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- [00:01]
Deloitte Narrator
The right technology can strengthen human judgment. That's why Deloitte brings together AI and data analytics with multidisciplinary teams who can help you connect the dots across your enterprise, from risk to operations to customer needs. So opportunities don't slip by and surprises don't spread. Because the smarter your systems, the sharper your instincts. That's how technology makes people better at what they do best. Deloitte Together makes progress. Learn more@deloitte.com TogetherMakesProgress okay, before we get
- [00:35]
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- [02:12]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Studios podcasts Radio news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.
- [02:28]
Bloomberg Tech Co-Host / Interviewer
Go this is Bloomberg Tech. Coming up, Apple surprises with a strong outlook, demand roaring and signs it's coping with a supply crunch. The stock soars back to life.
- [02:41]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Plus roadblocks plunges as an aggressive push to enhance safety tempered daily user growth. We'll discuss with the CEO and a
- [02:50]
Bloomberg Tech Co-Host / Interviewer
Bloomberg interview with Open Air CFO Sarah Fryer, who pushes back on the AI leader, missing its own target and bigs up its stretch goals.
- [02:59]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Let's talk about goals. Let's talk about where the NASDAQ 100 is at the moment. If you look at publicly traded companies we're up 9.10of a percent on the key tech benchmark, Ed. We are at a record high and in fact we've had five straight weeks of gains the same as we're seeing in the S and P. Longest winning streak and weekly gains back in 2024. Even as we're still waiting with bated breath between some sort of deal between the US and Iran, a longer term piece. The market is hopeful of that but really it's been tech driving it and you've got the key stock.
- [03:29]
Bloomberg Tech Co-Host / Interviewer
Yeah, Apple is the big story and this is big move higher. We were off session highs but we're looking at a 3.5 standard deviations move on track for the best day at one point in almost a year. This doesn't normally happen. The last time we got an immediate post earnings move like this from Apple was in May of 2024. The outlook for sales in the June quarter is growth of 14% to 17%. And Apple was super clear. Demand for their products is outpacing their ability to supply. We'll get into the specifics and more on the consumer demand side of the app story with Julia. Ask Julia's advisory, a tech futurist who studies consumer behavior and of course a long time follower of Apple. And what's going on inside Apple, let's be very focused on demand. Apple has a wealthy high income customer base and all of the evidence is they're very happy right now to buy iPhone, iPad and Mac. Yes, give me more.
- [04:30]
Julia Ask (Tech Futurist)
Yeah, so I think if you look at the US economy, you know, the economy grew by 2%. GDP in the United States grew by 2% in the first quarter. Folks have tax refunds in their pockets and we all know that we're in a, I guess we're going to call is it K or V shaped economy here where the affluent, you know, the affluent folks, United States are still doing well and still spending a lot of money and that outpaces some of the things on the other side like low consumer sentiment, high energy prices and you know, things dragging the economy in the other direction.
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Bloomberg Tech Co-Host / Interviewer
It's a formula, right? An equation. Demand versus supply. And you know what Tim Cook's talking about is principally chips being a supply constraint and Mac is a focus that they can't get enough out there into the real world. What was your interpretation of the real story there of what's really happening of how Apple is managing in that environment?
- [05:18]
Julia Ask (Tech Futurist)
Yeah, I think, you know, Tim Cook is a genius when it comes to supply chain. He's also been very good at navigating the political environment. And you know, you could. I don't think they've gotten lucky here. I think they've planned well. I think the second thing, you know, you look at too, when we think about all of the AI and all of these use cases, it's driving demand for more powerful machines and more memory. And that certainly fits into Apple's sweet spot.
- [05:41]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
I'm surprised, Julie, that there isn't more hand wringing about the forward guidance, that these constraints on supply chain are going to remain, that this is going to affect gross margin in the second half of the year when Tim Cooks handed over the reins. Why is there not more worry about that?
- [06:00]
Julia Ask (Tech Futurist)
You know, I don't, I don't have a good, I don't have to be honest with you. I don't have insights into the supply chain. I mean, certainly Apple is one of the most prominent brands in the world. They probably have more power in purchasing in the supply chain. And they've also done a lot of things over the past couple of years to diversify their supply. So it's. Yeah, I wouldn't underestimate what they're doing.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
What's interesting is they've diversified their supply chain out of China, but finally China is back, ramping in terms of demand. What did you make of the stellar gains that they're making?
- [06:29]
Julia Ask (Tech Futurist)
That, yeah, honestly, I was impressed. It was, you know, one of the things that impressed me, but notice is that the iPhone sales grew by 20%, but they seem to have made gains in every market around the world. And they kept emphasizing it wasn't just the developed markets, but it was also the emerging markets. So an impressive quarter for sure.
- [06:49]
Bloomberg Tech Co-Host / Interviewer
We wanted to learn a little bit more about Apple's future and the story of Apple's growth trajectory. And we got the small list of glimmers when John Turner popped up on the earnings call and he said there's a great product roadmap. I'm just not going to tell you anything about it. Simple as that, really. I mean, what is the expectation from experienced industry analysts like you on how John Thomas would be any different on the product side to how Tim Cook has been?
- [07:17]
Julia Ask (Tech Futurist)
Well, I think there's a few things I keep in mind. I think the first one is there's really no device like an IT device on the horizon that's going to replace the smartphone.
- [07:25]
Bloomberg Tech Co-Host / Interviewer
You don't think the foldable phone is an IT device?
- [07:28]
Julia Ask (Tech Futurist)
Okay, so maybe. But fundamentally we are glued to screens. We like cameras, we like social media, we like YouTube, we like watching sports. So a screen is important. I don't believe the next IT device, so to speak speak, is going to be an AI pin that's listening to us and generating context for a number of reasons like the use cases, the privacy and so forth. So I think that's a piece of it and I think the other side of it is too. Certainly, you know, we talk about I will increase demand for more powerful devices with more memory and more speed.
- [07:57]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Julia Ask from Juliosk Advisory, it's great to have you back on the network. Thank you very much for joining us. Now look, for that deployment, you need all the hyperscalers to spend and boy, are they on track to spend at the moment over $700 billion on infrastructure. A new macro analysis though suggests there's limited evidence that the payoff thus far justifies the extreme cost. Tatiana Derriere Daria is here with us from New York to break it all down. Tatiana, your piece actually caught my attention because I thought it was positive about the fact that people are using AI, deploying AI in their businesses and actually the labor markets and climbing at this point same time. So maybe we relieve some angst about labor and I, but the angst about paying for infrastructure and I what was the data that showed you that we're really not seeing a payoff these hyperscalers yet?
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Tatiana Daria (Bloomberg Analyst)
Yeah, exactly. So the macro angst, perhaps this is does not justify that because the workforce is still growing, at least for the 14 large corporations that I looked at, which arguably have the largest budgets to deploy AI. But is the, the cost of those who are enabling this technologies worth it? And if you look at across measures, I mean everyone has their favorite CFA metric, right? I'm not saying these are the only ones, but I'm a macro tourist. So I look from a bird's eye view and I looked at things like sales to gross assets. I look at things like return on investment, invested capital. This is a key one because it has turned the corner lower in recent quarters and it's a new development as has been going up so since ever since the launch of Chat GPT and it's turning lower now. And that explains why investors are getting very jittery here because yes, it will take time for this investments to pay off, but how much time? That is the key question.
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Bloomberg Tech Co-Host / Interviewer
Tatiana, I'm going to help the Bloomberg Tech audience out a bit. The reason we're talking about this now is on Wednesday night, four of the biggest tech companies in the world told us this year they're going to spend a lot of money on the infrastructure that powers AI. AI and everyone wanted to know, well, what's the result of that? What comes out the other side? And so in your analysis, the dynamic is that AI is improving efficiencies, it's not displacing jobs and it's undermining the cost cutting case for technology. Tease that out a bit and also explain like why did you dive into this data set?
- [10:13]
Tatiana Daria (Bloomberg Analyst)
Yeah, well the key question is, well, is really a revolutionary for companies yet and it be should shows that it's boosting productivity but it's not displacing labor. So that means the benefits are real but perhaps modest and not as revolutionary as Sam Altman is selling you and telling you that I will displace all humans. And then that casts a shadow on how much demand will this companies ultimately get down the line. Right. If a CEO decides well it's great, but perhaps not worth all of this investment because it's only helping me 4% then perhaps they will slow down the spending, will slow down the demand. But the big tech hyperscalers there, they're investing ahead of the demand. And this is something obviously we've seen back in the dot com when the Internet infrastructure is the same key risk. What they have going for now, the hyperscalers have going for them now is the strength of their balance sheets and their profits. That is earning them a little bit of the benefit of the doubt. But some of these metrics are all already mixed. If you look at return on assets, it's been falling for Matt and Microsoft, but surging for Amazon and Alphabet. So only companies who are really delivering very solid results like Alphabet, it was just an outstanding report. Those will earn the benefit of the doubt more than the others because the evidence is really mixed across the companies.
- [11:33]
Bloomberg Tech Co-Host / Interviewer
Bloomberg's Tatiana Daria with the macro view and the data analysis and what's really happening in tech. Thank you very much. Now coming up, OpenAI CFO Sarah Fryer tells Bloomberg the company sees a quote, vertical wall of demand for its products. We have more from that conversation. Next car.
- [11:53]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
We've got some key CEO conversations come up and we've had some big volatility in the stocks that they represent. Roadblocks up by 15%. This as they move aggressively, they say to adopt safety precautions. It's all about age verification but it's perhaps putting some friction into new users. We're down 50%. Twilio ramping up 17%. The age of AI is an inflection point. We have both of the CEOs on later in the show. Stick around for that, Ed. What else?
- [12:20]
Bloomberg Tech Co-Host / Interviewer
Okay, let's get to shares of Spirit Airlines down severely sharply out 60% after a report from the Wall Street Journal saying the company is preparing to cease operation operations after bailout talks with the US Government have failed. That is from a Wall Street Journal report where they cite sources. Remember last week, over the course of many trading sessions, we saw 150% gains to the upside, bigger gains to the upside, because there was an idea the US Government would bail out Spirit. Looks like it's not happening. We'll be right back. This is Bloomberg Tech. OpenAI CFO Sarah Fryer tells Bloomberg the company is meeting objectives and sees strong demand for its products. Fryer pushed back on a Wall Street Journal report earlier this week that the company missed internal goals for revenue and user growth. Let's get the details from Bloomberg. Sharing Ghafari, who conducted that interview. I want to start with the pushback, right. That the metric that was out there, there from the Journal is that they are not hitting a billion active weekly active users on chat GPT. And in the course of the conversation you had with Sarah Fryer, she's talking about them hitting the highest levels that they have and stretch goals. What did you learn from that?
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Bloomberg Reporter (Interviewing OpenAI CFO)
Yeah, I think she was talking in the perspective of the internal revenue targets, which there were also, you know, in that report that, that opening, I did not hit some internal revenue monthly goals early this year and some other revenue targets. And what she said was that, you know, at the highest level, we feel like we're beating our plan, but how we often get there moves around from period to period because it's still a young business that's not perfectly forecastable across every metric. So how I interpreted that and how she explained the stretch goals was an acknowledgment that internally they may have not met certain goals, but that overall she, you know, assured confidence in them. Meeting their revenue targets at a higher level is sort of the direction of how I interpreted her comments.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
And that confidence with that quote saying we've got a vertical wall of demand. So it's still the argument that actually it's compute that limits the ability for the company to grow at perhaps the pace of it even could.
- [14:43]
Bloomberg Reporter (Interviewing OpenAI CFO)
Yeah, that's right. So she talks about the fact that she feels they're still very compute constrained, meaning they, they want more compute. They're scouring for more compute. Now, we've seen the Stargate plan shift as we reported a pullback in some sites in Norway and UK I asked her about that and, you know, the response again was that while the details may change and the types of COMPUTE deals they do, they do that overall. They want to be able to serve products like Codex or their new image generation model more broadly. And the compute is still a limiter there to getting more revenue. Essentially.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
It is such a great story. Basically the most read on the terminal throughout the morning, Shreen and all about how they've got a genuine friendship. Sarah Fry and Sam Altman, we appreciate the reporting. Thank you. Now, Elon Musk told a jury that there was no contract dictating the terms of his early donation to OpenAI. Now, at the trial of the company's nonprofit status, Musk said he was reassured by his fellow founders that OpenAI would continue to operate as a charity. Now, during his three days of testimony, the Tesla boss stressed his concerns about safety. Open Air co founders Sam Altman, Greg Brockman, well, they're set to take the stand later in the trial at Elon Musk.
- [15:59]
Bloomberg Tech Co-Host / Interviewer
Musk's annual compensation from Tesla was $158 billion last year. That information revealed in a regulatory filing from the company late last night, about six months after investors signed off on a $1 trillion stock award for the billionaire and compensation plan. The filing also offered new insight into the overlap between his companies, showing that Tesla made more than half a billion dollars in revenue last year from selling products to other Musk run companies, in particular xi. Another top story, the Pentagon has struck agreements with Nvidia, Microsoft, Reflection AI and US for use of advanced AI tools on classified military networks, according to a Defense Department statement and two Defense officials. This adds on to other tech companies that have agreed to similar deals like Space X, OpenAI and Google. Bloomberg senior tech editor Mike shepherd joins us from Washington, D.C. i just want to go to basics with this. What the deals are for, what the underlying technology we're talking about is.
- [17:02]
Mike Shepherd (Bloomberg Senior Tech Editor)
Well, this takes these companies, which already have been providing some AI tools, to the Pentagon. It gets them into the classified space along with Space X, Open AI and of course, the company that didn't get mentioned by the Pentagon, and that is Anthropic and anthropic. Anthropic was really the first to break in. And until recently, they were the only AI provider that was allowed and cleared to work in the classified space. So this gives the Defense Department a wider range of vendors to choose from if in the end they really do part ways as they have threatened with Anthropic in this dispute over terms. The idea is that you would see these companies, you use their products more in both intelligence platforms and in combat operations platforms like the Maven system that has been used in operations against Iran.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
The anthropic context is important because many are feeling that perhaps they're just broadening the circle of expertise they can lean on. Nvidia, for example, talk to us about how this new agreement expands the use cases for the Pentagon.
- [18:09]
Mike Shepherd (Bloomberg Senior Tech Editor)
Well, in a way, the Pentagon is also thinking about some edge deployment of AI and what that would mean is that if they wanted to move a data center to a remote location somewhat closer to the battlefield, well, that would mean that they are not connected to a cloud per se and running a very small data center. And I'm speaking of this in more hypothetical terms. But if you wanted to bring some of Nvidia's processors remotely and away from a cloud and away from the safety of, say, a large data center in Northern Virginia or at a large military base in the Middle east or elsewhere, this would be a way to do it. And of course, if the Pentagon wants to expand the data centers it runs and provides on its own property, and we have reporting on that from earlier in this, earlier in the year, that they intend to do so at a facility in Georgia, this would give them more leeway to do so on a classified basis as well. So for Nvidia, this is an expansion of their interest in government work. We saw it at the, at the GTC here. Ed, when you were here in October, there was a lot of talk about what more Nvidia could do for the government. And certainly the Pentagon has been one of the biggest buyers of tech services and really a driver historically of advances in technology over the years.
- [19:27]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Bloomberg's Mike shepherd, fascinating as always. Thanks for bringing us from Washington. Now coming up, Twilio absolutely soars after reporting strong first quarter results. CEO Cosimos Chandler is going to be here with us next. This is Bloomberg Tech.
- [19:46]
Deloitte Narrator
The right technology can strengthen human judgment. That's why Deloitte brings together AI and data analytics with multidisciplinary teams. People with deep industry experience who can challenge assumptions and help you connect the dots across your enterprise. From risk signals to operational pressure points to shifting customer needs, Deloitte helps you see what's coming sooner so opportunities don't slip by and surprises don't spread. It's not just dashboards. It's real clarity in the moments your decisions are made. When models reveal patterns, people can ask ask better questions. When data and people are connected, leaders can move faster with confidence. And when your teams are aligned. Smart choices can scale from the frontline to the C suite because the smarter your systems, the sharper your instincts. That's how technology makes people better at what they do best. Deloitte Together makes progress. Learn more@deloitte.com TogetherMakesProgress support for the show
- [20:46]
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- [21:45]
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Bloomberg Tech Co-Host / Interviewer
My policy advocate.com Twilio shares taking off after strong first quarter results, the company reported its fastest revenue growth in over three years, fueled by a massive surge in AI driven demand. Joining us to discuss what he describes as, quote, a milestone quarter, Twilio CEO Cosmos Ship Chandler the stock's on track for its best day right now since the End October. But at one point Since May of 2020, this doesn't happen every day. So in that milestone quarter, what were the milestones that you think your companies hit? This got the market thinking like this.
- [23:20]
Cosmos Ship Chandler (Twilio CEO)
Yeah, thanks for having me on. I point to a handful of things. First off, I would say this was one of the best quarters in the company's history. And you know, we've been in the process of a turnaround for a handful of years. And I think this marks a really important inflection point in terms of, you know, the history that's unfolded over those couple of years. I think in particular in the quarter, something that was really exciting for us was that our voice channel grew up to 20%. That's the sixth consecutive quarter of accelerated growth in a row for us in that channel. And you can see a lot of that sort of being catalyzed by voice AI workloads that you see from so many different kinds of startups. And I think what's exciting about that is, is that these conversations are being enriched by data, which also kind of speaks to our strengths. And in particular, these conversations are moving from things that used to be human to human, increasingly human to agent, agent to human.
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Bloomberg Tech Co-Host / Interviewer
For lots of people, the kind of base level story is messaging demand, right? Going back to Twilio's roots, the more exciting story is that Twilio is on this journey where it goes from being that messaging and communications offering to being much more of an infrastructure layer. You know, you hold yourself to really high standards. Kazimo, I know that, we've discussed that. But where do you think you are on the journey towards that kind of much more encompassing platform that you wanted Twilio to be?
- [24:52]
Cosmos Ship Chandler (Twilio CEO)
Yeah, I mean, I would say that we're executing well on it. We've got our big customer conference signal next week, so I don't want to get too far ahead of that and front run it. But the way that I would characterize it is very similar to the way that you described it. Like these things tend to start in a channel like messaging, like voice. Our ambition is that many more of these translate into cross channel communications in which there's this channel orchestration layer, which means basically that however a customer wants to be reached whenever they want to be reached, whatever the kind of context with which they want to be reached, they are. And that allows for a highly enriched, deeply personalized interaction. Whether again, that's human to human or agent to human. And I think at a time when the lams are unleashing so much power Power. Being able to add context to those conversations is crucial and that's something that Twilio is really able to do.
- [25:51]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Customer, you're so B2B, but how much are you starting to see your B2C? Like the whole world of Vibe coding. I having to set up Twilios to be able to connect my whatsapps with my. With what I'm writing to be able to basically see the way in which I use AI personally. Is everyone suddenly using Twilio in a more consumer focused way?
- [26:11]
Cosmos Ship Chandler (Twilio CEO)
I think predominantly we're like 99% B2B to be honest. I mean, I think for the lead developer, maybe that's kind of the angle of your question. I think it's never been easier to use our console than it is today. We've actually done a ton of behind the scenes work to make that console experience super simple. So we've always been a very, very attractive brand for developers. I think increasingly whether you're a Vibe coder, whether you're just experimenting, whether frankly you're launching an agent for the first time and asking your agent to do the work on your behalf. Our consoles ready for that. We're seeing pretty limited volume I would say so far, but we definitely think that that's going to take off and we're super excited about it.
- [26:51]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
This is clearly a very positive story for the stock. We're up 4 billion in terms of market cap today alone. What does it mean for people at the moment? Because you hiring in this moment?
- [27:03]
Cosmos Ship Chandler (Twilio CEO)
Yeah, I would say we are doing like some modest hiring. Like by and large over the last couple of years our workforce has been relatively flat. I think like a lot of companies, we're seeing tremendous productivity gains as a result of AI. I'll speak for myself, but I think this is true of our workforce. I'm 10 to 15% more productive today than I was two years ago as a result of using different kinds of AI tools. We deploy a variety of them with very, very strict security guardrails right to our workforce. But I think everybody is seeing a real improvement rather than turn that into like a layoff or something of that nature. Instead we're turning it back to how can we accelerate innovation velocity.
- [27:44]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Twinio CEO Cosmos Chandler on the back of big moves on a big earnings report. We appreciate it. Now coming up, roadblocks. Aggressive push for safety features. It's costing them nearly $1 billion. We're going to discuss that and the outlook with the CEO. Dave Suzuki, this is Bloomberg Tech. Welcome back to Bloomberg Tech. And let's get back to Apple's earnings and break down one of the highlights. Today's big number, 20 and a half billion dollars. That's how much Apple made in the China market. Well look Apple, Apple has struggled in recent years beating Wall street projections this time and then some. They thought it was just going to be $18.9 billion. And we are seeing a significant move in the stock at one point hitting a new record high. We're up 4.6% and this really is just showing that Apple is back to firing on all cylinders. What was amazing though is they were really clear about the supply chain headaches, about the cost pressures. But for now investors not worrying about the margin hit.
- [28:46]
Bloomberg Tech Co-Host / Interviewer
Let's talk about the change topping Apple investors minds what to expect from incoming CEO John Turner as Mark Gurman joins us for more. Mark led our coverage of the earnings print last night and in the end, right, it becomes a pretty simple story where they give an outlook for the June quarter and we know that there is a supply constraint, particularly on Mac. But the moment that John Turner's popped up on the call, could I just ask you, Mark, now that you've had a night to sleep on it, what the takeaway from that was was of what Mr. Turners had to say.
- [29:16]
Mark Gurman (Apple Analyst)
Well he certainly didn't keep me up all night thinking about it. He didn't really say much. He praised the guy who handpicked him as his successor. He said the right thing for the audience on the call, which was we're going to continue with the financial discipline that we've had the last two decades under Tim Cook. But the real comments related to Turnus actually didn't come from Turnus himself. They came at the very end of the prepared remarks, remarks from CFO Kevin Brech where he said we're having a CEO transition and we're reevaluating what we do with our cash. And this practice we've had about share buybacks, giving money back to the shareholders, we've given back over $1 trillion. Well, we're going to continue that. We're doing another $100 billion buyback that we're announcing today. But the fact that we're talking about it means something is going to change. And what they're doing is they're giving themselves more flexibility now to give less money back to shareholders and hold on to the cash for things like deals, for investments, for infrastructure, for R and D. And that is a really big deal. And this puts John Ternus in terms of what they're going to be doing with their cash somewhere in the middle between Steve Jobs and Tim Cook. Tim Cook was all the way on one side giving as much back as possible, right? Trying to get to net cash. Neutral troll Steve Jobs is on the other end of the spectrum where he didn't want to give anything back to the shareholders because he wanted to hold on to as much as possible for investment. And by the way, he lived through the early years of the company and Apple nearly going into bankruptcy, the Turnus is somewhere in the middle, whereas they're not going to keep it all to themselves. They're still going to give money back, but they want to be more judicious with that money as needed.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Some analysts have perhaps read into holding on to cash, not promising as many big buybacks perhaps or hinting at that under the new leadership as being. Also, we've got some price pain to swallow. We're going to have to take a hit to gross margins if we are going to see the pricing pressure from memory. For example. Mark, is there that anxiety? Should there be that anxiety?
- [31:16]
Mark Gurman (Apple Analyst)
That may be a small component of it, but I would be surprised if Apple's response to pricing changes related to memory ends up being taking money out of their own bank account and eating those margins. I think they're going to offset some of that by raising prices. Typically in these types of scenarios, Apple likes to do a split, right? They like to eat some of it and like to give some of it to the consumer. So it may be some of that, but we'll see. I don't think that's going to be entirely clear until the tail end of the year or early next year.
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Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Montgomery, all over the Apple news, thank you very much indeed. Now on another earnings front, Roblox is paying a price for children's safety. The stock plummeted after the company cut its full year bookings forecast. Making clear though that that new age verification and child safety features that they've embedded, they're creating some friction for user growth. CEO Dave Bazooki joins us now. And you made really bold statements in the investor letter saying this is worth it, this is worth it long term because it's building a safer global standard of safety. Talk us through when you will see actually that friction die down.
- [32:24]
Dave Bazooki (Roblox CEO)
Hey, great to be here. And highlighting coming off a great quarter, 43% year on year bookings, growth bookings of $1.7 billion, more than twice what we've shared with investors is our long term growth trajectory. And yes, we've highlighted our commitment to, to setting the global standard for healthy, safe, age appropriate digital engagement. We have rolled out age check all around the world this quarter. We now have over 65% of US users who we have age checked. But we did highlight in our earnings call there is some short term friction from communication and other factors. We believe though this is worth it. We are well on our path to 10% or more of the global gaming market and more of that of us. And we want to bring along all of our under 16 users as well as the over 16 who are growing very rapidly.
- [33:27]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
How about bringing along the industry Dave, because you're a first adopter here of this technology that can help age verify. Do you think others in gaming will have to do this? Do you think others will experience such friction as you come out of it?
- [33:42]
Dave Bazooki (Roblox CEO)
I want to highlight if you go to our corporate site and read our values, one is take the long view and the other is respect the community. We've continuously innovated on safety since we started in the company and as the technology got good enough to age check, we've leaned into to it. This is in addition of course to our industry leading text filtering. The fact that we don't allow image sharing on the platform. This has allowed us to do several things in addition to age checking. We're going to be introducing kids accounts and select accounts. We're able to do this within our same app because we are age checking. Also because we're age checking, we can now identify the 18 and up players on our platform and we've introduced some interesting economics for them. So we do think we're setting the industry standard and we have this commitment to what we call the global standard.
- [34:39]
Bloomberg Tech Co-Host / Interviewer
Dave, good morning. You came on the program three weeks ago and I asked you if you would kindly model for us at that moment when you were announcing the new policy and new platform changes with safety in mind, how that would impact user behavior and that's kind of played out in the in the earnings print, right? Just explain that. The interaction between the policy that you put in place and why it would impact user metrics and behaviors Platform Well,
- [35:11]
Dave Bazooki (Roblox CEO)
I want to highlight we're using age check and we're asking our users to age check check if they want to use the communication functionality on roadblocks. So in Australia we're over 70% age checked, in the US over 65%. But that does highlight there could be roughly 35% of our users in the US who currently are not communicating on our platform. We believe that can contribute to some short term friction. In addition, as we go long on our 18 and over segment, we've shared that more and more. We're using our recommendation algorithms to support long term retention on the platform more than shorter term monetization. These both have contributed to short term friction.
- [36:03]
Bloomberg Tech Co-Host / Interviewer
Dave, let's, let's talk about Roadblocks Future and Roadblocks Reality. This seems like a big play, a big upgrade from Roblox Studio. We talk all the time to Unity. I am very into Unreal Engine right. And how that impacts my experience in the games that I play. This presents an opportunity for you to do work with some of the big budget developers. Could you just explain the pathway to that?
- [36:31]
Dave Bazooki (Roblox CEO)
I want to highlight two separate levels of this. We have continued to release over the last quarter and will continue functionality that is very unique to Roblox. Roblox is a game engine, a client, a cloud, and together we're committed to publishing once and having whatever you publish work. Both super high quality on a gaming PC, but also perform very well on a 2 gigabyte Android phone. Those are very different configurations. We want to support both with the same build as well as when our creators build on Roadblocks, they go around the world. The future for us is a hybrid architecture. And what we want to do is make it easy for creators to create experiences that are ultimately multiplayer and photorealistic and do it very easily by powering it with AI. So we have combined really a hybrid architecture. We're starting to show it off that combines our multiplayer synchronization with cutting edge real time video world models. We believe this is the ultimate hybrid architecture to democratize photorealistic multiplayer.
- [37:45]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
I like that about the democratization and making sort of the building of games open to many. But how, how do you think about the pricing structure briefly, Dave,
- [37:56]
Dave Bazooki (Roblox CEO)
We've said initially Roblox Reality will not be free. I mean real time video AI modeling in the cloud is expensive. But just like with the rest of the world, these prices are going to come down and down. I want to highlight this is complemented really with our vision for creation. And if we look at what's happening in the coding space over the last six months, more and more software engineers are literally having AI run overnight doing multiple iterations to help build software. Gaming is much more complex. It involves software, 3D assets, NPCs, real time operations, terrain geometry. We're really pursuing that same vision that agentic multiple iteration AI work. With Roblox Studio we started introducing things as innovative as using NPCs to help test software and we, we believe we're uniquely poised to help creators build more quickly, higher quality and more diverse experiences.
- [39:06]
Bloomberg Tech Co-Host / Interviewer
Dave Bazooki, CEO of Roblox, thank you very much. Now coming up on the program, sources tell Bloomberg Peter Thiel's Founders Fund has raised $6 billion to back later stage companies less than a year after its last growth stage hall. We have the details next. This is Bloomberg Tech.
- [39:29]
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- [41:58]
Bloomberg Tech Co-Host / Interviewer
raised $6 billion of fresh capital to back growth stage startups. That's according to sources. The new fund comes less than a year after it closed its last late stage vehicle, Bloomberg's venture reporter Natasha Mascare and has broke the story. As with us, I think this is Founders Fund biggest ever haul. So it's not just that it came in quick succession from the last fund being done. They're going big and so is everyone else at the moment.
- [42:20]
Natasha Mascareñas (Bloomberg Venture Reporter)
Totally. I mean I made a joke on X earlier this year that firms were going to have to raise new funds just because of how much they're putting into open air and anthropic.
- [42:28]
Bloomberg Tech Co-Host / Interviewer
Right.
- [42:29]
Natasha Mascareñas (Bloomberg Venture Reporter)
And now we're seeing exactly that. I mean their last growth fund, they closed last year around 4.6 billion. They invested that in less than a year and now they're back in the market. And the last growth one was only invested in seven companies. We saw its first ever investment in Anthropic, a $1.25 billion check. Big investment in OpenAI as well. And then across their other late stage investments like cognition and stripe.
- [42:52]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
Natasha, who's wanting to recommit here? Is it LPs and new monies coming in to Founders Fund?
- [42:59]
Natasha Mascareñas (Bloomberg Venture Reporter)
Yeah, no, I mean it's, it's 4.5 billion from their institutional LP. So we're talking sovereign wealth funds from across the world institutions and then 1.5 billion from founders Fund employees as well, including Peter Thiel. And this is something that people really do focus on because it is unique to Founders Fund. A lot of times when venture capitalists raise fund, you might see just the general part partners, the top senior management put in some capital. But this is the largest amount that actually the employees of Founders Fund have put in to the fund itself.
- [43:29]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
To putting the money where the mouth is, Bloomberg's Natasha Mascare Ennis, we thank you so much. Just all of these scoots when it comes to vc. Now let's talk more about generative AI right now. Because it's turned coding from a specialized skill into something anyone can do, a simple prompt. But as I write some code, its impact is being felt on hiring for junior software engineers. Just take a look.
- [43:50]
Natasha Mascareñas (Bloomberg Venture Reporter)
I actually tried a whole bunch of tools in the beginning and this was about a year ago, which I think is like, feels kind of like the stone ages of vibe coding. I was able to make the foundations of the app in maybe a month. And as like a totally non technical person, I was actually able to like build a full stack app so there's like front end and backend capabilities and I was able to get it out on the app store just entirely myself.
- [44:15]
Bloomberg Tech Co-Host / Interviewer
And whilst that's opened up new possibilities, there is a downside. Since 2022, employment for software engineers right out of college has fallen by nearly 20%. Nagel thinks companies are making a big mistake.
- [44:28]
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Think that one of the biggest risks of the whole thing is that people are going to get too focused on the short term and not think about
- [44:34]
Bloomberg Tech Co-Host / Interviewer
the long term enough.
- [44:36]
4imprint Advertiser
First of all, if you don't hire any new people, who's going to run the company in 10 to 15 years?
- [44:40]
Bloomberg Tech Co-Host / Interviewer
But second of all, our research and
- [44:42]
4imprint Advertiser
others has shown that these junior people are actually the ones who are able to change their job and get the most out of using these tools.
- [44:49]
Windows 11 Pro Advertiser
Chen agrees.
- [44:51]
Natasha Mascareñas (Bloomberg Venture Reporter)
I feel very strongly that this is like not replacing engineers. I think the more you use AI to build, the more you understand the space and kind of even know what you can and can't do. It's like technically I can make it, but an engineer probably could have made this in a much shorter timeline and probably with like much more robust code.
- [45:14]
Bloomberg Tech Co-Host / Interviewer
Watch the full Wall Street Week episode later today, 6:00pm Eastern, 3:00pm Pacific Time. Okay, coming up we're going to get back to Apple and the week that was in tech earnings. What a week it was. Apple back up towards session highs up 5%. This has been big tech. NASA administrator Jared Isaac man says a future space economy cannot be completely taxpayer driven and cannot be forced into existence. But NASA can work to set off the spark. He laid out the his vision on Bloomberg Surveillance this morning. A space economy sure would be great because I don't think we're going to have that sci fi future we imagine with lots of space stations and orbital outposts in a Mars base if it's entirely paid for by the taxpayers. So I want data centers in space to work. Why not take advantage of a giant fusion reactor that's already out there? I want, you know, I want a three. I want us 3D printing organs. I want us making cancer curing drugs in microgravity. I want, I want all that to come to fruition. We can't force it into existence at NASA, but we can do all we can to ignite it.
- [46:30]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
A lot to discuss, but let's get back to our main story of the day. It's Apple shares as you can see up 5%. They're basically at a record high. Gene Munster, managing partner at Deepwater Asset Management, joins us in June. Before this, you were worried, but perhaps stock's not getting enough credit. Are we getting enough credit yet?
- [46:48]
Gene Munster (Deepwater Asset Management)
Now we're inching there.
- [46:49]
Dave Bazooki (Roblox CEO)
5.
- [46:49]
Gene Munster (Deepwater Asset Management)
I would have guessed based on these results, you'd probably be up closer to 10%. And Carolyn, I think what's at the core of this is a concern that we're kind of at the peak here, that this is the super cycle over the past three quarters. Just to put this into perspective about this disconnect, which I believe between what's going on at Apple, what the stock is doing versus the fundamentals, I think there's this piece, an important piece around the consensus concern that we are at the peak. As I mentioned, over the past three quarters, iPhone's grown at 20%. The previous three years. To that, it was up one and a half percent. So you see that super cycle, of course, investors are always looking forward for next year. The iPhone growth is now expected to be 6%. So you see that big drop down. And that's what investors are wrestling with. If they truly believed what we saw in the March quarter, quarter, in the June guidance, that there was any form of sustainability to that, the stock would be up more than 10%. So I think this idea of understanding what's beyond the super cycle is at the substance of understanding what's in front of the stock.
- [47:56]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
What about beyond the June quarter? And Tim Cook, who's handing over the reins after the June quarter, saying, look, we believe memory costs will drive an increasing impact of on our business. Is that also what's holding back the stock?
- [48:11]
Gene Munster (Deepwater Asset Management)
Well, I think, you know, the memory piece, they're showing that they're doing an incredible job of navigating that. So the guidance that they gave did anticipate some depression in margins, very small amount, 30 basis points. Effectively, the street had been expecting about 120 basis points compression because of these component environments. So yes, they are seeing an effect and that could be part of kind of what's going on here. But I think in aggregate, investors are probably feeling better today about how they're managing this environment than they did a couple days ago. And so there is also this dynamic, kind of a unique dynamic. Again, I think this is about understanding growth for next year. But in fairness to the conversation today, there is a dynamic around on capital, returning capital to investors, and they added some new language about putting the business priorities first. Now, they of course, always do that. But the fact that they had added that language to their conversation about capital return really sparked some questions on the call, like are they thinking about doing some sort of upsizing in terms of their investment pace, which is very much behind of course, not just on the capex, but on everyday R and D compared to the other tech companies. And so that was another small dynamic. But again, I think this comes back to a very basic question is what's the true growth rate of Apple?
- [49:39]
Bloomberg Tech Co-Host / Interviewer
Gina, I love following you on the socials because in real time you're just giving your honest thought. I think you're in the camp of people that, that made a big deal of John Turner speaking on the call and though he didn't say much, you got some vision out of it. Right. You see the direction of travel for Apple under Turners.
- [49:58]
Gene Munster (Deepwater Asset Management)
Yeah, you can, I think like you said, you didn't say a ton. And you have to put everything that they say in the context of what they've always said in the past and kind of decode it. In the case of what Turner said, he did lead with talking about them having financial discipline, continuing that, which basically, basically means that they're not going to go and start to spend a ton of money unexpectedly. So I think this idea that they're going to join some sort of hyperscaler capex race is that's just simply off the table. The other piece he jokingly said, I'm not going to talk about new products but if we think about what we're doing, this is the most excited I've been because of what is going on at this time now, the most exciting that I've ever been. They say that that standard operating language but at this time, this time is referencing of course the AI chapter and I think that, you know, he knows what's at stake here and, and they've got a lot to do to change investors and consumers alike in terms of their, their competence.
- [50:57]
Bloomberg Tech Co-Host / Interviewer
Classic Apple maximalist language. Gene Munster, managing partner at D Water Asset Management. Thank you very much. Breaking news on the Bloomberg terminal. President Trump says he will increase tariffs on EU autos to 25%. See shares of Stellantis dropping pretty quickly. This is in a true social post where he says it is understood that if those companies were to build cars in the United States, there would be no tariffs. So of course this is impacting cars built in the EU shipped into the United States. It's a developing story car.
- [51:27]
Bloomberg Tech Host (Caroline Hyde / Ed Ludlow)
It is. And just think how well many the analysts say Apple has navigated such tariffs. For example, example we tied up a story on Apple on so much more. That does it for this edition of Bloomberg Tech.
- [51:38]
Bloomberg Tech Co-Host / Interviewer
Check out the pod. It's worth it. It will give you everything you need to know. This is Bloomberg Tech.
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