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- [00:01]
IDA Ireland Representative
With the highest number of young STEM graduates per capita in the eu, Ireland has the people and skills your company needs to succeed here. IDA Ireland, the national investment development agency, can help you find and nurture the people you need to internationalise and thrive. Our talent is just one of the extraordinary benefits Ireland has to offer. Learn more@idailand.com invest in extraordinary.
- [00:31]
Bank of America Representative
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- [01:01]
IBM Representative
So there's a lot of noise about AI, but time's too tight for more promises, so let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM
- [01:33]
Ed Ludlow
Bloomberg Audio Studios Podcasts Radio News. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. This is Bloomberg tech. Coming up, OpenAI says advanced AI models unexpectedly hacked Hugging faces system during testing, raising fresh concerns about AI safety. Plus, AMD is making a major AI bet, saying it will invest up to $5 billion in anthropic. Will it help AMD compete against Nvidia? And we'll break down Apple's latest overhaul of its Mac lineup for the age as Samsung makes its biggest consumer hardware push of the year at its Galaxy Unpacked event. Let's get straight to our top story. OpenAI is disclosing what it calls an unprecedented AI security incident. The company says it was testing GPT5.5.6 Sol and an even more capable but unreleased model with reduced safety guardrails to measure their cyber capabilities. During this evaluation process, OpenAI says the models found a way out of their sandbox testing environment, obtained Internet access and then targeted AI platform Hugging Face, searching for secret information the models could use to cheat the evaluation. OpenAI says the models ultimately reached Hugging Face's production systems. The investigation is still ongoing, but it's already raising New questions about what today's frontier AI models are capable of. Let's bring in Bloomberg's Rachel Metz, who broke the story. And I think the best place to start, Rachel, is how did this happen?
- [03:22]
Rachel Metz
This happened while OpenAI was testing some model cybersecurity capabilities. It was actually essentially giving it tasks like problems on a test, like a person would conduct a test. And in the process of seeking answers to the test, the model did a series, or the models, it was several of them did a series of things in order to get access to the Internet and go over to Hugging Faces servers to try to find answers to the test.
- [03:51]
Ed Ludlow
What have OpenAI and Hugging Face done in response to this? Like they've said, the investigation's ongoing. But if this is as significant a security incident as the companies have portrayed it as, and as the Internet is discussing it as, they must have taken some action in the interim.
- [04:09]
Rachel Metz
Yeah, they've done several things already. So they are. OpenAI is implementing some controls, it says, even though it might slow things down with their own work in order to patch any vulnerabilities. It's also working with Hugging Face to go through everything that happened here. There was a third party company whose software the models found vulnerability in in order to get access to the Internet. So OpenAI did what you're supposed to do with these kinds of things, and that is let that vendor know with a certain amount of time so that they could patch their own software. And one other thing that they did is OpenAI several months back, similar to what Anthropic has done with its most capable cybersecurity models, is they have a trusted access program. And so that gives certain vendors and researchers access to these less restrictive cybersecurity aimed models. And so they brought Hugging Face into this program so that a hugging face can also be more aware of what's happening with those models.
- [05:10]
Ed Ludlow
I ran into you on my way out yesterday evening and I think the kind of moment was what is happening. You know, it's hard to understand in the moment how severe something is what happened. But I mean, do you have a sense overnight, you know, how seriously the companies are treating this, what the sort of sentiment of industry is towards, like what this represents? It's a worrying development to a lot of people in the world of AI.
- [05:36]
Rachel Metz
Yeah, I mean, I guess I think about it kind of two ways. One is this is not good. If you have AI models that are, you know, breaching the containment you set for them and then going off and doing things and hacking essentially like accidentally hacking into another company's servers like that. I think we can agree that that's problematic. But on the other hand, the model did, I would argue, essentially what it was tasked with doing. It was told to solve a series of problems related to an evaluation process called Exploit Jim and the model took these steps. It just wasn't the steps that the researchers were expecting it to take or perhaps might have wanted it to take.
- [06:18]
Ed Ludlow
I'm going to get into some of the detail and why the models took those steps right now. Bloomberg's Rachel Metz, thank you very much. Let's stay with the Open Air story. Joining us now is Kara Sprague, Hacker One CEO, who says the latest incident isn't a scandal, but an example of responsible behavior as the company stress tested capable models. Hacker One, of course, a leading independent cybersecurity testing firm. It probes AI models and software for real world vulnerabilities. And card, thank you so much for your time and welcome back to the show. Let's start with your reaction to what happened. You believe that actually how Open Air and Hugging Face have handled this is completely appropriate.
- [06:59]
Kara Sprague
Yeah. What we're seeing here is an example of a Frontier lab that is stress testing its most capable model. We want to see the Frontier labs doing this kind of safety testing, and we also want to make sure that when something goes wrong, they come forward quickly and they disclose that. And that's exactly what happened here.
- [07:18]
Ed Ludlow
They're saying that the investigation's ongoing. A lot of people phoned me overnight and were like, this is a big moment for AI. You know, I think the way that Clem DeLong, the CEO of Hugging Face, and Sam Altman, the CEO of Open Air, I've kind of framed it, is that this is kind of day one in our exploration of AI and cyber. What do you want to see happen as this investigation proceeds and, and what determinations you think need to be made?
- [07:46]
Kara Sprague
Well, I think, you know, as, as this investigation proceeds, we want to make sure that we are continuing to test the safety and alignment of these cyber capable models. I would frame this as the next turn of the crank where a model not only broke out of its sandbox here, but then it went and actively exploited and broke into a third party, in this case, Hugging Face. So that's really the new part in this story is the breaking into a, a third party. Now, what we can take away from this incident is it was a controlled test and again, both parties collaborated very quickly to come forward and disclose it. And both are taking a number of steps to address It I think there's also some lessons in here for security leaders and defenders, which is the time is now to really retool environments to make sure that their discovery to remediation gap is really closed. Because many of the exploits, in fact all of the exploits that were, were used in this model's behavior. Those were issues that, that are sitting in someone's backlog that need to be addressed, they need to be found and fixed car.
- [08:58]
Ed Ludlow
I have both a technical and sort of academic question for you from our audience and that is the OpenAI relaxed, the, let's call it the attacking models guardrails for this evaluation. Right. The way they described it, reduced cyber refusals for the evaluation process. In response, Hugging Face tried to use an open source model in defense. But what it said was that that open model also had guardrails in place that limited its abilities to defend. Could you sort of unpack that a little?
- [09:31]
Kara Sprague
Yeah, the. So the first, the first model that Hugging Face tried to use or the first models that they tried to use in order to assess the attack, there are 17,000 actions that OpenAI's model took over the weekend as part of the cyber attack against Hugging Face. And in order to analyze that, Hugging Face attempted to use another model and that model's guardrails were tripped and Hugging Face was unable to proceed with that analysis. And so what they ended up doing was using a open weights model that they hosted in their own environment and infrastructure in order to complete that analysis. And so on the one hand we had a model that was breaking out of its guardrails and showing not enough alignment. And then in another one we had a model that was using its guardrails to prevent the defenders from effectively doing incident response. So it's, it's a very interesting case study of both, both sides of this.
- [10:34]
Ed Ludlow
This was two American companies, right. An American frontier lab with American models and a lot of people on social media opposing the question, what if this were an adversary, a ransomware operator, an apt group. But the companies on the defense were sort of stunted, had stunted defensive models. Right. In other words, the guardrails that you explained to us in Hugging Face's case.
- [11:03]
Kara Sprague
Yeah, I think in this particular instance, instance, what I would say is the tool matters less than the principle here. And Hugging Face shared their conclusion, which I think is spot on. Defenders in the case of incidents like this, they need to have capable models that they can run in their own walls so that the security work that they need to do under very intense pressure and fast timelines isn't going to be blocked and the data, which is very sensitive data around an attack doesn't leave their premises.
- [11:33]
Ed Ludlow
Carl Sprague of Hacker One on the Road traveling right now, joining the show at short notice, staying up late for us. I really appreciate that. Thank you very much indeed. Some other Open Air News. OpenAI is adding more Wall street experience to its board as it prepares for a potential public listing. The chat GPT maker has appointed bank of New York Mellon CEO Robin Vince and new bank CEO David Velez to both its for profit and nonprofit boards. The move comes as OpenAI lays the groundwork for an IPO that Bloomberg's reported could happen as soon as 2027. Okay. Coming up, we're going to take a look at the big news across private markets equities. And Sarah Rahi, Franklin Equity senior vice president back on the show, joins us next. This is Bloomberg Tech. AMD is making a major AI bet. The chip maker says will invest up to $5 billion in AI startup Anthropic, which plans to deploy up to 2 gigawatts of AMD's next generation Mi 450 AI chips in the form of Helios Rackscale Systems. The first gigawatt deployment expected to begin in 2027. AMD AMB will use Anthropic's Claude AI across its engineering teams and to improve its AI chips and software. And the deal highlights how AI competition increasingly looks about locking in customers, building complete ecosystems, not just selling chips. And for Anthropic, more access to supply, more options for compute. AMD actually open lower. The story has been out there for a few hours, but it's now rebounded with the rest of the chip sector is up 2.3%. The stocks following a very similar trajectory, which we'll get to in a little bit. Let's stick with Anthropic, talk a bit about OpenAI and look ahead to a monster tech earnings season. We're joined by Sara Arahi, senior vice president, portfolio manager, Franklin Equity and a partner with Franklin Venture and an investor along the way with Anthropic. What does that story signal to you?
- [13:39]
Sara Arahi
So first of all, thank you again for having me here today. And so, so you know, look, it's a little bit more of the same here. We've heard, we've seen Anthropic do deals with Broadcom, Google, all the players, they need more compute. And so this is just more of the same year. It shows that AMD is also a key player in this ecosystem. And I think, you know Part of this announcement is ahead of their advancing AI event tomorrow. They wanted to, to drum up some, some excitement about that. And so I think it's a big deal for that.
- [14:06]
Ed Ludlow
I appreciate the timing of it. I mean, I remember when Lisa Su was that. Wait, where you're sitting now along with bit a quite Greg Brockman and you know, they did a similar compute deal with Open Air. And the quite reasonable question at the time is why do you need to make equity investments for this to happen? Right. If your compute is competitive, Anthropic will just acquire it from you.
- [14:27]
Sara Arahi
Yeah, no, I know. And of course we'll drum up the circular financing topic here and look, look, that's, that's a part of the ecosystem here now. And there's, there's a need for these investments. And so having a stake in this I think makes a lot of sense for these companies. And you're seeing every single player do that. And so AMD wanted to be a part of this. I don't, I don't. You know, I think this ecosystem is thriving. We're seeing all the success here and we're still in the early innings. So it makes a lot of sense here.
- [14:57]
Ed Ludlow
Sara, can ask you a little bit about the broader ecosystem for you. So like of course, course anthropic and Open Air are important, but when you look at the rest of the Franken Ventures portfolio, what about the rest of the companies that you're supporting in private markets? Access to compute. Yeah, like is that a worry right now? Is that something you're feeling confident about?
- [15:18]
Sara Arahi
Look, I think there's one Anthropic and open. I have all this access to compute. They're getting this and there's still a need for so much more of it.
- [15:25]
Neela Richardson
Right.
- [15:26]
Sara Arahi
There's so much demand. We're just scratching the surface here on the demand for AI. And so I think they're getting that access. You're seeing the variety of MAG7 companies needing that access and getting that access to compute, but you're also seeing providers of that now monetizing you some announcements from Metta Space X providing some of that compute. So we're not that concerned in terms of one, the demand on that side and supply continues to come. Of course there's a lot of supply chain bottlenecks here and costs are going up, but over time that should also correct itself.
- [16:01]
Ed Ludlow
We covered in detail an event overnight of the OpenAI mistaken vulnerability. It's hard to put in sleep last night, right? It's hard to put it into one sentence, but you know, you're aware of the reporting and the details of it. Like what, what do you think about that?
- [16:20]
Sara Arahi
Look, I, we get this news, you know, we wake up and there's this news and it's a little bit more of the, in my opinion, it's a little bit more of just the fears that we're drumming up around AI. We actually had Jensen Huang in our office a couple of weeks ago, right. And he talked about how we're doing a bad job of some of this fear mongering around. Ooh, I think overstated, becoming a little bit overstated. One just job losses related to, to AI and how, what kind of impact that could have and then just maybe some of the impact around how AI is scary. I think ultimately we know that we're going to get productivity gains around this and as long as we create some of the guardrails around this, I think the, the, we should be using AI. We shouldn't be creating an environment where people are scared about AI. That's creating some of the issues around people not wanting data, data centers in there in their neighborhoods. It's making this more of a scary narrative around AI and I think we need to start staying away from that somewhat.
- [17:21]
Ed Ludlow
Okay, I'm going to set the Bloomberg Tech audience up for what is a big Wednesday evening after the market close. Alphabet, the parent of Google, reports earnings, Tesla reports earnings and IBM technically reports earnings but has pre release. And I'm trying to think what all three of those companies have in common. Spending. Spending. But the relationship with spending is different in each case. You know, maybe investors are like, okay, Alphabet is going to spend a lot of money. What's the return here in Tesla's case? Everything I read is they want to see Elon Musk spend even more money. Like get going Elon Musk on your ambitions, that company and then IBM maybe without telling the whole story myself but like IBM is like, what if you're spending on AI, what are you not spending on in its IBM mainframe frames? You know, earnings are important. Are they important? You know, how are you going to go into this evening?
- [18:09]
Sara Arahi
Yeah, look, it's definitely important. Alphabet is going to set the tone on hyperscaler Capex today. You know, we've seen anthropic accelerated earnings in Q1 and Q2. How is that going to result in potentially an acceleration in hyperscaler revenue? Right. So we want to see some of that cloud revenue accelerate.
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Ed Ludlow
You and I've just got. Sorry to interrupt you, but before like there is a difference between the capital Expenditure deployer and the capital expenditure recipient.
- [18:38]
Sara Arahi
And the recipient is seeing the returns right away. Right. That recipient is seeing it in their cloud revenues. We talk about the ROI of AI, the hyperscale. The cloud companies are already seeing that right away. And so you talked about it this morning, over 60% cloud revenue growth last quarter for Alphabet. So we're going to want to look for some of that that you know, you point out. And then of course it's going to be important to see some of the ROI related to AI and some of their core businesses. Right. How is it impacting advertising? Of course it's hard to dissipate whether that it's coming from the AI piece or it's just their regular search business. But of course that's going to be something we're watching for. And your question on Tesla. Look, Tesla is very much muddied with Space X right now.
- [19:21]
Ed Ludlow
Right.
- [19:22]
Sara Arahi
So where is the Capex being spent for Tesla? Where is that? We just saw the Cybercap announcement last week with Starlink in the Cybercap right from Space X. So I'm not sure we're really getting the full picture. I think you pointed out this morning CEO of two companies is going to be on and talking about these companies.
- [19:41]
Ed Ludlow
I think it's unprecedented. I think like Jack Dorsey is a kind of, we've had some example, a
- [19:46]
Sara Arahi
little bit of that.
- [19:46]
Ed Ludlow
But so you've talked about to me really quickly about Space X in the past, your current thesis on the Space X Tesla link up.
- [19:52]
Sara Arahi
I mean, look, I think, I think it's going to take some time. Right? We're working through the cap table right now. Right. The SpaceX cap table is still being, we still need liquidity events here. So I think that's going to take some time. Of course the regulatory environment is more favorable to something like that, but I think that's going to take time. Regarding Tesla spending on Capex, I think we're just going to need some proof points on robot robotics today. We're going to have to hear some on just AVs and then over time, you know, we'll hear more about that link up.
- [20:21]
Ed Ludlow
Franklin Equity, Senior Vice president, Portfolio manager and leading the venture fund. Sarahi, thank you very much. Okay, coming up, OpenAI is also planning a massive new data center in Georgia, spending tens of billions of dollars to keep pace with surging demand for AI. We have that story next. This is Bloomberg Tech.
- [20:45]
IDA Ireland Representative
With the highest number of young STEM graduates per capita in the eu, Ireland has the people and skills your company needs to succeed here. Ida Ireland the National Investment Development Agency can help you find and nurture the people you need to internationalise and thrive. Our talent is just one of the extraordinary, extraordinary benefits Ireland has to offer. Learn more@idailand.com invest in extraordinary support for
- [21:15]
Public.com Representative
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- [22:10]
Public.com Announcer
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- [22:24]
IBM Representative
the thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand, but by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM
- [22:56]
Yahir Anand
it's time now for talking tech. I'm Yahir Anand. First up, Tencent shares in Hong Kong fell the most in over a year today, sparking a sell off in other Chinese gaming stocks. Investors cited worries that the company's mobile gaming revenue could have declined in the June quarter. This as the global games industry is already under pressure. Plus, Samsung is in talks to join the funding round of Mistral AI. That's According to the Financial Times, the South Korean company is in discussions to invest hundreds of millions in the French AI startup at a valuation of about $22.8 billion. And here in New York, Uber and Lyft have won a temporary legal victory. A federal judge has paused the city's new law that would have made it harder for rideshare companies to deactivate drivers, the judge saying the companies are likely to succeed in their constitutional challenge.
- [23:50]
Ed Ludlow
Ed Yuhara, thank you. One other story we're watching super micro surging 24% offering signs that infrastructure demand remains strong. There's a strong backlog and a lot of numbers. Bloomberg's Dana Bass covers infrastructure joins us now. What is the Supermicro story?
- [24:07]
Dana Bass
So look, they are backlog log indicates that not only demand is strong, but that Supermicro is taking a, you know, a good amount of it as they compete with other folks like Dell and hp. I think, you know, given Supermicro has had a bunch of issues around investigations of its employees for whether they're sending things to China in ways that might violate rules, there's been a persistent concern about, you know, is that going to scare off customers or something like that? Based on the numbers that they preannounced yesterday? Doesn't seem like it.
- [24:37]
Ed Ludlow
Dina, today's big number, more than $30 billion. That's how much Open Air is paying to spend on a build out of this massive new data center in Savannah, Georgia. A story you reported this morning, lots of readership here. What do we need to know? Where does this fit in with the Open Air infrastructure plan?
- [24:54]
Dana Bass
Look, part of OpenAI's infrastructure plan is just getting more as quickly as they can. But, you know, there's two interesting things that we see, see in the way that they're announcing and doing this data center. One is that this, in this case, they have designed and are designing the data center and went out and secured the power contract themselves. This is, you know, a bit of a change from what we saw earlier on in their infrastructure deals in the earlier Stargate things where they were relying a little bit more on partners, you know, and then moving into compute that was already kind of developed for them. Here they're doing that design work and, and I spoke to their head of compute, Sachin Katie, yesterday and he said, look, like, you know, we've done a couple of these now. We know what we want. We have a specific design that works. And the other interesting thing he told me is that, you know, over, you know, over time, they're hoping to have a design that they can standardize and then open source and share with other people. He mentioned kind of similar to the, you know, the Open Compute project that matter developed in 2011. He thinks it's, it's better for OpenAI, better for the industry if there's some sort of standardization around what people need for these AI data centers.
- [26:02]
Ed Ludlow
The other thing that we've seen about, sorry, Dina, we're halfway through the show. We've got to go. But I would say it's a must read on Bloomberg on the terminal and dot com today, Bloomberg's Dana Bass leading AI infrastructure coverage. Okay, Apple's planning new versions of every single Mac that it sells, including updates to its desktop computers and the laptop. Laptops. Yes. Another Bloomberg Mark Gurman special coming right up. It's half time. From San Francisco, this is Bloomberg Tech. Welcome back to Bloomberg Tech. Treading water a little bit on the NASDAQ 100 symbolic of treading water to a head to Alphabet's earnings after the bell. I would say that since we've come on air, there's been a change in fortunes of semiconductors. We've seen a rebound on the stocks in line with AMD that continued to gain having opened lower. But that $5 billion equity investment anthropic and a multi year deal for 2 gigawatts of compute. Another big story breaking this morning, Apple readying a major overhaul to its Mac lineup. Beginning later this year, the company is going to be introducing new computers including a refreshed low end MacBook Pro, new iMacs and a high end MacBook with a touchscreen. That is all according to sources. And Bloomberg's consumer tech and Apple managing editor Mark Gurman broke the story. I find this so interesting because like in the age we've been through the cycle of the ipc, who needs an ipc? That Apple side of the story fascinates me. You have a lot of detail in the report this morning. What are the main highlights?
- [27:46]
Mark Gurman
There is so much coming from Apple over the next three months, over the next six months, nine months. The next two years are going to be a blockbuster period of new products. We've already detailed the iPad roadmap last week. Now we're talking about the Mac roadmap. There's about a dozen new Macs in development right now. You're going to see see the first new iMacs in two years, new Mac Minis, new Mac Studios. There's a new MacBook Air and new MacBook Neo coming next year. But a lot of the focus is going to be on the high end Mac book. So things like the Mac Book Pro. There are a few new MacBook Pros in development. There is the first M6 model which is a major new chip great for AI, coming out September, October time frame. And then between the end of this year and early next year year, you're going to see probably the biggest overhaul to the MacBook Pro in that computer's basically 20 year history. For the first time, Apple is going to introduce a touchscreen to the Mac. It's going to also be oled. It's going to have the Dynamic Island. It's going to be a seriously hot machine. I think it's going to be very popular. These first versions will use the M5 Pro and M5 Max chips which are pretty good for AI. There'll be a subsequent update a year after these first ones come out with M7 Pro and M7 Max chips which are built entirely around artificial intelligence on device models. More advanced processing of both first party and third party AI applications. So if you're a computer user, a Mac user or an Apple investor interested in their AI strategy, there's a ton to like here.
- [29:21]
Ed Ludlow
And read Mark's story out on the terminal and on blue but.com this morning. There's a lot happening this morning in the world of consumer technology. Samsung has its big hardware event. Let's start on the smartphone side of what Samsung's announcing. Where is their focus?
- [29:36]
Mark Gurman
So three new phones. There's the new Flip phone. There's the new Ultra phone, the Z Fold 8 Ultra. That's their high end foldable phone. But I want to talk to you about the Z fold 8 which is their new mid tier foldable. Apple replaces the larger size they've had for a few years now. It's the one you're showing on screen right now. It's incredible. It's amazing. It's going to sell super well. It's the same exact form factor that Apple is going to be releasing this fall. The wide format is awesome for gaming. It's pretty good for multitasking. Where it really shines is e book reading and watching video on YouTube and what have you. It's a little shorter than your typical phone, but wider. It's a really cool form factor. You have to get your hands on it to really understand it. I'm pretty pumped for the Apple version, but the Samsung one's going to do great too.
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Ed Ludlow
Okay, smart glasses. Samsung has actually had quite a lot to say about smart glasses. Where are they on the product side and why are they worried about privacy when it comes to smart glasses?
- [30:38]
Mark Gurman
Yes. So they're launching their glasses in concert with Google, Apple and Warby Parker and Gentle Monster later this year. We're told these have about 9 hours of battery life and you know, these are standard fare. All the smart glasses without displays that you're seeing from Metta, from Google, now from Samsung, you'll see them from Apple to next year. They're pretty much all the same product, cameras, audio, technology. But Metta, you know, as fast as the category is growing in terms of sales and usage is as fast as people are becoming concerned with the privacy of these products. Royal Caribbean has banned them from casinos and bathrooms and children play areas on its ships. There have been courthouses in Wisconsin, New York and Pennsylvania that have banned these things. There's a lot of concern about the privacy implications. And of course, that is because of the meta privacy baggage that they've had for years now. So Samsung Metta with its own pair of glasses. Apple, of course, are really going to need to figure out the privacy story here to get people not only comfortable wearing them, but to get people around people who are wearing them to be somewhat comfortable.
- [31:46]
Ed Ludlow
So when I woke up this morning, none of this news was out yet. And actually the biggest story was what you had written out yesterday about upgrade device lease programs and Apple's relationship with Klarna. Like a lot of people are reading about that. We have time. What do we need to know?
- [32:03]
Mark Gurman
This is a blockbuster new initiative from Apple. It's called Apple Upgrade. They're going to announce it next Tuesday. They're going to roll it out on their online store and in their physical retail stores. This is essentially a hardware subscription program or leasing program. This is something Wall street has wanted for a while. As these Apple products become more expensive, as Wall street wants to look for ways to get people to upgrade more frequently to new Apple devices, a leasing program is exactly how Apple is able to do this. So you'll be able to lease an iPhone or Apple Watch over 24 months, or an iPad or Mac over 36 months. You'll make monthly payments just like you're leasing a car. At the end of the lease, you can either give it back or you can buy it out with a fee. These are going to have less costly payments compared to financing and iPhone upgrade programs that Apple offers today. So this is going to replace those. And I think it's a gigantic move for Apple to try to lock consumers in long term to spur upgrades and to get people to buy devices that maybe normally they wouldn't be able to afford. Now that you've seen price hikes on all their Macs and iPads, the iPhone is about to get a price hike. And of course, the foldable iPhone that we just talked about a couple of minutes ago, that's going to be a pretty penny as well, coming in north of $2,000. So great timing for Apple here. They've Been wanting to do this since 2022. They originally were going to do an in house version that they were going to financially back in concert with Goldman Sachs. Now that the Goldman Sachs relationship has fallen apart, Apple deciding they don't want to do as many financial services in house. They're partnering with one of the name brands here which of course is Klarna and you saw their stock go up about 11%. We put our story out yesterday.
- [33:43]
Ed Ludlow
Yesterday Apple device lease program. Bloomberg's reporting on the overhaul of the Mac line up at the high end. Samsung smartphones, latest generation Samsung smart glasses all from Bloomberg's Mark Gurman who leads our consumer tech coverage. Thank you very much. AT&T reported its second quarter earnings with greater than expected mobile subscriber gains. And the company's valuation will ultimately correct itself as the wireless company positions itself to be indispensable in the era. That's what they're saying. AT&T CEO and chairman John Stankey joined Bloomberg Surveillance earlier today.
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Public.com Announcer
I think there has been a stratification of pricing for customers depending on what kind of services they want to buy. There's the segment of the market that needs high performing symmetrical gigabit services, very robust wireless plans. That segment of the market is willing to pay for that and they pay a premium as a result of that exceptional value that they get back. We've played very, very well in that space given our asset base. But there's also a segment of the market that's more value oriented. And I would say choices have come into the market because of good regulatory posture that have allowed investment that weren't there before. And those choices are putting more value oriented products and services at more attractive price points. But the product and service maybe isn't as robust. And at AT&T we've played really well upmarket, but not as well down in the value space. And we've been working hard to get our product portfolio so that it matches up across the entire continuum of the market. You saw that in the results this quarter because our account additions new accounts to AT&T hit like a three year high. And that's because we're doing a lot better job down market. And there's nothing wrong with having a more affordable product that's tuned to certain parts of the market. I don't consider that a price war. I consider that meeting market needs. As long as you're doing the things that you can do upmarket, which we've done very well. And I think when you see margins the way they are at at&t this is like a record for us. That's a good sign that we're getting that balance correct over the next five to ten years.
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Sara Arahi
John, how do you see the breakdown of the mix of broadband and fiber on one hand the wireless or the more budget sensitive areas and then satellite from the likes that you're seeing from Starlink?
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Public.com Announcer
Look, my, my point of view is they have a fantastic product. There's great innovation that's moving in that space and it fits part of the market that hasn't been well served, especially in less densely populated areas. And you know, the interesting part about that is our investment has largely been in urban and densely populated suburban. We haven't pushed real hard in the rural and less densely populated areas. That tends to be more the stronghold of cable companies. I think they'll do pretty well in that space. Bringing an alternative and competition in there. I think it's going to be very hard to come into the more densely urban populated areas to compete with that bundle that I just talked about earlier of fiber. That is the best product in the market, best performing. It's the lowest marginal cost. Our great wireless density that far outstrips what you can do from direct to device and satellite. Years of investment in the hard to reach places like stadiums. Everybody who went to a World cup game knows how important being able to connect in a stadium is to experience what goes on socially and actually in the arena so that you can see a few replays that they're not showing there. We've been doing that for a long, long time and it's going to be very, very hard to catch up on that infrastructure. And I think we're going to do really, really well competing in metro and suburban areas, which is where our investments have been.
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Ed Ludlow
That was AT&T CEO John Stankey. Coming up, there's a glimmer of good news for young workers in AI exposed jobs after months of employment decline. Neela Richardson of adp going to tell us why that's next? This is Bloomberg Tech.
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Public.com Representative
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IBM Representative
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Optum Representative
IBM, let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling the system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a healthcare company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in home care. And then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients and those prescriptions. Optum is working to bring costs down, save patients money and make it easier to get refills. Little by little, Optum is helping make health care work as one for everyone. Head to business.optum.com to see how,
- [40:36]
Kara Sprague
after
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Ed Ludlow
five straight months of declines in early career employment, there's some encouraging news for younger workers in AI exposed jobs. New data from the Canary's dashboard shows employment for that group edged slightly higher in June, offering one of the the first signs the trend may be stabilizing. Joining us more is one of the researchers involved in the project, Neela Richardson, chief economist at ADP and a former senior economist here at Bloomberg. Really interesting data that we have been tracking for time. It's a slight change of trajectory in June, but it signals something. What Is it?
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Neela Richardson
Well, thank you. Thanks for having us on to talk about this exciting new report. This is a collaboration with Stanford Digital Economy Lab and what is showing is that early career in AI exposed fields is affected negatively in terms of employment when it comes to AI. And we've tracked that since 2022 in the AI rollout. But what's unique in June is that we're finally seeing, as you noted, that stabilization. And what's important to remember about this Canaries dashboard, it's, it's more than just an employment index, it's a transformation index. It's showing in real time how actual AI occupations and high exposed AI careers are being affected by these new tools entering the workplace. And so that's why it's so critically important to see an uptick in June. Because if we can move AI impact from automation of science skills to augmentation of skills, especially with early career, then we have something, we have that secret sauce that the labor market has been
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Ed Ludlow
waiting for taken in aggregate. Right. The labor market data for June shows the market cooling, but underneath something is happening. I think the way you'd put it is that it's quietly reshaping under, underneath that top line. Is that very specific to AI as the catalyst for that?
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Neela Richardson
It is. There are two drivers in my opinion that are affecting the labor market. It's AI and it's aging. The demographics of this change are super important. Back where I'm from, we say still waters run deep and we see a lot of still water in the macro data. This is a low, higher, low fire environment. But the depths is what we can see with this new canary's dashboard. It's hard as a young entrant to move into a labor market that's not very dynamic. And so if you can see I start to pull in that young labor in a different way and augment their skill base and level them up, then you have a different kind of productivity than we've ever seen in the past. And so right now, the drivers of the job market are pretty agnostic. It's health care. Those are demographically driven because of this aging workforce. But that doesn't have to stay that way. In fact, some of the most exciting innovations about AI are in health care. So if we can match the labor with the tech, the tech that you are so super focused on, Ed, then we have the ingredients for high scale growth.
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Mark Gurman
Right.
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Ed Ludlow
Well, that's why I want to go back to younger workers because that is replicated representative of the Bloomberg tech audience and industry as well.
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Kurt Wagner
Right.
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Ed Ludlow
You are focused on ages 22 to 25, 26 to 30. Let's go back over those trends quickly.
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Kara Sprague
Yes.
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Neela Richardson
Since the rollout of chat GPT In 2022, in the fall of 22, we saw a noticeable decline in employment for these young workers. It's deepened even for that second stage of early career, the 26 to 31. And it was present all along for the 22 to 25. And if you juxtapose that with older workers, it looked like I actually gave employment a boost in those exposed fields. Now this is what we're talking about. I exposed occupations, software developers, customer service reps. That's where we're seeing the action in terms of AI impact and the negative employment trends up until recently this June data. But if you're looking outside of exposed occupations, you're not seeing the same story at all. You're seeing employment growth in these really high demand, non exposed fields tied more to demographic change.
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Ed Ludlow
Neela Richardson, Chief Economist at ADP, thank you very much. Now coming up, IBM, ServiceNow and Alphabet all report after the bell what Wall Street's going to be wanting watching when the numbers hit. That's next. This is Bloomberg Tech, IBM and ServiceNow is set to report quarterly earnings today after the market close. The numbers come a crucial time, particularly for software companies that are facing a crisis as clients shift away from traditional software in favor of of AI products. Joining us, Bloomberg's Brody Ford. So IBM prereleased, Right. And that was a story where not AI is not important. Right. The mainframe business in particular. They now do full earnings this evening. What do we need to know?
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Brody Ford
The big question for IBM is whether the funding went from mainframes to other kinds of AI hardware, as they said, or whether this has really spread more. Exactly right. Is there some software business impacted? Are folks buying a variety of IBM products? No longer because they're too busy trying to buy a bunch of memory chips before the prices go up. That's kind of the big question for IBM tonight.
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Ed Ludlow
What's the story for ServiceNow?
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Brody Ford
Story for Service now is the same as a lot of application companies, which is is the AI monetization story real? Are the growth rates going to hold up? Is the AI growth, growth coming at the expense of their traditional businesses or is it truly additive? I mean, it's been a similar narrative for like three years now on the application companies and the market.
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Ed Ludlow
Like you just dominate reporting of this space. Like there is a common thread here across all these different software names or application layer names or it's more Idiosyncratic.
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Brody Ford
It remains pretty consistent across the application layer because this is the one that is getting the most kind of competitive pressure. It's not clear that they've been able to directly monetize AI in the way that infrastructure layer name like a Microsoft or a databricks has.
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Ed Ludlow
Bloomberg's Brady Ford will be very busy after the closing bell. So will some other people. Another tech heavyweight reports after the bell today. Alphabet. After ramping up spending to record levels, investors want to see whether those investments are driving growth across search, cloud and specifically Gemini. Joining us now blue as Kurt Wagner, the editor who leads our coverage of big tech for us at Bloomberg. So Wall Street's just like zeroed in on Capex spending. Are they worried about it?
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Kurt Wagner
I think a little bit. That's evidenced not just by sort of the fact that it's such a focus for Google, but it's been a focus for Metta, as you know, Microsoft and others that haven't yet reported. So I think that is going to be an important moment, not just for Google, but for the industry at whole to sort of show that these hundreds of billions of dollars these companies have committed to AI and infrastructure this year are actually going to have a return. And so I think Google Cloud in particular is going to be a first real test of that.
- [48:15]
Ed Ludlow
Right. So a lot of people in the Bloomberg Tech audience and around the world would say okay, Google, Google search. But really when it comes to growth, that's like ailing. It's Google Clouds where we look.
- [48:26]
Kurt Wagner
I think that's right. And we saw a good report from Google. Last quarter the revenue from Google Cloud was more than 20 billion for the first time. And that was better than expected. I think the numbers now the estimate is somewhere around 22 billion just north of that. One other thing to keep in mind, Ed, is this backlog of potential revenue for them. I think last quarter they said they had $460 billion of cloud backlog. So the faster they can get data centers and compute online, obviously the faster that goes from just a paper commitment to actual revenue for the company. So going to be focused on Google Cloud revenue, but also what, what does the backlog look like and how quickly are they turning those commitments into, into real dollars?
- [49:07]
Ed Ludlow
You know what's really exciting is it's just day one, Google's just the first to report and then there's loads more. But often how it works is like Google signals something for the other hyperscalers.
- [49:18]
Kurt Wagner
Right.
- [49:18]
Ed Ludlow
I think that that's why we try and take a bigger picture this evening.
- [49:22]
Kurt Wagner
That's right. And I love that you and I can get excited about day one of big tech earnings and this is great for that. But I think next week we have Metta, we have Amazon, Microsoft, all reporting and a lot of the narratives and a lot of the stories are going to be similar. Even with Metta, which hasn't historically had a cloud offering, as you've seen and as we've talked about, they're now looking like they're going to get into the mix on that too. Right. So if, if Google is starting to show promising signs with its cloud business, with that demand, if it's still high, it shows obviously a strong appetite for AI across the board. You can probably assume that might be reflected by some of those other companies as well.
- [49:59]
Ed Ludlow
Kurt Wagner, who leads the team covering the biggest technology companies in America, thank you very much. That does it for the addition of Bloomberg Tech. So we talked about, talked about the calendar. This is what it looks like. Alphabet, Tesla, ServiceNow, IBM after the market close today, Wednesday, Intel Thursday, then many more next week. The open air hugging face story. So important recap on the podcast. That's how we started the show. You know where to find it online. Apple, Spotify, Iheart, and all the Bloomberg platforms. From San Francisco, this is Bloomberg Tech.
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Optum Representative
Health care doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person how you need it. Optum is helping make healthcare work as one for everyone. Learn more@business.optum.com these days it seems like
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Public.com Announcer
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Yahir Anand
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