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Nathan Hager
you have invested in artificial intelligence maybe you have pilots or even proofs of concepts that show real promise the next opportunity is scaling that success across the business at ey consulting we help organizations redesign how work gets done so innovation can move beyond the nascent stage by addressing architecture operating models and governance we help ai deliver real lasting value at scale when ai fits how you actually work that is ey consulting small businesses
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Chase Bank Announcer
are the pulse of every community they bring people together create opportunities and drive growth chase for business helps business owners like you with personalized guidance and convenient digital tools all in one place with that guidance and your determination you can take your business farther and help build a brighter future for your community learn more at chase dot com business chase for business make more of what's yours the chase mobile app is available for select mobile devices message and data rates may apply jp morgan chase bank na member fdic copyright twenty twenty six jpmorgan
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Public Investing Announcer
chase company when you're running a business the best days are the ones where priorities stay on track for midsize and large companies that isn't always easy risk can touch multiple parts of an organization at the same time often in ways that aren't immediately obvious it might involve property liability or cyber it could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation at that level managing risk becomes an ongoing discipline not a one time decision at the hartford the focus is on helping businesses manage risk before it turns into something more disruptive that means working with companies to identify where they're exposed to decide what matters most and put practical standards in place so risk is managed as part of day to day operations and when losses do happen the hartford can pair that risk control work with insurance coverage grounded in underwriting risk engineering and claims experience developed over time learn more at thehartford dot com riskmitigation
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Chase Bank Announcer
bloomberg audio studios podcasts radio
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Caroline Hyde
news
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Chase Bank Announcer
bloomberg tech is live from coast
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Caroline Hyde
to coast with caroline hyde in new
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Chase Bank Announcer
york and ed ludlow in san francisco
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Karen Moscow
this is bloomberg tech coming up money race alphabet will raise eighty billion dollars while anthropic makes its ipo move the confidential filing is in the sec plus
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Caroline Hyde
elon musk space x is negotiating to pay razor thin fees to wall street
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Karen Moscow
firms its ipo and hp soars after its annual sales outlook beat estimates on the back of massive demand for infrastructure we'll be joined by ceo antonio neri
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Caroline Hyde
but there is so much going on in the meantime and we start the show off with today's big number and it's eighty billion dollars look alphabet sees that seventy five billion dollars being raised by space x in its ipo and just says well hold my beer i'm going to eighty billion we're seeing it being distributed in really novel ways maybe trying to limit some of that dil and more broadly but eighty billion dollars in future equity raised to finance infrastructure does have an impact on the stock now we're going to have a little look at how we currently are seeing shares of alphabet slightly under pressure on the day but only slightly we're down by nine ten percent we've actually come off of our lows amid what has been some anxiety in the market more broadly but dig in to what this equity issuance really is yeah here's what
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Karen Moscow
we need to know about the package it includes a ten billion dollars berkshire hathaway investment thirty billion in public offerings and then a forty billion so called at the program atm to sell shares from time to time beginning in the third quarter that means starting on july first together the transactions represent one of the largest equity deals of all time and basically it's just a capital expenditures story we know from alphabet this is how much capex will be this year and we know that it's going to go up and buy has an even
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Caroline Hyde
bigger number let's get into what buy is all about bloomberg intelligence analyst shifman is joining us who has analysis out on this today saying this raise marks an important funding signal for hyperscalers as infrastructure spending moves along a multitrillion dollar path that already raised eighty five billion dollars robert in the credit market and now they turn to the equity market what does it mean more broadly for the size of the money that is needed by hyperscalers yeah we'll put the
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Robert Schiffman
beer away technology companies are popping champagne bottles right now listen i've come on this show time and time again said i've never been more bullish on the tech sector and i think this move is wildly bullish to get such a boost of confidence from from arguably the world's greatest investor in berkshire hathaway to go against all everything i've learned in math camp where the weighted average cost of capital suggests you're supposed to be issuing more debt and instead obviously alphabet is so confident and rois on their investments to be able to raise this much money to have this big of a kitty certainly suggests that spending this year they said was going to go up significantly now our friends on the equity team are saying they might spend as much as three hundred billion next
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Karen Moscow
year on capex robert stay with us we have some breaking news crossing the bloomberg terminal red headline trump to get audit immunity even as one point eight billion fund in doubt basically us officials are continuing with this agreement that bars the government from probing past tax filings of president trump and his businesses this is bloomberg reporting according to a source there is a plan to set up an anti weaponization fund that's now on hold we're going to bring you more details of that story as we get it but coming from bloomberg virus source trump to get order immunity even as a one point eight billion fund is now in doubt let's get back to our top story alphabet raising eight hundred billion dollars in equity to raise in different structures what you just said is so important because alphabet has held our hand on this a little bit so capital expenditure one hundred ninety billion dollars in the current period of the year they said it would be higher you know going into twenty seven you just referenced the buy number which is like capex could be three hundred billion dollars for a year am i right am i misspeaking yeah that sounds the numbers
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Robert Schiffman
and listen the biggest hyperscalers are spending close to eight hundred billion dollars cumulatively this year i think it's going to be well over a trillion next year and five trillion over the next five years so they're sort of searching the globe for all different sources of capital it's summertime the pool is open for raising capital whether it's equity public debt private debt currencies across the globe everyone wants to have a little bit piece of ai and this is the way to get it again i think it's so bullish because there's so much capital on the sidelines that's willing to fund this the beauty of issuing equity here it's actually not the first time somebody's done it oracle did this earlier in the year saying they were going to issue twenty five billion dollars of equity it's super positive obviously from a credit perspective it helps create and protect healthy balance sheets i think going forward what it also means are stock buybacks are going to be lower you're not going to be issuing eighty billion dollars of stock and then start buying stock back any time we've actually already start to see slowdowns in stock buybacks and i think over the next year you're going to see more of that and you might see more equity issuance and poor part of that is because spending is going so much higher and i think it's because the confidence level in monetization of ai is finally coming to fruition and we saw that in first quarter
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Karen Moscow
results i think i misspoke a second ago and said eight hundred billion but they will raise eighty eight zero billion still big numbers robert schiffman of bloomberg intelligence thank you this is about a race for capital other top story anthropic has confidentially filed to go public pulling ahead of rival open air in the ipo race more let's speak with bloomberg's reporter shereen ghafari yeah yesterday was wild right and the confidential filing the anthropic blog post announcing it there's nothing in there no price range no terms of the offering so there's a lot we don't know try and tell us what we do know at this point
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Shereen Ghafari
that's right so it's short on details because it is a confidential filing and the financials are not public however anthropic has as of yesterday submitted submitted a draft to s one to go public pulling ahead of openai which is also expected to be filing as soon as in the coming weeks ceo sam altman reacted to that in an interview yesterday saying that the company will go public when it more or less when it feels like it or when it wants to and not not sort of before it's ready so still some uncertainty about when exactly anthropic competitor will and anthropic has now pulled ahead to be the first to pull that trigger but with the filing that being said what do we know about anthropic well its revenue has been growing at rapid pace it's now reached an annualized run rate revenue projection of forty seven billion in annual revenue you know there's been the ceo has said that they had an eighty x increase in that kind of projection in the first quarter compared to the on an annual basis so extreme revenue growth but also still high cost it does
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Caroline Hyde
feel like the momentum the wind is behind anthropic at this point shereen should we be though thinking of it as some sort of race to go public that seems to be a lot of the narrative
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Shereen Ghafari
i think there's no denying that you have three major ai firms space x which now is an ai company because of x ai and then openai anthropic all going public are all talking about going public or planning to in the span of several months and some of the filings here happening within weeks so i think it's undeniable that there is this race dynamic much like there is with their technical products and of course going first could help set the narrative there you know some are questioning how much money wall street has to devote to these stocks and will the firms who go earlier absorb more of that that being said there's also a lot of pent up demand for getting in on the ai boom these companies companies that the core ai only companies in general have not been public until now so it remains to be seen how much of an advantage there is to going first but there certainly is this competitive dynamic in the ipo
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Caroline Hyde
discussion right now fari great to have your analysis thanks so much coming on now some news crossing the terminal that guy rosen he's met his chief information security officer was previously oversaw the company's election integrity work he's departing in the coming months now it's all according to an internal post review by bloomberg matter has begun a search for his replacement the post said and rosen will stay at the company in the meantime but let's get back to those ipos to the so called race the frenzy emily zhang is with us she is the senior venture capital research analyst over at pittsburgh emily is there a risk that oxygen is being sucked out of the room the fact that we've got all of these mega ipos just tell us the numbers that you've crunched of just how significant the wall of a new equity coming to the market is yes
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Emily Zhang
we're really in uncharted territory just for context looking at the past ten years it's one point five trillion dollars in terms of all of the us vc backed public listings and space x alone would be greater than that decade long figure and in terms of the number of ipo proceeds that are being raised space x is looking at seventy five billion openai anthropic are looking at a combined one hundred billion dollars and that is again greater than all the ipo proceeds that have been raised in the past decade so really we're in uncharted territory in terms of how gargantuan these mega ipos are
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Karen Moscow
what i find interesting about this is it could all happen at the same time so so what shireen did was recap what what we know the s one is in confidentially from anthropic space x will price june eleventh trade soon after maybe open air goes in september is it possible for all of that to happen in the balance of twenty twenty six though that's
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Emily Zhang
a really good question and i think like sri mentioned like there is a lot of pent up demand but it's also such a big number and i think all eyes will really be on the spot space x ipo to see how that demand actually plays out and if it's actually sustain has substance because if the spacex ipo flops then potentially anthropic might wait until later to go public until the volatility evens out so a confidential filing is one necessary step to going public but it's not necessarily a guarantee that it will happen in the next few months or even the
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Caroline Hyde
next year what's so interesting is we're almost coming back to this circularity issue now you think about how anthropic is paying one point two five billion dollars per month to space x for compute then when we really get the documented files that are currently just private to us and to the sec at the moment the sec has got its hands on the filing coming from anthropic eventually when we understand and then look at them we'll see how much they're reliant on google or on amazon how much is this a worry for investors how much could this be an impact for those vc investors who are also invested in many of the same names yes
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Emily Zhang
the cycle is so like interconnected and also like on top of that like thirty percent of usbc backed startups are native or ai adjacent so all eyes are really emphasizing trying to see if this ai valuations and these pricings are able to be upheld because so much of the market is interdependent and also depending on this technology to move forward and eventually become profitable so i think this is really the big question for vc right now and that's why there's so much emphasis on these big names and these upcoming listings emily it's more
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Karen Moscow
than that it's not just the commonalities on the cap tables space x anthropic openai they're all pitching the same thing is there any precedent in history that gives us a warning signal about that three companies trying to occupy the same
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Emily Zhang
lane oh that's a really interesting question and i feel like in terms of something like such a transformative technology that hasn't seen something in the public markets i don't think we have had such similar precedent president and that's why i think this day and age is really really interesting to see how these mega
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Karen Moscow
listings will play out pitchforks emily jiang great to have you on the program thank you very much now coming up elon musk space x is shooting for the moon with the biggest ipo ever but when it comes to the banks musk keeping their fees in low earth orbit going to have the details next this is bloomberg tech
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Caroline Hyde
elon musk's space x well it's negotiating to pay one of the lowest ever underwriting fees and what is expected to be the largest ever ipo sources say the company is aiming at a rate less than zero point seven five percent for the seventy five billion dollars as it aims to raise let's get more bloomberg finance reporter kevin doherty is the idea here that look zero point seven five percent of seventy five million still quite a lot
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Kevin Doherty
of money that's right i mean split among twenty plus banks it's five hundred million so if you're really going to think about morgan stanley and goldman sachs who are leading this ipo they're the ones that are going to see the biggest benefit but across the board it's not a bad payday for the banks they're really happy to be there and you're seeing that the negotiation power is really for space x they are working with all of these banks but again they're the ones that are saying we want to show up and we want to help you come to the market in this historical moment across wall street
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Karen Moscow
that's a really great point i mean when i've been speaking to people on the space side you know their answer on this is well elon musk is a very good negotiator but even if the bank fees are like you know i don't know what we're talking fifty sixty basis points whatever it ends up being of an ipo where they raise seventy five billion they go to a two trillion valuation whatever ends up being they'll do fine right catherine they'll be
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Kevin Doherty
okay they'll do absolutely fine this is something that they can also tout in quarters moving forward and we have other ipos that are coming down the pipeline so really this is again this moment in history that all of the banks want to have their names tied to it's going to lead to future ipos that they can work on it's going to lead to more fees that they can end up paying their bankers and they're hoping that this is just the start but it is supposed to be a very strong start i mean we've
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Caroline Hyde
just been talking about how strong it could be if we've got anthropic already fighting with the sec if we've got open air hot on the hills how important is it for these bankers how much anxiety is that the this has got to go really well i think
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Kevin Doherty
that they've all been preparing for this moment it's all of the talking points that the bank ceo's and all of the heads of investment banking they've all been saying we've seen green shoots we are expecting based on our strong pipeline think about how many times the word pipeline has been talked about but no one has talked about i mean moving beyond the pipeline let's talk about the deals let's talk about the billions of of dollars that could come to the public markets they're hoping that this sets a precedent that that is going to lead to future fees that it's going to keep keep the ball rolling
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Karen Moscow
catherine one of the most read stories so far today thank you now coming up we're going to get more on the impact of the space x ipo from space x employee number one and now ceo of impulse space which itself raised five hundred million in a new funding round we saw speak with tom mueller next this is bloomberg tech
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Bloomberg's King
you have
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Nathan Hager
invested in artificial intelligence maybe you have pilots or even proofs of concepts that show real promise the next opportunity is scaling that success across the business at ey consulting we help organizations redesign how work gets done so innovation can move beyond the nascent stage by addressing architecture operating models and governance we help ai deliver real lasting value at scale when ai fits how you actually work that is ey consulting support for the show
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Emily Zhang
news you need in just fifteen minutes
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Nathan Hager
start your day with bloomberg daybreak the podcast with a global view on the stories that matter hi i'm nathan hager
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Karen Moscow
and i'm karen moscow join us each morning for curated stories on current events politics business and foreign relations plus one
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Nathan Hager
conversation on the day's biggest developments all
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Mike Shepherd
in just fifteen minutes subscribe to bloomberg
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Karen Moscow
daybreak for a precise thoughtful take on
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Nathan Hager
the stories that matter listen to bloomberg
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Karen Moscow
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Nathan Hager
anywhere you listen
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Karen Moscow
impulse space led by space x alumni space x veteran tom mueller has just hit a massive four billion dollars valuation the company raised five hundred million dollars to scale its space tugs or spacecraft that can haul satellites across different orbits joining us now is impulse space founder and ceo tom muller tom it's great to have you on bloomberg tech i've been able to spend some time with you in socal right look at the facility see what you're building and you've always been super honest like space is hard difficult to get there five hundred million in one go just explain how that gets you to this world where you are like the traffic conductor in low earth orbit moving different orbital planes for different satellites yeah
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Tom Mueller
well you know there's there's a lot happening in space right now and we're here basically take over where launch leaves off so you know launch vehicles like you know like space x falcon get you to low earth orbit and we take you everywhere else we move you around within orbits and we have vehicles very high energy vehicles that can take you out to very high energy orbits or out to the moon to mars and beyond
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Karen Moscow
the very high energy bit is the bit i find super fascinating you were demoing for me the propulsion technology you've worked on on so so explain how it works but i think also for a lot of the audience why is it necessary to move whatever the satellite is from one position in orbit to another what what would cause that
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Tom Mueller
so in the in if you're talking about helios are very high high energy product you know most most satellites that want to get to geosynchronous orbit like the very high orbit twenty two typically get typically get dropped off in low earth orbit and then and then they they end up in a transfer orbit and it can take months to get there with helios we can get you there in one day we just we we have it you know it's basically a rocket on a rocket it's it's got a big tank full of propellant and a very high energy pump fed engine on it and it it does a couple burns and gets you to a high energy orbit it can also take you like way more payload to the moon or to mars or
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Caroline Hyde
to the outer planets helios the larger is meant to be flying what in twenty twenty seven you've already had the miracle flying three missions and that was first launched in november twenty twenty five almost recently in twenty twenty five i'm interested what five hundred million dollars buys you because as ed says space is hard but also it's also expensive yes
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Tom Mueller
so we've we've more than doubled the size of the company in the last year and we're continuing to hire we've got a new facility here that we're building out we've got a lot of work in all sectors you know commercial nasa and government so we're we're addressing all that work and we're building the highways to to the space economy you
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Caroline Hyde
were of course integral to the propulsion over at space x and we think now of the spacex spacex mafia that's about to be created by the end of this month and how much money that might infuse new space technologists new founders what does that moment mean to you for space x to go public
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Tom Mueller
i mean this this is this is great for building a space economy and what i what i say now often is that i think the true space age is starting now i think we're going to start building mega structures in space which we're seeing with you know know a million data servers was already talk about using the resources of the moon which is something i've been talking about since before i started this company this is this is the things that we're super excited for this is this is the reason i started this company this is the reason that employees joined to do really cool things we're super excited about this permanent moon base that's been announced by by nasa this is
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Karen Moscow
exactly what we do you know tom part of visiting with you in socal is like there's a ripple effect there there are companies born out of space x is growth there is a network of people that are space x alumni when this biggest ipo of all time happens what do you think the economic effect will be for your industry gigantic
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Tom Mueller
i think you know i grew up in the star trek era the original series and i felt like some you know by the time i this age there we'd be living in a star trek world and i still think we're going to get there and you got to imagine that in a star trek world the space economy is a big the biggest part of the economy right now the space economy single digit of the global economy and i think we're going to get there where space by that measure will grow faster than any
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Caroline Hyde
other sector it's space it's also defense tech and we think about the billions that the administration wants to put to work in a so called golden dome and i'm interested as to how that is going at the moment how the intercept to work that we understand you've been doing with andrew how that progresses
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Tom Mueller
at this moment tom yeah we're here to just provide advanced solutions you know the government needs to move around they need to protect their assets and we're here to help out however we can
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Karen Moscow
tom do you think we'll be in a place where like this year or next you'll have a demo for the tech or the work of andrew we're talking about space based interceptor inception technically is that a realistic timeline for the next twelve to eighteen months i can't
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Tom Mueller
talk about the specifics of these programs
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Karen Moscow
let me ask you this one final question on the space x ipo reflect on how hard it was those early years for you and now how you got to this point i know you're no longer with the company but it's a part of the story real quick
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Tom Mueller
yeah you know we always said we knew it would be hard and was harder than we thought but i'm super proud of what we achieved it's i mean amazing that this company that i was employee number one at is now a trillion dollar company it's just you
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Caroline Hyde
know amazing and now we wonder where impulse space goes now worth four billion dollars and a five hundred million dollars raise fascinating thank you the founder ceo tom mueller there coming up perplexity makes a big bet on the future of how ai workloads get done we're speaking with the ceo aravind srinivanda srinivas next this is bloomberg tech
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Karen Moscow
welcome back to bloomberg tech there is so much going on around the world we're looking at the us listed shares of ten tencent which follow the asia listed shares in absolutely soaring up eleven percent a report that they are bringing out an agent version of wechat and right now in this story it's so in line with everything that's happening that trading's really come over into the us session and the stock up eleven percent we're going to keep an eye on that one and then the power of a few words from probably the world's most important figure in ai i would play you the sound bite but by the time we hit play it'd be over jensen huang walked on stage at computex in taiwan and said the next trillion dollar company about marvell that's it that's the story and the stock is up almost thirty percent as a as a consequence and copytext in taiwan has put the spotlight on the companies that are building the hardware behind the ai boom for more on the latest developments bloomberg's in king leads our semiconductor coverage is with us probably i was going to say the most substance we can debate that but for the industry one of the most important stories was sk hynix coming out and saying pledging we are going to double our capacity over a certain timeline could you just take that explain why sk hynix is important and why that commitment kind of was a big deal for for the chip industry sk hynix
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Bloomberg's King
is the second largest maker of computer memory chips there's a massive memory shortage right now because of the massive amount of memory required for data centers so hynix coming out and indicating hey we're going to step on it in terms of putting more capacity in place in general helps it means okay well we'll get enough memory chips maybe this growth story can continue but the big caveat here is chet taiwan the chairman of this company he said previously we could be losing money tomorrow he's he's been very careful in the outlook for this market and he hasn't given a specific timeline here and that would be really important that would tell you exactly what's
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Caroline Hyde
going on it's really fascinating some of the details we do get out of computex and anything that's really stolen the thunder yesterday it was all about nvidia's announcements and then the negative impact it had on the likes of intel amd and we're waiting on qualcomm what have you heard from some of the other companies throughout the couple of days well
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Bloomberg's King
i mean you mentioned you mentioned qualcomm you mentioned intel and obviously nvidia one thing they all agree on is robots ain't happening as fast as we'd like and they've all come out with essentially the same story which is we're going to give you hardware we're going to give you software we're going to give you all of the tools to bring humanoid robots to market faster and all of these companies and others too have said that this is one of the next big markets this is going to be something that really changes the economy and brings ai into the home the office the factory and really makes it that pervasive story that it has to become to support this spending bloomberg's king
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Karen Moscow
with the download from computex thank you very much it's not just chip makers pitching the future of computing at computex perplexity took the stage with intel to unveil what it calls the world's first hybrid local server agentic inference orchestrator a phrase that sounds like it was generated by ai at point some self here with more perplexity ceo aravin srinivas aravin it's great to have you back on the show i spent all morning thinking about how do i explain this and basically the orchestrator is there it's a piece of software to decide whether a or a part of an ai workload is best done locally on device at the edge or if it needs the superior computing of cloud server is that right have i come kind of nailed what you're trying to solve for here
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Aravind Srinivas
that's correct so yeah thank you for having me again and that is exactly correct you don't want all your compute centralized in gigantic servers and everything running through the largest frontier models you're already reading reports of how people are freaking out about their token costs some people are spending half a billion dollars per month per engineer what you actually want is efficient token value per watt per user and that requires orchestrating privacy accuracy intelligence and cost all together in one single unified system and that orchestration capability requires hybrid model between server side and the local and that's what we demoed today with intel and we are actually chip agnostic so our solution works with intel it works with nvidia rtx so we just like how we've been model agnostic we plan to be chip agnostic
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Karen Moscow
here that's interesting so my next question was going to be why intel you know what is it about intel's role in the the apc market and on the server side that makes it work but if you're agnostic stick what's the breakthrough that you've cracked like if you've written the software what is it you've managed to achieve in how those workloads are diverted okay go go a bit further
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Aravind Srinivas
so like i said you want you want one single system to route across models files tools chips servers and decide when to use which model or when to use your local file system your local sub agent model your local llm or when to use a frontier model for depending on the task and the prompt or depending on the confidentiality and sensitivity of your files or apps that requires you to make clever orchestration decisions balance trade offs between accuracy and cost and that's what we're doing in our software and that computer is essentially an operating system that balances all these different objectives simultaneously simultaneously i mean you
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Caroline Hyde
sit in such an interesting place as an orchestrator whether it be letting people use your own in house models whether it's using a mix of third party models and the third party models are up to a lot right now i just want to get your take on how you feel about competitive moats or competitive threats if these big companies anthropic openai space x will go public in the next few months we actually love
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Aravind Srinivas
anthropic openai xai all these frontier labs every time any of their ai gets better our unified system also gets better because we route across all of them we basically think of perplexity computer as taking the best of all ai and putting it together in one single unified interface and system so all of you know how much anthropics models have improved since the beginning of the year what what has it led to for us our revenue actually tripled since the beginning of the year it's just been five months in the year and our revenue is already tripled to what that that that so we're actually like very happy with all these companies progress and they completely deserve their ipos so we're very
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Caroline Hyde
excited for them can i follow up to are you able to discuss what that revenues jump to there were reports in the ft that you're up to about four hundred fifty million dollars just in the month of march yeah we
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Aravind Srinivas
crossed that i think i publicly tweeted that we crossed five hundred million about some somewhere around mid april we are announcing new numbers yet but we are
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Karen Moscow
doing really well irvin i've been thinking a lot about where perplexity sits in the suite of available tools and technologies right research seems to be a really interesting place with perplexity and i'm wondering like how you measure the engagement on the platform so like it's not just like one query and done but do you kind of track the time that an individual desk or user would stick with one query as sort of indication of success you know how the platform's being used the behaviors of the user
- [34:52]
Aravind Srinivas
base so we are actually not trying to maximize engagement per user in the sense we're not actually trying to keep them longer on the platform or something in fact accuracy is somewhat towards the opposite end of that if you give the user an accurate answer in the first turn it's likely that they're not going to continue in the same chat what we actually look at is retentive uses if the same user is using perplexity for a lot more research tasks not just like that one single task it came with and that's that's always been the case for example we introduced a max plan and that's already like you know at the beginning of the year in terms of subscription split between the max plan that is a dollar two hundred a month plan versus the pro plan was something like nine is to ninety one today it's more like thirty to seventy so i think that that already shows that there are these power use users who are willing to pay like two thousand dollars a year out of pocket this is not even enterprise because they love the superior research and orchestration and accuracy that we bring
- [35:59]
Caroline Hyde
in in our product interesting so we're seeing the growth you're talking about your average revenue run rate tripling going up to almost five hundred million dollars i'm interested as to where the combative nature does come in because it looks like you're playing well with all the other players out there but there is some issues in the courts in particular cnn for example has just the latest to hit you with a lawsuit alleging that you violated federal copyright laws how are you dealing with how people get paid and what you train upon and what you feed and source to us as
- [36:30]
Aravind Srinivas
a user i mean the fact of the matter is that like nobody has any copyright over truth and facts like i think we've been consistent with our position we we are very confident in our position and we will let the legal process you know decide what the right thing is in that particular situation i don't want to comment further on that but nobody has any copyright over
- [36:51]
Caroline Hyde
truth and facts perplexity ceo staying up late it is like eleven thirty pm with you we so appreciate you coming after your yeah jet lag works worldwide of our safe flight back from taiwan we appreciate appreciate it now look the build out may be bigger and longer than investors actually expect arm ceo rene has been telling bloomberg that demand for memory and compute could keep growing for years and says the industry's biggest customers may need to share more of the cost he spoke exclusively with bloomberg's stephen engle over at computex to take a
- [37:24]
Rene (Arm CEO)
listen i would say one thing that's different about what we're seeing right now is the amount of compute that artificial intelligence requires is quite significant to anything before it and it touches every single industry it touches everything around humanity everyone on the planet will have some interaction with ai whether that's ai indirectly or directly but it affects everyone if you think about world gdp one hundred thirty trillion dollars knowledge work white collar work being maybe a thirty trillion dollars market that is a large market of which today is largely under tapped so so is memory going to be short till twenty thirty i don't know i hope not but could i see this demand continuing much longer than people have ever seen historically that i do believe so
- [38:08]
Mike Shepherd
do you maybe look back at twenty twenty three and there wasn't enough investment because a lot of memory chip makers were having trouble absolutely they just didn't build in that capacity or foresee the demand that was going to shoot through the roof like it is now the
- [38:21]
Rene (Arm CEO)
folks at micron samsung segment khan is they have tough jobs and then twenty twenty two twenty twenty three they're all losing money and now they're in the
- [38:28]
Mike Shepherd
trillion dollar valuation club trillion dollar club
- [38:31]
Rene (Arm CEO)
but but cautious right because they look at that and say if i over if i overbuild where will i be when the supply crunch eases up but i do think you may see some more innovative business models would hyperscalers be investing in fabs would there be more equity partnerships around that such a secure supply i think that's quite possible well
- [38:53]
Mike Shepherd
yeah so what kind of resiliency needs to be built into the system so you don't have such peaks and troughs
- [38:58]
Rene (Arm CEO)
there needs to be a shared system right shared shared risk shared investment shared risk i think asking public companies like a micron to take all of that risk themselves with no shared risk from the people who are the largest consumers that's very very hard to sustain the governments have been helping and us government has helped in terms of the work they've been doing with micron and also encouraging samsung and hynix to expand the us but i think it's more than
- [39:23]
Karen Moscow
just government that was arm ceo rene how speaking with stephen engle now coming up on the show hp annual sales outlook crushed estimates fueled by demand and its president ceo and terry neri joining us next this is bloomberg tech
- [39:46]
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- [40:59]
Caroline Hyde
june tenth bloomberg invest is back in hong kong we look at the role hong kong plays between china and the world as major powers compete and markets realign as global investors rethink risk we'll explore the forces driving asian demand and the future of private capital catch exclusive interviews with top newsmakers plus a live recording of bloomberg's odd lots podcast visit bloomberg live dot com invest hong kong to learn more supporting sponsor deutsche bank hp stock can we just look at it skyrocketing this morning as we see it surge after second quarter results beat expectations it raised its full year forecast where sales could jump by an entire one third up to thirty three percent that growth is being fueled you know why by massive demand for infrastructure joining us now hp president ceo antonio neri you're up twenty one percent you have led to a record high on the stock it is a record move for the stock and you've added thirteen billion dollars in market cap just reflect for a moment on what people are calling
- [42:00]
Antonio Neri
a blowout quarter yeah well good morning caroline was an exceptional quarter as you said right we we achieve a record break results a number of key metrics we have tremendous demand across our portfolio our portfolio is at the intersection of networking cloud and ai and that demand is durable and therefore you know thanks to the results of the first half the tremendous record breaking backlog that we have the pipeline which remains multiples of that backlog allow us to to raise the twenty six guide and provide twenty twenty seven guide six months ahead because of that durability so we are very
- [42:40]
Karen Moscow
very proud of this moment antonio this is a story about demand right and outlook and it's through hp lens a revenue figure but i think there's a lot of value if you can talk us through whether that outlook for twenty six and then the twenty seven outlook which you say is evidence of durability is a volume story or it's a pricing story in other words no great volume of service more than you'd normally do you can just charge a lot
- [43:10]
Antonio Neri
more for them well first of all when we talk about the the outlook we are actually pulling by two years the twenty twenty eight outlook that we provided last october of the security analyst meeting intro twenty twenty six and to give a sense you saw that our earnings per share at the midpoint will be three dollars forty cents which is a dollar higher than the previous guidance and at the core of that is our networking story and the improvements we have made across the entire portfolio a combination of course of volume in the key product segments whether it's campus and branch which is up almost thirty percent in orders so the routing business so the data center switch of business orders which is close to twenty percent and then on the server side of the equation we are up triple digits in demand storage for the sixth consecutive quarter triple digits digits in our private cloud portfolio which obviously has the factories for enterprise continues to grow so it is a volume story with very disciplined pricing
- [44:20]
Caroline Hyde
execution i mean talking about discipline the fact that operating profit you see going to eighty to eighty five percent growth for the fiscal full year and this in the context of memory prices just going through the roof how are you able to navigate what could be a significant pricing pressure bottlenecks still there's a lot still to be a little bit anxious about antonio what could disrupt this
- [44:44]
Antonio Neri
well we need to go underneath the portfolio and look at the mix caroline because now with an eleven billion dollars business in networking clearly drives a different mix in our gross margin which was record thirty six point nine percent let's not forget that we are ahead of plan in the juniper and catalyst initiatives by of milestones as synergies that fuels cost of sales improvements and opex improvements and then you have of course you have the cost increases in dram and anand but fundamentally there is all about the demand i have to tell you and i comment this yesterday customers need access to this technology you guys have covered extremely well the momentum both in the build out but we were very pleased to see the acceleration in enterprise which is driven by that option and especially in infancy there are lots of
- [45:39]
Karen Moscow
things happening on prem is back hybrid cloud as we just discussed with perplexity is becoming increasingly important in your outlook or even in the quarter gone was this a story about one big customer that changed the trajectory for you or you see seeing new types of customer it's not just a hyperscaler story anymore
- [46:00]
Antonio Neri
no we have been very selectively playing in the air scale in terms of profitability as well as working capital because you need a lot of working capital we have prioritized paying down the debt and making sure we drive the profitable growth through networking cloud and ai and enterprise rise and sovereign and influencing so this is not one customer this is a number of many many customers i spoke yesterday about some of the customers that we are winning that they're bringing that infrastructure on premise because for compliance reason governance reasons data privacy reasons security reasons they need to on premise and i give an example of my own use case we inside hp gsp we have twelve hundred use cases of which two hundred and fifty are in production we actually use a combination of proprietary or closed models and open models and we have very stringent governance and we do it on premise and we see that trend happening across the enterprise more
- [47:05]
Karen Moscow
and more i'm going to be very dry and very specific with you antonio is this an enterprise super cycle or is this something different where agentic ai leads to a complete structural shift on how all kinds of companies change their spending habits what do you see is
- [47:24]
Antonio Neri
the latter and i think you know ai enterprise will accelerate but the reality is that agent ki is transforming the way we do business is transforming business process processes workflows and is making companies more agile and efficient so that's what we see today and i think we are early in the enterprise adoption and i think you know customers now want to make sure they don't be they are not left behind we have a say inside the company the future belongs to the fast and so you got to move really fast and we learn a lot through the COVID right through the on ramp to digital so is the ladder and i'm enthusiastic about this because it really help customers to be more competitive in the market which ultimately is the thesis about the productivity it's
- [48:15]
Caroline Hyde
about productivity and many worry that means fewer jobs that means change in labor have you seen any changes to the way in which you're hiring maybe you don't need as many employees what do you think about the narrative well definitely
- [48:29]
Antonio Neri
the type of of roles you're hiring is different but inside the company we have a very aggressive talent development succession plan in fact this afternoon i'm going to have a session with my entire team about that but the skill sets of the future have to evolve and you know i always remind our sixty five thousand employees to use this technology in their favor to become more productive and i believe everyone everyone including yourselves as anchors you got to be you have to have a minor and i have to use the technology is going to be a competitive advantage in every
- [49:04]
Karen Moscow
role across the enterprise we're using the technology hp president and ceo antonio neri back on bloomberg tech thank you very much some news the white house just released an ai executive order and it says it will select trusted ai partners within sixty days bloomberg senior tech editor mike shepard joins us with the details go into the details what is this what is the government trying to do what is it saying well ed we're
- [49:33]
Mike Shepherd
still reading through it right now this is the directive that president donald trump was set to sign about two weeks ago but then abruptly put the whole thing on pause expressing some concerns about elements of the plan that he didn't like like and that he thought could impede innovation in essence this this directive calls for the government to work with ai developers on a voluntary basis and gain access to cutting edge frontier models to determine whether they could pose a cybersecurity risk the whole idea here ed is really to try to ensure that security risks posed by artificial intelligence are somehow reined in and nipped in the bud ahead of time by the government and the companies working together voluntary is a word that appears several times in the order and the idea is that the government will be cooperating with the companies rather than dictating to them yeah
- [50:30]
Caroline Hyde
it really is a voluntary framework with ai developers they talk about collaborating but they also talk about benchmarking mike who are the people in the room who are able to do that benchmark how benchmarking how are we going to get that expertise driven through well it's a
- [50:44]
Mike Shepherd
great question because to make the determination about whether a model should even be covered by this order whether it's advanced enough say mythos for example you would have to have a room full of experts and the idea is that you would have people from various departments within the government people who have classified clearances and they would be working across classified setting in a top secret process deterrent to determine whether a model would even qualify under the terms of this order whether it has the kinds of cybersecurity capabilities that we've seen identified in mythos such to be a worry of the of the government and of industries more broadly now what we have seen the order also lay out is a process that now through which federal agencies state and local authorities and operators of critical infrastructure would also gain access again on a voluntary basis with from the companies to these models that are determined to be so cutting edge that they could pose some sort of a cyber risk and could also be used to test networks for vulnerabilities much in the same way that mythos has been dis described to us now we've seen caro is that this is coming the very same day that anthropic is releasing mythos on a much wider basis to another one
- [52:06]
Caroline Hyde
hundred fifty additional organizations around the world mike bloomberg's mike shepherd thank you very much indeed that does it for this edition of bloomberg tech yeah a lot
- [52:14]
Karen Moscow
of news in today's show check out the podcast to recap you know where to find it online apple spotify iheart and on all the bloomberg platforms the this is bloomberg tech
- [52:26]
Chase Bank Announcer
on june tenth bloomberg invest is back in hong kong we look at the role hong kong plays between china and the world as major powers compete and markets realign as global investors rethink risk we'll explore the forces driving asian demand and the future of private capital catch exclusive interviews with top newsmakers plus a live recording of bloomberg's odd lots podcast visit bloomberglive dot com investhongkong to learn more supporting sponsor deutsche bank