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- [00:00]
Caroline Hyde
When your data goes dark, Veeam turns the lights back on. Partner with Veeam to increase your data resilience and get your data back so fast you won't even have time to miss it. With Veeam, it's all good. Keep your business running@veeam.com that's V E E A M.com how can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast free shipping to in depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals. It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to amazonbusiness.com for support.
- [00:44]
Kanjan Sobhani
At GSK, we believe that to get.
- [00:46]
Ed Ludlow
Ahead of disease you need to understand its root cause.
- [00:49]
Kanjan Sobhani
And that's why we combine our deep understanding of immune science with cutting edge technology.
- [00:55]
Caroline Hyde
It helps us to create targeted therapies.
- [00:57]
Kanjan Sobhani
That match the right treatment to the right patient, transforming the lives of millions.
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Caroline Hyde
By uniting science, technology and talent, we.
- [01:05]
Ed Ludlow
Work tirelessly to get ahead of disease together.
- [01:09]
Kanjan Sobhani
Visit gsk.com to discover more.
- [01:14]
Caroline Hyde
Bloomberg Audio Studios Podcasts, Radio News Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.
- [01:36]
Ed Ludlow
This is Bloomberg Tech. Coming up, intel returns to profitability gives an upbeat revenue forecast. All the chip makers comeback efforts working.
- [01:44]
Caroline Hyde
Plus banks are preparing to launch a $38 billion debt offering to help fund data centers tied to Oracle. It's a record for infrastructure and Mistral.
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Ed Ludlow
CEO Arthur Mensch joins us on the company's release of a new platform to help ENTERPR clients make customizable tools.
- [02:01]
Caroline Hyde
An important private market conversation. We get back to the public markets to end this week. We are at a new record high when you're looking at the S and P, when you're looking at the NASDAQ, we're up 2% over the course of the last five days, but a real tick higher on the day. At the macro, picture the inflation cooler than many had worried about and indeed that gives the Fed room to run when it comes to maybe some more cuts that the market had already been pricing in. We've got China us, we've got plenty to be digesting and you're looking at earnings.
- [02:25]
Ed Ludlow
Yeah, in the earnings context, Intel's post earnings rally is basically completely faked. Did a gain of more than 7%, is now less than 1%, but profitable for the first time in a long time on a net income basis. The PC Market was better than they expected. They're making some progress in server, even a little bit in foundry. The issue is that the quarter was all about getting money from anyone they could, clearing some of the debt. And there's still a lot of unknowns about how far there's left to go on this turnaround plan. Carrie?
- [02:56]
Caroline Hyde
Yeah, let's get about where some of the hold still left on Intel. Kanjan Sobhani is with us Bloomberg Intelligence senior analyst covering semiconductors. And we are still left with a lot to chew on because clearly PC doing a bit better, maybe even CPUs getting into those data centers. But what about the next iteration of fabrication of chips?
- [03:16]
Kanjan Sobhani
This result shows the first sign in the right direction. Sort of a turnaround, a beginning of a turnaround. You know, the gross margin headwinds like you said, the challenges have not gone away. But what they showed yesterday, where they are running, that's their demand is running ahead of the supply, which it will be for the first half. 26 There very structural gross margin improvements though we will not see a gross margin expansion next year primarily due to the new 18A coming on the exit from the Altera business which was their highest gross margin business. But structurally under when you peel the onion we like what they're doing. Most of the 18A will be moving from Oregon to Arizona which is a better cost structure Fab to begin with.
- [03:55]
Caroline Hyde
A lot more volume will be coming.
- [03:57]
Kanjan Sobhani
Back to Intel's foundries which is better for them as they go through the initial transition cost. And the revenue scale which it's just showing from the higher demand in PC and datacenter improves slowly structurally the overall gross margins should start start to keep up.
- [04:13]
Ed Ludlow
I don't know what happened can jam but in the time you've been speaking Intel's now flat and eliminated all of its gain of the day. And I'm not saying that's your fault. I'm just making the observation. Look, when I spoke to the CFO Dave Zinser on the phone, he he was a bit surprised by some of the end markets that they're reliant on. On the product side servers in particular. The basic argument they're making is the hyperscalers have suddenly realized that you have to at some point update your CPUs, you have to invest in them. And so now they're saying that actually on a year on year basis they'll see unit growth. What did you make of that?
- [04:50]
Kanjan Sobhani
You know that is a very credible story to believe in. We have seen signs of this in other markets. For example, the storage server market has been seeing a big demand when it comes to hdd. So when you think about every time and we are pinging something like a co pilot it and clearing or analyzing data which was sitting dormant for the past six months so the storage servers were not really using them. Suddenly now we are pinging them four to five times. So that does, you know, it is a credible story to believe that the need for CPU even outside AI servers is going to increase now as we involve more and more in our world.
- [05:27]
Ed Ludlow
Conjunctivani Bloomberg Intelligence later in the show we'll get more on intel from the sell side. Meanwhile, banks are reportedly preparing a $38 billion debt offering for data centers tied to Oracle. Sources say the deal could launch as soon as Monday with JP Morgan and MUFG among the lead banks. Here to discuss Bloomberg Intelligence, senior tech analyst Anurag Rana. There's a key point of clarification here that Caroline made to the team earlier in the chat and it's not Oracle taking on this debt, its Vantage, the developer who will do the project. Even so, when you see a news piece like that about that level of debt supporting the build out in infrastructure, what is your reaction to it?
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Kanjan Sobhani
No, that's a very good point. And in fact, you know, I had a very good conversation with our credit analyst Rob Schiffman and we discussed this quite a bit. We have seen something like this coming from other places as well, which is when you have a contract from a particular vendor, you know you can create, you could an asset backed securitization product where the contract itself says there is revenue that's going to come in the future. So the question is whether they're going to be appetite for such large debt deals going forward as well. Because I think that's critical for recognizing a lot of that RPO that's coming in into revenue. Otherwise you know it's going to be very difficult to convert that into sales.
- [06:56]
Caroline Hyde
This is about yield and for the facilities related to Vantage, they're expected to come due in about four years is about a two one year extension options. You're getting two and a half percentage points over benchmark though. So people who are clamoring to get exposure to the narrative now don't just have to do it through equity, they can do it through debt and they can do it at a nice yield. More broadly, are we going to see these sorts of packages come in this sort of sheer scale because of the need that we've got out there at the moment?
- [07:25]
Kanjan Sobhani
So you have to, because I think, think about it, if, if OpenAI has signed a deal worth $300 billion with Oracle, you know, how are you going to finance that? How are you going to convert that contract into sales? And you need data centers to come there, you need equipment and finally that needs to be realized. So we are expecting a lot more in the market. The question is whether the private debt market has the ability to, you know, basically absorb this level of, of debt or not.
- [07:56]
Caroline Hyde
Anuragrana Bloomberg Intelligence we'll see how this does get absorbed. It's coming to the market as soon as Monday. But let's just talk more broadly about what's happening in the debt markets when it comes to tech, when it's happening in the equity markets, which are actually tech outperforming in that particular area today you got earnings, you got hopes in the China US trade talks, you've got stocks taking a record after that CPI number came in with, well, a relief that the Fed will potentially keep on cutting at the rate the market thinks. Martin Norton's with us, chief investment strategist at Empower. I want to go back to what we're just talking about and the debt that's coming to the market and the absorption that's going to be happening. I'm looking at a story right now saying that the bank of England is actually probing data center lending because they're worried about bubbles brewing. Is this something you're starting to hear about in the market, Martin? Well, it's so interesting because a of lot, lot of the rationale for the, I guess complacency around the trade has been that this is largely being funded by very well capitalized, very strong hyperscalers and the companies are not taking on debt, they are using what they have to extend into this space. But now in the most recent month we are beginning to see more debt issuance. And I think when you think about this scale of investment and the ratio of capex to revenue that we're seeing even at the hyperscalers, it does argue that we're going to have to use a broader range of financing to meet some of the targets that we have. And of course that's the signal that folks are looking for that there is an AI bubble. Now. You know, I think there's a real difference between extreme valuations, which is where I think we are, and an AI bubble. I think the sentiment has to get more aggressive. I think we would have to see far more debt issue. I think we are, I guess kind of wildness around it. We're getting a few hits to the line. Marta we need more compute. I'm interested in, look, 5 trillion is what the spending is likely to be up to 2034 going to get the data center and compute necessary to fuel the viewpoint. To that end, when you're thinking about clients coming to you saying I want extra exposure, I want it to be cross asset, are you saying don't? How are you talking about the diversification between equity exposure and debt exposure, bonds and the like? Well, at this point, I mean the primary exposure to AI is still within the equity market. I think this is something that especially for the active credit managers, it is an opportunity to vet. You know, you can get that added yield as suggested, but I do think people want to be really cautious in terms of adding that debt. One thing that we're talking about about a lot in the credit market is just how tight spreads are. And so that is, want to watch to make sure that isn't, you know, a valuation risk within the, within the credit market.
- [10:39]
Ed Ludlow
Marta Earnings was a factor in this market. This morning when I came to my desk, we showed intel actually is now basically flat. Even so, in the course of a conversation we had with Intel CFO Dave Zinser, he made for an interesting case study which is that he said they had been very cautious about tariffs, but the impact wasn't there in the end. And actually in the PC segment on which they depend, shipments were very strong, stronger than they had anticipated. Just as a case study. You know, that's really interesting data to me. What do you make of it?
- [11:11]
Caroline Hyde
I mean, it's totally interesting and it really echoes what we've seen over the course of 2025, which is the sea change in trade policy and yet really no discernible effect from either an earnings perspective or from an inflation perspective. Our emphasis over this period has been expecting to see some hit to earnings, less concern on the inflation front. And I think one thing that we're really learning over this process is that you can see a sea change in policy and yet not necessarily see the impact immediately. I think the concern I would raise to investors is just because you don't see an immediate impact doesn't mean there isn't an impact. When we look at the long term implications of globalization on earnings, it has been a real positive for the US and globally. And so as we roll that back, it stands to reason that it is a headwind, maybe a headwind that we can overcome, but a headwind nevertheless.
- [12:06]
Ed Ludlow
Marta, please respond to what is one of the top news Stories of the day President Trump says he's halted trade talks with Canada because of an advertisement that they ran, citing a Reagan era comment. You're aware of it. In response, Mark Carney says that trade talks were making progress before the president's post on true Social again, as a case study of trade and policy in this market, your reaction to it?
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Caroline Hyde
Well, I guess I would say that that trade talks are the toddler that just won't go to bed. I don't think this story is really over yet. I mean, we have a lot of certainty, I guess in terms of the overall effective tariff rate, but the fine details of what those trade talks look like, yes, with Canada, but also of course there's still a lot of negotiation with China. So I think this is something that will be this kind of lingering volatility within the market. Marta, you have a sea of parents of young children who are just feeling that pain, that analogy really beautifully. Thank you very much. Just I want to go back to the very start of our conversation and to say the valuations you think are extended where exactly and what will earnings have to vindicate which types of companies? Well, when we're looking at the US Market broadly, really every sector from our vantage point, with one exception is quite expensive. And when we talk about expensiveness, we're looking at sectors in deciles of value valuation relative to their own history. And what we're seeing is valuations that are really in those 9th and 10th deciles. And that's when that starts to matter to prospective three year returns. When we look under the hood in technology, we really see it across industries. Now that doesn't mean that these stocks can't grind higher. And if we do see upside surprise within earnings, potentially that could push the stock market even further. I think the idea here is that there's just low implant community. So if we were to get an earnings season that people expect, I think that's a lot harder to move the stock market. I will do a shout out to health care. This is something we've been surfacing since the summer. This is one of those areas that is more attractively priced. It has a lot of problems that it faces, but it also has, you know, the potential to benefit from something like AI. So that's one of those areas that we're looking to in this environment.
- [14:33]
Ed Ludlow
Martin Norton, chief investment strategist at Empowerment thank you very much. Clara Resources, an exploration and mining services provider, plans to build a $227 million rare earths plant in Louisiana. The first of its type in the U.S. this comes as Western nations attempt to reduce reliance on China, currently the dominant supplier. The facility will process material from A Clara's clay deposits in Brazil and Chile for magnets used in EVs and wind turbines and connect construction is expected to be completed by the end of 2027.
- [15:07]
Caroline Hyde
Coming up. So much for pet rocks. Hey. JP Morgan takes another big step into the crypto world. More on that next. This is Bloomberg Tech.
- [15:30]
Ed Ludlow
JP Morgan is set to allow clients to use Bitcoin and ether as collateral for loans. That's according to sources. The move marks a deeper step into crypto for Wall Street. Bloomberg's digital finance reporter Emily Nicole broke the story, joins us now. I think it's really important to go through the mechanics of what we think this will work as, right institutional clients, what they can do as collateral, and then what the bank will do in return. Take it away.
- [15:57]
Caroline Hyde
Yes. So what we've been hearing is that JP Morgan will be allowing this by the end of this year. What the process would look like is where institutional clients come to JP Morgan with holdings of Bitcoin and Ether that they already own that would then be transferred to a third party custodian that JP Morgan will appoint who will look after the crypto so the bank doesn't have to touch themselves and that can be used as collateral for financing that the bank can lend against. What's really interesting. Interesting is the context of JP Morgan and shall I say Jamie Dimon's relationship with crypto, because it was a few years ago they were, he was calling them pet rocks, hyped up fraud. And now most recently in your story, which is a beautiful quote, talking about, I don't think we should smoke, but I defend your right to smoke. Is that why they're not going to be custodian while they're letting others like State street, bank of New York, Mellon, Fidelity still play that game rather than J.P. morgan itself. There's definitely a bit of a divide in terms of how banks want to touch crypto. Some, like JP Morgan, are happy for clients to touch it, but they don't necessarily want to be involved in touching it themselves. So earlier this summer, for example, this started out with JP Morgan allowing clients to use crypto ETFs as collateral. So traditional finance wrappers that they're used to touching, but it tracks the price of a cryptocurrency.
- [17:09]
Kanjan Sobhani
This is a step further than that.
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Caroline Hyde
But they're still not getting to the point of where they'd want to touch the crypto direct directly. It should be noted though, it is pretty difficult for banks to touch crypto directly sometimes because there are rules like the Basel rules on banking that prevent them from touching crypto without having to hold an equivalent amount of capital in reserve. At the same time, it can get pretty expensive unless you've got the right structures in place. There's a lot of institutions and a lot of private individuals have a lot of crypto gains they want to be able to use as collateral. Emily Nicole, It's a great story. Thank you. Coming up Up Google says it's reached another new milestone in quantum technology. It's a step that could bring the long promised power of quantum computing closer to reality. On that next this is Bloomberg Tech. When your business evolves, so does your risk of data loss. But with Veeam, your data is always on the map. Partner with Veeam for coverage that keeps you moving and get protection for workloads of all shapes and sizes, even the ones you haven't created yet so you can stay resilient as you scale. With Veeam, it's all good. Get workload coverage that works for your business. @veeam.com that's v e e a m.com.
- [18:29]
Kanjan Sobhani
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- [20:02]
Ed Ludlow
Google says it achieved a major milestone in quantum computing, bringing the technology's immense processing power a step closer to real world use. The company says it ran an algorithm on its Willow quantum chip that is verifiable and 13,000 times faster than today's best supercomputers. Let's discuss with Karina, chapter chief operating Officer at Google Quantum AI I think actually the best place to start is the basics of quantum computing versus accelerated or supercomputing. Because if you explain why that 13,000x performance is notable in simple terms, it gives some measure of why it's a piece of news this week.
- [20:42]
Caroline Hyde
Absolutely. Today's computers, classical computers, they use bits, right? Zeros and ones. They use that to capture, calculate. It's useful for a number of different problems across the world. However, quantum computing is different, uses a combination of zeros and ones at the same time. That enables access to different types of problems like the quantum echoes algorithm.
- [21:01]
Ed Ludlow
We announced this week you have brought Willow with you. You've put it in an impenetrable safe housing and casing. There it is on the desk in front of me. I read a lot of academic papers this week and many point out that you didn't use use a scalable or fault tolerant chip for this demo. And so the argument follows that it would be a big challenge for you to commercialize or scale out that that technology. Is that a fair concern from from the academic community?
- [21:27]
Caroline Hyde
That is the goal of quantum computing, to get to fault tolerant quantum computing. Nobody is there yet. It is a long journey, but it is very exciting. We've been excited last December to announce for the first time that error correction can work. We demonstrated that with our Willow chip and we continue on this journey pushing the number of qubits and also bringing the errors way down. And it's the timing now, Karina, what is it, five years? Do we get something that actually will show quantum computing being really applicable and useful in the areas of science, the area of medicine. Why that timeline in particular? Yeah, we are optimistic that we'll see real world applications that are only possible on quantum computers in the next five years. You know, this breakthrough that we announced this week is a great milestone towards that path. We showed that quantum echoes this algorithm is not only 13,000 times faster on a quantum chip, but that it can be used to simulate and calculate the exact structure of a molecule. So we think this is an important step on the path. Someone on your team won the 2025 Nobel Prize in physics. As among the winners, you have Herman leading the charge. We have real stellar, well, talent, but also a lot of investment. What did you make of the news? The flow that maybe the US Government is there to support other smaller quantum players here in the United States. Is that important? Yeah, we are really excited and pleased to see all of the investment, the support and the excitement about quantum computing across the board. The US Government has been a strong supporter and partner in this for the last many years and we're very excited about those investments and continued partnership across the ecosystem.
- [23:09]
Ed Ludlow
Karina, you are the CEO of the Quantum Group, right. And we reflected earlier in the week on the show when the headline hit the Bloomberg about this breakthrough, actually markets reacted. Alphabet shares moved market markedly. Would you reflect a little bit on what the days that followed that were like? Did the phone ring off the hook from various parties that are interested now to know more about how they might be able to use the tech?
- [23:35]
Caroline Hyde
Yeah. For us at Google, we are really excited about all the interest that we're seeing across the board. Our mission at Google Quantum AI is to build quantum computing for otherwise unsolvable problems. I think that's why there's increasing interest with every breakthrough. People in other fields are getting excited about what can be possible and we look forward to continue.
- [23:53]
Ed Ludlow
So the bar has been set now for you. What is the next milestone that we should judge you by? In progress?
- [24:00]
Caroline Hyde
Yeah, there's going to be continued work across the board. One really important marker of progress is continuing to push the hardware. So you can see on this Willow chip Here, it says 105Q. That's 105 qubits on our willow.
- [24:13]
Ed Ludlow
Too far. Give the cameraman a chance to catch up. He will get it. Yeah. All right, keep going.
- [24:18]
Caroline Hyde
Yes. 105 qubits. So that is great. This has been honestly cutting edge chip. But to get to where we want to go to solve these important problems in chemistry, in physics, in materials science, batteries, energy and more, we want to get to a million qubits. So we're going to keep pushing the performance of our system. We're also going to keep pushing the algorithm and software development so that we can solve these problems. What does that take, Karina? What does that take in terms of supply chain? What does that take in terms of talent? What does that take in terms of focus? Yeah, these are all really important questions. I'll start with talent. You mentioned a Nobel Prize winner on our team. We are super proud of Michelle Deveray and the entire group of, of of team, teammates and body of work that's happened over the last many decades. We're super proud of our team. We've got a super talented team of engineers, technicians, research scientists, program managers and others who are pushing the boundaries of this technology. We've got to keep bringing the best and the brightest to our team to push the performance of what is possible. Karina Chow, it's been great speaking with you Chief Operating Officer over at Google Quantum AI on the back of what has been quite a week for your team. Congratulations. Now coming up we get back to Intel's earnings and the chip makers efforts. Come back from New York, from San Francisco. This is Bloomberg Tech.
- [25:58]
Ed Ludlow
Welcome back to Bloomberg Tech. If you're just joining us, intel and its earnings were our top story and the stock actually has eliminated most of the gain that it had. It opened up almost 8%, is now up just half a percentage point. But trading at its highest level Since April of 2024, it has returned to profitability. It saw surprising demand across PC and server and it had some fighting talk about its place in the AI infrastructure industry which largely was around wafer and packaging. Not as exciting as gpu but it's worth digging into numbers, car and is.
- [26:33]
Caroline Hyde
And we can do that with the perfect person. Pierre Ferragu is with us, New Street Research, Head of Global Tech Infrastructure joining us. And look, we have seen the gains fade. What did you make of the numbers? Was there enough there to keep the share price rallying as it has been?
- [26:47]
Kanjan Sobhani
Yes. So the numbers for intel on a day like, like yesterday are about relatively short to near term trend. And so the PC market has been very weak for some time meeting actually expectations that we are very high because everybody was very excited about the PC and things like that which didn't really move the needle for, for the market. And so now what we see is a more traditional driver like Windows refresh cycle helping enterprise demand and that's great of course. And then servers, we've seen the server market being weak for quarters and quarters if not years because you had so much focus on deploying like AI servers that a lot of very large players were kind of, you know, deprioritizing the deployment of traditional servers. And now we are entering a phase of catch up. So the near term for intel looks good and it reminds you that it's a good business that there is operating leverage. But even if they've lost a lot of market share to amd, they are still like a market leader. So that's great. But these are very surprisingly positive but relatively short term. And that's the way I interpret the stock movement, you know, yeah, big on the news flow and then you look back and you're like, well but at the end of the day what does really matter for Intel? Is that really like PC demand over the next couple of years or is.
- [28:07]
Caroline Hyde
That more so what matters, Pierre? What matters is 14A. What matters is are they they going to be the cutting edge of the next iteration of chips? Are they going to really rival TSMC and get others than Intel's own fabrication going? What did you hear from Lipputan and the team about that?
- [28:25]
Kanjan Sobhani
So I heard two things. The first one is mixed signal which is at 18A the manufacturing is ramping, is going to get into volumes immediately, you know, like for the beginning of next year. But comments about the yield so you know, the quality of the process are very, very mixed. Let's face it, the yields are not good today. So early yields not being good is almost business as usual. But I think 18 performance in terms of manufacturing performance is disappointing. And then the second piece of news that that really matters the most for the long term of intel is like more positive comments. But fortunately, remember three months ago the CEO had very cautious comments, even mentioned in writing in the 10K as a possibility of not developing fortunate if intel didn't find enough customers to do it. And now they're talking positively about fascinating on the technical front like the roadmap is progressing well. And also I don't even want to call that the commercial front, but more like the coalition front. This idea that if you really want intel to be successful in manufacturing, you need more than clients, you need industrial policy, you need a coalition, you need partners that deeply engage with intel, invest in intel, commit to intel to work with Intel. That's the only way the foundry is really going to do well. And honestly on that front it's very, very early signals but I think they are positive.
- [29:52]
Ed Ludlow
I tried to get a sense from Intel's CFO Dave Zinsner when I spoke to him on the phone about about that long term you were talking about and in an AI world I his answer was quite simple. They do see opportunity in accelerators, but the foundry bit is what I was like most surprised that he's saying that the foundry opportunity for them in AI is in wafers and packaging. That that doesn't Sound hugely exciting, Pierre?
- [30:21]
Caroline Hyde
Well.
- [30:23]
Kanjan Sobhani
Maybe it doesn't sound hugely exciting, but it sounds very realistic and really playing to Intel's strength. The way I see intel today is they have two major product franchises. One is in the PC business, x86 CPUs for pieces and was in service. So I'm pretty sure the management wants to maximize the value of these two franchises and concentrate on them. And it's good. You can't invent yourself, you know, like an accelerator designer, like 15 years down the line or 10 years down the line and then yes, intel has an edge in packaging. Intel is a strategic asset for this industry and this is probably what management wants to build on. And I see that as maybe not as exciting as we're going to compete against Nvidia, but very realistic and the right industrial approach probably, you know, and for our audience.
- [31:20]
Ed Ludlow
I appreciate that answer because you also cover in video, right? You're able to make the comparison on x86. I think the argument intel were making to us was the hyperscalers have woken up a bit to the value of having the latest CPU and infrastructure. They're willing to invest and refresh on cpu. So again for them intel, they would argue that it's a great opportunity for them. Do you see that opportunity?
- [31:44]
Kanjan Sobhani
Opportunity, yes, absolutely. No doubt. And it's very, very strong. You have like clients asking for it. The specifics of the x86 architecture and the way intel implements it is very differentiated. I've always been a great believer in the quality of the products of intel on that front. Like the ability of an intel x86 chip to. To deal with very un foreseen situation in very complex workload is excellent and you've had so much demand for it that it actually triggers Nvidia's move first to open up Nvidia like the high bandwidth connectivity with their GPUs so that x86 chip can be integrated into systems. And a $5 billion investment in network intel and a partnership with intel to co develop chips that would be optimized to get integrated into Nvidia system. And my read having followed that for a few years is that it's not just like a nice gesture from Nvidia under political pressure or anything like that. It is a genuine, thorough and deep interest for intel products in the industry for that role. Now keep things to the scale. They are out on NVL72 server powered by X86 chips. Chips. The X86 chip. Chip is going to be single digit percentage of the cost, cost of the overall server and the other 90 plus percent would be Nvidia.
- [33:14]
Caroline Hyde
So yeah with Nvidia's support and we know the money's yet to come through and that'll settle in the next quarter. Will that be enough to see Ohio break ground? Will we see an actual commitment not just to co develop but actually to eventually fabricate on side in the United States not just relying on tsmc?
- [33:33]
Kanjan Sobhani
It's a great question. You need more than that to have like a final commitment or to to claim victory. Basically in order for intel to successfully manufacture chips in the U.S. packaged chips in the U.S. for U.S. clients you need the money and major progress made on that front with money from the government, from Nvidia, from South bank and I'm sure more will follow. You need also like the multi year commitment of a coalition. So you're not going to get like the right ship in the first go with it's a dialogue that needs to last very multiple years before you get to success. And last but not least you need execution. You need intel to come up with a 14 a node that is going to show up like progressively be unveiled and better convince and make potential adopters more confidence it's going to be the right not to do something with it.
- [34:36]
Ed Ludlow
Pierre Farragut of New Street Research, great to have you back on Bloomberg Tech. Thank you very much. Now coming up, Mistral CEO Arthur Mensch joins us to discuss the startup's new platform designed to help help companies get the most out of AI. It's a big interview. We've been looking forward to this one for some time. Stay with us. This is Bloomberg Tech.
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Caroline Hyde
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- [37:13]
Ed Ludlow
Today, European AI startup Mistar announced the release of a new platform to help its enterprise clients make customizable AI tools that are easy to operate throughout their businesses. Delighted to welcome Mistral CEO Arthur Mensch to the program. This is a path to production, right? And the enterprise category between you anthropic open AI, it's a fierce battle I think. Let's just start by you explaining why you feel this is such a significant milestone for me.
- [37:44]
Arthur Mensch
Strong hello and happy to be here for us. So we're a global company really focused on creating value for the enterprises and we have had three years now of experience in doing that. And so AI Studio is basically the one stop stop shop platform where you can build your application as a business and so it brings everything that we need to create value in the enterprise, to create applications that belongs to the enterprises, that contains their ip, that is connected to their data and that improves over time by leveraging the knowledge that is contained within enterprises, that is contained within employees mind.
- [38:21]
Caroline Hyde
You are a global company, you're producing foundational models are I wonder though how you compete against those that are already serving the enterprise. How is your solution different from that of Anthropics that have open eyes, that of X's and many others?
- [38:35]
Arthur Mensch
Well, I think our solution is much more integrated in that we have thought about all of the bricks that needed to be there to go from a model, which is how we started, to an application with the right front end, with the right backend and with the right learning mechanisms. So that integration is really the reason why we've been succeeding in delivering value of enterprises. So that's one very strong area of differentiation. The other thing is that in contrast with some of our competitors, we really believe that enterprises should build their own AI, that they should own the systems, that the IP should remain their own, that the data should remain where it is and should not necessarily flow back to us. And so that approach of building a portable platform that can be deployed on prem, that can be deployed on private cloud, combined with the vertically integrated approach of having just one platform, allowing you to go from prototype to production, I think is very, very different from the approach of our competitors. And that has allowed us to make a lot of progress in particular in the US.
- [39:37]
Ed Ludlow
Arthur, can you talk about how quickly you're able to onboard scaled enterprise customers, customers to this and in turn therefore what the capacity and compute constraints are for you in launching a new product and then trying to run workloads with clients?
- [39:56]
Arthur Mensch
Well, the good example that, that I can give you is what we've been doing with one of our big customers, which is a logistic company called CMS and one of the biggest shipping company in the world. And so as many other companies companies, they were a bit struggling with the adoption of AI. If you look at the MIT reports, they state that 95% of use cases just don't go into production. And the way we have done the work with them is we used AI Studio and we deployed our AI applied engineers or AI applied scientists. We made them work with the business unit owners and they realized what kind of processes could be automated end to end. And from ideating what we could automate to going to production. So from March to July in four months, we were able to understand a full function to be automated. So cargo release and dispatching of, release of, of of containers to multiple customers, we're able to go from that to production that is now going at the global scale. So the, the way we think about it is that it takes a quarter to go from a prototype to production. And, and for it to happen, you need to have the right tools. You need to have the right tools, you need to have the right experts. You need to deeply understand what AI agents can do and cannot do. You need to connect the agents to the data sources, need to connect them to software, which is sometimes legacy. So you need to have the right interfaces, the right Plumbing, that's what AI Studio can bring. You also need to have the experts. So that's why we deploy people in the companies that we work with often.
- [41:24]
Ed Ludlow
There is intense interest in Mistral as the European champion among AI labs, Frontier Labs. The thing we're most interesting to learn about is the progress of the follow on fundraising round that's reported you're undertaking. How much money are you seeking to raise? But beyond the money, why do you need to do a quick follow on what is the most pressing need for capital at the moment?
- [41:49]
Arthur Mensch
So I'm not sure we'll talk to you about the follow on, but we are not raising money at the moment. We've just actually announced a fundraise with asml, which is the biggest European company and with whom we work with whom we have a commercial agreement where we help them make better products, automate their processes, we help connect their vertical expertise to horizontal expertise. We make them create their own AI and deploy this AI into their systems. So that. That was a 1.7 billion euro raise which, which makes us, we've raised around 3 billion euro in total and that in turn has enabled us to grow very fast and to create unique technology and to release it in particular on the open source world.
- [42:34]
Caroline Hyde
That was really interesting this strategic investment coming from asml. You just referenced cma, cgm, another French based giant. It's a global company but it's French based. You got work with Stellantis, you got work with BNP Paribas. What about US companies? How are you managing to penetrate here?
- [42:51]
Arthur Mensch
So we are working with multiple US companies. We're working with Cisco for instance, which is, which has chosen us because we allow them to deploy on private cloud and we deploy people to work with them in particular on the customer experience side. So that's one important customer of ours. We also work with Snowflake, deploy our cloud technology in particular on document processing and all of our technology to unstructured knowledge into take unstructured knowledge and turn it into things that can then be crawled by AI systems. We also work as you know with Microsoft which is a very important partner of ours and exposes our model on Foundry. Our models being very competitive in particular on, on their cost performance ratio. We work with AWS and GCP and we work with multiple digital natives company as well.
- [43:43]
Ed Ludlow
Arthur, your peers. Dario Amadei from anthropic, Sam Altman OpenAI are looking increasingly to the Middle east both for capital but compute capacity. Right. This week we broke the news of anthropic securing 1 million TPU's with Google and GCP. That's the scale that people are talking about. Are you making those future plans for scale? Are you looking at debt markets to, to ensure the future of Mistral and what you want to do?
- [44:15]
Arthur Mensch
The future of artificial intelligence is very linked to infrastructure as you know. And as a consequence of that we, we have created a new business unit called Mistral Compute which is creating Digital Infrastructure Infrastructure, GPUs in particular in Europe which is lacking infrastructure today. And so we've been growing that very fast and we are acquiring multiple hundreds of megawatts capacity in the coming year to actually be able to serve our customers, to serve AI startups, to serve all of the our existing customers and customers that come to us because they are looking for sovereign capacity capacity. We also use that capacity to train our own models and to maintain our leadership on the, on the open source front.
- [44:59]
Caroline Hyde
But with that comes the need to continue to invest. You raised money and is that what's being used to finance the exploration and data center build out? Because I'm looking at a headline at the moment that the bank of England itself is really worried about a so called AI bubble and some of the debt and the, and the financing that's going on of data centers at the moment. Is that something that gives you pause offer?
- [45:20]
Arthur Mensch
Well, we've raised equity and we are deploying that equity to actually train models. So R and D is financed by our equity. We also have long term contracts for our compute facilities and with those long term contracts we are able to actually finance them through debt. But that's not. This is bank debt and gives us confidence that we are not overly exposed to debt. There is a lot of investment happening on the, on the, on the infrastructure side. Today we're really focused on creating the long term value that will justify those investments because we operate with enterprises because we go all the way to delivering value for them, to identifying their use cases, to making things that transforming what looks like magic to something that looks like money. We are not exposed to whatever may happen on overly investing on the infrastructure side. We invest on the infrastructure side in.
- [46:13]
Caroline Hyde
A wise way to help build Mistral a studio. Arthur Mensch great to have you on that news today. Thank you so much. The CEO of Mistral and co founder now coming up we'll come back on the US shortage and outage but is one of the biggest in history. Remember what could that mean for cloud giants future in the age of AI? This is.
- [46:41]
Ed Ludlow
Amazon basically invented the cloud business but now it's struggling as Monday's outage shows one of the worst outages in the cloud unit's history. Bloomberg's Amazon reporter Matt Day joins us to discuss his latest deep dive and why US is now perceived as trailing its rivals in AI. This week's been rough outage, losing some ground to ant to GPUs, GPUs for Google. Just give me the headline of your story.
- [47:07]
Kanjan Sobhani
The headline of the story is that Amazon is essentially no longer the only game in town in cloud computing. They've got real credible rivals, you know, down to Oracle and Google. Five years or so ago, it was only Microsoft that was knocking on the door then. Now you add on all this AI workloads and that's not a business that AI is that Amazon rather seem to be leading.
- [47:23]
Caroline Hyde
In just for context though, how successful does it remain? How much market share does it still own and what are we starting to see in terms of inroads?
- [47:32]
Kanjan Sobhani
So on traditional cloud, it's something like 38%, reckons Gartner.
- [47:36]
Ed Ludlow
That's down from about half of the market, you know, five or six years ago.
- [47:40]
Kanjan Sobhani
Folks who made inroads, you know, there's.
- [47:41]
Ed Ludlow
There'S Microsoft, there's gcp, there's Oracle, and.
- [47:45]
Kanjan Sobhani
A lot of the, a lot of.
- [47:45]
Ed Ludlow
The threat there is just some of.
- [47:46]
Kanjan Sobhani
The services that Amazon pioneered, like those are leaning toward commodities. Other companies can offer you a similar package of goods. Right.
- [47:52]
Ed Ludlow
Matt, when we brought the story about anthropic using TPU's, Google stock up, Amazon stock down, how have you reflected on that in the story?
- [48:01]
Kanjan Sobhani
Also, you really can't overstate the importance of Anthropic to aws. They're their marquee artificial intelligence customer.
- [48:08]
Ed Ludlow
They're helping kind of co develop Amazon's artificial intelligence chip called Trainium with them.
- [48:13]
Kanjan Sobhani
So the fact that they now have what really looks like a hedge or an option to go more toward Google, Google, should they choose, do they like the tech results better? That is a, that is a real risk or potential risk rather for Amazon's business.
- [48:27]
Caroline Hyde
Have a feeling it's a story, you're going to continue to dig into it. So well read today. Thank you so much. Bloomberg's Matt Day, reflecting on the week that was for Amazon and we reflect on the show that was because it does it for this edition of Bloomberg Tech. Ed, it was another huge busy one and boy, next week, full on it.
- [48:42]
Ed Ludlow
Yeah, like we didn't even get to mention really the course of today, but like next week is, is the tech super bowl, right? Like in an earnings context. It's the biggest one. It's going to matter.
- [48:53]
Caroline Hyde
Well isn't video there? I guess not. We got everyone else matter. Microsoft, Amazon, you name it. The vindication, the fundamentals. They've got a lot to check out on the podcast.
- [49:03]
Ed Ludlow
I am heading to DC for GTC with Nvidia so there might be some news that Check out the pod. You know where to find it. This is Bloomberg Tech.
- [49:15]
Caroline Hyde
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