that helps is a great product solving real problems for customers and delivering lots and lots of value. So people are excited to work at a company that really helping like that company that is helping their customers achieve their goals and is delivering on that success and is growing fast. And we've hired an incredible leadership team over the last, well since the start of Canva and a lot of our leaders have been with us for eight plus years. But we have also brought in a really great C suite of folks like our CFO Kelly, who came from Zoom and a bunch of others to really sort of like pad out that leadership muscle in the lead up to an opportunity, IPO and beyond.
- [47:51]
Bloomberg Tech Host
You are really augmented by AI in many ways, but some would say that OpenAI is a key competitor of yours. How do you see that with Sora? How do you see innovation as your lifeblood?
- [48:03]
Hon Hai Chairman Young Lu / Cliff Obrachi (Canva CEO)
Open Air, absolutely fantastic partner of ours and you can even start a design within Chat GPT now. So if you're creating a presentation outline, you can simply say can you can I please have that as a Canva design? And it will give you that Canva Design straight into ChatGPT and then you can click through to Canva for the final mile of editing, collaboration, deployment and then understanding how that content actually performs in the world. So we have an absolutely fantastic partnership with OpenAI and we really build the tools around the models like Sora. So in order to create a video, there's a lot more than just prompt, a short clip. You need to create character, consistency, audio, there's so much more. So we really create that end to end workflow that that enables video creation, design creation. And now we're the first company in the world that's launched a layered design model that really generates a Canva design that you can edit straight away rather than having to every time you make a change, redesign or re recreate that image or piece of content.
- [49:02]
Bloomberg Tech Host
Global phenomenon. I know you're off to China next. Enjoy that trip, Clifford.
- [49:06]
Podcast Advertiser/Announcer
Thank you so much.
- [49:07]
Bloomberg Tech Host
Co Founder thanks for joining us. That does it for this edition of Bloomberg Tech. What a week. Check in on the markets as we go to break. We're higher on the day, but it's been a sell off of a week. This is Bloomberg Tech.
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Bloomberg Tech Host
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