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Striking deals with so called Neo Clouds first we check in on these publicly traded markets that were at record highs clinging to them as we speak. The NASDAQ 100 is up but 5 points now notably we've got a wall of worry coming towards the markets at the moment. But there have been this desire to buy into chip stocks, in particular the open air valuation that we'll dig into the idea of the contracts that they're building with Hynix, with Samsung, all of that had really helped lift the stocks. I'm looking at that up 1.3% but really there's other stocks that are dragging the overall benchmarks a little bit lower. Yeah, they've part of the argument is that it's Tesla that's doing that right? We had been higher Pre market when the Delivery numbers broke 497,099 EVs delivered in the third quarter, an astonishing turnaround, a huge beat against consensus. But as we've been talking about for a while now, they started advertising in the quarter, they started emailing on a daily basis saying, by the way, the federal tax credit runs out. How big a factor is that? That it's an isolated quarter of an elevated proportion of sales. Let's go to private markets. Big piece of reporting from Bloomberg. Shereen Ghafari open a $500 billion valuation based on employee share sale to a really interesting group of investors. Remember, Shreem broke this story first on August 6th, but now it's done and there's actually a lot of interesting data in the report, Caro, about who opted to or not to participate if you're an that had two years of holding the shares. And let's get straight to it. Shereen Ghafari, look, extraordinary scoop that first came in August. Now we get the real details and perhaps those current employees and former employees not selling as much as they could have done. That's right. So you know, again, this is a record valuation for OpenAI and for just startups right now, surpassing Space X as the most highly valued startup. That being said, there was more, there could have been more units sold as well, what we're told. And actually employees chose not to take up all of that potential share sale. So, you know, it could indicate that employees are feeling, you know, optimistic about the future of the company and that their, their valuation could go even higher. But of course, this is an ongoing story and there are still a lot of uncertainties as well in OpenAI's future, including its ability to go forward with the restructure when there is a tender or a secondary or any kind of financial transaction. Shereen, there's always a data room. Just take my word for it. And so I find the group of investors here really interesting third parties that were able to buy those shares from employees. Just run us through the list and any that caught your eye. That's right. So many of them were expected. We have Thrive, also a former large investor, as well as SoftBank, another major partner. We also have Abu Abu Dhabi, MGX, Dragon Year and T Row. And you know, MGX is an interesting one given we're seeing more money coming in from overseas, from the Middle east and to AI companies. And you know, this, this is just an ongoing as I find in AI, once one investment closes, it's the beginnings of another one. So we can we can expect these sizes to just get bigger and bigger in terms of funds going in and sales being shares being sell? I mean, that's what's extraordinary is the fact that they raised money, fresh money from Softbank back in March and the valuation is just spiraled even since then. Shree. Even as remind us of the data and the fundamentals, the company remains unprofitable and at the moment revenues tiny in comparison to, say, Netflix, which is also worth about $500 billion. That's right. So while we're seeing the revenue increase rapidly, they have something like 700 million users. @ the same time, the company is also unprofitable. And that's because of the large costs to fuel basically the development of AI. There's huge data compute costs, there are these unprecedented data centers that they're building out. There are researchers. All of that takes a lot of money. So it's still a highly capital intensive and unprofitable business, even though the revenue is growing at a very fast rate. Bloomberg Shereen Ghafari. It's Dev Day for Open Air on Monday and I think we're going to be able to pose questions that might give us some of the answers to what's really going on. Top and bottom line, Open Air. Let's pivot from the private market side to the public public side because Open Air story is driving us equities to fresh highs. We've seen some pullback since the show started, but generally the idea was that the Open Air valuation signaled a lot of optimism for AI across those public names. Nancy Tangla, CEO and CEO of LA for Tengla Investments, joins us now. For more. There's a lot of life in secondary markets. Right. Shereen was running us through T Rowe Price, participating in that round. I know that this might not be your domain, but what did you make of the Open Air evaluation? And if someone came to you and said, hey, Nancy, I'm putting together an SPV or something like that, would you try and get in on Open Air at this private level? Yes, we would, yes. And we're actually in the process of working with a firm to do just that. But we're also interested in spending, you know, Space X and Xi and many of the other names that are still private. And I think if for retail investors it's an opportunity. And then of course for the insiders, it provides liquidity. Right. At least through the provider we're working with. Wait, Nancy, one sec, one sec. Marguerite, bring up the chart. There it is. Okay, so open air $500 billion valuation. Space X number two, 400 billion. And then I don't see XI on there, but I reported that XI is raising money at a $200 billion valuation. Of those three, what's your top priority? Space X is my greatest interest. I think we know the game, and there's a lot of ways to play it. It's not a game, but the opportunity. And I really want to get more exposure to space. So we just launched a fund, a strategy that is, is focused on all of the above quantum space, nuclear robotics, and spaces of particular interest to us. Fascinating that you're looking at basically these valuations in the private side as well as, of course, all the exposure that you build in the public side. Nancy, what draws you. Is it just too hard to ignore when you're seeing companies staying private for so much longer? Yeah, well, right. I mean, Caroline, we used to have the Wilshire 5000 and now it's the Wilshire 3500. I think, you know, as an investor, investor, my job is to look around and try to figure out ways to make money for my clients. When you're going through a transformative technological revolution like we are, you get these concentrations, you get higher than normal valuations. But that is not to say this cannot continue for some time. And as you know, I've drawn the analogy to the 1990s. I think the technologies we are seeing now are much more robust than just eyeballs on a screen green, which was what we were measuring in the 90s. So I'm excited about all the opportunities and really working hard to try to figure out ways to gain exposure because the private markets are open to a very elite group of investors. Certainly we want to open it up to our, our clients as well. Nancy, talk about the fundamentals that you like within these companies, because, yes, you're saying valuations can continue up into the right for a foreseeable future. You think it's underlying technology that gets us there rather than the market being irrational in some sort of hype cycle. Absolutely. So just, just think back as far as Amazon. I mean, that was a valuable lesson for me as a. As a value investor trained as a, you know, buy when things go down. Valuation matters. I could never figure out how the company couldn't report earnings and, and continue to drive forward. I think that. And so ultimately we became. We participated in the name and learned a lesson that during certain periods of time, that's what you're going to see, see, and you have to depend on management. You have to be focused on the underlying fundamentals. And that's, that's our job. And that's why we have a team of analysts that support me and the other portfolio managers at the firm. So we're primarily focused on catalysts for outperformance. In the soft side, we look at all the numbers that everybody else looks at on the quantitative side. But qualitatively, we're looking for catalyst route performance and strong management teams. And you can measure those over time. It's obviously, obviously subjective decision, but we spend a lot of time on it. Nancy, we're going to go very, very deep on Tesla in the next segment, but actually, as a team, when we were talking about today's show yesterday, your name came up, right? You join us all the time. 497,099 vehicles delivered in the third quarter, a record. The stock rose and now it's down almost 2%. Just your reaction. And to what extent you see the expiry of the federal tax credit being the principal factor? Well, I do think it's a principal factor. And I mean, I think there was some strength seen in China, which was good, or at least less deterioration. So I think that that is a rebound that we're going to be watching, continuing to watch closely, but for us, and I've said this to you, historically, we're interested in the name because of the energy business, which we've been talking about for two years. And I think now people are sort of, you know, excited about that business. We're interested obviously, as everyone else is, in fsd. They seem to be seeing really robust improvements. It may not be a linear acceleration, it may just be at one point we see that FSD is, is at the levels we need, and then they've got 7 billion miles traveled and that that dwarfs Waymo. I live in Waymo land. You know, you can't stop at a stoplight in Arizona without seeing four or five of them. And Tesla's way ahead on that. So they just need to catch up on the technology and they will because they have the data. So we're very excited about the new model, Robotaxi, all of the others. And then of course, Optimus, which I'm counting on as my home health care solution. My kids asking me yesterday when we're going to be getting a robot in the home, Nancy. And I can see that we're all waiting on tenterhooks, but so too is the comp package for Elon Musk. It's tied to real deliveries of Optimus, of robo taxis. 20 million EVs on the roads. Are you going to be voting in favor of that? Oh yes, absolutely. And, and the, you know, the XI fundraise, we would love to see the companies meld together and get access to Space X and xi. We'll see. I mean that's me talking, not Elon, but we'll definitely be voting in favor. I love when incentives for the management team or this or the visionary CEO are lined up with me and my shareholders. So we're very excited about the future of Tesla. And remember, it doesn't go straight up. It's a volatile name. We were buying at 240 in the spring during the tariff tantrum. We will, we will buy again when the stock dips down. But it's a 6% holding in our new strategy, which is a macro cycle opportunities and then in our growth strategy, it's a four and a half percent holding. So we're committed to the name and you know, we believe, we believe in Elon. Maybe I'll get a T shirt made. Well, when the space fund goes live, when you've got the money coming in for the private funds as well, do join us. I mean you're always joining us and we love it. Nancy Tanglar CEO CIO Tangla Investments Stay well. Meanwhile, coming up, we're diving more into Tesla, into the vehicle sales that jumped to a worldwide record in third quarter. We're going to be going into what's behind this, whether it's sustainable. Stay with us. 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. 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All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member Finran SIPC crypto trading provided by Bakkt Crypto Solutions, LLC. Complete disclosures available@public.com disclosure Introducing the all new Adobe Acrobat Studio now with AI powered PDF spaces. Do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more at adobe.com/do that with Acrobat. US customers helped drive Tesla's third quarter sales to a record high as buyers rush to take advantage of federal tax credits before they expire. I want to get out to London and Bloomberg's automotive lazar Craig Trudeau. Like data is really important here. Okay, third quarter, 497,099 vehicles. The the expectation was we'd see a drop year on year even if it was a sequential improvement. This, this is an anomaly. This is like something happened in the quarter. Just explain it. Yeah, you know I think this is a surprise if you're looking at the consensus and yet if you sort of were watching closely to where estimates were coming in toward the very end of the month of September a lot of sell side analysts were saying we think these deliveries are going to be much higher than that. I think even having said that, you know this is a surprise even for those who are bullish going into this print and you know you do have to hand it to this company to have delivered more vehicles than they ever have. Even if there are some real questions about whether there's some staying power to these numbers without the seventy five hundred dollar tax credit in the US that's going to be, you know, the I guess, you know, $420 question on the earnings call in a few weeks for 20. Craig, I'm interested though like you are sat in the heart of the UK and indeed Europe has been against Tesla's. Basically we've seen sales destruction over there in large part people blaming the politics of Elon Musk and is that still, the sentiment that you're seeing, are you getting any other granular data that shows that maybe other regions in the world have liked the model Y's and the upgrades of late? Yeah, I mean I think in terms of the way things have been trending in Europe, it's been very consistent. There's maybe some you know, kind of marginal narrowing of, of the declines over here in Europe, but still substantially down in a market that is up substantially. And in China you've seen, you know, at best shipments move sideways flat, you know, down by small percentages in a market where, you know, BYD and Zhao me and you know, domestic players really are making a lot of noise. We did see just recently some loss of momentum on BYD's part, but that's from a standpoint of really just dominating their local markets. So sort of by process of elimination we really can, can sort of come to this conclusion that the US is, is really what drove this result for Tesla. We'll see to what extent, you know, Elon Musk is willing to sort of get into that, but I think we've already heard from him during the last earnings call that you know, this, this could be a company that's in for a few rough quarters as a result of this pullback of support from the US Government. Bloomberg's crude oil. Thank you as always for the thorough analysis. Let's stick with Tesla sales. Bring in Stephanie Valdez Street. She is the director of Industry Insights of Cox Automotive. And just the larger picture in the U.S. first Stephanie, it was but earlier in the week that we saw Jim Farley, CEO of Ford saying the EV market in the US is going to slump by half because of the policies currently being enacted here. And meanwhile we see Tesla jump, but because of that evidence, tax credit expiry potentially. What is the forward looking analysis of yours for U.S. sales for Tesla? Yeah, definitely. We, we knew Q3 was going to be a record quarter. Right. Driven by policy. Right. Everyone created a sense of urgency whether it was dealers, OEMs and so consumers reacted. So we're probably going to reach about 410,000, probably 10% market share in the US market and Tesla is definitely taking advantage of, of that. But once again that was policy driven. Moving into Q4 we're going to see a slowdown. However, I've already seen, and you've probably seen some of the manufacturers are going to continue a seventy five hundred dollar credit going into Q4. On leasing, Hyundai mentioned they're going to reduce their Ionic 5 by you know, 9800, the 26 model and continue to offer the 7500. So, so just very specifically, Stephanie, in this quarter that's just been reported in, in Tesla's case specifically, you see evidence that the consumer knew that the federal tax credit was running out and so took advantage of that to make a decision and either purchase or lease a vehicle? Oh, definitely, yeah. Like I think the consumers came very aware of this incentive. If you went to any online search website, you saw that, you know, the IRA tax credit was there, it was winding down. And I think definitely this sense of urgency created consumer reaction and we're seeing that in the data. The numbers are still coming in for September in the US but definitely going to be a record quarter and you know, highest market share to date. There's so many things I want to poke around at. Like what sources inside Tesla told me in recent weeks was like, hey, have you been noticing the advertising we've been doing on YouTube and Instagram, something that Elon Musk historically is completely against. But I'm also like almost 500,000 vehicles in the quarter. Do you see that as just being a one time thing? Like, like would this be replicated? Because it has to if he's going to deliver 20 million vehicles over a 10 year period. That's the math. 500,000 a quarter. Yeah, I think it's going to be challenging, right, Because I think just, I think a lot of consumers that were considering buying a vehicle, EV specifically pulled ahead, bought it in Q3 because of the incentives. And so I think just we're going to see that slowdown coming, Q4 and we'll start to see the market stabilize. What's that natural demand for EVs and I think it's going to be dependent on for Tesla, right. Once again having some product, new product that's going to resonate with consumers. And then I think the other challenge for Tesla is navigating the changes in regulatory policy. You know that revenue they've gotten from carbon credit will soon disappear. And so how do they navigate that? And once again I think they do have some opportunities with energy storage. They have their AI, robotaxi, so they have stuff in play, but it's navigating the short term when demand goes down and having not the product available, new product that resonates with customers. Stephanie, go global because we can with you. And what's so interesting is while the EV market is getting smaller here in the US because of policy, China is going up and to the right. Europe, it's expanding. But Tesla's Foothold has not been. Can they turn that around? I think they can if they continue. I mean the Model Y, I think the 6, 3 row or the 6 seat Model Y is really doing well in China now. I think if they continue to, you know, once again have new product. But I think the Chinese OEMs, you have BYD, shell me that are really gaining market share and I think Tesla has stiff competition. So I think it's going to come down to having product and being able to resonate that with the consumer there. Stephanie Valdez, Street Director of Industry Insights, Crooks Automotive. We really appreciate having you on the show, Carrie. Like check me on this. When we spoke to Robin Denholm, she was crystal clear, like the 20 million EV sales targets there for a reason. I went onto the Tesla website. All of their factories around the world are capable of building 2 million vehicles a year. So he's going to have to hit 500,000 every quarter. Like am I understanding that right? Deliveries. What I'm interested is production pulled back a bit. Yeah. As well. And tell us is that about the change in the way that they're moving to different vehicles and they're thinking about increasing, improving Model Y's and Model Threes. The data not in this press release on costly deliveries is inventory and inventory days and you know, look at that. Actually you can, you can kind of work out, out using satellite imagery how many vehicles are on a lot. Exactly. But yeah, and then the share reaction is kind of weird. Right? You know, I guess people are saying this was a one time thing because of the tax credit and the shares have done rather well. Yeah. The September we maybe have a little bit of a profit taking moment. It's time now for talking tech and first up, AI language language platform Deep L said to be exploring a potential US ipo. Now according to sources, the Google Translate rival based in Europe has held preliminary discussions with advisors on the listing with the possibility of share sales taking place as soon as next year. Plus a notorious ransomware group have claimed to have stolen data from a suite of Oracle apps. Now the hackers claim to have breached Oracle's E business suite, giving them access to finances, supply chains and customer relationships. In one case, the group has demanded a ransom up to $50 million. And Elon, Musk and X, they have settled with three former senior Twitter executives who said that they were wrongly denied $53 million worth in severance after the takeover. And the deal comes six weeks after Musk and X move to settle a separate class action alleging 6,000 laid off workers were owed as much as $500 million at least in severance and okay. Coming up on the program, Microsoft copes with datacenter shortages through a $33 billion deal with nebulous Group. The idea is that if you can't do it with your own gear, look to the NIO cloud stock down 1.6% in the market. Nebulous is up higher. But there's also a bigger picture story at play in the markets today about how optimistic or not we are about AI. This is Bloomberg Tech. Welcome back to Bloomberg Tech. I'm going to take another look at Tesla. Look, we're down. When the numbers hit in pre market we were up significantly almost 500,000 vehicles delivered in the third quarter. But it's a one time anomaly and it's driven by consumers, particularly in the United States flocking to Tesla vehicles because of the extreme fiery of a federal tax credit. It's also a stock that was up 12% year to date, had a sort of a rebound from April lows and maybe there's a bit of pulling back here, I don't, I don't really know. But the consensus seems to be this was a one time deal and what was a record quarter for deliveries and the future isn't even about cars, is it? I'm also looking at Microsoft. This is kind of interesting because there's some news flow about Microsoft. We're about to get to it. But the early part of trading in the session was actually about OpenAI's valuation. $500 billion per Bloomberg reporting in a secondary and the simple logic that it's a, it's a signal of optimism for AI broadly and it carried a lot of names with it. We're now down 1.6% car. There's also the Nio Cloud deals and we've got to dig into that because it's a fascinating perspective of just the rampant demand for AI compute right now across the world. And to break that story down is Bloomberg's Brody Ford who has articulated and found out that Basically there's been $33 billion dollars spent by Microsoft on NEO clouds. You're talking European players like N Scale Nibius. There's also local player core weave. Why would the data center like rent router of that we all know for Azure be turning to others. Yeah, it's kind of funky, right? It's like if I was paying somebody to write stories and I was still writing stories. I mean it's like essentially because we have huge capacity constraints, right? Microsoft needs to get as many chips Online as it can, both for its customers itself and open AI and it's needing to kind of pull every single lever it can. And so it's emerged as a major customer for all of these names like the Core Weaves and the Nebbyses which have become, you know, very newsy in recent months. It's like managing assets. Right. And you know the point of a NEO Cloud is it's dedicated to AI, either training or inference and you know, storage, running other software software, you know, that's a different thing. Talk to me about the figure of $33 billion though. Like is that news? Is it something that we were able to work out because Microsoft doesn't disclose it in like quarterly earnings or something like that. So Microsoft has just kind of disclosed it in piecemeal ways and likely it is going to be much higher than that. 33 what we have been able to discover is what this capacity is actually being used for. And in many cases it's for Microsoft to build their own AI models and that's surprising because it's a larger amount of investment in their own internal AI teams than many had realized. And it points to them saying man, we better catch up with the open eyes and anthropics and have our own models on hand and we're going to use the Neo Clouds to do it. And Mustafa Suleiman who came from DeepMind went to Microsoft with obviously inflection being bought in this rather odd way. He's the man behind the consumer AI offering. He's. I mean you found out that that basically the first large language model they're building internally under him is using Core Weaves assets over in Oregon I think it is. Which is another way of saying they're using Nvidia Gear to do it. Yeah, using basically via Core Weave. Right. But also what's interesting is the numbers that you have to orientate yourself around because basically allows Amy Heard not to have to write this all as Capex. That's a really important point. Right. If you buy a bunch of servers now, you have to depreciate them now it's on your capital expenditures, not your operating and investors want to see a good balance there. And you know, Microsoft's then able to when it's renting from Neil Cloud is to say if in 5 years we actually don't really need that many GB3 hundreds we'd rather use some more. Vera Rubens Bye bye. We don't need to deal with all these servers that we don't have a necessarily use for. That's what it allows them to do potentially. Brody throwing around your GB300 Vera Rubin so appreciate the reporting a lot Freddie. Has he bench pressed them though? That is the question for those uninitiated Nvidia once let me pick up an which is a 80 pound. We'll get to it another time. Let's talk about the investor perspective if Brian Kirschman, GQG Partners Portfolio Manager joins us now. GCOG portfolios have recently turned significantly underweight tech on concerns of deteriorating fundamentals and a part of what Brody was discussing. Right. I know that we can talk about Microsoft here because there's some exposure in the funds but the idea that you rely on the NEO cloud so it doesn't show up on the balance sheet in the capex. What was your sort of reaction to hearing that? Yeah, so I think what it speaks to from a Microsoft perspective is sort of that capex sort of notion where you don't necessarily want to spend all of your capex on sort of an asset that could depreciate or may not necessarily be as advantageous for you on a go forward basis. There's a lot of things that are evolving really quickly when it comes down to these things. But if I were to take a step back and you had mentioned sort of we have become a little bit more cautious so to speak on sort of these names in general and from an AI perspective I think one of the reasons for that is there's been a whole lot of spending on the CapEx side of things. $600 billion in spending on CapEx and really if you take out the infrastructure spending side of this, there's only been about $30 billion in revenue that have been generated off of this. So our issue here is that there is a lack of headroom sort of returns that are coming through a lot of these types of businesses over the course of time. Now Microsoft to its credit has a software business. They have sort of steady earnings. They have been able to deliver some decent results over the course of time. But we are becoming more skeptical about sort of a lot of things on the side where these returns coming from. You open Air particular. Yeah, I'm sorry, I mean Brian, we're looking at a note that you're taking team put out September 11th. You rang that alarm bell basically saying we believe that the sector stands at a significant inflection point and everyone's making a one way bet as you see it on AI Mania and they're ignoring the alarming fundamentals for you. The alarming fundamentals are that there is a lack of revenue today, is it not? Therefore, can you not just make that Bet that eventually OpenAI will make $300 billion worth in revenue by 2030. That vindicates the amount that they have to spend on all this compute. So I think it becomes hard because if you actually look at the data behind this, you look at OpenAI, they have about a 2% conversion rate in terms of people that actually want to pay for the Service. That means 98% of people that use OpenAI aren't actually paying for it. So now they have 700 million users globally. About half of those are coming from the emerging markets. And what's interesting there, if you think about the unit economics of sort of cloud, and I'm sorry, sort of the AI sort of side of things, is that this isn't like SaaS. So this isn't like a CRM business where you add additional users and it all sort of revenue drops to the bottom line. There is a high cost to compute that comes along with this. So you need to generate some sort of revenues off of each one of these users. Now, with half of that user base coming from the emerging markets, a significant chunk coming from India. For example, if I can get a 5G television phone plan within India for less than $10 a month, do I really think that folks are going to pay $20 a month for a subscription to. Okay, here we go. I like this because I think we're looking at the same data set. So the top story today is Open Air being valued at $500 billion on the latest secondary round. But the big question here is, is where the future for Open Air lays on subscriptions or an enterprise. The data point that I look at is that it has a user base. We know it's like 700 million monthly, right? Caro, how much of that user base is free and then converted to being a paying subscriber? Because that kind of answers all your questions. Yes, that's exactly the stat that I was referring to. From what we've seen, only about 2% of those folks actually convert over to being paying users. 2%, which means 2%. Yes. So that means that 98% of folks that are using this actually don't find enough value to actually sort of spend money on this. Now, going back to that India data point that I was referencing earlier, if you think about those folks and you need to sort of charge, call it $20 a month for some sort of subscription to make this break even profitability or even come close to that in India, you have Barthi Airtel that has a deal with Perplexity that offers this service for free across parties. So it becomes really hard to see where the monetization path comes on a lot of these things over the course of time. Now the other side of this is on the enterprise side. So a lot of people say, okay, well maybe it's more of A B2B sales. And there's a lot of things that people are investigating or looking at from the enterprise side in terms of I can use AI to get efficiencies and things like that. The MIT study, I think we all know that by now being quoted in terms of the lack of sort of effectiveness in a lot of those. We've talked to other tech consultants recently. In fact, one one of the big three consultant firms said that 85% of the projects that they're working on, so the 400 projects they've done on a year to date basis, 85% of those projects were absolutely useless. I said 15% generates some sort of benefit. You're literally sort of echoing exactly the conversation that we had with Synthesia's CEO founder yesterday, saying basically only about 15% or even vaguely working and only 5% actually working well. But Brian, can you not think that eventually they will work? And that's actually more to implementation issues rather than actually the fact that they're not adding value. So I think you have to show me sort of the math and the monetization and then the pathway for that working. There's a lot of data organization that needs to happen. There's a lot of things that need to happen to get to that point. And what we're seeing in terms of large language models is we're kind of peaking out in terms of what the capabilities are. And you saw that sort of transitioning from GPT4 to GPT5. It's not simply you throw more compute at the problem and you solve bigger and more complex large language models. There's more post training types of things that are coming through and you're seeing that the models are actually peaking out in terms of their effectiveness. And at the end of the day, these are extrapolators. So you're guessing what the next letter is, what the next word is based on a large training set. It can't think for you and it can't sort of make those decisions for you. I think you're starting to see that within the enterprise side of things. Now to pivot to an even bigger question here is where has this spending actually come through? And where are we actually seeing the money spent? And that is actually more on the hyperscaler side of things, actually providing the cloud services, where the data is coming through and where you're paying for it on the cloud side of things. So. And this is also fairly concerned. I'm sorry to jump in because. Because we'll run out of time. But linked to that, including the top line growth discussion, what we've asked private market and public market participants a week is their assessment of the role debt is playing in all of these infrastructure projects and how worried or not one should be about that. Yeah. So debt or no debt, one of the points that I was trying to make earlier was that if you look at the pricing dynamics within cloud, they're coming under a lot of pressure and there's a lot of increased competition that's coming through. And I think that's where we're really struggling on a lot of these things, where you have Oracle coming in and undercutting price by 40 to 70% on a lot of these enterprise deals and you're seeing that dragging down in terms of the pricing a lot across a lot of the cloud players, including like an AWB and things like that. So because a less profitable venture, the switching costs are becoming a little bit lower and the economics aren't quite as good as becoming more commoditized. And that's where we really struggle because there's a whole host of investments that's happening in this area and it's becoming increasingly commoditized, similar to the fiber build out, so to speak, week back in the dot com boom and bust cycle, the commoditized element a concern. What about the circularity argument that we keep hearing and that feeds into the debt question in many ways. Absolutely. So then the other question to ask is if this is such a fantastic investment on a go forward basis, why do you have participants in the ecosystem that are actually funding their customers and then those cash flows are then coming back to them? So then a lot of the sort of obscure sort of arrangements and deals as well in terms of special purpose vehicles, JV structures, why are you putting some of these assets into other sort of places where you can depreciate the debt or you can depreciate the assets within those other vehicles and it's not sitting directly on your balance sheet. So there. This tends to happen later in a cycle where you start to see a little bit more aggressive accounting coming through and you start to see some of these things that are starting to become a little bit more obscure. That has us concerned that we can't see a true sort of trajectory of where the economics are coming through. That's that's what has us concerned right now and why you've gone underweight. Brian Cashman Great to have you. Come back soon. JKG Partners. We thank you. Coming up, Apple hits pause on revamping its Vision Pro headsets. We discussed the rivalry with Matter. This is Bloomberg Tech. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. 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Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more@adobe.com do that with Acrobat Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey with smart business buying. Get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon Business takes the buying experience you know and love from Amazon plus tools that help you save costs and make insights based decisions ready to bring your visions to life. Learn how@AmazonBusiness.com Apple is said to be ditching plans to revamp its Vision Pro headsets. Instead the iPhone makers said to be looking to fast track and develop smart Glasses to rival matters. Ray Bans as the reporting. Let's get to the analysis of Apple's entry into the smart glass glasses category of Anuragrana Bloomberg Intelligence Senior tech analysts they have a lot on their plate right now to shift a new generation of handset of smartphone. But have you modeled for the idea that they enter a new category, the smart glass away from augmented in VR? No, not yet. Then we have to see what it is. We have to see what kind of potential reception it's going to be. I think Meta has a massive lead here so you know, you just can't sign off just because it's an Apple product that it's going to do well. I think it's going to. We have to see the details and, and before we start to model any kind of shipments should they be fast tracking? I mean it is but at the end of the day a lot depends on the models that go into it. So AI is a very big on device, is a very big part of any of these edge products and I think as we know Apple has to get that thing first right before they can move on to some of those features. Anurag, I've been reading your latest research wait times inventory hand sets of the iPhone 17 generation. Your conclusion? Yeah, so I think that's a good part is the the base model is doing very well, the Pro is doing very well but iPhone air is not at all doing well and frankly that was the one model we thought could get some traction but it seems like the battery life is an issue there and the second piece could be it's not available in China right now and that could be another driving factor. Must read always. Bloomberg Intelligence Anuragrana, thanks so much for spending time with us. Meanwhile, Peloton shares let's talk about half they've performed after yesterday. They've continued to be on the downside after unveiling revamped hardware software along with new higher prices for its equipment and subscriptions. We spoke with Peter Stern, Peloton CEO yesterday about the new features. We are focused both on existing members as well as non members for existing members they're getting so much today we are interested in introducing for everyone regardless of when you bought your equipment, the benefits of Peloton IQ and that's just included in your in your membership. We are now including a new acquisition that we did, a company called Breathwork because we know the power of breathing and how it can help people with stress and anxiety and depression and improve heart rate variability and improve blood pressure. So everyone's getting that major partnerships, for example, one with the hospital hospital for special Surgery to focus on injury prevention and rehabilitation. All of these things happen for existing members. But if you're not an existing member, there has never been a better time to become one. With the launch of this all new equipment lineup, the cross training series, now we're delivering the benefits of both cardio and strength because we know that adults should be doing a couple of hours, at least a week of cardio and two days of strength training every week. You can do that now all with one piece of equipment. That makes it super easy. It's almost in many ways like cross training is the way that which you're sort of identifying it. But if I look at the analyst notes and maybe the reaction from the stock is because a lot of this has been baked in, you've already given us full year forecasts that in many way talk about what churn you're expecting, but what subscriber growth? What do you think this will spur in terms of. So we knew of course as we went into this year what we were going to be launching and we were able, as you point out, Caroline, to bake all of that into our guidance for the year. But we also included in our guidance that as the year progresses, we will be inflecting back toward growth. And that's a big, big step for us as a company. You know, we, we had a couple of years where we've been down as we have regrouped after the pandemic and we are now in such a, a good place where you see us having reignited our innovation engine. Of course, our customer love has never left us. Customers really just appreciate what Peloton does for, for them and in particular have that deep connection with our instructors. So we're building on that foundation and now feel even more confident about our future than ever before. That was Peloton CEO Peter Stern speaking to Caro in a big conversation. Who be the next CEO of Disney? The search is on and right now the board is focused on four internal candidates, including Josh Tomorrow, Dana Walden, Alan Bergman and Jimmy Pitaro. Now this is the company is getting ready to name a new CEO early next year. But it sounds as though conversations are starting to steer towards one particular name. Lucas Shaw has the details. Why, after Bob Chapek, would it be deemed that the person in charge of exposure, experiences and parks is the right pick? Lucas? Well, look, it's both about personality and the future of Disney. You look at where Disney's putting all of its money Going forward, it's into that parks and experiences division. Most of the capex over the next decade is going there, whether expanding existing parks or building new parks. And Josh is also a very different personality than Bob Chapek. Right. He, he seems to have more facility with other parts of the business. He frankly looks like a Disney CEO, as weird as that may be to sound, as weird as that may sound. And he is just seen as very well qualified relative to the other candidates in the business and a Disney lifer, which matters at a company that has a very distinct culture. He was, he was around and hanging out in some valley in July, saw him. The Screen Time team gave a detailed report about a breakfast that took place. Lucas, I think it's worth you explaining to the audience what happened and why it's significant. Well, Bob Iger, the current CEO of Disney, who's been at the company for, for more than two decades, was having breakfast with someone who said what many in Hollywood are already thinking and saying, which is Josh is going to have the job and said something positive about how he would do in it. And, and Bob reacted very negatively, insisting that the board has not made a decision. And there's two important things to know about this. One is that Disney as a company, even though everyone in Hollywood believes that Josh is now the clear frontrunner, the company is insisting it has made no decisions and it's not going to make any news about this until early next year. The other is that Bob Iger, who has been pretty involved in succession the last few times, which have not processes that have not gone well, is said to be more marginalized this time because the board knows they need to get it right. And one way to get it right is to not have the current CEO as involved as he has been. And so I think this is just a source of great frustration for Bob, who doesn't want to be seen as a lame duck, but also doesn't have as much control over this as he has. Briefly, Lucas, I just want to switch gears to Netflix. It's down for four straight days now. There is growing anxiety about what's happening over on X and Elon Musk, I mean, maybe growing anxiety among a few investors. I am not detecting that with, with my sources at the company, most of whom would point out that it's a little bit ironic for someone who's been a free speech warrior to browbeat them for a television show that was released like three to five years ago. Bloomberg's Lucas Shaw, who leads the Screen Time team. Thank you so much that does it for this edition of Bloomberg Tech, but screen time returns next week. Live from Los Angeles, you got to tune in conversations with the best of the entertainment industry, including Jimmy Kimmel. Caroline yeah, cannot wait to go. Cannot wait to hear the conversations Lucas is going to conduct to many others. Do not in the meantime forget to check out our podcast. Find it on the terminal as well as online on Apple, Spotify and I Heart. This is Bloomberg Tech from New York. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey with smart business buying. Get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon Business takes the buying experience you know and love from Amazon plus tools that help you save costs and make insights based decisions ready to bring your visions to life. Learn how@amazonbusiness.com what does being financially invested sound like? A retiree on a cross country drive? Someone with new long term goals? A student getting their start with over 450 ETFs. IShares gives you access to countless market opportunities. IShares by BlackRock the market is yours. Visit www.ishares.com to view your perspectives, which includes investment objectives, risks, these expenses and other information you should read and consider carefully before investing Risk includes principal loss prepared by BlackRock Investments LLC. Member FINRA did my card go through? Oh no. 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