AI Spending Delivers Mixed Results to Stocks

Summary

Bloomberg Tech Podcast Summary

Episode: AI Spending Delivers Mixed Results to Stocks
Date: January 29, 2026
Hosts: Caroline Hyde (New York), Ed Ludlow (San Francisco)

Overview

This episode explores how the massive investments in artificial intelligence (AI) across tech giants like Microsoft, Meta, Tesla, and others are leading to divergent stock market outcomes. The panel includes analysts and guests who assess the logic behind surging capital expenditures (CapEx), the returns (or lack thereof) investors are seeing, and the broader implications for enterprise software, hardware innovation, and the intersection of tech and policy. Notable discussions include Microsoft’s Copilot, Meta’s AI monetization, Tesla’s ambitious fab plans for chips, Apple’s "innovator's dilemma," and a deep dive into the Hill & Valley Forum’s tech-policy bridge.

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Key Discussion Points & Insights

1. Market Turbulence Around AI CapEx (02:13–04:15)

• Tech stocks face significant turbulence due to concerns over high AI-related CapEx outpacing revenue growth, especially in companies like Microsoft and Meta.
• NASDAQ 100 is down 2%—worst day since Nov 2025. Crypto markets, once seen as "digital gold," are not acting as a safe haven.

2. Microsoft’s AI Bet: Long-Term Promise Amid Short-Term Pain

Capital Allocation & Strategic Priorities (04:15–11:30)

Guest: Gabriella Borges, Goldman Sachs (Emerging Software Analyst)

• 66% CapEx increase at Microsoft raises questions despite strong long-term AI positioning.
• Capital is not flowing strictly to Azure; two key priorities:
  1. **Copilot integration in first-party apps—**driving gross margin and long-term monetization.
  2. Internal R&D into new markets, such as medical diagnostics ("Microsoft AI could be a really interesting long term product cycle" – Gabriella Borges, 04:37).
• Short-term vs. long-term tension:

  “Short-term you see that in the Azure revenue number every quarter. Longer term though, something like Copilot, that’s a gross margin, margin accretion cycle…”
  — Gabriella Borges [05:45]

• Azure’s growth has decelerated, but Copilot and AI/R&D are “hard to see into the future.” Market punished the uncertainty, with Microsoft stock down 12%, erasing $429B market value—its biggest drop since March 2020.
• Enterprise adoption is key:

  “It’s been a real struggle to see adoption tick up on the enterprise side... there is starting to be enough critical mass to suggest that enterprise adoption will go up from here.”
  — Gabriella Borges [06:46]

• OpenAI relationship: Microsoft diversifying AI bets via Anthropic and first-party models, with a $250B OpenAI contract moving into the backlog.
• Competitive landscape: Entrenchment in Office suite gives Microsoft an edge; quality of productivity enhancements will be their metric, not consumer-facing chatbots.
• The enterprise vs. consumer AI divide:

  “There is a disconnect between the consumer facing market and the enterprise facing market…”
  — Gabriella Borges [10:31]

• Strategic completeness: Microsoft’s multi-layered approach through foundational infrastructure, apps, and differentiated benchmarking tools (Foundry).

3. Meta: AI Drives Growth and Wall Street Comfort

Guest: Shweta Kajuri, Wolf Research (Global Internet Managing Director) [11:30–17:02]

• Meta's massive $135B CapEx is now seen as justified after “best-in-class” revenue acceleration.

  “This is a quarter where they're showing IT... first quarter guide of over 30% year over year... This is best in class remarkable growth rate.”
  — Shweta Kajuri [12:06]

• Meta’s internal productivity is up with AI, and monetization levers seem “durable,” not just for advertising but also for potential e-commerce and business AI products (ex: WhatsApp).
• Next-gen LLM "Avocado": Its success is seen less about being #1 and more about being competitive.

  “The expectation... is not for Meta’s next model to really break the top three... If that happens then... they are on a good trajectory for upcoming updates to frontier models that they can leverage then for better impressions or monetization.”
  — Shweta Kajuri [14:49]

• More optimism about commerce applications driven by AI agents and Meta’s distribution scale.

4. Tesla: Chips, Robotaxis, and an Ambitious Future [17:23–24:04]

Guest: Tasha Keeney, ARK Invest (Director of Research, Autonomous Tech)

• Tesla’s $20B+ CapEx signals commitment to the Robotaxi future, projected to comprise 90% of Tesla’s value by 2029.
• Elon Musk's “Terraform” chip fab plan:

  “He's always been a very ambitious CEO... He knows Tesla needs a lot of chips... We've seen him vertically integrate in the past.”
  — Tasha Keeney [19:56]

• Tesla aims to double its pilot Robotaxi fleet monthly; if realized, could surpass Waymo within months.
• Key competitive edge:
  • Unmatched (vertical) scale
  • Massive FSD data advantage: 17 million miles/day vs. Waymo's 400,000
  • Potential price per mile down from $2+ to $0.25.

  “If you look at Waymo's miles... Tesla gets 17 million miles of FSD data per day that they can use to train the fleet...”
  — Tasha Keeney [23:30]

5. Software Landscape: Winners, Losers, and Market Skepticism [26:32–30:30]

• Snapshots of other tech earnings: IBM and Comcast outperform; SAP and ServiceNow face skepticism despite good fundamentals.
• Bill McDermott (ServiceNow CEO):
  • Points to ServiceNow's industry-leading growth, integration of AI, and strong cash flow.
  • Argues that the market misunderstands SaaS and undervalues their IP and workflow integrations with AI.

  “AI makes us better and we make AI better... We have 80 billion workflow in flight, doing six and a half trillion transactions. That's pretty hard to rewrite overnight.”
  — Bill McDermott [29:26, 29:48]

  • Active users are up 25%, bucking industry trend.

6. Apple: The Downside of Massive Success [30:30–34:08]

Guest: Mark Gurman, Bloomberg (Consumer Tech Reporter)

• Apple faces "innovator's dilemma": Cash flows from established products (iPhone, App Store) suppress urgency for AI innovation.

  “You have a company here that is lagging right now in AI, is lagging right now in products to some extent... They are so successful that it's probably hurting them in the long term.”
  — Mark Gurman [31:18]

• AI investment is overdue; integration with Google Gemini signals reliance on external partners.
• No "next big thing" on the horizon—shift to AI agents and new hardware is overdue.

  “Air [AI] is not a bubble. It's bigger than the Internet was, you know, 25 years ago.”
  — Mark Gurman [32:44]

7. Hill and Valley Forum: Bridging Tech and Policy [34:08–42:00]

Guests: Christian Garrett (137 Ventures), Delian Asparaghoff (Founders Fund)

• Forum now in its fifth year, spotlighting policy/tech alignment, industrial leadership, and global tech alliances.
  • More international participants, expansion beyond US-centric conversations.
• Emphasis on policy papers in biotech, rare earths, industrial policy, and tech independence vs. China.
• Noted shift from tech–policy divide (post-Project Maven) to a hybrid class of tech-savvy policymakers.

  “I think the same trend is happening abroad where you're seeing governments want to partner deeper with their technological sector...”
  — Christian Garrett [40:46]

• OSTP and space commercialization: Streamlined regulation aids innovation.

  “We used to have to go to almost like six different agencies... the administration's new space policy [is] starting to understand... space companies can't have to go after that many different agencies.”
  — Delian Asparaghoff [42:00]

8. AI and Child Safety: Amazon’s Troubling Discovery [45:19–49:00]

Reported by: Riley Griffin, Bloomberg

• Amazon detected and reported "hundreds of thousands" pieces of child sexual abuse material in datasets used for AI training. Content was removed, but Amazon did not provide enough source data for law enforcement follow-up.

  “When hundreds of thousands of reports came in, they typically expect details, location, data sources. Where did you find this data? And Amazon has not shared that detail, which has stunted further investigation.”
  — Riley Griffin [46:20]

• Broader problem: 1 million AI-related child abuse material reports in 2025, with most coming from Amazon.
• Experts call for far more rigorous data hygiene by tech firms.

  “Companies themselves [must] ensure their training data sets are clean before they train their models... how are they ensuring their data sets are clean?”
  — Riley Griffin [48:03]

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Notable Quotes & Memorable Moments

• On Microsoft’s AI spend vs. reward:

  “It’s a tradeoff between short term and long term... Longer term though, something like Copilot, that’s a gross margin, margin accretion cycle and a long term monetization story…”
  — Gabriella Borges [05:45]

• On Meta’s internal productivity:

  “...engineering output internally is up 30%. Is that a data point that you look at and say OK, I believe you that this is worth it?”
  — Caroline Hyde [13:22]

• On Tesla’s scale in autonomous vehicles:

  “Tesla could surpass Waymo’s robo taxi fleet within three months... On top of that, they have the data advantage.”
  — Tasha Keeney [23:30]

• On Apple’s current challenge:

  “They are so successful that it’s probably hurting them in the long term... when everything is working so well in terms of sales, it’s really hard to do [move fast on AI].”
  — Mark Gurman [31:18]

• On the shifting tech-policy landscape:

  “Everyone believes across the aisle in the importance of making sure that the US has technological, industrial and economic leadership... that is important for national security as well.”
  — Christian Garrett [37:18]

• On AI and child safety:

  “When you hoover up a ton of the Internet, you're going to find this kind of material... it is on the companies themselves to ensure that their training data sets are clean before they train their models.”
  — Riley Griffin [48:03]

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Timestamps for Important Segments

• 02:13 – AI CapEx’s effect on the markets
• 04:15 – Microsoft’s CapEx debate with Gabriella Borges
• 11:30 – Meta’s spending justified by AI-driven results with Shweta Kajuri
• 17:23 – Tesla’s chip ambitions and Robotaxi focus with Tasha Keeney
• 26:32 – Market roundup: SAP, IBM, ServiceNow, and software sector insights
• 30:30 – Apple’s "innovator’s dilemma" and AI strategy with Mark Gurman
• 34:08 – Hill and Valley Forum: tech-policy bridge with Christian Garrett and Delian Asparaghoff
• 45:19 – Amazon, AI data, and the child safety crisis with Riley Griffin

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Takeaway

This episode highlighted the tension between massive AI investments and the near-term visibility of financial returns, leading to volatile market reactions. Despite short-term skepticism, analysts remain optimistic that the AI groundwork being laid—whether through massive CapEx, research, or software integration—will yield long-term strategic value. The shifts in tech-policy ecosystems and unanticipated challenges (like data provenance and AI’s dark side) frame a complex, high-stakes landscape for the future of technology and business.

Transcript

[Ed Ludlow]

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[Tasha Keeney]

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[Ed Ludlow]

Bloomberg Audio Studios Podcasts Radio News.

[Gabriella Borges]

Bloomberg Tech is live from coast to.

[Ed Ludlow]

Coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.

[Caroline Hyde]

This is Bloomberg Tech coming up. AI Capex in after Meta, Microsoft and Tesla all report earnings with mixed fortunes.

[Ed Ludlow]

Plus Apple is also set to report earnings later today with holiday season results and the impact of memory prices. Top of mind for investors and Amazon.

[Caroline Hyde]

Reported hundreds of thousands of pieces of content it believed included child sexual abuse material which it found in data gathered to improve its AI models. We have the Bloomberg reporting and it.

[Ed Ludlow]

Is significant in reporting at that. But let's turn our attention to what's happening happening on the markets right now, Ed, because It is a tough day to say the least. It is all about capex in AI and you're going to go there with the individual names but I point to a NASDAQ 100 that's having its worst day since November of last year. Two months now. We're down by 2 percentage points. Some huge moves on individual names but crypto also languishing. We're up by 5%. We're at 84,000 at the moment. So much for being a digital gold in this currently debasement environment. It ain't working out for this particular area of gold because now it's just working as a risk asset. What are you looking at?

[Caroline Hyde]

Look, since we've come on air like there is a bit of a vibe shift or a deepening of concern around AI capital expenditures. Two very similar stories but stocks going in different directions. Matter told US this year $135 billion of capex but showed in the current period and beyond significant growth, particularly in the ad business that justifies it. Microsoft CapEx $1.5 billion beyond consensus in the quarter gone but 38% growth in Azure, the cloud unit that's the one we look at for the AI progress on a constant basis or currency adjusted basis is basically in line with estimates and people are worried that this growth in capex is outpacing what is now decelerating growth in Azure for the time being Carried much to dig on here.

[Ed Ludlow]

Now we've got the perfect person to do that with. Let's bring in Gabriella Borges, analyst covering the emerging software sector within Goldman Sachs is global investment research unit maintaining a buy rating on Microsoft citing long term strategic AI positioning. So do we have to swallow the 66% increase in CapEx in the quarter for long term rewards with Asia that just aren't showing up quite yet?

[Gabriella Borges]

Yes. Hi, good morning. That's exactly the question that investors are asking us. What's really interesting is this is the second quarter in a row where Microsoft is actually telling you there is a more nuanced way to think about that. Capex allocations typically what you would expect to see is capex goes up, Azure revenue goes up. There's a really direct correlation. What's happening in reality is Microsoft is telling you there are two important important strategic priorities in addition to Azure revenue. The first is Microsoft copilot and what they're doing in the first party apps ecosystem as copilot adoption goes up so does the CapEx allocation that has to go to support that business. The second is what they're doing with internal R and D. So think Microsoft AI, for example, very strategic imperative because if they get some of these new markets right, like medical diagnostics for example, that could be a really interesting long term product cycle for them as well.

[Ed Ludlow]

Amy had tried to get that nuance across in the earnings calls saying, look, we could have had markedly bigger percentage growth for Azure if we'd served external clients, but we're serving ourselves with the compute. Why do we see the market overreacting like this, even with that?

[Gabriella Borges]

Yeah, it's a trade off between short term and long term. Short term you see that in the Azure revenue number every quarter. Longer term though, something like Copilot, that's a gross margin, margin accretion cycle and a long term monetization story that happens over multiple years. Microsoft AI, that's something that you're not. You're going to get maybe a couple of blog posts this year, a couple of really exciting data points, but it's hard to predict when exactly you'll get those data points. So the way we see this is there's a little bit of a short term negative reaction here because it's hard to see into the future. Ultimately we do still believe the data points will crew positive on those two other strategic initiatives.

[Caroline Hyde]

So let's go back to basics a bit. Gabrielle and Cara, you know we talked about this for the show. This is a drop of 12%. So this is the biggest drop in the stock since March of 2020. $429 billion of market value wiped off that. That suggests serious concern. Gabriella, what do you think is the counter argument to that concern in the market?

[Gabriella Borges]

Yeah, I do think it's going to be a more balanced evolution on what enterprise adoption looks year. We know for two years now it's been a real struggle to see adoption tick up on the enterprise side. There's a lot of heavy lifting that has to happen on the data architectures, the data infrastructure, marrying some of these really cool alarms with the richness of an enterprise context. And that's taken time. So as we go through 2026, one of the data points we'll be looking for is, is that enterprise adoption starting to go higher? And what Microsoft told you last night is actually they have, they have an increasing uptick on adoption on the co pilot side. We've seen data points on Claude Cowork as well just in the last couple of weeks. You put all of that together with what ServiceNow is saying last night and there is starting to be enough critical mass to suggest that enterprise adoption will go up from here.

[Caroline Hyde]

Net income was boosted by a gain in Microsoft's investment in OpenAI. Lifted per share earnings by a dollar and two cents. Right, but, but our issue here is still how Microsoft manages the capacity issue that Open Air presents them as well as the circular financing issue. Right, that, you know, that's the arrangement. Here is some capital and here are the services that will charge you for as well. How do you think about that, Gabriella? And whether we now shift Open Air a bit more into the risk column for Microsoft or not.

[Gabriella Borges]

So it's really interesting because Microsoft is taking steps to diversify their exposure to the ecosystem. Last quarter we saw Anthropic come on to Microsoft Azure for the first time. We're also seeing Microsoft invest in their own, what they call off frontier Microsoft AI models. Each of these steps diversifies the ways that Microsoft can win independent of whether OpenAI is doing well or not. With OpenAI in particular, what we did see last night is that $250 billion contract that was announced about three months ago. Now you're now starting to see that in the backlog and that will roll on over time. The other positive catalyst to look for is the Fairwater data centers. They're coming online over the course of a multi year timeframe. But we'll start to get more visibility into that as we go through the next two quarters.

[Ed Ludlow]

We've had a bit of visibility about the silicon strategy, we've had visibility about sort of the hardware side, but ultimately this company is getting caught up with software negativity. What about Anthropic coming out? And yes, we see relationships, partnerships, but a cowork offering that could just not copilot out the water. How are you thinking about competition right now?

[Gabriella Borges]

Yeah, the burden of proof will be on Microsoft being able to show that the quality of outputs in a knowledge worker, desktop and a knowledge work environment are better than what, than what the competitors can provide. One of the key, key reasons they may be able to do that is because they're already entrenched in the Microsoft ecosystem. We already use Microsoft Excel, Outlook, PowerPoint suite of apps. And so if the intelligence that's embedded in those apps can be married with the intelligence of the alums, you get a better point from a productivity standpoint than if you bring in a third party.

[Caroline Hyde]

Exactly. I'm so pleased we're going to this conversation. This has been so focused on earnings and like classic Bloomberg stuff. Stuff like I grew up in the generation of people that learned computers using Microsoft Word and Excel and PowerPoint etc. Etc. Irrespective of what I use today, I don't use that. I use chat, GPT, Gemini, Claude. The totality and functionality of those platforms makes that kind of suite of software obsolete and I'm certainly not paying for it. How big a sort of existential question is that for Microsoft and how reliant is it? Sorry to have a long question. How reliant is it for Copilot being a success, therefore?

[Gabriella Borges]

Yeah, I think there are multiple ways to tackle this problem. I do think there is a disconnect between the consumer facing market and the enterprise facing market where we see this at our own organization. In order to get really good AI tools in the hands of people who work at enterprises, you need enterprise grade security, reliability, depth of functionality. There are no number of systems that have to ultimately connect to build you something that is sustainable and durable over time. So I do think Copilot is one of the key ways that Microsoft is addressing this problem. But there's also something like Foundry. Microsoft Foundry allows you to actually benchmark elements against each other and pick where you are on the frontier of cost and performance in a way that's quite differentiated today. And so there are multiple ways, whereas at the infrastructure layer, the platform layer, the application layer, over time that will come together. And one of the things that we wanted to highlight today is just the strategic totalness and completeness of how Microsoft is thinking about this.

[Tasha Keeney]

Yeah.

[Caroline Hyde]

Gabriella Borges of Goldman Sachs. It's been brilliant to have you on Bloomberg Tech.

[Gabriella Borges]

It's my pleasure.

[Caroline Hyde]

Thank you so much having me. Let's get over to Matter. Thank you. Shares of Matter right now on track for their biggest jump since July. The social media giant has eased some of Wall Street's concerns about its massive spending after beating expectations in the holiday quarter. But it's all in the outlook. Joining us is Shweta Kajuri, a managing director of Global Internet at Wolf Research. An outperform rating on the stock price target, $850 135 billion of capital expenditures at the top end, but also enough growth in the core business aided by AI to justify it. Is it as simple as that?

[Shweta Kajuri]

I think so. Well, first of all, thanks for having me. And I think the key question getting into the trend was, well, Metta is one of those companies that is spending a lot of money not only on AI headcount, but also on Capex and they have yet to show something for it. Well, this is a quarter where they're showing IT where the first quarter guide of over 30% year over year on a reported basis is the highest we have seen since the third quarter of 2021 in over four years. And so and at that time met as business was about half the size of it is now. So this is best in class remarkable growth rate. So the point is if it can accelerate to this level, even if the growth decelerates going forward modestly, they have enough monetization levers that seem durable because they are making so many changes to their own models that are driving impressions growth and ROI for advertisers in addition to potentially new monetization beyond advertising revenue that will come on because of their AI models over, over near long near to midterm and that is giving comfort on okay, well maybe they are spending to sustain a pretty healthy level of top line growth.

[Caroline Hyde]

Matter is not a hyperscaler but something interesting Caroline brought up with with our last guest Gabriella from Goldman is you know Microsoft tried to talk up all the benefits it's feeling internally from allocating compute and investing. Susan Lee talks about exactly the same thing. Engineering output internally is up 30%. Is that a data point that you look at and say okay, I believe you that this is worth it because internally you're doing better as well?

[Shweta Kajuri]

Yeah, absolutely. One of the metrics that we do track is headcount growth. And so what we are seeing is and what we expect is headcount growth to moderate going forward even though it will be in the positive territory. But more moderate as well as compensation compensation skew to shift more towards engineering and higher compensated employees in return. What we expect to see is perhaps greater level of productivity or shipments of products and new features that we think will then drive further ROI for advertisers and in exchange drive impressions growth, engagement growth and then monetization. That's how we see this play out.

[Ed Ludlow]

What a difference the quarter makes and how much we beat up over capex last time. And this time we see the optimism and the driving forward the promise of AI that understands us personally is how Mark Zuckerberg was talking about it. But how crucial is therefore the next iteration of their large language model? How important is Avocado, what the code name is of what they're building that it lands unlike LLAMA for well, it.

[Shweta Kajuri]

Is incredibly important going into the print. That was one of the key concerns for matter that we haven't heard or seen a model yet when Gemini and arguably GPT5 as well as Cloud's models are way ahead. The expectation however is not for Meta's next model to really Break the top three in the Marina rankings. It's more about Meta's models to be in the ranking of in conversation of being a competitive model. If that happens then that is a sign that they are on a good trajectory for upcoming updates to frontier models that they can leverage then for better impressions or monetization. And that should be enough to give investors some comfort.

[Ed Ludlow]

What excites you the most? Is it the commerce applications, the ways in which we're going to find it easier and easier to purchase using their own offerings or is it actually that we're purchasing hardware through them? The fact that billions of people can be wearing glasses and might be therefore wearing metal glasses?

[Shweta Kajuri]

I think it's the former. They have shown a lot of competency in technology, in product development and then also in distribution. And so this is not a new thing for Metta. When we go back and Snapchat was picking up in their product, well then we saw reels and it's over $50 billion of revenue run rate. There's OpenAI Sora and guess what, there is Meta Eyes vibes as well and they benefit from having a massive distribution, great resources as well as the tech knowledge and product knowledge to scale these types of products and compete. So I'm more optimistic on their ability to drive monetization not only within advertising because they are upgrading their models but also beyond advertising. Whether to your point, it's agent E commerce because guess what, a lot of Gen Z start their shopping and they start their search on social media. Social media. So there's a huge untapped opportunity there as well as business AI where they don't necessarily compete with anybody but themselves in getting a lot of those businesses on WhatsApp on board to spend on their business AI product. That we think is a $40 billion opportunity for them.

[Ed Ludlow]

Shredded Jury, always so great to have you on the show. Thank you from Wolf Research. Coming up, more earnings, more capex to delve into. Tesla announces a new Terraform build out as it looks to make its own chips. We're going to speak with Tasha Keeney of Ark Invest, this is Bloomberg Tech.

[Christian Garrett]

I think in order to remove the constraint, the probable constraint in three or.

[Caroline Hyde]

Four years we're going to have to.

[Delian Asparaghoff]

Build a Tesla Terraform, a very big.

[Christian Garrett]

Fab that includes logic, memory and packaging.

[Public Sponsor Announcer]

Domestically.

[Caroline Hyde]

That was Tesla CEO Elon Musk outlining ambitious plans for a Terraform, a chip factory for Tesla in an effort to alleviate chips and parts constraints. Shares now down around 2% actually at one point in the session we were up 2% and then as low as down 4%. The company's fourth quarter earnings, top test as everyone looked back past them. Tasha Keeney, ARK Invest Director of Research, Autonomous Technology Robotics, joins us now. The kind of big headline for me was the capital expenditures commitment. $20 billion this year. You know full well it's way beyond what they might do in a typical year. So let's start with that. You know, it's clearly a signal that these things that Elon Musk has kept you guys looking to the horizon on for some time now. It's on paper, it's time to act.

[Tasha Keeney]

Yes, well, you know, I think the capital expenditures are not too surprising to us. We had fairly aggressive investment estimations in our public valuation model. But that's all to say, you know, I think the next five years for Tesla will be dominated by the Robotaxi story. You know, we've previously published. We think this could be attributable to over 90% of the enterprise value for the company in that time period. And you know, in order to put many vehicles on the road, which is their plan, they need to invest. Of course, a lot of that money is going into factories, infrastructure build out. So, you know, I think the story here is that Tesla, while they were second or behind Waymo in terms of a commercial launch for a robotaxi platform, they have an incredible scale that is really not matched by anyone in terms of the public announcements that they've made of putting actual vehicles on the road. Right.

[Caroline Hyde]

On Terrafab specifically, you and the team at Ark know full well a fab at that scale is a fixed cost of 20 to 30 billion dollars. And the CFO was clear. This is not reflected in their capex forecast. But there's a reason that the industry doesn't put memory, logic and packaging on one site that doesn't exist. But it is Musk's proposal. How seriously are you taking that?

[Tasha Keeney]

Well, I think, you know, he's always been a very ambitious CEO. I would interpret this as, look, he's, he's concerned. Tesla needs a lot of chips. They have grand ambitions for AI data centers in space. We think, you know, that could, that could be a really interesting play, especially as launch costs continue to decline. It could actually be cheaper than terrestrial, than data centers on Earth. So, you know, I think the way to interpret it is that he knows that he needs a lot of chips. We've seen him vertically integrate in the past in the electric vehicle business, for instance, and parts of the supply chain that he did not see popping up in the U.S. that they, they needed in the U.S. so, you know, I think this sort of fits in with, with what he's done in the past, albeit, yes, it's a major announcement for Tesla. So I'd say broadly that like I would interpret some of it as a call to action that, you know, he is looking out there at the supply chain. But yes, for now they have this very ambitious plan. And again, I would focus on the, at least from a valuation perspective on the Robotaxi picture here. Of course they'll also use those chips for Optimus, but I would focus on.

[Ed Ludlow]

Robotaxis and let's focus just on what you have told the market you anticipate. If I'm right, by 2029, what is it? The stock will hit 26, 88% of the company's value will be Robotaxis. And you've talked about the millions of Robotaxis that really could be produced by then. To that end, how, how integral is the XI integration, if we're going to think about integration, is that important for the story and the 2 billion basically capital allocation that was made towards it.

[Tasha Keeney]

So, you know, of course we hadn't previously accounted for that the way that I would think of it as, you know, on the call they mentioned, of course, they're making Grok available in the vehicles. I think the more interesting parts of the story are, of course, you know, they could potentially share infrastructure investment and mutually benefit from each other. He, he did mention that Grok could sort of act as this like maestro for Optimus and for the Robotaxis in terms of, you know, like networking them together and sort of being the AI control center, if you will, for, for Robotaxis and any sort of like large scale optimist project. So that's how I would think about that investment.

[Ed Ludlow]

Let's talk about this Robotaxi unlock then. What needs to fall into place for the 2029 moment to occur from your perspective? Because at the moment we've got just a handful in Austin that don't have someone in the driver's seat. How quickly does that scale do you think? In realistic nature?

[Tasha Keeney]

Yes. So you're correct that, you know, there's, there really are only a handful that currently have no one in the driver's seat. They did say though that they have 500 robotaxis and that they plan to double that every month. I mean, if that's true, if you look at Waymo's fleet, the last reported number we saw was about 3,000 cars. So in other words, Tesla could surpass Waymo's robo taxi fleet within three months. I mean, I think that's incredible. If you look at the fact that Waymo launched the Service back in 2019. Right. So again, I would focus on the fact that this is like unmatched scale. They're a vertically integrated player, they do not have to partner with other auto manufacturers. This also gives them a cost advantage. So in the big ideas presentation that we just published, you know, we estimate that they have a 50% cost advantage over Waymo on the next generation vehicle if you compare it to the Cyber Cab. So, so this is really what matters for Tesla, scaling robotaxis that competitors do not have. On top of that, they have the data advantage. You know, if you look at Waymo's miles, we estimate they're doing around 400,000 per day. You know, Tesla gets 17 million miles of FSD data per day that they can use to train the fleet. So, so that is something that competitors just do not have in the robotaxi front. And it's important that scale is important because we think that what will drive robotaxi adoption is a reduction in the price per mile. So today human driven ride hail costs over $2 per mile on average. We think at scale that could be profitably priced at 25 cents, but the reality is there's a lot of headway in between that $2.25 to make profit.

[Ed Ludlow]

You think it eventually cheaper than driving your personal car. Tasha Keeney of Ark, we thank you very much indeed. And a correction to myself, the safety drivers are in the passenger seat. Every day millions of customers engage with AI agents like me. We work round the clock and have the facts at our fingertips. We're fast and effective, but incredibly patient. And we're built on Sierra, the leading AI powered customer experience platform. No hold music, just answers and action. Visit Sierra AI to learn more. That's Sierra AI.

[Public Sponsor Announcer]

Support for the show comes from public. On public, you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI, it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com disclosures so have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members that CMK Co Store I E S ed points out.

[Ed Ludlow]

Meanwhile, let's talk in video still hasn't received any orders from Chinese customers. I'll talk that next. This is Bloomberg Tech.

[Caroline Hyde]

Welcome back to Bloomberg tech. We're in it. This is it. Mag 7 earnings and the story. You know it. Capital expenditures. How do they compare to growth directly from AI? Well in matters case it was enough for the market to believe up by the most since July of last year about 8%. Microsoft having a very hard day. Biggest drop since March of 2020. $400 billion of market cap shed and the reverse equation. Tesla now lower but it had been higher in the session a big capex number the likes of which we've not seen before. From that name plenty of other earnings as well. IBM posting revenue, topping estimates, surviving doing good in this software environment that's difficult. Comcast also moving to the upside on its earnings and then there's SAP. Yeah in Europe this isn't that pretty down 17% again challenging software environment. We spoke to the CEO. When you look back into all technological innovations which happened over the last 10.

[Christian Garrett]

Years, it all always started on the.

[Caroline Hyde]

Hardware side of the house.

[Christian Garrett]

Over time it's also always the same that the real value creation is lying.

[Caroline Hyde]

On the apps layer.

[Christian Garrett]

So the investors are of course now seeing hey first the groundwork needs to be done but I'm 100% sure that.

[Public Sponsor Announcer]

They already understand today that the value.

[Caroline Hyde]

Creation at the end to arrive on.

[Christian Garrett]

The business side of the house will come via companies like SAP.

[Ed Ludlow]

Other software names having a very hard time of IT today and one of them is ServiceNow. In fact Bill McDermott the CEO of that company used to be the CEO of SAP. Check out the shares off by 11 and a half percent but this stock trades at the lowest since October 2023, the market remains skeptical the company's strategies even after it gave strong sales outlook for the current quarter. Just take a listen to what he told us earlier.

[Christian Garrett]

I think the most important thing is, is to level set what ServiceNow is all about. First, it's the fastest growing enterprise software company of all time. First to a billion 5, 10 and.

[Caroline Hyde]

Now 15 billion plus.

[Christian Garrett]

So that's fantastic. And we're operating at the rule of 55. They say you're world class when you're operating at the rule of 40. We're now growing revenues more than 20% and free cash flow at 37%.

[Caroline Hyde]

So it's actually a rule of 57.

[Christian Garrett]

Company and we gave a guide that blew away everyone's expectations.

[Caroline Hyde]

So I think the key is this.

[Christian Garrett]

We're in a category of one and.

[Caroline Hyde]

We'Re playing a different game.

[Christian Garrett]

And right now the disjoint between that successful company and the compression of the multiples is simply Wall street putting ServiceNow in a SaaS neighborhood with other SaaS companies where they think that I can rewrite those programs. I can't rewrite our programs. In fact, AI makes us better and we make AI better. We've been building AI into our model for seven years now. We have 80 billion workflow in flight.

[Caroline Hyde]

Today doing six and a half trillion transactions.

[Christian Garrett]

That's pretty hard to rewrite overnight. So we're beautifully positioned. And we just announced partnerships with OpenAI.

[Caroline Hyde]

And Anthropic because they understand the meaningful.

[Christian Garrett]

Difference between giving enterprise access to an AI model and building that model into workflow where real decisions are made.

[Caroline Hyde]

So it's actually a win win.

[Christian Garrett]

And the market hasn't caught up with that story yet, but they will.

[Ed Ludlow]

I'm going to nitpick here. When will analysts start saying okay, revenue will grow not at 19% for fiscal 26, but out of 21% that you just delivered for fiscal 2025. When will it look out that we'll still see more than 20% growth or an acceleration in revenue growth based on how much you're working with AI to hasten the business?

[Caroline Hyde]

It's a wonderful question because we're the only one.

[Christian Garrett]

You know, one of the other concerns was are seats compressing?

[Caroline Hyde]

Meaning do you have less people buying.

[Christian Garrett]

Your seats on a license basis and our active users are actually up 25%.

[Caroline Hyde]

When all the other ones are actually going down. That was Bill McDermott, CEO, ServiceNow to Software CEOs saying has made everything better. Yet both their stocks are down pretty severely now. Apple shares are down about 10% since their high in December making them by far, far the worst performer among the magnificent seven. The iPhone maker is due to report earnings that include holiday season results. An insight into the impact of memory prices. Let's get to Bloomberg's Mark Gurman, the man who brings all the reporting on Apple and leads our consumer tech team. China is going to be a spotlight, right? I think let's start there and we'll get to memory prices because I read the preview and some of the third party data, I look back at what, what you wrote last quarter, there was momentum in China. What are you expecting there?

[Mark Gurman]

Yeah, I think the momentum in China is real. I think you're going to see growth there. Obviously they're still quite a ways away from their peak in China several years ago, but clearly this iPhone 17 Pro Max launch in China, particularly with the new colors and the new design seems to be doing the trick there based on all the forecasts we're getting. I know the memory so situation is, is important and everyone is hyper focused on that. But I just want to take a step back here. Here's what we're dealing with. I'm going to just be honest. You have a company here that is lagging right now in AI, is lagging right now in products to some extent. You haven't seen a major new idea that's making a huge impact in a while. And the problem is is they have this air cover with these just absolutely gigantic, terrific, unprecedented financial results. And when everything is going well on paper, when you're selling your current devices and your current strategy so well, you know, you really don't have the inclination to go try to make major changes. And so that's the problem they're dealing with at this point. They are so successful that it's probably hurting them in the long term.

[Ed Ludlow]

So successful that revenue is likely to jump 11% to $138 billion mark. But as you say, there's no foldable phone at the moment. They're depending on Google for the underlying AI technology. How much will they have to talk and steer us to the next big innovation?

[Mark Gurman]

You know, the foldable phone is cool, but really doesn't matter. The big thing here is that a lot of the platforms Apple are running right now, it's, it's legacy stuff, right? The App Store is a legacy platform platform. The iPhone operating system is a legacy operating system. They need to accelerate the shift to artificial intelligence, the shift to agents everywhere, the shift away from jumping in and out of applications to something entirely new. They need a shift to A stream of different AI hardware devices. You know, Apple has been operating the last few years on. We're not going to overspend on AI. We're not going to over hire an AI. This is a bubble, it's going to burst. All these models are going to become commodities ties and maybe there will be some commoditization on the models. And obviously you're seeing that with their ability to partner with Gemini here to fix some of their problems. But AI is not going away. Air is not a bubble. It's bigger than the Internet was, you know, 25 years ago. And so they really need to shift into this new direction. And when everything is working so well in terms of sales, it's really hard to do so. It's hard to operate the current business and operate the future business. You know, operating on two timelines is very difficult. It's like a sports team that's winning championships. They have the best player, but they're also trying to draft, you know, younger guys to create a next generation. And you've seen lots of difficulties for sports teams being able to do that. It's hard for Apple and tech companies to do the same.

[Ed Ludlow]

Innovators dilemma. Mark Gurman, you're always giving us the truth bumps. We appreciate it. Thank you very much indeed. Coming up, Dalian Asparaghoff from Founders Fund, Christine Garrett of 137 Ventures. Join us to discuss what we can expect from this year's Hill and Valley Forum. This is Bring Back Tech. The Hill and Valley Forum. It brings together leaders from tech and politics and it's entering its third year, the time when links between Capitol Hill is Silicon Valley are front and center. Thanks of course to this boom. We're pleased to welcome Christian Garrett's partner at 137 Vengeance and Delian Aspera Hoff, partner at Founders Fund. And both are co founders of the Helen Barry Forum. In fact, the other person who helped co found it, Jacob, is now helping in the administration. So talk to us first, Christine, about what you want out of this year. How do you want to take this from a global perspective around AI?

[Christian Garrett]

Well, you know, this year it's is our fifth year of doing the Hill and Valley Forum.

[Shweta Kajuri]

Fifth.

[Christian Garrett]

It's the fifth. It started as a small dinner in 2022 during the Biden administration and it's obviously grown to become one of the largest, if not the largest gatherings of D.C. and tech leaders. I think this year is very special because it's obviously happening during the 250th anniversary for the country. And I also think this year will be a little bit unique in that we're really focused not just on technological leadership, which is the underpinning, but industrial leadership which has been a huge focus in this administration and then also alliance leadership. And so you'll actually have leaders there from other countries, from within naito. And I think that's going to be a big difference is the global scale of everyone's focus on building deeper bridges between technology and government.

[Ed Ludlow]

What's been really interesting is how the vibe has shifted. When it was private dinners, then it was these now third sort of in public event telling that now the Hill and the Valley are so much closer. I'm interested as to how you keep that contrarian perspective, how you get different voices around the table of how this can be done from an industrial, from a tech perspective right now.

[Delian Asparaghoff]

Yeah, it definitely takes a lot of intentionality. I think one of the things it's been exciting to see as a shift is rather than just having discussions this year, you're going to see us actually release a set of different policy papers across different sort of industrial areas. Whether that's in Rare Earth Earths, there's going to be a set around biotech versus China and making sure that we don't lose that supply chain to them as well as re industrialization. And a lot of it is in the sort of conversations ahead of the forum with both technology leaders, leaders within the government, regulators to understand the different perspectives and come in a line on something that actually is like a material product that we're trying to actually use to go shift how a particular industry works.

[Caroline Hyde]

Christian, thanks for coming on the show. You know, it's going to be interesting to hear about what your objectives are here. Right. Think back to last July winning the race summit. You know, the president took specific action and what's interesting about the Hill and Valley forum is its industry and DC right that you know, there will be politicians and policymakers there. Do you have a goal or something that you want to achieve? Like what is the next action that you and your peers feel this administration needs to take and in which domain?

[Christian Garrett]

I think that's a great question. You know, for us the fundamental goal is creating an environment for there to be a rebuilding of these bridges. That was kind of the goal from the beginning and it still remains that. So I think first and foremost is gathering everyone together and having these open discussions and most importantly actually gathering people from different backgrounds. You'll see actually, you know, Vinod Khosla, who's spoken every single year and is attending this year has been very different views on certain regulatory opportunities or certain industrial opportunities. Then maybe you'll have, from another partner at another firm, maybe you'll have. Obviously every year we've had OpenAI and Anthropic speak who are competitors, but in this case they're both alive. The importance of technological leadership in AI So I think first and foremost it's gathering everyone together. We don't per se take goals or things that we think about. We really want to create the stage for there to be open debate and have a rare opportunity, opportunity for there to be unity. You know, we use the term bipartisan, but I think actually this is something that's just nonpartisan. Everyone believes across the aisle in the importance of making sure that the US has technological, industrial and economic leadership and that is important for national security as well. And that is how we can create opportunity. And then everything else is a great forum really to have discussion and debate.

[Caroline Hyde]

Around Dell, you know, bipartisan initiative. Right. If you're being honest and you think back five years ago, you know, you guys might, might have felt like you were probably outsiders in dc. I don't, I don't know if that's fair, but present day, you know, how are things different in the way that the administration and the apparatus of DC works with the technology industry? And how would you reflect on progress that you think you've made?

[Delian Asparaghoff]

Yeah, I mean, obviously if you look at the sort of peak divide between the two communities, that maven program within Google and I think it was 2016, 17 people within Silicon Valley did not want to be working at all, you know, basically with the government. Now, obviously, you know, look at us a decade later, you have folks that actually have deep technological sort of backgrounds, both as elected officials and within appointed officials. So J.D. vance, obviously being, you know, sort of a former venture capitalist, Steven Feinberg, Emil Michael, you know, Jim o' Neill leaders basically, you know, across the entire administration that bring that technological leadership. And so, yeah, obviously, you know, at this point, when we look at the Hill Valley Forum and some of the elected officials that are speaking, it's no longer folks with just a political background, but it's folks that have a strong technological background and obviously are now in the political ecosystem. And so it is very merged. But we want to make sure that we're going to continue to keep this because, you know, the Hill and Valley Forum, it was founded under the Biden administration in 2029. We want to make sure that irrespective of who is president, it still is a place where we can continue to maintain those ties no matter which president is in office.

[Ed Ludlow]

And those ties, or indeed reliance on some of the companies that you have backed to become ever more important in this geopolitical context. You think of Andrew, that both of you and we think about Space X, which everyone's very excited about, potential IPO of this year. Will they inherently deepen, do you think, Christian, at the moment? And will they deepen with other countries as well? How much more are we seeing countries in Europe still wanting to rely on an Andril? Are you worried about that from a geopolitical perspective?

[Christian Garrett]

I think that one in the US Domestically, you will continue to see these relationships deepen. And really, this is not anything new. You know, the United States used to practice statecraft. The United States used to invest heavily in industry. The United States also, for example, was a key driver in the creation of the Silicon Valley industry.

[Tasha Keeney]

Right.

[Christian Garrett]

It was the Cold War era. Funding, whether it was grants through research in universities or whether it was government contracts in the early days really helped build Silicon Valley in California. And then that has obviously expanded to a global tech industry. And so I think the same trend is happening abroad where you're seeing governments want to partner deeper with their technological sector. But in regards to governments and how they partner with each other, what we've seen is actually the focus on technology has been a key factor for that. If you look at initiatives like Pack Silica or various other initiatives, they're centered around industrial and technological partnership. And so I think United States companies will play a big role in how the U.S. and our allies work together. And I think the same way we want to see successful companies in Europe, in the Middle east, in Japan and South Korea play a big role in how they also partner with the US too. So I think at the forum, you'll see leaders from companies across the. Across the Globe, not just U.S. companies. And that's something that we're very excited about.

[Caroline Hyde]

You know, we can discuss this March 24th. We hope to be there, guys. And the President's changed how space is funded. Right? OSTP now has a role. Dell. We're going to run out of time, but a big milestone day for Varda. We're showing this image here. Just explain what we're looking at, please.

[Delian Asparaghoff]

Yes, this is Varda's fifth vehicle that we sent up to orbit. We build these 300 kilogram satellites that basically manufacture pharmaceuticals in the microgravity environment of low Earth orbit and then bring those back down. What you're seeing here is a vehicle that reentered at Mach 25 in South Australia and landed earlier this morning. Right now it's actually nighttime in Australia, so we'll be sort of picking it up from the desert once daylight hits. But we're super happy. This is our successful sort of fourth landing and we've got a sixth vehicle that's going up into orbit in about a month and a half. And so, you know, taking what was an initial demonstration in 2024, doing this very regularly. And a part of it is, I think, enabled by some of the groups within OSTP that have made it so that the regulations around space are starting to become more centralized, more streamlined. We used to have to go to almost like six different agencies in order to be able to figure out basically how to operate a vehicle like this versus the administration's new space policy. Starting to understand, okay, space companies can't have to go after that many different agencies.

[Caroline Hyde]

Christian Garrett, Deli and Aspero of two of the Hill and Valley co founders and venture capitalists, founders in their own right. Hope to see you in March. Thank you very much. Coming up, Amazon discovered child sexual abuse material in its AI data. The content was removed before the company's models were trained, but support for the.

[Public Sponsor Announcer]

Show comes from public on public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation, recommendation or advice. Complete disclosures available at public.com disclosures so have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members. That's CMK Co stories. These days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity.

[Tasha Keeney]

Opportunity.

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[Caroline Hyde]

Giant still won't disclose where it came from. We have more next. This is Bloomberg. Throughout last year, Amazon detected and reported hundreds of thousands of pieces of content from its AI training data sets that it believed included included child sexual abuse content. That material was removed before the models were trained. But child safety officials say the company has not provided them with information about its sources that could be helpful to law enforcement. In a statement, an Amazon spokesperson said the training data was from external sources and the company doesn't have the details about its origin that could aid investigators. Bloomberg's Righty Griffin reported on and broke this story. I think let's start with the very basics of what this entity that we reported with saw in the data when it came to two specifically related reports of child sexual abuse material. Just start with that please.

[Gabriella Borges]

Yeah. So there's an organization called the national center for Missing and Exploited Children and it effectively serves as a clearinghouse fielding tips from industry of child sexual abuse material to law enforcement. This is a really important part of the process because this is the connectivity that allows local law enforcement agents to actually track down children who might be in active danger and find the perpetrators of abuse. They field these reports from companies like Amazon and when hundreds of thousands of reports came in, they typically expect details, location, data sources. Where did you find this data? And Amazon has not shared that detail, which has stunted further investigation.

[Ed Ludlow]

Is that why Amazon's data is seen as some sort of outlier here, Riley?

[Shweta Kajuri]

Yeah.

[Gabriella Borges]

So ncmc, the clearinghouse has been tracking this broader bucket of AI related reports that can be a generated child sexual abuse material exploitive conversation with chat bots. It could also be known images of abuse that have existed on the Internet and ultimately this bucket is rising. This year, 2025 was the first in which they saw 1 million reports of AI related child sexual abuse material and Amazon drove the vast majority. So hundreds of thousands of those cases. That's what makes it an Outlier here. In addition to the lack of information.

[Caroline Hyde]

This is a story about how artificial intelligence is changing the child safety landscape. And in the course of reporting, you spoke with a wide range of experts in this field. What are the risks that they are warning about and I suppose the solutions.

[Gabriella Borges]

Yeah. One expert said when you hoover up a ton of the Internet, you're going to find this kind of material. The Internet can be a dark place, but it is on the compass Companies themselves to ensure that their training data sets are clean before they train their models. The risks, of course, Ed, can be that the models learn these kinds of behaviors, they can reproduce those images, they can continue to retraffic images of abuse. And so questions that we have for all companies right now is how are they ensuring their data sets are clean?

[Ed Ludlow]

As we see, Amazon has responded to your reporting. What do you think the next steps are?

[Gabriella Borges]

Riley yeah, you know, we still don't have answers from Amazon on where the actual training data came from. It'll be interesting to see when we get full data in March from the company and when we hear more from the national center for Missing and Exploited Children as as about the broader landscape. But for now, the question lingers.

[Ed Ludlow]

Caroline Marty Griffin, Important reporting on how this landscape, landscape is changing very swiftly and downhill for child safety it would seem at the moment. That does it though. We appreciate your time for that conversation and it does it for this edition of Bloomberg Tech.

[Caroline Hyde]

Yeah, Apple after the market closed. That is big. And we'll learn a lot about the world. Memory prices through to the markets in China. Earnings continue a lot to recap on in this episode, check out the podcast, you know where to find it online on Apple, Apple, Spotify, Iheart, and of course on all of the Bloomberg platforms as well. Thank you for tuning in. From New York City and San Francisco, this is Bloomberg Tech.

[Public Sponsor Announcer]

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