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- [00:00]
Ed Ludlow
When your business evolves, so does your risk of data loss. But Veeam protects workloads of all shapes and sizes, so your data is always on the map. Partner with Veeam for coverage that keeps you moving. With Veeam, it's all good. Get covered@veeam.com that's verm.
- [00:20]
Robin Denholm
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Caroline Hyde
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- [01:31]
Ankur Crawford
Bloomberg.
- [01:32]
Caroline Hyde
Tech is live from coast to coast with Caroline Hyde in New York and.
- [01:37]
Ed Ludlow
Ed Ludlow in San Francisco.
- [01:42]
Host/Interviewer
This is Bloomberg Tech. Coming up, Microsoft and OpenAI finalize a new agreement with Microsoft now getting a 27% ownership stake in the startup worth about 135 billion plus. Today is Nvidia's DC Super Bowl. We'll discuss what investors are looking for in CEO Jensen Huang's keynote address at the GTC conference. And we sit down with Tesla Board Chair Robin Denholm to discuss the push to convince shareholders to approve Elon Musk's $1 trillion pay package at the index level. There is not a lot going on in the world of technology, but there are two big stories. Nvidia is off its session highs up a percentage point and trading at a record high. We await Jensen Huang later today and a big GTC keynote. Then there is the big breaking news story of the morning. Microso will get a 27% stake in OpenAI at a value of $135 billion. There or there about it is some certainty for investors for both companies who have been waiting to understand the evolution of this relationship and we've got some details well into the future. Let's get to Our senior tech editor, Mike shepherd, who's here in D.C. there's the ownership in the financials. Let's go through those, please. But also we now know that that Open Air will license its technology to Microsoft for a very long time.
- [03:04]
Mike Shepherd
Yes, until 2032. ED and this is really in a way a bigger move for OpenAI because it removes some of the uncertainty that has been surrounding its evolution into a for profit venture. We know the numbers there. We Microsoft getting a 27% stake worth about 135 billion. But another key element that we also heard was that it will have a hold on OpenAI technology until 2032. And that also includes includes when OpenAI achieves AGI artificial this is the state of generalized intelligence, when AI can think like a human in essence. So that's a key development. And there is also some money going into the nonprofit Open Air foundation that also resolves another loose end. And for investors, this removes one of the hurdles that have been standing in the way of this all happening. And it had been standing in the way. Microsoft was one of the last holdouts among the backers of open AI for this evolution to a for profit.
- [04:06]
Host/Interviewer
Okay. So the pathway is open for Open Air to become a for profit business and get the resources it needs. It was a hell of a day to pick to put news out between 9 and 934 Eastern this morning for red headlines on the Bloomberg terminal, which is a lot for our technology newsroom. We are here for Nvidia gtc. And as we've written on the Bloomberg terminal, this is the Super Bowl. The expectation is very high that Jensen Huang will say something that moves the needle and he'll say something political.
- [04:32]
Mike Shepherd
Well, there sure is. And we've been looking at this for from two lenses. One, what are they going to be introducing in the way of products, features, partnerships to accelerate this push that Jensen Huang and Nvidia have been making to try to spread and disseminate artificial intelligence through the economy and a lot of different sectors ranging from health care to transportation. We'll hear him talk about things like robotics and other areas where they want to see what he calls the AI factory take hold. This is where air is used to develop ideas. But one of the things that has been holding back the Nvidia push, of course, has been U.S. export controls that has kept Nvidia out of the world's largest market for semiconductors and that is China. And he would sure like to see that change. And not coincidentally, President Donald Trump is in Asia as we speak. He is about to meet with Chinese President Xi Jinping on Thursday and perhaps hash through some of those issues. For now, this preliminary corps between the US And China does not include any change to those export controls. But perhaps Jensen today will be sending a signal to his new friend Donald Trump. And Jensen will be traveling to South Korea, and he will see Trump there as soon as the super bowl wraps up later today.
- [05:48]
Host/Interviewer
The president told us he expects to see Jensen Huang tomorrow, so he's going to have to hot foot it away from Washington, D.C. this afternoon, Bloomberg's Mike shepherd, thank you very much. Now coming up, Robin Denholt, chair of Tesla's board, joins us to discuss the push to convince shareholders to to approve Elon Musk's $1 trillion pay package. That conversation is next. This is Bloomberg Tech.
- [06:18]
Ed Ludlow
When your business evolves, so does your risk of data loss. But with Veeam, your data is always on the map. Partner with Veeam for coverage that keeps you moving and get protection for workloads of all shapes and sizes, even the ones you haven't created yet so you can stay resilient as you scale. With Veeam, it's all good. Get workload coverage that works for your business@veeam.com that's V E E A M.com.
- [06:46]
Caroline Hyde
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- [07:58]
Anthony Noto
Did my card go through?
- [07:59]
Host/Interviewer
Oh no.
- [08:00]
Anthony Noto
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- [08:13]
Ed Ludlow
There we go.
- [08:13]
Anthony Noto
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- [08:27]
Ed Ludlow
We are pleased to welcome our TV and radio audiences worldwide as we're joined here in New York by Robin Denham, Chair of Tesla's Board of Directors in New York. Meeting with shareholders, key institutional shareholders of Tesla, because there's a pay package that many have been analyzing that will keep from your perspective, Elon Musk in the driving seat and CEO of Tesla. Who are you meeting with and what thus far has been the response been to this pay package that could see Elon paid as much as $1 trillion?
- [08:56]
Robin Denholm
Well, thank you for having me today. Yes. As part of our annual shareholder meeting, I meet with the top investors that in Tesla on the institutional side and obviously also talk to retail investors through forums like this this morning to, to encourage everybody to vote, but also to answer any questions that they have. From a board perspective, we really like to engage with our shareholders, understand their questions, their concerns, their optimism for the future. And so it's a really important part of the process we go through on a quarterly basis, but also with the proxy on an annual basis as well.
- [09:40]
Ed Ludlow
So the initial feedback, is it one of optimism around the pay package? We've heard from Claus Lewis from iss, which have said they're not in agreement with the way in which the pay package is thus formed. The key concern seems to be the sheer amount of money going to Elon Musk, if indeed he achieves all of those key milestones. But for you it's about, and for Elon influence, it seems like. So how are you managing to discuss that with the investors, institutional and retail?
- [10:09]
Robin Denholm
Yeah, so firstly it is a performance package. So he gets nothing if he doesn't perform against the pretty audacious milestones that are part of the, the performance criteria that's been outlined by the board in the, in the performance package. So, so I think rather than compensation, it's actually about the performance and the goals that we have for the company as, as we move forward. And so for me, it really is about making sure that investors understand that, that they actually get paid if he hits the milestone before he will. And but to your point, it is about voting influence. Elon's been very public, including on last week's earnings call about the fact that it's around the voting influence that he could have in future shareholder meetings as opposed to the economic interests of the shares that he would get as part of the performance plan.
- [11:11]
Host/Interviewer
Robin, good morning from Washington D.C. you've acknowledged that there is a very real risk that Elon leaves if the vote is a no. This question we get most often from shareholders to you is what's the plan B? Either is there a plan B as a different person stepping up up, or have you discussed with Elon the idea that it will result in a no vote and that you can use some kind of bridging mechanism, another interim pay award, for example?
- [11:42]
Robin Denholm
Well, he's been quite public in terms of the implications of a no vote being on his leadership as well as on the, obviously on the, the performance plan itself. And so from our perspective as a board, we, we obviously take our fiduciary responsibilities really seriously to all shareholders and having, you know, a succession plan, you know, those types of things, things we've discussed on an ongoing basis, particularly, you know, if something untoward were to happen. So from our perspective, succession planning is an important part and so, so much so that we've actually baked in an orderly succession plan and a plan for a plan, if you like, as part of this performance plan. So the last two tranches of the, of the performance plan are unlocked by having a, a robust performance plan that, sorry, succession plan that Elon would be part of.
- [12:45]
Host/Interviewer
If Elon Musk walks away from Tesla on November 6th or 7th because of a no vote, is there a contingency where there is an individual already within Tesla or an individual outside of Tesla that is lined up as, as a near term option?
- [13:01]
Robin Denholm
Yes. So from our perspective, the most important thing at this point in time is making sure that we're explaining all of the items on the shareholder agenda for the annual shareholder meeting, making sure that institutional investors, retail investors have their questions answered. That's our most important thing right at this point. And we are only.
- [13:23]
Host/Interviewer
Robin, that is their question. Who's the backup plan? Is the question that they're asking you.
- [13:28]
Robin Denholm
Well, there is no other person that is Elon. We think that he is the right leader for the company over this next decade and delivering the plan and the opportunities ahead of us. So it's about how do we create the most value for the company and for our shareholders over this next period of time? And he, he is the right leader for us over this next decade.
- [13:50]
Ed Ludlow
Can you give me a sense of probability if the vote is no, what Probability, Elon walks.
- [13:57]
Robin Denholm
So, so right at this point in time, it's too early to actually make a call on the outcome. Most investors wait to the last minute to vote. So we're still early in that cycle, which is one of the reasons why I'm in New York to meet with our institutional investors. And we will get a better sense, you know, as the votes come in. And some institutions are more public than others in terms of how they're going to vote. So yesterday there was public announcement by the pension fund in Florida. And so other investors, investors will start to make their, their votes public as well.
- [14:39]
Ed Ludlow
But if it's no, the probability that.
- [14:40]
Robin Denholm
Elon goes 100%, well, time will tell, but he's been very, very public in terms of, you know, it would be more of a say on his leadership over this period of time, not just about the performance plan itself in terms of a nova.
- [14:59]
Host/Interviewer
Yeah, Robin, you've been generous with your time. You know, we've already spoken with you in September at length about the goals that you've set for Elon Musk. But one of the things that came out of that from, again, the shareholder base is why are the energy products not as strictly mandated to Elon when you consider the earnings that just posted, that was a growth driver. Right. It's such a key part of Elon Musk's master plan, part for and this abundance that he's going after. So why didn't you include energy products as a stated goal?
- [15:33]
Robin Denholm
Yes, so there are many different goals that we looked at. Energy is an important part of the, that Tesla product lineup today and in the future. And you can see the impact that energy is having not only on the results, but also on the transition to sustainable energy longer term. So it is embedded in the plan, the EBITDA goals that we have as a company, you can't get there without a robust energy outcome. And so again, if you look at the results of last week, energy contributed very significantly. And to get to $400 billion of adjusted EBITDA is, is a monumental task for anybody. No one out there, at least to my knowledge, is, is at that sort of level. And so even the first EBITDA goals at $50 billion is nearly three times our highest EBITDA goals that we've had. So from our perspective, it is absolutely embedded in the goals. To your point, it's not a specific line item in terms of, of the revenue or the units or the kilowatts of energy or megawatts of energy that are out there, but it is implicit in the plans. And the master plan for, you know, talks about that as well in terms of getting to sustainable abundance.
- [16:59]
Host/Interviewer
Robin, has the special committee and the advisors that you took on discussed the use of interim awards in the event of the no votes and how you might replicate what you did already?
- [17:11]
Robin Denholm
Well, there's an important other measure on the board as well proposal in terms of increasing the share pool that we have, firstly for our employees. As you know, we're in a talent war at the moment, particularly around AI talent and adding to the employee reserve as part of that to actually increase the amount of equity that we have for our employee program. But secondarily, we've also asked shareholders to add to the pool in the event that we need to award an amount to Elon to compensate for the 2018 plan. Because as you know, we put an interest in interim award for roughly one third of what he earned under the 2018 plan, given the appeal that is ongoing in Delaware at the moment. So. So we have not ruled that out. The special committee was charged with looking at all matters compensation wise. As you're aware, in August we did actually award a, an interim award which does have a two year vest existing period and is forfeited if we win the appeal in Delaware for the 2018 compensation program.
- [18:36]
Ed Ludlow
It does seem then to be about money and I'm interested as to how you continue to. You've made very clear it's about influence as well. Some of the feedback has been just the gargantuan amount that could go to Elon in terms of monetary value. But then others are worried about the dilution to other shareholders. How was it in just no way possible to give him more voting rights without the $1 trillion mega money bonus?
- [18:59]
Caroline Hyde
It feels like.
- [19:00]
Robin Denholm
Yeah. I mean we looked at many different instruments to be able to award equity that had voting rights versus the economic value. And it's just not possible once a public company has gone public to introduce a special class of voting shares. Other companies have that. If you look at some of the tech companies, they have two classes and founder shares if you like, or special voting rights exist. But for Tesla, that wasn't implemented at the time that we actually went public and therefore we weren't able to use that type of instrument. But what we were able to do was to bifurcate the voting rights versus the economic rights rights. And so under the plan, the first, all the awards have voting rights that are earned first and then the economic rights happen, you know, seven and a half years later in the first instance or 10 years later. So it really isn't about the economic or monetary value, it's more about the voting rights. And if there was a different mechanism that was available to us, we may have use that, but we had many experts look at it over an extensive period of time and we were not able to, to come up with something that would enable us to do that.
- [20:21]
Ed Ludlow
We are speaking with Robin Denholm, Chairperson of the Tesla Board of Directors, of course. And Robin, what's so interesting is Elon's made very clear why he wants influence. And in the earnings call he was saying he's worried about this army of robots that he is creating and then not having the influence if something went untoward. His concerns about I have been well documented. But why is he the right person to have influence, to have more than 20, 25% voting control?
- [20:49]
Robin Denholm
I think there's not another person on the planet that has the skill set that Elon has, both in terms of the manufacturing prowess that we've developed and he has developed over many years, but also around AI, that, that confluence of those technology skills. I think there are very few people that have that. And therefore, obviously looking at the, the risks associated with new technologies and tech and risks that haven't even yet emerged around those technologies, I think he is the right person not only to take advantage of the opportunities for the company ahead of us, but also to make sure that there are, are not the pitfalls of new technologies that could happen. Obviously the board plays a role in that as well. And as from a governance perspective, looking at the types of evil that could be done with different types of technology is part of our purview as well. And it is why we have such a phenomenal board with the skill sets that we have, both from a technology perspective perspective, but also from a governance perspective. And so we play a role, but obviously the CEO, the management team, play an even bigger role on safeguarding companies. And safe safety is a huge priority of ours as a company. And so when you're developing new technologies, technologies that other people have not yet developed globally, it is important to make sure that you have the right framework in place.
- [22:23]
Host/Interviewer
Robin, final question from the shareholder base is did the situation around the 2018 package, Chancery, Delaware situation, mean that the board had to hold off on authorizing any other investments or big strategic shifts?
- [22:38]
Robin Denholm
No, I don't think so. I mean, obviously we take into account a whole bunch of factors as we're working through strategy and, and different alternatives the company has ahead of us. But, but clearly the Delaware situation was Disruptive, but not disruptive from a strategic point of view. Making sure that we have a, have an eye on the future and the evolution of the company over the long term I think is something that the board is focused on, but also something the management team is focused on.
- [23:16]
Host/Interviewer
Robin Denholm, Chair of Tessa's board. Thank you very much.
- [23:19]
Robin Denholm
Thank you.
- [23:22]
Host/Interviewer
Adobe is hosting its annual user conference this week where the company will announce its continued integrations of generative AI into flagship creativity and productivity tools. The announcements include an updated version of their Fly Fi image model and an AI assistant in Adobe Express and access to models from Google and OpenAI. We sat down with Adobe CEO Shantanu Narayan for an exclusive conversation about its AI ambitions.
- [23:49]
Shantanu Narayen
I think everybody is so focused right now on training and the creation of these models and that's where the investment is until that moves to inference and you're starting to see, you know, the usage of that. All of this investment is not going to be monetized and you're not going to get a return. So you know, I'm very confident that Adobe is already at the path where it's the inference, it's the usage, it's the workflows, it's the actual value that we provide to customers that's going to be the long lasting value.
- [24:19]
Host/Interviewer
You present a picture, a human generated picture of a business in rude health to the markets. Give you enough credit for that.
- [24:29]
Shantanu Narayen
Well, I think it's fair to say that, you know, the stock price right now I don't think represents, because there's a couple question about software at large that I think is misunderstood. When you look at how profitable we are, the growth prospects that we have, models are going to be an on ramp. And what we have to do at Adobe is just to continue to focus on driving the innovation, on demonstrating the metrics that are power powering this underlying business, the early metrics and adoption of all of this technology. And that gives me great confidence that the innovation that we're doing, innovation is alive at, well at Adobe as well as it's being recognized by our customers. So you know, we, we recognize that inference is where the action is. We're skating to where the puck is. And you know, I think the stock will take care of itself, but it's certainly undervalued right now, which is why we're buying back a lot of our stock.
- [25:25]
Host/Interviewer
Let me address this head on. Wall street does not see Adobe as a place where AI innovation is happening. And you just said, you know, when inference comes, you will be there. What's the counter argument to the statement that I just made.
- [25:42]
Shantanu Narayen
I actually think Wall street has recognized that AI and Adobe and the way we've innovated has actually been stellar. I think they're wondering where the monetization of training and inference. I think this incredible focus on chips and the infrastructure for training is where the action is right now. And you know, my belief is that it will switch to inference. So I would actually dispute the fact that they are not recognizing the innovation that we're providing. But I think they're waiting to, you know, see how that accelerates on the inference side.
- [26:21]
Host/Interviewer
That was Adobe CEO Shantanu and Orion. Okay, some more news. It's time for Talking Tech. First up, PayPal shares surging today after the company raised its full year earnings guidance and announced a new partnership with OpenAI. The deal will integrate PayPal's digital wallet into ChatGPT products, enabling users to seamlessly turn searches into purchases. Plus, Meta is moving its top metaverse executive to a new role. Vishal Shah is set to oversee AI products and will be responsible for adding the company's AI tech to Meta's app and wearable devices. This comes just a week after the company cut 600 jobs from its AI unit. And Paramount Skydance is preparing for a major round of layoffs, cutting about 1,000 jobs starting Wednesday. That's according to sources. The move follows the company's merger in August as management looks to streamline operations and reduce costs. A second wave of job cuts is expected at a later date.
- [27:23]
Ed Ludlow
Welcome back to Bloomberg Tech. Let's get a quick check on these markets because record highs folks. The NASDAQ 100 tracking up just about 3. 10 of a cent. We're coming off of the previous highs of the day, but nevertheless we march ever higher as the moon music is positive one around earnings. One about some of the seismic announcements we're going to get from Nvidia is trading higher ahead of the big announcements from GTC. Microsoft trades higher with clarity on that 27% stake they have in the Public Benefit Corporation of OpenAI going forward. But let's dig beneath. Also what's rallying in Amazon is now we understand with clarity now that 14000 jobs in the corporate part of the business are to go. We're up about a quarter of a percent but we want to dig into this particular story what it means going forward. The Matt day you cover Amazon Matt and in many ways this has been signaled by Andy Jassy. Generative AI is going to allow them to do More with less from a corporate personnel perspective.
- [28:14]
Host/Interviewer
That's right. Andy Jassy, the Amazon boss, came out with a memo earlier this spring, I guess saying that over time they expected AI to reduce the headcount in corporate roles. Now, PR is telling us that's not the driving force today, but it's hard to escape that as a background. Just in the layoff memo from the HR chief this morning announcing those 14,000 cuts, you know, they mentioned AI is transformative and Amazon's got to reshape to be ready for it. We actually did find out a little bit more granularity from sources. Right, Matt, on which roles, which departments. And I think it's worth pointing out 14,000 is less than half the number that Reuters put out yesterday afternoon. That's right. And I think one of the, one of the indications in Amazon's communication to employees is that these might not be over. They said, you know, looking to 2026, the company would continue to hire in some areas, but also look for efficiencies and look for ways to, to cut the fat. So employees are definitely taking that as a sign that more are coming, which would be within the patterns Amazon has established for material prior. Big layoff. Right. We saw this movie a few years back when they rolled out layoffs in October, November, January and March. Bloomberg's Matt Day, thank you very much. Let's get to earnings. Shares of so far down roughly this morning. This despite the company reporting pretty strong earnings, raising its full year profit outlook and increasing membership in the latest quarter. Let's talk through those numbers with CEO Anthony Noto. I'm reading actually the Bloomberg intelligence reaction to the numbers. Right. You've been through the numbers on the call, but the story is that this one stop shop platform is getting traction with affluent younger people. Is that the story that you'd want to tell?
- [29:54]
Anthony Noto
Absolutely. And the results speak to that. We've driven 17 consecutive quarters where our revenue growth and our margins when added together exceeds the, you know, very attractive rule of 40 that technology investors like to see in software companies. We've actually averaged 58 and this quarter we're at 67%. We drove 38% revenue growth and have 29% EBITDA margins, which is an exceptional performance. And it's really the direct result of the foundation that we've built over the last eight years to have this diverse set of products that are all now firing together to deliver durable growth, growth and really strong profitability. Our business continues to diversify into products Outside of lending 56% of our revenue was from the non lending segments and that was up quite meaningfully 57%. So the strategy is working with 35% product member growth, 36% product growth and then about 40% of the products in the quarter were bought by existing members.
- [30:58]
Host/Interviewer
Anti, Bear with me one moment please. There's just some breaking news. Nvidia is making a $1 billion equity investment in Nokia, the European telecommunication telecommunications networking name. Nvidia will subscribe Nokia shares at a price of $6.01 per share and hold 3% of the company. Almost 3%, 2.9%. Nokia is going to use that money to accelerate its strategic plans around AI and the shares will be delivered in the form of ADRs. It's an interesting piece of breaking news. We are here in DC for Nvidia gtc. I'm sure later in the day we'll get back to it. Anti, thank you for bearing with me. The other question I want to ask about is what's happening in the market right now. If you are a fintech company and you put out a press release or you say the words open air in the public forum, your Stock goes ballistic. PayPal is example of that. Does so far feel the need to integrate itself as an API through chat GPT?
- [31:58]
Anthony Noto
What I'd say is this. We're benefiting from two technology supercycles, blockchain and artificial intelligence. We'll talk about products and impact as they're released. I think it's critically important to stay grounded in reality of the business as well as the impact of these new initiatives on the business. We recently launched something called SoFi Pay, which is the ability to pay in the United States through our app in dollars of money that's remitted internationally to Mexico. As a start, it rides on a layer 2 blockchain and it arrives in the destination country in local fiat. We've rolled out Mexico and we'll soon be adding the rest of Latam as well as Europe and we think it's a very unique product. We also will be launching before the end of the year the ability to buy, sell and hold cryptocurrencies at so far we'll be the first national bank in the US to offer buy, sell and hold crypto currencies and you'll be able to do it through your SOFI Money account. Our Sofi Money accounts are checking savings accounts. They have up to $2 million of FDIC FDIC insurance. People can open up a crypto account and fund that purchase directly from their SOFI money accounts seamlessly. So not only building unique products, but we're, we're stitching them together so that you have a seamless ability to use all of our products when. And it's better to use them together. We'll also launch next year a stablecoin, which we think will impact a number of our different businesses. It'll be part of SoFi Pay. It'll be part of so far, Buy Health, Buy, hold and sell crypto and will also be offered to our technology platform partners.
- [33:34]
Ed Ludlow
The product innovation. Innovation is rapid, Anthony. What's interesting though, is trying to understand the asset quality going forward. And as Ed started this conversation, there's perhaps a sort of higher level, higher type of person that you've been marketing to. But PayPal has just been saying amid their earnings, they're worried about the US Consumer right now. Are you?
- [33:53]
Anthony Noto
No, we're not. Our consumer is very strong. We're going after prime and super prime customers with their lending products. Our credits performed incredibly well. We actually saw an improvement sequentially again in net charge offs by about 20 basis points across both products. Our average FICO score for our personal loans is in the 740 range and the average FICO score for our student loan financings in the 750 range. So we're seeing really strong performance of credit and great demand from our capital markets partners in our loan platform business, which is now in this quarter over $3 billion, up $900 million sequentially. And so not only is our credit performing well, the returns investors are getting and buying our loans or licensing with us on our loan platform business is also performing well and we see a flight to quality and we're benefiting from that.
- [34:43]
Ed Ludlow
Anthony, you have been talking about the innovations when it comes to investing in AI, investing in crypto. Maybe there's a bit of inorganic as well as organic, but I'm interested about what it means for your workforce. Are you still going to be expanding? Expanding briefly. Might you see some trimming in terms of corporate jobs?
- [35:00]
Anthony Noto
We are accelerating our rate of investment and we've announced a number of new initiatives, including the smart card for next year as part of SO5 Plus. We'll continue to expand the selection that we have in the best product. And I mentioned the crypto investments. We're also doing things in artificial intelligence. We've recently launched Cash Coach, which is a way to evaluate the cash that you have in your SOFI accounts and all of your external accounts and show you how you're not using your cash optimally. We'll also launch Something more broadly called coach, which will answer your questions, but most importantly help you understand how to spend less than you make so you can invest the rest. We're moving forward with hiring. We've hired more engineers this year than we've had in the past and we don't see that slowing down.
- [35:45]
Ed Ludlow
Anthony NoTo so far CEO, great to catch up with you today. Today on the back of your earnings.
- [35:51]
Host/Interviewer
Secretive American startup Substrate has come out of Stealth with a $1 billion valuation and a bold claim on chipmaking technology. It's built a new lithography tool that it says uses particle acceleration and x ray wavelengths to etch intricate wafer patterns as sharp as all sharper than ASML's UV machines. ASML shares fell after Bloomberg published its story. The company also has long shot plans to build an American foundry taking aim at TSMC Dominant Substrate. Founder and CEO James Proud joins us now from San Francisco. James, I've had the benefit of spending some time with you in recent weeks looking at the company, seeing the technology. The technical breakthrough is the use of a particle accelerator. But you're very keen to point out that, that you didn't take any IP from anyone else or work with another technology company. The response when we published the story was how is this different from a company called X Lite? So take that and run with it, please.
- [36:53]
James Proud
I think that what we've shown today is a working tool that is producing beautiful images. To our knowledge, there's only two companies that are actually printing images, images at this, these resolutions and one in the United States.
- [37:11]
Host/Interviewer
Let's bring up those images. You're basically sharing these images as evidence that the machine itself works. What is it that we're looking at here? And you know, beyond that, I think some of the technical questions that the analyst community came to us with is what is the throughput of this machine? You know, beyond this being a lab based experiment.
- [37:34]
James Proud
Yeah, so that's a great question. So it's important to know that the images that we've printed, printed, we've done them under production like conditions. So this isn't something that is a very long exposure, a sort of one off. We've been very, very focused on if we're going to use this kind of light source, it has to be capable of high volume production. And then on the other side, the actual tool itself, we have what is a production quality 300 millimeter wafer tool with the mechatronics in that tool moving at production throughput. Of course we're not in a fab. We've not built a fab yet. And so the proof is really going to be there. But we feel very, very confident that on the key metrics that go into throughput, we've been demonstrating those.
- [38:18]
Ed Ludlow
Okay, so you haven't built a fab. You are planning an American foundry. Why J things That's.
- [38:24]
James Proud
Well, if you look at the history of all of this technology, from the transistor to photolithography itself, the United States invented all of this. It was predominantly, actually two companies, intel and IBM. And so I see that we have a long history in this country of doing crazy, bold things. And, and it's in. It feels like a more brief aberration that the United States States is not in a leadership position here. We've gone and done something very, very different on the sort of key process, in the manufacturing process. Our ideas aren't limited just to the lithography. We have lots of ideas about what would it look like if you were starting a foundry from scratch. And so we're very excited to go and, and keep building on top of that.
- [39:09]
Ed Ludlow
And I'm sure ASML looks on with wonder as at the moment they are at the heart of lithography and, and maybe Japanese player too, but really they have the choke point. I'm interested as and when your facility might be up and running for such lithography, for such semiconductor equipment making machines to be up and running and producing commercially.
- [39:28]
James Proud
James, our goal is to be up and running in 2028. It's a very, very fast timeline, but we've moved at incredible speed. The company's really only three years old at this point. And so if we can continue at that pace, we think that we can get that done.
- [39:44]
Host/Interviewer
James, for you, this is about American sovereignty over a national security critical technology. Would you just explain your pitch in those terms? I know that you are driven by a very specific ideology on how and why America should lead in this field.
- [40:04]
James Proud
Yeah, to be very clear, like you said, like this company and starting this. This is a very ideologically driven mission. Doing this and starting this is not easy. It's been incredibly, incredibly hard to get to this point. But I feel like the national security and economic security imperative, we need to be doing absolutely everything that we possibly can to get the United States back into a leadership position. We need to be building as many fabs from domestic and foreign players as we possibly can. My number one goal is wafers built in the United States. We, we think that we can do a different version of that and bring that online very rapidly. But the end goal is semiconductors built in the United States as quickly as possible.
- [40:49]
Host/Interviewer
In the story we outline both that you were once a UK citizen who renounced UK citizenship and became an American citizen and that you have no intention to sell these machines. So I want to get to some subject matter that we didn't cover. You know, that you need to raise tens of billions of dollars probably to achieve this vision. The capital right now is coming from the Gulf in the Middle East. How would you manage that situation?
- [41:16]
James Proud
So I think it's actually really important to note that traditionally with a large semiconductor fab, you need a very, very large anchor customer to be able to fund the sort of tens of billions required to get a fab up and running. But with, with what we're doing, we can actually reduce those costs so that to bring up a low volume facility, you'd only really be in the single digit, low, single digit billions of dollars. And so because of that, we think that we have a lot more flexibility in raising capital and actually getting this built as quickly as we can.
- [41:48]
Ed Ludlow
So maybe keep on depending on US capital to build and fabricate in the United States. And for that, how much have you had to liaise with the Trump administration? How much we had to be in sync with their own focus on fabrication in the United States?
- [42:04]
James Proud
Well, I think the Trump administration and the President have, have made it very clear. They see that this is a golden age for the United States and that we are in a, in a, in a technological battle. There's an AI race and the United States needs to win. And so from, from literally day one of that administration, they have been incredibly supportive, engaged and, and the door has always been open. And so we, we're incredible fans of the administration and appreciative of the time that they've given us.
- [42:32]
Ed Ludlow
James, Proud CEO Substrate, we thank you for joining us today. Meanwhile, coming up, we're going to be speaking with Anka Crawford Alger EVP and Portfolio Manager and what to expect out of Nvidia's GTC keynote. Add some news on Nvidia.
- [42:45]
Host/Interviewer
Yeah, and it was breaking out of Europe. Nvidia is making a $1 billion equity investment in Nokia where Nvidia holding almost 3% of that company. And it's about Nokia having both the capital and the technology relationship to advance its strategic priorities in AI. I am here in DC for gtc. One would assume therefore that later today we'll hear more about it. But Carol, look at Nokia shares right now and that reaction that's called the Nvidia effect. The golden ticket in AI this is Bloomberg Tech.
- [43:18]
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- [46:26]
Ed Ludlow
Got to get back to our top story of the day. Microsoft has finalized a pact with OpenAI giving the tech giant Microsoft, that is a 20%, 27% stake in the chat maker, its public benefit corporation, part of it worth about $135 billion. Ankur Crawford is with us, EVP Portfolio Manager at Alger. And you've been putting a lot of thought into underlying valuations, into the overall AI spectrum right now. Is this clarity a good one for you when it comes to the Microsoft thesis?
- [46:55]
Ankur Crawford
Oh, sure. I mean, you know, partnering with OpenAI, OpenAI probably one of the most significant companies of, of our decade of this decade. And to be able to partner with OpenAI and increase the time horizon over which the partnership will, will exist was important for, for Microsoft because the underlying technology is being developed at OpenAI. So, you know, welcome. We're very happy to see it. The extension of the data center pact, also an important step in the right direction.
- [47:28]
Ed Ludlow
$250 billion worth of SEO.
- [47:30]
Ankur Crawford
Yeah, that's right. And so moving forward, I mean we've. There was a lot of kerfuffling that we had heard between OpenAI and Microsoft. I'm glad that they're over it. I think they'll make great partners.
- [47:41]
Ed Ludlow
Once again, this is about deal making. Once again, this is about open air just trying to ensure that it's got the bandwidth of compute that it needs. With Microsoft, Microsoft being able to see real revenue from generative AI in the here and now and still have access to the ip. When we keep thinking about these deals, some of them being talked of as circular, has it given you any pause, any, any cause for concern?
- [48:03]
Ankur Crawford
Actually, quite the opposite in that maybe we should be asking what is it that OpenAI actually thinks their revenues can be that they need so much capacity and back into perhaps, you know, how big is this market and how are they framing it? How is anthropic framing their market? You know, last week there was a really interesting article about how open I was hiring investment bankers where they're coding a junior investment banking analyst. What is that worth? What is that worth to a bank that may hire an OpenAI digital banker right and if you, if you do this across the economy, I think it becomes clearer that, you know, the opportunity set here is, is very significant. It's not tens of billions, it's hundreds of billions if not greater.
- [48:54]
Ed Ludlow
We are at a new record high on the day. We are seeing Nvidia push higher ahead of more announcements coming out of gtc. We are seeing earnings anticipation, all of some of the major players of Magnificent Seven this week, the key five coming forward. But when you're looking at your investment playbook, are you going to keep putting money into a Microsoft, into Nvidia, into an Amazon and an Alphabet or is it a broader remit now?
- [49:17]
Ankur Crawford
I think it has been a much broader subsection that we have been investing in, mostly playing on the infrastructure side. At some point you're going to have to pivot from not only infrastructure but into the those companies that are actually deploying and getting the benefits of AI that is still on the come because we are still in this ramp of building infrastructure. I mean we can't actually deploy artificial intelligence to companies and get that benefit until the infrastructure is in place. So I think there's another two to three year build out on the infrastructure. I think as we go through this earnings season we will see everyone is going to be raising their capex as estimates next year that numbers probably go.
- [50:01]
Ed Ludlow
Up again and you celebrate that rather than seeing the revenue going up and.
- [50:05]
Ankur Crawford
To the right, you celebrate both. Right. You need to see that the infrastructure people spending capex which will eventually come as revenue to them over the next few years. But you do have to invest first in order to see the gain.
- [50:21]
Ed Ludlow
Uncle, it's always great to get your perspective. We so appreciate it. Uncle Crawford of Algeria there with us Portfolio Manager. Meanwhile, let's just take a quick look as we wrap up this edition of Bloomberg Tech of the movers of the day. Nokia European what was telecom equipment pivoting into AI equipment and then some. Nvidia vindicates that pivot by investing some 1 billion in terms of equity. That's $1 billion equity investment in Nokia. This is all about the future of AIR Ran, that's radio access network market market that's rapidly growing. It's about 5G. It's about 60, 17%. Look out of course for the GTC announcements to come but that does it for this edition of Bloomberg Tech. One key focus is also to get your podcast satiation. Do it with us, go to the terminal, get online on Apple, Spotify and iHeart. Look out for Ed a little bit later at the GTC coverage as well. This is Bloomberg Tech.
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