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- [00:00]
Caroline Hyde
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Anna Rathbun
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Jonathan Ross
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Mike Shepard
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Jonathan Ross
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Mike Shepard
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Mike Shepard
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Caroline Hyde
Bloomberg Audio Studios podcasts Radio.
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Jonathan Ross
News.
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Yajo Son
Bloomberg Tech is live from coast.
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Caroline Hyde
To co with Caroline Hyde in New York and Ed Ludlow in San Francisco.
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Ed Ludlow
This is Bloomberg Tech Coming up, Amazon says its cloud service is recovering after widespread outages affected customers like Zoom, Snapchat and Coinbase.
- [01:54]
Caroline Hyde
Plus US China trade talks resuming this week as President Trump lists Rare Earths among his top priorities and IBM and.
- [02:02]
Ed Ludlow
Grok partner up to provide greater access to the full potential of enterprise. I will discuss with them later this.
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Caroline Hyde
Hour but first let's check in on these markets that I'm sat in London this week but I can see from across the pond 1.3% on the NASDAQ 100, a new record high. There's a risk on tone throughout the markets. We're looking towards those China US Trade talks but there are some notable gainers underneath the hood.
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Ed Ludlow
Yep, Apple is a big points driver to the upside at the index level. Apple has touched its first record high of 2025. That's the first record high since December of 2024. We have an upgrade at Loop to buy like many recently trends in the iPhone upgrade cycle. We're going to have a lot more on this story throughout the hour but clearly this is a big jump for the company and it's really impacting markets at the macro level. We're also looking at Amazon, the parent of Cloud Computing US the stocks actually up a percentage point a massive outage overnight principally around one U.S. data center in North Virginia, the U.S. east One site. But it has had repercussions for the public sector, the private sector and technology companies of all types. Let's get out to Bloomberg's Yajo son who's been reporting on this throughout the incident. Very simply Joe, what happened and what have the ramifications been?
- [03:20]
Yajo Son
Yeah, so this morning Amazon reported that they're experiencing operational failure across multiple services and its data center hub in Northern Virginia. Even though the issue occurred in eastern the northeast of the United States, the impact was really felt far and wide. Some of the victims of this of this outage include trading platforms, platform, Robinhood Lloyds, the British bank hmrc, the British Tax Tax Authority as well as Perplexity, the AI platform. So the company said that the issue has been largely fixed, but there are residual effects. And this definitely gives me flashback of the CrowdStrike outage last year, which you might remember a buggy update from CrowdStrike really paralyzed nearly half the world's computers and left people scrambling at airports and sent bank home early because they simply couldn't turn on their computers.
- [04:19]
Caroline Hyde
Yeah Joe, it does remind us of the importance of a very few very powerful players when it comes to our tech infrastructure. It hasn't been that significant an incident for Amazon in and of itself as many years now. Is it 2021? But tell us about the learnings that Amazon is going to push forward for us.
- [04:38]
Yajo Son
Yeah, I think this really speaks to the fragility of overdependence on the very few hyperscaler cloud operators that we is the world's largest cloud provider. Its business surpasses Google and Microsoft's. And I believe analysts predict that this unit is going to bring in about $126 billion to the company. Amazon itself has said that the company is going to invest around 100 billion or so into building data centers and model training. Given that, you know, so much of our AI training and inference is run on data centers cloud cloud computing services these days I think Amazon will really have to think about business continued continuity so that this does not happen again.
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Ed Ludlow
Yeah Joe, lots of our audience here on Bloomberg Tech are highly technical. It might be their job to deal with their cloud computing provider. Loads of people will be watching and be like, I don't understand any of this. I don't understand what happened. I spent a lot of time reading about DNS and reading about DynamoDB, the data center database that relies on. Have they actually answered the why of what happened? How could they let this happen?
- [05:56]
Yajo Son
They have not answered why. So DNS is a system that translates web addresses to IP addresses so your apps and your websites can load. I think we will, throughout the US day the company will say exactly what happened, will probably let us know. But I think it's, I think it's, it's very telling that a very small part of the digital infrastructure can create such a ripple effect throughout the global economy. And I think we will see if the company will say anything about how, you know, if there will be what they would do to satisfy their customers going forward.
- [06:38]
Caroline Hyde
And I'm sure you'll be the first one to help us report it out. Yeah. Joe, son, we so appreciate you jumping on today. Thank you. Let's get to the wider impact look on the tech sector writ large. Today we're in risk on mode. Anna Rathman's with us. Grenadellar Advisory founder and CEO And Anna, look, we see these technical glitches and the realization and well, maybe just rememberizing the idea that we do depend on a few very big players not just for our infrastructure but for the market to go higher too. What do you make of the rally today?
- [07:09]
Anna Rathbun
Yeah, the rally, I mean especially for Amazon, it seems like there was no glitch today because Amazon is also up with the rest of the market. As regards to Amazon, I do think that there is a concentration problem. Everyone talks about the stock market concentration. I mean this is sort of the same thing. I think we have to start looking at digital infrastructure almost as utilities. You really can't live without it. And so from that standpoint I think barriers to entry are high but we need to start thinking about sort of diversifying our exposure with regards to the rest of the market. I think there is a lot of excitement, certainly not only in tech, but in other areas of the markets as well. I mean last week we learned about wal Mart and OpenAI. Today we learned about Cleveland Cliffs and Rare earths exploration. I feel like what's happening now is something that investors have been waiting for for a long time, which is to see the expansion of the tentacles AI reaching the different parts of the economy and different parts of the markets. And this makes us feel a lot better about the AI play And AI development because it's becoming stickier. We can't peel this off as easily. We can't just say, okay, those are the data centers that are going to go dark and we may not use it for 10 years. This is becoming more of a real thing in our daily lives.
- [08:31]
Caroline Hyde
So interesting. They're talking about the broadening out effect in the markets. But let's just go back to the first point about the over focus. There are basically an oligopoly when it comes to cloud provision. I'm here in Europe because we've got our tech summit in London and one of the key debates is to be had is Europe's over dependence on other global players. The fact that they don't make their own chips but they also don't have their own cloud providers. What do you make out of whether that might indeed change as we all think about sovereign AI and sovereign cloud world?
- [09:03]
Anna Rathbun
Yeah. So I think the concentration risk we talked about earlier, it applies to everybody. This was a global event. Right. And so you do need to think about diversifying your exposure. But we've had stuff like this in the past, maybe not as large as Amazon, but I think the previous speaker talked about CrowdStrike. CrowdStrike. It really. It requires a massive amount of investment and a massive amount of effort to get that done. And so far the effort has been coming from a select few regions and countries. Certainly Europe probably needs to think about having their own infrastructure as well. But it's not as easy to do as it is to say.
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Ed Ludlow
And Apple's just touched 4% in the session again, hitting a record high for the first time this year. It's a big factor at the index level. What do you make of all of these upgrades? Updates on optimism around iPhone.
- [10:01]
Anna Rathbun
Yeah. So especially with regards to the negotiations with China, it is really nice to see sales up in the United States because then it makes Apple look less dependent on some of this rhetoric between China and the U.S. but I would also say that there is a little bit of a spending of pulling forward of spending. When you think that iPhones or anything is going to cost 4, 5% more in a year. Are you really going to wait for iPhone 18? No, you're going to buy it today. Especially if you have an iPhone X or iPhone 9. I can't even remember the numbers anymore, but a lot of people have been keeping them and if they're going to renew it, they're going to renew it now rather than waiting until next year. So I think we're seeing some of that Pulling forward effect as well.
- [10:48]
Ed Ludlow
The optimism in technology markets today seems to be around earnings, earnings in particular and what's to come this week. But trade negotiations are also to come this week. Balance those two risk factors for us.
- [11:01]
Anna Rathbun
Well, earnings is fundamental and in my mind is much, much more important. And I do think that the stock prices will react to earnings with regards to trade talks. I mean, I feel like the market's rising. Ever since the first day when President Trump said that he may not meet with President Xi, it's been going up. And I think that's the market basically calling bluff on both countries. China is an export dependent country. It needs to export rare earth minerals as much as we need to buy them. US is a consumer based economy. We need to be able to import cheaper goods from China as much as, you know, China needs to export them. We need each other. So I think the markets are saying, okay, the deal is probably going to get done. It's just a matter of time.
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Ed Ludlow
Anna Rathbun of Grenadilla Advisory, thank you very much. So coming up, matter, tick tock, snap and many more under pressure. We're going to discuss why social media giants are about to face a mountain of litigation. That's next. This is Bloomberg Tech.
- [12:11]
Caroline Hyde
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Caroline Hyde
Social media giants are about to face a wave of litigation matter, Snap, ByteDance, Alphabet are set to appear in court over two consolidated lawsuits accusing them of knowingly designing their platforms to addict users, resulting in depression, anxiety, insomnia and self harm. For more Bloomberg's Olivia Carvel has been following these lawsuits, joins us now. And in one of the key lines in your story about this, Olivia, you talk about how one lawyer who's going to be representing the federal cases says, all told, this is a massive legal siege on the social media industry. Why is it all coming in this wave?
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Olivia Carville
I mean, we have been seeing these lawsuits filed in state and federal court over a number of years now. This all started back in 2022 after Francis Hagan kind of blew the whistle on Facebook, releasing a trove of documents about how the social media giant was kind of impacting youth mental health. Following that, we saw plaintiffs attorneys really focus in on that and start to file lawsuits against these companies accusing them of harming children. And over the course of three years, all of those lawsuits, or the majority of them now, have been consolidated into two different litigation tracks in state court and in federal court. We're going to see these cases come to the courtrooms next year and it's going to be, you know, as he mentioned in the story, a massive legal siege on the social media industry. We're expecting to see, you know, a number of trials next year and possibly thousands of plaintiffs waiting in the wings once those trials close.
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Ed Ludlow
Olivia, a part of the reason that this litigation has been pending for quite a long time is that the social media companies have had this liability shield, right? That is protected them in some sense from user harm litigation. Explain that shield and why it's now not preventing these pieces of litigation moving forward.
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Olivia Carville
Yeah, that's right. I mean, the Communications Decency act, this is a federal law that has long protected social media platforms, platforms and really any Internet platform from facing user harm lawsuits. What that law does is it provides an immunity shield or a blanket that says you cannot file a lawsuit against these companies for the content that exists on their sites. What these cases are trying to do is sidestep that immunity blanket by saying this is not about the content that users are posting to Facebook, to Instagram, Instagram, Snapchat or TikTok. This is about the design of the platforms, that these companies intentionally designed their platforms to try and addict young users and resulting in many harms to kids from, you know, mental health, harms like depression, anxiety all the way through to self harm and suicidal issues.
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Caroline Hyde
Olivia, often, often the markets ignore potential legal threats for big tech companies. And it has been notable that actually a lot of companies have been trying to update the protections for children. In particular, I think of Instagram just last week. How have they set themselves up to really tackle this in a forward going way?
- [17:17]
Olivia Carville
Yeah, as these cases have been piling up in the courtrooms, we've seen almost every one of the defendants start to update their policies to really try and get better, stronger safeguards for kids. And you saw that recently with what Metta announced on Instagram. And that's certainly true. But at the same time, this litigation is not going away. These allegations stand in court. And I think what's remarkable about the kind of position that we're in right now is that as of next year, we're going to see the alleged victims of social media into the courtroom for the first time in the U.S. so these cases are going to be tried. Juries are going to hear testimony from teenagers, from experts, from company insiders as well, about whether or not social media has actually harmed the mental health of youth. A lot of people have been asking that question, but a jury will have to face that question for the first time next year.
- [18:16]
Caroline Hyde
Bloomberg's Olivia Carville. We thank you very much for bringing us the latest. Now we turn our attention to talking tech. First up, sales of Apple's iPhone 17 off to a strong start in the US and in China, the latest iPhone model has outsold its predecessor in their respective first 10 days by 14%. It's all according to Counterpoint Research. The research firm attributes the boost to an improved display, more storage and the upgraded A19 chip. Plus, London based FinTech Revolut has been cleared to launch banking operations in Mexico. It's the second regulatory green light in Latin America this month after Colombia approved it to create a bank. The region is central to Revolut's growth plans. The company says it expects, quote, millions of people in Mexico and China says it has irrefutable evidence of A US Cyber attack on its national timekeeping agency dating back to 2022. Beijing accuses Washington of exploiting vulnerabilities in the mobile phones used by the agency, these employees to steal sensitive data. The US National Security Agency didn't immediately respond to request for comment.
- [19:20]
Craig Trudeau
One of the things I want is China is going to buy soybeans. I want China to stop with the fentanyl very, you know, normal things. I don't want them to play the rare earth game.
- [19:30]
Caroline Hyde
With US President Trump there aboard Air Force One outlining his expectations for upcoming trade talk talks with China, discussions that could have major implications for the global tech supply chain and semiconductor industry. Bloomberg senior tech editor Mike Shepard joins us now on the latest important conversations to strike up again in Malaysia this week.
- [19:50]
Mike Shepard
They certainly are, Carol. We're going to be watching exactly as you said, for what the US Might be willing to give up in return for those three key areas that President Donald Trump outlined on Air Force One yesterday. One of them, of course, is rare earths. That matters a lot for the tech industry. All those critical minerals going into so many different products, but not just in tech. They go into autos. They even go into defense equipment. So this is something that is crucial for the US to reach an agreement on after China moved to start to impose export controls on sales of those critical materials to buyers here in the U.S. u.S. That really hit a nerve with U.S. negotiators. But another sore point, Carol, and while it's not exactly tech, it is important perhaps in, in a connected way, and that is soybeans. The president has been disgruntled, along with his advisers, that China is not buying any soybeans from US Producers this year. And that is taking aim at a key source of political support for the president here in the US and he wants China to start buying those soybeans again. That was $12 billion in purchases in 2024. It has zeroed out this year. So again, it's on the table. But Carol, the question is, what will the US Give up in return? And does that mean a relaxation of some of those export controls on critical technology that Beijing has chafed against for the past several years? Will it mean a relaxation of limits on excellent exports of AI chips or perhaps semiconductor manufacturing equipment like what we see made by ASML and Tokyo Electron? This will be all on the table later this week when Scott Bessant meets with his Chinese counterpart in Malaysia later this week.
- [21:37]
Ed Ludlow
Mike, overnight, a lot of headlines on Next Baria, can you just help us understand what's happening in that case study scenario. What the US Government is aggrieved about about relative the Dutch.
- [21:50]
Mike Shepard
Well, this is a fascinating shot sideshow really to the broader conflict between the US and its allies and China over technology. But in this case, it all boils down to one company based in the Netherlands Next Period. The US Is concerned that its parent company Wingtech has a plan to siphon critical chipmaking technology out of European hands and into China to bolster the domestic industry. And it put pressure on Dutch authorities to seize control and replace the CEO, which happened at the end of last month. We learned about this all last week through court filings in the Netherlands. And China is responding forcefully. It has imposed restrictions on exports of Next Period products that were made in China. And we've also seen messages in WeChat to next period employees in China saying that they do not have to listen to the new management running Next Period based in in the Netherlands. So this is something we will want to watch closely as we see the Dutch taking on the world's second largest economy over the fate of this company, which also I will say Ed provides a lot of semiconductors, legacy chips mind you. But still to the auto industry and consumer, consumer electronics producers.
- [23:08]
Ed Ludlow
Bloomberg's Mike shepherd, thank you very much. Another story, proxy adviser Glass Lewis is urging Tesla shareholders to vote against Elon Musk's potentially trillion dollar Pay package, the second major proxy firm to do so ahead of Tesla's November 6th annual meeting. Let's get out to Bloomberg's global autos are Craig Trudeau. I'm reading the, the Glass Lewis note and they're worried about I think shareholder dilution. But just summarize why they're proposing and recommending voting against this comp package.
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Craig Trudeau
Yeah, I think you put the nail on the head there in terms of dilution being an issue, I think. And this goes back to, you know, sort of criticism that, you know, the judge in Delaware sort of level that at the initial pay package that Tesla's board arranged for Musk eliotsk back in 2018, this is a case of, of a CEO who's already quite aligned with the future of his, his company by virtue of the substantial stake that he has in the company. And there is a question on the part of, of you know, these proxy advisers of just, you know, to what degree is it, is it necessary or appropriate to hand over more control of this company and issue so many shares that would dilute the current shareholder base of, of Tesla?
- [24:30]
Caroline Hyde
Now Tesla, Craig has said that the Glass Lewis recommendation is quote, misguided in an ex post and they're talking about the recommendations attempting to override the mandate of our shareholders delivered to Elon and ignore the staggering financial results that were delivered under Elon's leadership. Just what is the argument coming from the business right now?
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Craig Trudeau
Yeah, I think it's, it's interesting because you know, you sort of at some points hear Tesla, you know, talk about the idea that they're more than just a car company and yet it's interesting that they sort of compare their performance versus other car companies and they're by virtue of doing that comparison, you know, make themselves look, you know, awfully different from, from these companies that for a long time they've said, you know, we shouldn't be compared with those, with those companies. So of course there is, you know, some, some, some reason to sort of celebrate the returns that this company has managed under Musk. We should acknowledge that as well.
- [25:32]
Caroline Hyde
We'll see if that celebrating hammers on Wednesday when their earnings come Bloomberg's crude oil we thank you.
- [25:43]
Ed Ludlow
Welcome back to Bloomberg Tech. The vibe in tech markets right now is a lot of anticipation around earnings season. 85% of the S&P 500 has already beaten profit expectations. Nasdaq 100 up 1.4%. A big factor is good vibes around Apple and also other names pushing higher despite negative news headlines. Let's get out to some of the top stories of the day with Bloomberg equities reporter Nora Melinda. Let's start, Nora, with Amazon and nwc.
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Nora Melinda
Yes, lots to keep an eye on right now, Ed, and pertaining to Amazon here, of course we know this has been a discussion all day long about the widespread outage that was seen here, this disruption from us that affected a lot of different companies including Roblox, Fortnite, Snapchat, a few others here. So we are seeing shares currently rebounding but we were seeing some weakness earlier in the trading session as it was really falling behind lagging a lot of its Mag7 peers. But if you look about a year to date basis here looking at shares of Amazon down about 2% here. So definitely something to keep an eye on as we just think about the broader landscape of this company.
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Caroline Hyde
And it's also notable that it's one of the key points additions but not the one but Apple. Let's switch gears to a company that's at a new record high helping the index from an underlying focus today. Nora, talk us through Apple and why it's rallying.
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Nora Melinda
Yes, Apple shares down just shy of 5% year to date but really Seeing some green on the screen today of course. Course this comes after the fact that we did see over the first 10 days of the sale of the iPhone 17 series, we are seeing that it outsold the iPhone 16 by about 14%. So you did see loop capital upgrading the stock to buy from hold of course under underscoring the positive iPhone demand trends. But we are seeing shares of Apple, as you mentioned Caroline, rallying for a record high today.
- [27:30]
Caroline Hyde
Really strong today as well. Absolutely starting to see that 4% add to now a 4% rally on the year. Finally breaking into positive territory. Bloomberg's normal. Linda, we thank you so much. Let's shift gears to other areas that are rallying in particular crypto and crypto stocks are actually doing better this Monday than underlying bitcoin is. We're looking at bitcoin miners in particular. They're outperforming in general the original cryptocurrency as they expand further into AI data centers. I can Torvich is with us all in this co CEO and co founder to discuss all things crypto. But I just want to dwell on that for a moment. This desire for compute has seen companies pivot, core weave. Once upon a time was a crypto miner and now it's a key neo cloud. What are you making of others trying to ride that wave and hiring key executives to do so?
- [28:17]
Nora Melinda
Look, at the end of the day you're going to go where you know whoever pays you the most and where you can sell the highest price. And to your point, the bitcoin miners have a secured grid power. It gives them that strategic advantage if you think about datacenter space. And so I think right now they're definitely coming out as a favorite and you're seeing that demand across the board. So it's going to be very interesting. You know, today bitcoin isn't used. Bitcoin blockchain isn't used for processing transactions. But it'll be interesting to see if that has any effect online.
- [28:47]
Ed Ludlow
In recent weeks it's been very interesting to track how bitcoin Bitcoin's behaved in the moment. Sometimes it can seem severe in the context of risk headlines about trade, the president's relationship with China. But I think you could give us some historical context that things are actually more calm through the bitcoin lens than. Than at least the headlines might suggest.
- [29:10]
Nora Melinda
Yeah, absolutely. So on October 10th we had our newest Bitcoin block Friday, which saw 19 billion in roughly liquidations across a number of exchanges. You know, it was a very large move, but Rel. To your point, Ed, you know, Bitcoin only moved. The price moved 12%. And if we had looked at, you know, call it 2020 or 2018, we probably would have seen that move over 40%. And so, you know, the maturation of the space is definitely here. The liquidations were clearly isolated to a number of exchanges, but it did show that while there was price maturation in terms of the technology that actually exists in the space, there's a lot of work that needs to happen for it to reach the level of a New York Stock Exchange or cme. And so we're really looking forward to that level of progress in the industry.
- [29:56]
Caroline Hyde
Okay, what has to happen?
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Nora Melinda
Yeah, it's a number of things, I would say. You know, first off, it's a level of coordination. And so if you think about, you know, what happens in circuit breakers, for example, when something happens in the market, you don't necessarily have, you know, an uncoordinated circuit breaker. You have a number of different exchanges that are speaking to one another. The second is also if you think about inventory. And so there's never really an instance, for example, where you can't move from one exchange to another, which you see on very often happen in crypto. When an exchange goes down, then someone can't necessarily send funds into the exchange to top up on margin calls. And so you see this level of cascading liquidations, which is exactly what we saw. Another thing that happens is, you know, even if you think about margin calls or the standardized risk metrics, typically in traditional finance, that's completely standardized across all of these exchanges. And today we think about institutional overseas exchanges as almost isolated islands of risk. Each one has their own methodology. And so when some of this happens in the market, when you get this level of volatility, it's very, very hard to track, you know, across all of the different venues that you're trading. And so you get this level of liquidations. I mean, 19 billion is a number we haven't seen historically before. But again, Bitcoin performed quite well relative to that, as did, you know, some of the other ETFs. You know, XRP and Solana.
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Caroline Hyde
Let's talk about those ETFs, because you are definitely the voice we want to hear about settlement, about management of software. You're thinking about the ways in which the underlying infrastructure is going to support the growth here. But when we think about regulation that could see the SEC, I think it's got 130 ETF applications on its desk. If the government ever opens back up again, they'll be able to start allowing them to go through. There is a lot of particularly leveraged versions or very indiosyncratic altcoins. Is that the way you want to see the industry progress?
- [31:49]
Nora Melinda
Look, at the end of the day, I think access is the most important. But I agree with you. There's. There's definitely a point where there's just attention deficiency. And so you can't look at and underwrite 100 of these different structures. And so the biggest thing when I think about some of these structures and, and teams is really who, who is the management behind some of these and what's the underlying risk in terms of the strategies? You know, you're seeing some of these digital asset treasuries or ETFs, they might just be buying the underlying. They may just be staking. But to your point, Caroline, you're seeing some of these others that on leveraged looping and other levels of risk. And, you know, you just want to make sure that you have some level of understanding of the underlying structure. And so I would say for some of these, it is a little bit gray. You know, we are pretty excited of this level of access going into, you know, whether it's avalanche, Athena, you know, there's the access really opens it up to a net new market where people are willing to pay for that premium in order to get access. But you are right, the underlying risk is not the same for all of us.
- [32:48]
Ed Ludlow
It's been a while since we've had you on the show and we've spoken. I just wanted to get your reflection on this administration's legislative efforts across crypto and the work that David Sacks has been doing and how you feel it has or hasn't worked.
- [33:06]
Nora Melinda
Without a doubt, it has been night and day. Relative to, you know, previous conversations that we've had. We have been able to hire in the United States across the board and tell people that we work in crypto. And you know, historically, if you think about a year ago, that was just not possible. And we were thinking about, you know, moving the company offshore, hiring overseas. And so, you know, relative to conversations that we've had with folks even in Asia, we're seeing a lot of focus transition back to the United States. And that is just incredibly compelling. As someone who is building here in the US and we're really, really excited about the communication and support, support that we're getting from this administration.
- [33:43]
Ed Ludlow
Just very quick, do you support the dollarization thesis that David and others are trying to put in place?
- [33:51]
Nora Melinda
Yes, Absolutely. And you're seeing a lot of that happening with some of the stablecoin legislation where it is going to strengthen the dollar by having a lot of these global stablecoins be backed by the US dollar as the underlying. And so you know, I do think it leads to a stronger US dollar but it, it, you know, it will see what the administration can do within now and the next three years and whether they're able to get everything over the finish line.
- [34:16]
Ed Ludlow
I can Torovy of August. Great to have you back on the show. Thank you very much. IBM and GROK are announcing a strategic partnership to give clients ultra high speed low latency capabilities via Grox inference technology. For more on how this partnership is going to provide greater access to the full potential of enterprise I we're joined by Rob Thomas, Senior Vice President of Software and Chief Commercial Officer at IBM and Jonathan Ross, CEO and founder of grok. And Jonathan, I want to start with you. You know the way that I look at this is it's a very interesting go to market channel for you, a sales channel. Think about all of the clients that IBM has and how you, you've tried to grow the company. Explain how people will access LPs through this or through the cloud matrix.
- [35:06]
Jonathan Ross
Absolutely. It's an extraordinary opportunity for both of us. IBM is going to have their sellers sell GROK SKU and so now you'll be able to directly access our speed. The advantages that we offer, you could think of it a little bit like offering broadband in the era where dial up wasn't fully rolled out and people were still trying to connect to the Internet. Our LPU's are just significantly faster but we also keep the cost down. Just imagine if you were to offer broadband and you charged more per bit of data that was sent over the line. It would be uneconomical. Broadband increases the demand. With agentic use cases it's particularly important to reduce the speed. You don't ask a question, wait 10 minutes later and come back back you'd rather get the answer in under a minute.
- [35:55]
Ed Ludlow
Rob, under this arrangement with Jonathan, does IBM make any sort of financial investment into Grok or is there some kind of sales or revenue split? Explain the economics of this deal for you guys.
- [36:09]
Craig Trudeau
Big picture is we have a lot of momentum in AI with Watson X. As we said on our earnings last quarter, 7 and a half billion dollar dollars as a book of business and we're trying to solve the client problem of how do they deploy AI faster. So this partnership is all about what Jonathan said, which is 5x performance at 20% of the cost. We've seen it with Watson X running on Grok. And so we will be distributing Grok as part of our go to market and there's a revenue share as part of that. We are are really excited because we've seen clients already getting an impact to how they're deploying AI because of the integration of our technology together.
- [36:52]
Caroline Hyde
Let's talk about that Rob, a little bit more because you're the man who's in charge of the software business. You're also really responsible for the world revenue and profitability of your company. So help us understand why GROK was the obvious choice. How is it helping your clients get answers faster? On the inference side of things, we.
- [37:07]
Craig Trudeau
Looked at every possible ability in the market and the clients are looking for significant performance. So some that changes how your call center operates or how your supply chain runs and then you combine that with a fraction of the cost, suddenly the economics make sense. It does have a cost problem. And we think this breaks through that In IBM we've said we're going to drive four and a half billion of productivity by the end the of of this year. That's another example of AI truly having an impact. And the number one question I get from clients now is how are you doing that at IBM and can you help us do that? And we think the combination of IBM and Grok can make this a reality for any company.
- [37:51]
Caroline Hyde
Let's dig into that a little bit now with you Jonathan, because the integration with what's the next orchestrate? What does that look like on your side? How does that happen and how happen seamlessly?
- [38:02]
Jonathan Ross
So the Watson X API is available for anyone to use day it'll be invisible to most users, it'll simply work. We have a compatible API and this is something we've been working on. We will also work on some lower level integrations with vlm, which is a technology that IBM is very deeply involved in. But it should just be transparent, you should just get more speed. Just imagine one day you come home, you had dial up and now you have broadband and it costs less.
- [38:33]
Ed Ludlow
Rob, where's the demand coming from on your side like IBM Granite or some other agent tech workload that they want to run using the Grok LPs. Are these public sector names? Are they private sector SMEs? I'm trying to understand who you're serving with.
- [38:49]
Craig Trudeau
It as often happens, I would say financial services services have been early adopters. But the thing that has changed in the market in the last Six months is everything is moving to multimodal. We have IBM models that we open source which are the granite models. We announced a partnership with Anthropic, we have a partnership with Mistral and Llama, just to name a few. What is incredible about what Jonathan and team have built is any model can run and get instant improvement improvement running on the LPU's from GROQ. So I think this is a combination of a multimodal world accelerating inference. With grok, I think this is a great combination.
- [39:29]
Ed Ludlow
Jonathan, does this capacity already exist or are you supply constrained still? You've got to go out and build it either in Saudi, Finland, here in the States.
- [39:39]
Jonathan Ross
So the entire world is supply constrained and I would actually expect that to continue for at least the next next five to 10 years. When it comes to AI, our advantage is that we have a supply chain that actually ramps much faster. So customers will be able to come to IBM, put in an order and we will be able to fulfill that faster than you would be able to with other technologies. But the supply constraints are real and this is another reason to start working with IBM sooner. The sooner you get access to that capacity, the sooner you're going to have it. I can't tell you you how many startups come to us and other companies come to us and they are looking for capacity because some of them are actually growing 10, 20 or even 30% per week or per month, which is an astronomical growth rate. But by approaching us early we can build to your needs.
- [40:30]
Caroline Hyde
You were just mentioning Rob, about all the partnerships you have when it comes to alarms and the offerings that, that you're intertwining within yours. Will you go to others to ensure that inference is as fast as possible or is it this exclusive?
- [40:44]
Craig Trudeau
With grok, we are open to working with anybody in the ecosystem of AI around what we're doing. Specifically on the acceleration with grok, we want to lean into this partnership. That's why this is the one that we've announced today because we have confidence working together with grok, as Jonathan to mention, we're also enabling some of the lower level technologies in open source like vllm. So this is the right place to be when it comes to inference. But when you think broadly about what's happening in AI, we have many companies working with us on agents. Last week we announced S and P Global is now running on Watson X Orchestrate as an example. So we're always open to new partnerships.
- [41:24]
Caroline Hyde
And let's just talk about Jonathan, the go to market strategy here of the Teaming with the age old juggernaut that is IBM, that has so many deep relationships across global enterprises. But is that how you're going to work this going forward? Is teaming up with companies that have those legacy relationships or do you still go out there and win the business yourself?
- [41:46]
Jonathan Ross
So I would say this is a peanut butter and jelly sort of relationship in the sense that oftentimes when we meet with C level executives, those those C level executives turn to their tech teams and ask them to evaluate Grok. And I've been in meetings where the CTO did that and the response from the person is I already use grok. It's my default for everything. So we already have the bottoms up. We have 2.3 million developers already building on us. For comparison, OpenAI has 4 million. Now going to those deep relationships from IBM and the fact that IBM as a trusted partner who's been delivering for decades, you put those two together and that's an amazing go to market motion.
- [42:30]
Caroline Hyde
Well, it's been great having you both on to talk about the go to market strategy. Jonathan Ross, CEO, Grok, of course, Rob Thomas of Senior Vice President of Software over at IBM. We thank you both very much indeed. Now coming up, we're going to be diving into Amazon's souring relationship with its contract delivery firms and also we got to remind you what's happening in the moment. President Trump signing critical minerals agreements with the Prime Minister of Australia. Can catch more on Live Go. This is Bloomberg Tech.
- [43:01]
Nora Melinda
President.
- [43:09]
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Caroline Hyde
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Caroline Hyde
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Caroline Hyde
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Jonathan Ross
At gsk, our focus is on doing the right thing for patients. We believe they should be free to focus on doing what they love, especially when they're living with a disease like cancer. That's why we focus where we can make the biggest difference matching the right treatment with the right patient. At gsk, we're pioneering advanced technologies like antibody drug conjugates that precisely target and attack cancer cells. By uniting science, technology and talent, we work tirelessly to stay ahead of cancer together. Visit gsk.com to discover more.
- [45:18]
Ed Ludlow
President Trump, speaking in a bilat with Australian leaders, says that China may pay a 155% tariff if there is no deal made by November 1st. He's also saying that he is expecting to meet with Xi in a couple of weeks. He will meet with Xi in South Korea in a couple of weeks, but the headline's not doing much to move markets in the moment.
- [45:39]
Jonathan Ross
Kara would in fact we're not.
- [45:41]
Caroline Hyde
But we'll keep everyone abreast of it and they can tune in on Live Go as well if you want to see it throughout. But right now we're about to talk about how we're taking a look inside Amazon's deteriorating relationship with its contract delivery firm. Firms which have tangled with Amazon for years, often over what they consider unreal unreasonable delivery targets that are monitored 24,7 by AI now, tensions flared earlier this year when the company passed along some big bills to repair aging delivery vans. Amazon reporter Spencer Sofa took this deep dive for us and you really hone in on certain individuals who decided to become entrepreneurial in spirit, teaming with Amazon and then the profits just fell away. Talk us through it.
- [46:24]
Mike Shepard
Yes. So Amazon has what they call delivery service partners. They've got 4,500 of them globally. These are basically small businesses that lease vans, hire drivers and get those packages to your doorstep. And so it's almost like a franchise, but it's technically not a franchise. And so a lot of them are saying, hey listen, the costs of, of doing business are going up faster than Amazon is is paying us for these packages. They're in these lopsided agreements. They don't have any negotiating power. They basically have to take what Amazon offers them and then so some of them are taking the ultimate step of quitting. And when they do that, they realize, hey, I've been doing this seven years, that I don't really have anything.
- [47:04]
Ed Ludlow
Spencer Amazon did recently hike the proportion that these guys get on a per package basis basis. But on your reporting, like what's the direction of travel here? Where are we headed?
- [47:16]
Mike Shepard
Well, the direction of travel is that logistics is a high risk business. If you have a bunch of car collisions or dog bites or anything that's going to push up your vehicle insurance rates or your workers compensation rates, you're going to have a difficult time. And if you don't, you will, you will make money. And so some of that is going to be your operational practices. And so some of that's going to be luck.
- [47:40]
Craig Trudeau
Bloomberg.
- [47:40]
Ed Ludlow
Spencer so thank you very much. Just real quick, Karen, update on us. They're saying that the root cause overnight was an internal subsystem, but they're not saying any more than that other than there are issues still remaining. That does it for this edition of Bloomberg Tech and what an addition it.
- [47:57]
Caroline Hyde
Was and so much more to come. And I'm sat here in London because it's the Bloomberg Tech Summit. It's kicking off tonight, in fact, I'm hosting a debate on Europe's future in the chip wars. But then tomorrow we're going to be tuning in to the summit as it goes live over in Moorgate, conversations with leaders in tech and I and vc. You don't want to forget to check out all of that also on the podcast. You can find it on the terminal as well as online on Apple, Spotify and Iheart from San Francisco from London for the next day or two. This is Bloomberg's Tech.
- [48:41]
Craig Trudeau
This is Tom Keane inviting you to join me for the Bloomberg Surveillance podcast. It's about making you smarter. Each and every business day we bring you a recap of what happened overnight in Europe and Asia. The days economic data and complete coverage of the US Market open. We cover stocks, bonds, commodities, currencies, even crypto, all the information you need to excel. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that with lengthy conversations with our expert guests, the smartest names in economics, finance, investment and international relations. We do all this live each and every weekday, then bring you the best analysis in our daily podcast search for Bloomberg surveillance on YouTube, Apple, Spotify or anywhere else you listen on the east coast, listen at lunch and on the west coast when you wake up. That's the Bloomberg Surveillance podcast with me, Tom Keene along with Paul Sweeney and Lisa Mateo. Subscribe today wherever you get your podcasts.