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- [00:01]
Deloitte Representative
The right technology can strengthen human judgment. That's why Deloitte brings together AI and data analytics with multidisciplinary teams who can help you connect the dots across your enterprise, from risk to operations to customer needs. So opportunities don't slip by and surprises don't spread. Because the smarter your systems, the sharper your instincts. That's how technology makes people better at what they do best. Deloitte Together makes progress. Learn more@deloitte.com TogetherMakesProgress so there's a lot
- [00:35]
IBM Representative
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. Business let's create smarter business IBM Sending
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Adobe Representative
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- [01:38]
Bloomberg Audio Studios Announcer
Bloomberg Audio Studios Podcasts Radio News.
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Caroline Hyde
Bloomberg Tech is live from coast to coast with Caroline Hyde in New York
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Ed Ludlow
and Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, Space x pitches a 28.5 trillion doll dollar opportunity from aid of Mars ahead of an all time blockbuster IPO. We break down the S1 plus Nvidia fails to reignite the AI trade as CEO Jensen Huang pushes to diversify the chip maker saying AI is set to go mainstream and another major IPO on the horizon Open Air preparing for a filing which could come as soon as tomorrow. Let's get straight to our top story. Space X has publicly filed for an IPO and in the process disclose imposed billions of dollars in losses along with a super voting share structure that would give Elon Musk sweeping control over the company. The ticker will be sp see X. The filing also underscores just how ambitious Space X believes its future could be. Today's big number $28.5 trillion. The total addressable market the company says it's pursuing according to the documents. Let's get more on Space X's IPO and on Starship at the heart of it, managing for space. Benedict Campbell, Bloomberg Deals reporter Ryan Gould. Benny, I start with you. We learned a lot about the reality of where Space X is business is right now. So let's start there. The numbers that jumped out of you as we poured through the document and went through it with a fine tooth comb.
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Benedict Campbell
Yeah, I mean, you've already mentioned some of them and the one that really was, was a bonkers number. Let's say it is the total addressable market, the market they're targeting just shy of 90, 29 trillion. So that's one number that I think everyone sort of gulp. But also on the other sort of end of the spectrum, the, the sales and the loss are actually not that great. So you've got a company here with quarterly sales of just shy of 5 billion and with a loss that's not that dissimilar. So for a company with those kind of numbers to seek a valuation of 2 trillion, that is obviously pretty steep. We then saw what Musk is trying to sort of retain the control he's trying to control. He wants to retain in the company 41% of control that he wants to keep. So that obviously gives him a really hard sort of control of the company. So he's the man in charge and he will remain so going forward.
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Ed Ludlow
The debt pile, $29 billion. I want to get into how this IPO is going to work. Ryan, what do we confirm about the banks whose lead left, who's lead and who's behind, but also like the roles, because if this is going to be the biggest IPO all time, dollars raised or valuation doesn't matter in your world. It does matter who's trying to pull it off.
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Tony Wong
It does, Ed.
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Unnamed Bloomberg Analyst
And you know, there's been so much said and written over the past, what, two, three, four, five months around who's actually going to be quote unquote, leading this deal. I mean, if you look at the S1, Goldman Sachs is in that plum left position to the right of them, the Morgan Stanley, bank of America, Citigroup and JP Morgan, the last three, sort of in alphabetical order, as it were.
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Tony Wong
But you know, I think if you're
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Unnamed Bloomberg Analyst
Goldman Sachs, you're looking at this and saying this is a great market win for us. You know, we are the preeminent franchise for IPOs in technology on the street. And then you're Morgan Stanley who maybe is saying, well, you know, we've done a lot of work for Elon Musk over the years. What does that mean for us? Well, if you actually dig down into the filing, you can see that Morgan Stanley does have that stabilization agent role, which I will say, you know, is not something to, you know, really pass over. The stabilization role is crucial to trading that very first day flow. And in some cases that could be up to 20 to 30% of that flow on day one. And they're obviously going to take a certain cut of that revenue. So, you know, it comes down at the end of day to sort of marketing versus economics. I mean, our understanding is that the economic structure in terms of who's getting the fees is roughly equal. But if you're Goldman Sachs, you're able to go out to your investors and say, or your shareholders and say, you know, we are leading the biggest IPO of all time and that's clearly huge.
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Ed Ludlow
And we got the reporting that David Solomon, Goldman CEO, slid into Musk DMs to get that win. Benny. The other important thing is who controls this company? What do we learn about Elon Musk's voting power?
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Benedict Campbell
Yeah, so he retains absolute control over the company. Overall, about just north of 40%. Some other interesting investors in there, we're not quite sure what the role of Google is. They're obviously an early investor in this, but this is a company that will mint lots of billionaires and possibly the first trillionaire if Musk gets his way, if the pricing turns out as hoped. And he could really get into a very different stratosphere altogether if he gets those bonus shares. That's something that was also teased yesterday. If you manage to actually put people on Mars, if you manage to inhabitate Mars with a colony. I know this all sounds deeply science fiction, but if he does that and if he takes the valuation of the company to a certain level, he stands to gain another 1 billion in bonus shares. So again, that will sort of lift an already very wealthy man into a very different stratosphere.
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Ed Ludlow
Bloomberg's Benedict Cameron run gold. Thank you very much. The Space Prospectus ask investors to believe in three things. AI in space, a million people on Mars, and Elon Musk's ability to make it all happen. But that's also what great IPO storytelling is supposed to do. Sell the investors on a future that doesn't yet fully exist. Joining us now is Lauren Webster, Piper Sandler's head of investment banking. Just stay off the bat, you know, Piper Sandler is not involved in this IPO but you know this industry, you know how an IPO works and this will be the biggest IPO of all time. When you read that document, as far fetched and out of this world as it was, what were you thinking?
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Lauren Webster
I was certainly thinking aspirational, visionary. But let's unpack for starters, the TAM that, that you spoke about that.
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Ed Ludlow
Okay, so you have this document and you have to say something.
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Lauren Webster
Yes.
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Ed Ludlow
And what you say is we see a world where the market ahead of us is $28.5 trillion, but 26.5 trillion is just AI.
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Conjuren Sobhani
Yep.
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Caroline Hyde
Yeah.
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Lauren Webster
So. So two observations. First, I think every prospectus has a very lofty TAM in it. So this is not out of the ordinary. It truly is par for the course. The second one is every company going public wants to be able to tell investors we have multiple ways to win and multiple tams to be able to touch. So yes, huge numbers. We can kind of quarterback Monday morning, quarterback what's right, what's wrong in there. But it is saying to investors we have multiple paths here to really meet that growth outlook that you're investing us to achieve.
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Ed Ludlow
Is it believable the time number, any of it?
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Lauren Webster
I don't know if I fully truly believed any TAM put in a prospectus and I've always been able to poke holes in it. I think probably the one that was the biggest gap for me is really that enterprise application wedge. So you saw a very sort of rational stair step. The enterprise application one needs a lot of unpacking. But I think that's part of the story here is that there are really three core pieces and each of these are going to be foundational to the future of how enterprises is deliver services to their customers.
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Ed Ludlow
I think what Space X is arguing through xi, which is part of the story owns X AI, is that they are going to take on your open eyes. Anthropics. Google's in the market for agentic AI. You know they talk about how white collar work will be transformed, but is the TAM, even from a potential investor's perspective calculable? Whether you believe it or not, you know, there has to be some math involved on how Space X would get into that market.
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Lauren Webster
Yeah, look, I think, I think they're already delivering in some of those areas. Certainly on let's just take the XI piece and what they're doing with the Colossus data centers and now having Anthropic come in as a key customer there. But, but that is a market that we are going to hear over and over again throughout this Year you mentioned open air IPO coming up, potentially really large TAM numbers because it really does touch every part of the enterprise ecosystem and then flowing down into consumer daily life.
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Ed Ludlow
We maybe should have started here, but why does the preliminary prospectus matter? What is it that that needs to happen, you know, in convincing the market to participate. Participate in this ipo?
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Lauren Webster
Yeah. So good question. And a few areas where it's really, really critical. One is the storytelling and I think unpacking that story. There's three core parts that we've talked about in terms of what are you investing in. You're investing in a core space business, really the foundation of Space X Launch Rocket where they have a tremendous leg up on the competition and have really bent the cost curve associated with the future SpaceX economy. Two is really telling the story around autonomy and connectivity for that autonomy at the edge with Starlink and that we as Starlink are going to be able to empower power. The connectivity required for everything we're going to do with autonomous vehicles, robots go down the list and then three is really the piece. So that's the storytelling. And then of course you also have the numbers behind that, risks associated with it and informing investors of what they're getting into. But first and foremost telling that story
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Ed Ludlow
prior to the offering. Elon Musk has 85.1% voting power based on the structure of the shares historically in big IPOs. How has that been a factor?
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Lauren Webster
Yeah, so you've certainly seen across the tech industry these dual share classes where founders are retain significant, if not nearly total control.
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Ed Ludlow
Voting share.
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Lauren Webster
Exactly. I think for Musk in particular, he has a very long leash with investors in terms of capital intensive projects, in part because what he's delivered with Tesla, what he's been able to do in the space economy today. And so while you know there is some potential caution, it's not unexpected that he would retain this type of control. And we've certainly seen it in prior tech IPOs.
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Ed Ludlow
We just have about a minute left. What do you think is going to happen? How do you think this is going to go draw on your experience? Yeah, yeah.
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Lauren Webster
So a few things I, I'm really looking forward to the Starship launch this evening.
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Ed Ludlow
How critical is that?
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Lauren Webster
I think it is important. It is not binary. What it does is we're already seeing tremendous investor in things, enthusiasm around the Space X ipo. I think that enthusiasm holds even if Starship doesn't go up. Musk and Space X have primed us to understand there is failure when you're doing big things. But if it goes well this evening, I think that creates even greater enthusiasm and sort of creates the crescendo around this opportunity, which is of course what he's hoping for.
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Ed Ludlow
Lauren Webster of Piper Sandler Post Space Access one. Terrific. Now coming up, by the way, the world's biggest company, most valuable company, reported earnings last night. You may not be aware, but we got T. Rowe Prices, Tony Wong to break down in Video's earnings results and get a real investors reaction. That's next. This is Bloomberg Tech. Reality check for Nvidia shares now down 2%. We've been flat for most of the pre market. We kind of had choppy trading swinging between modest gains and modest losses. Early in this Thursday session after actually a strong forecast and a pitch that Nvidia is diversifying from the datacenter giants, Jensen Wong said on a conference call of analysts that from robots to robotaxis and every kind of startup in between, quote, we got it all covered. But investors have become harder to impress. Joining us to break it all down, Tony Wong, portfolio manager of the T. Rowe Price Science and Technology Fund and across the firm in different guises. You know, T. Rowe, a big investor in videos. Okay, let's start. $91 billion plus or minus 2% in the second quarter. It was like almost the whiskey spa number for the sell side and the buy side, but not enough, you know. And why is that?
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Tony Wong
Hey look, I think that the growth at this scale is just unprecedented. I don't think the market's ever seen anything like it. And I think you think about traditional semi investors, you know, the playbook is to sell this type of growth, right, because it's not sustainable, you know, the margins are peaked. But I think if you really look at what's going on at the driver of the driver, like what's going on the end demand, I think it's like really phenomenal in terms of agentic AI really taking off. The time of work or like time of task is expanding. Instead of being one shot or the, you know, the agent working for a few minutes, I think we're going to go towards like months of work. And that's requires like a lot of computer to have an agent go off and like complete a task and think and be persistent. And then this other thing is I think that scaling laws continue to hold. Like the frontier models are getting better. The more compute you throw at it, the better they get. And you actually save money by being on the frontier because it doesn't go through so many rabbit holes in terms of trying to complete your task. So I think if you look at like the end demand, it's actually very encouraging and I think we're climbing a wall of worry here as a result.
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Ed Ludlow
So the thing that I was trying to digest throughout the call with the data points that Jensen Wong and Collect Kress put forward as evidence of that, right, the scaling laws and the dollar per token and they go to this one trillion dollar figure which I think they clarified is Blackwell Rubin and it's for calendar year 2025-2027. And it's basically a backlog. Right. The main overarching point is that they would argue that Nvidia's own growth is trending ahead of even the hyperscale Capex growth. How do you model for that? Like, is that the math that you would do?
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Tony Wong
Yeah, one of the things that was really encouraging I think of the quarter is that I actually broke out like hyperscale versus the enterprise and sovereign. And so, you know, I think the bear case is that, you know, Nvidia can outgrow the hypercap hyperscale Capex numbers. But there's all this new TAM that's emerging that's not hyperscale. And you know, I think they continue to do well in hyperscale. But there's also new areas of agentic enterprise adoption. I think you look at talk to financial services firms, they're adopting a lot of, a lot of this end demand that Nvidia is producing. And so I think that plus robotics, that's on the, on the, to come in the future. I think that, you know, allows them to see, you know, not just not be bad bracketed in this like hyperscale kind of computer, you know, paradigm here.
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Ed Ludlow
Tony, slightly unusual situation, but I spoke to Jensen at some length on Monday prior to earnings, but actually a lot of what he said about the demand supply equation was very prescient salient. Just listen to what he said.
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Tony Wong
With the largest supply chain in the
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Ed Ludlow
world, our partners have done a great job securing supply for us.
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Tony Wong
And so all of the pieces go together.
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Anna Rathbun
The silicon photonics is lined up, everything
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Ed Ludlow
is all lined up.
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Tony Wong
It's just that the demand is much
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Ed Ludlow
greater than the overall capacity of the world. If you are a student of technology history, finding yourself in a situation where demand is vastly outpacing your ability to supply, even in a world where supply chains are doubling or quadrupling per annum, which is what he went on to say, that's been an enviable position. But right now it's not moving the needle for this stock?
- [18:08]
Tony Wong
Yeah, I mean I think that the market is looking at relative earnings growth and where the bottlenecks are, so capital slowing there. But at some point, you know, you look at the multiple for Nvidia, it's like really attractive and in addition like there's a point where you know, for the growth it is like tremendous. Looking at a PEG ratio, the expectation so, so if the growth is durable, you know, I think you could see multiple expansion actually from these levels and that's pretty exciting for holders. And in addition it is the platform that a lot of this AI inferencing is going to be built on. I think inferencing is going to be much bigger than training and training is also still growing because scaling loss. In addition, I would say that like at this valuation, you know, they are doing a capital return program and it. So I covered Apple and Nvidia for T row and I was super lucky to get that. I saw like, you know, what Apple did with the return program, you know, didn't like, you know, rerate the stock from day one. But over time consistent capital turn at that valuation really expand the multiple. I think within video it could be a similar story where it becomes less cyclical, more durable as a result. So I think it's, you know, they're doing the right things here with the disclosure as well as like, you know, with the capital turn program. I think it's just a matter of time here.
- [19:28]
Ed Ludlow
I think right now Nvidia is trading at like 22 times forward 12 month earnings. Right. I think I'll double check it. Something you just raised is really interesting which is basically use of capital. So the frustration with Apple is like do something. And maybe that, that story is changing with Apple in the handover to John Turner's but in video has gone out there and invested in the ecosystem in small increments. Two billion here, $2 billion there. How does Tony Wong read that strategy of investing?
- [20:01]
Tony Wong
Yeah, I think it's really smart. I mean I think that when you're at the frontier of technology, you have to build the ecosystem and bring up the supply chain, bring up the partners and you know, Nvidia has been really smart in terms of using their free cash flow to extend that. It also builds their ecosystem as well as furthers, you know, the technology frontier. So I think it's, it makes a lot of sense. And you look at the deals they've done in the private markets, they've been pretty good. So like great for shareholders, great for building the ecosystem. And they have excess Cash still. So I think that just goes back to like, they are like this single architecture platform and there's tremendous leverage on it. You see where the margins have gone. And so that's been their whole, whole, you know, bet from like day one, I think, is that they're an ecosystem company. And I think you're seeing it play through here as they build it out continuously.
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Ed Ludlow
We actually have a VC on later in the program whose portfolio companies, you know, are so tied to Nvidia. And we'll have that conversation just to close the loop. By the way, Nvidia does trade 22 times forward earnings, but historically it's like nearer to 34. Jensen has this equation, more compute equals more tokens equals cause more revenues. Do you see those revenues coming out the other side for all of Nvidia's customers?
- [21:13]
Tony Wong
Absolutely. Yeah, definitely. I mean, you look at like the cloud demand, you look at pricing for GPUs. I mean, these are old GPUs. Pricing is holding up phenomenally well. And, you know, you look at like the enterprise demand inflection that's happening, and you see it, you know, we see in our own company, we're developing AI solutions and it's eating up a bunch of tokens where, you know, we see the promise. Obviously, there's experimentation. I think you're seeing that come through
- [21:42]
Ed Ludlow
just real quick, like on.
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Adobe Representative
On.
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Ed Ludlow
On the socials. That's what people just go nuts over.
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Tony Wong
Right?
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Ed Ludlow
H100. H100 pricing right now. Like, are you tracking that?
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Tony Wong
Oh, yeah, yeah. I mean, I think you think about the bear case, you know, 24 months ago, it was that like, oh, like the obsolescence of video GPUs is like three or four years. Well, first of all, the warranty on these things are three or four years. And then also, you know, you have that depreciation and so you're able to like, adjust the pricing, you know, but even so, like, the demand has been so good that, you know, you're seeing more value coming out of the older GPUs. And even A1 hundreds if you were using them.
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Ed Ludlow
Even A1 hundreds if you're out there running workloads on A1 hundreds, give me a call. I want to know Tony Wong or T. Rowe Price, back on B Tech. Thank you so much. Now, coming up, we're going to hear from Airbnb CEO Brian Chester Ski actually on the company's use of AI models from China. That's next. This is Bloomberg Tech.
- [22:42]
Deloitte Representative
The right technology can strengthen human judgment. That's why Deloitte brings together AI and data analytics with multidisciplinary teams. People with deep industry experience who can challenge assumptions and help you connect the dots across your analytics enterprise. From risk signals to operational pressure points to shifting customer needs, Deloitte helps you see what's coming sooner so opportunities don't slip by and surprises don't spread. It's not just dashboards, it's real clarity in the moments your decisions are made. When models reveal patterns, people can ask better questions. When data and people are connected, leaders can move faster with confidence. And when your team are aligned, smart choices can scale from the front line to the C suite. Because the smarter your systems, the sharper your instincts. That's how technology makes people better at what they do best. Deloitte Together Makes Progress learn more@deloitte.com Together
- [23:40]
Bloomberg Audio Studios Announcer
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- [24:42]
IBM Representative
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, slashed 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.
- [25:18]
Ed Ludlow
The CE the CEO of Airbnb has defended his company's use of open source AI models from China. Last month, the congressional committee asked Airbnb for more information about its use of these models as part of a broader investigation. The committee says it has concerns about the implication for Airbnb's American customers. Here's what Brian Chesky told me in response to that yesterday.
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Adobe Representative
We are not a customer of those companies. We're using a variety of different open source models. I just want to say a few things about this matter. Number one, data and privacy is most important to Airbnb. I think anyone who knows everybody knows we have an outstanding track record on data security and privacy. Number two, all of our data is vaulted. No company has access to our data. It is vaulted in Airbnb. Number three, the Congressional committee has reached out to us. They said they have some questions. We said we want to cooperate and so we're in direct contact in cooperation with them.
- [26:14]
Ed Ludlow
Airbnb CEO Brian Chesky in a conversation yesterday. How's everyone doing out there? Let's take a quick check on the markets and it's taken a little bit of time to kind of find the story. Nasdaq 100 is now down half a percentage point. The stocks is basically flat. Nvidia is now firmly lower, down 2%. But actually, funny enough, Wal Mart in its earnings is the biggest points drag, at least on the NASDAQ 100. We have a lot more to come in the program about Nvidia, about the historic SpaceX S1 and a whole lot more Stay with us because it's half time in the program. And this is Bloomberg Tech.
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Tony Wong
The world world is rebuilding computing for
- [27:11]
Adobe Representative
agentic AI and robotic physical AI.
- [27:15]
Ed Ludlow
Nvidia sits at the center of these transitions. Welcome back to Bloomberg Tech. That was Nvidia CEO Jensen Huang speaking on the earnings call from fiscal second quarter financial year 27 earnings. One of the big takeaways from Nvidia's earnings was the rise in demand beyond the hyperscalers. Bloomberg Intelligence writing that it was a more important signal for the future than in videos. Signature beat and raise the offer of that research. Bloomberg Intelligence is Conjuren Sobhani here with us. What is the world outside of the hyperscaler? What are we talking about? You know, some people would say, oh, this is about companies big and small building on prem. Right. And Nvidia is going to have this whole new customer list that is that of that size. It's hard to to see. Give me the full thesis.
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Conjuren Sobhani
Yeah, you know, that second segment is very fragmented, but people keep missing because it's very diverse. So first of all it has sovereign right which is itself driving billions of dollars of revenue, all of the new cloud. So when we look at the space in the new clouds that keeps on growing higher and higher and they are becoming now a significant spender of capex, which does not get captured in most of the capex discussions from the public clouds that we hear you have all of your air labs up and coming enterprise and industries deployment of on Prem AI as well as these data center, you know guys who run the data centers are now becoming much more high GPU based AI datacenter cloud renders. So this 50% which is expected to grow faster than the top hyperscaler segment by the way is getting more and more significant especially for Nvidia because this is where you have the least competition. The ASICS and the cheap, the TPU's and the trainiums don't compete in this segment. So it's purely monopolistic for Nvidia. Nvidia gets the highest stack attach rate means they can sell a lot more of their networking and their other components here and they get the best margins in this segment.
- [29:15]
Ed Ludlow
I think during the call there was an attempt attempt to clarify that that kind of mysterious $1 trillion figure. So. So it runs calendar 25 to the end of 27. It is Blackwell and Rubin systems but it excludes various CPU and some of the other networking components you were just talking about. I always come to you always have your feet on the ground, right? It doesn't really matter what the number is that hits on the second quarter. 91 billion plus or minus 20 point percent that number, the 1 trillion. Give me your kind of like base level understanding of it.
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Conjuren Sobhani
Yeah, all it includes is just the Blackwell and the Vera Rubin. The full stack that is going to start ramping in 3Q. That's all it includes. It does not include like you mentioned the 20 billion CPU standalone that they mentioned. Right. For 26 and 27. It does not include the Groq based LP server. It does not include the new launch of their storage based CPX servers and a few other networking components. So a lot of good creamy revenues are not included in that. The 1 trillion number by the way based on our estimate is rising. So we think now it will be an upside to 1 trillion plus. All these other list of items that I outlisted could be an upside to that for revenues.
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Ed Ludlow
Conjure Barney from Bloomberg Intelligence. Your research is always to go to man. Thanks so much. Let's dive deeper into the Nvidia story. But also like the market reaction with Anna Rathbun, founder and CEO of Grenadella Advisory. You know we get ourselves into these frenzies. We're like the Nvidia earnings they're going to hit and they hit, right? And you get the red headline on the Bloomberg and it's $91 billion plus or minus 2%. And then everyone goes, but it doesn't even matter what the number is. It's everything else. You're in the markets. Why do we behave like that?
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Anna Rathbun
It's lonely at the top. I mean when you're the largest company in the world, I don't think there's anything you can do to surprise investors to the upside. So you become a company that needs to defend itself. Nvidia hit it out of the park in many ways, in almost all the ways that we expected them to. Not only in the top line in earnings, but also so, you know, networking business growing as well as diversifying its customer base. Everything we've asked for, they've given us. But I think there are other things like is the growth actually slowing? Is the growth what we've been expecting for the last two or three years? And that's the question that I don't think Nvidia was able to answer. And the dividend increase to me was a big signal that what the investors had been worrying about might be coming true.
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Ed Ludlow
Okay, I actually, I apologize to my team in the control room. I'm going to do the opposite of what I just said. Okay, let's linger then. Let's linger on, on the shareholder returns. What were you getting at there? Give me a little bit more.
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Anna Rathbun
Yeah. So you know, the buybacks, it's not that big because if you're, you know, multitrillion dollar company, 80 billion isn't that huge.
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Ed Ludlow
I see.
- [32:15]
Anna Rathbun
It was really the dividend side of it. When a company company starts to return dividends, that's a multi year commitment. Right. So that means, well maybe we're not going to be finding other areas to invest in. We're just going to be returning some cash to the investors. And that's a signal for growth companies that says okay, maybe we're not going to be growing as fast as you had anticipated. So that was a small signal. We'll see what happens. I still think Nvidia is going to continue to grow because because of this massive ecosystem they're at the center of. But it was definitely a signal. Maybe a small one, but a certain one.
- [32:53]
Ed Ludlow
We're showing this image on the screen, right. And we went into this earnings prior to them hitting saying two things, everyone expects a beaten raise situation. But also it doesn't really matter historically what Nvidia says. That data I appreciate there's a lot there is how the s and P500 trade in the days and months that follow and in video earnings, even when they beat big and there's no guarantee that the market is going to sort of respond with euphoria. You know, does that matter anymore? This kind of story that the index level, given Nvidia's size and scale, that was kind of what we were all bracing for.
- [33:30]
Anna Rathbun
Yeah, I mean, it matters because of its size. Right. The largest company behaving this way is going to have an impact on the index. Now this reminds me of how, how Apple used to behave about 10 plus years ago. There was nothing that Apple could do to satisfy investors. The market would actually punish them for it. So I think this is just what happens when you are at the top and you have high investors, have high expectations of you and if you happen to have a high concentration in the index, you can take everyone down with you.
- [34:02]
Ed Ludlow
It's really, really tempting always to look at how a stock trades in the moment and try and find the story. But what I would also say is that, you know, if you think about last Friday, Monday, Tuesday, when the President of the United States returned from China in video and the sector, the stocks were close to correction territory. You know, we're down again now, post earnings on video. What lesson would you learn from that?
- [34:26]
Anna Rathbun
You know, there are two things I think. I think the reaction today really is about Nvidia itself. It's not even about the AI industry. It's about Nvidia. Friday was a huge disappointment. And since then we've learned that China actually banned the gaming chips while Jensen Huang was there. So when we're looking at China and Nvidia, it's not a reliable market as much as is the market that we would like to be in. So it is, I think, right for Jensen Huang to sort of pay attention to other areas in which they can expand. Think about sovereign eyes outside of China, really. And I think China would be sort of a bonus, an upside optionality if it happens. But that if is a very big if.
- [35:12]
Ed Ludlow
Anna Rathbun, founder and CEO of Grenada Advisory. Thank you very much. Now, coming up, we're going to be joined by Sarah Guelph from Conviction to drill down on kind of the impact of Nvidia on a much broader ecosystem of startups. These are companies of all sizes that use the compute or the library of data and models themselves. Can't wait. This is Bloomberg Tech.
- [35:40]
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- [38:31]
Ed Ludlow
Let's get back to Nvidia earnings, a part of Jensen Huang's latest message to investors. Nvidia isn't just selling chips to big tech anymore. It's supplying the picks and shovels for an AI gold rush where startups are building everything from AI agents to humanoid robots, robo taxis, everything in between. But on Nvidia Compute. Joining us, one of the key backers of that ecosystem, Sarah, founder of Conviction, an AI native venture firm. And I think that's true, right? I think the best place I think to start with you is think about all your portfolio companies. Many of them come on the show and we say, okay, what's the biggest constraint on you right now where you most focus? And oftentimes it is compute. And they're sometimes super proud that they are working on Nvidia gear. But are they accessing that compute through the cloud provider or are they able to get the cluster themselves direct control?
- [39:22]
Caroline Hyde
It depends on what they're trying to do. Right. We have companies that are, you know, building at the infrastructure layer, building at the model layer, building at the application layer.
- [39:31]
Tony Wong
Right.
- [39:31]
Caroline Hyde
One of the first things we did when we started the fund was go buy compute for our companies just because we can take the timing risk as a venture fund. And we concluded exactly what you just described, which is they're all going to need it. Right. And it's what did that look like?
- [39:44]
Ed Ludlow
Sarah, sorry to interrupt you but like
- [39:45]
Caroline Hyde
we literally, yeah, we went and bought, you know, H1 hundreds at the time, a bunch of nodes, cloud and but the point was like, you know, the market has gone through different shortages and now people are predicting a lot of ongoing constrained supply. And we were worried about access for startups in that period of time, which is why we did it. But our companies, to your actual question is not almost all of them want to want to do experimentation. And they all start with Frontier Performance, which is Nvidia chips today. Right. Because that allows you to do new things. And then as these companies mature, they tend to post train smaller models, think about cost, think about how to be able to even just being able to use more tokens on the same task allows you to change the user experience. But everybody wants to start with current generation chips.
- [40:40]
Ed Ludlow
The state of play that Jensen describes is demand, vastly outpacing in video, but also in aggregate the industry's ability to supply. On the other side of the table, would you say that that state of play is true for the founders that you're trying to help grow?
- [40:56]
Caroline Hyde
It's probably been a 2/4 of increasing stress in the ecosystem about access, access to supply at different scales.
- [41:05]
Unnamed Bloomberg Analyst
Wow.
- [41:06]
Caroline Hyde
And so I have spent a good amount of time with the leaders of companies that you know, serve Nvidia chips in cloud asking to buy $100 million at a time of, of. Of compute. And I've never been in that scenario before. We're trying very hard to pay somebody a lot of money with a multi year commitment.
- [41:26]
Ed Ludlow
Yeah.
- [41:27]
Caroline Hyde
And it just speaks to the shortage dynamic.
- [41:29]
Ed Ludlow
Banks.
- [41:29]
Caroline Hyde
I think it's very hard to get on demand small scale compute right now, which is what many startups are starting with as you were describing. And so I think the shortage dynamic is real. And what is more interesting to me
- [41:44]
Lauren Webster
is
- [41:47]
Caroline Hyde
you know, Nvidia have this amazing outperformance on the earnings side. And Jensen will repeatedly tell people, people demand is parabolic. Humans struggle to consume that. And you know, it's hard to feel bad for Jensen Hun Jensen's winner in all of this.
- [42:03]
Ed Ludlow
But you know he's thank you for being honest.
- [42:05]
Caroline Hyde
Yeah, yeah. But like an amazing leader. But he's like, I'm telling you honestly the reality of what I project repeatedly and you just keep not believing me. Right. And I'd say like I believe him from the demand side because. Because what I expect will happen is this, you know, massive exponential growth that shows up in things like cloud code revenue is really because you have long horizon agents that people are using in this one use case already. But the world is not just code. Right. And so if there's zero, not zero, but small scale, a few billion to 40 billion of revenue in a very small number of months because we figured out how to, to use the models more productively on long horizon agent tasks. We're going to do that for lots of different functions in the knowledge economy
- [42:54]
Ed Ludlow
while you're here, if you don't mind. Like Space X S1.
- [42:57]
Tony Wong
Wow.
- [42:59]
Caroline Hyde
Yes, wow. It's inspiring.
- [43:00]
Ed Ludlow
You have a big event today right. Where I believe like some of the cursor guys will be there. And so we learn a little bit about that. But there's this number, total addressable market for AI. $26.5 trillion dollars. Super focused on enterprise. You know they literally label it as such in the, in the deck. Go ahead.
- [43:20]
Caroline Hyde
I mean, yeah, I think it's a, it's a, it's a, it's a funny number. And then like a funny diagram when you visualize the tan. Because it's like Starlink and then Enterprise.
- [43:29]
Ed Ludlow
Yeah, yeah.
- [43:30]
Caroline Hyde
And you know, much of what we Invest in is enterprise. My, my friend Andrej Karpathi described this well, which is the, the simplest way to think about the use of AI is automation. Right? Is automation of tasks. We already do.
- [43:44]
Ed Ludlow
Right.
- [43:44]
Caroline Hyde
And if we give these models the tools and the harness such that they can do these tasks, they can take over things for us. And so I do think that the, the opportunity is as big as Does
- [43:58]
Ed Ludlow
Elon believe the opportunity or is this him trying to justify why SpaceX took X?
- [44:02]
Caroline Hyde
I think, I think it's interesting that, you know, what you put in the S1 is a choice. Right? And he could have easily just said, you know, like something broader or, you know, focus on other parts of the Space X TAM overall. But he is making a commitment that we are going to go make, you know, our offerings relevant in enterprise AI. And so I think he's very committed
- [44:26]
Ed Ludlow
to yes or no. You think he will pull it off.
- [44:30]
Caroline Hyde
So there's a question about whether the value is infrastructure, models or applications. And see this in the, you know, anthropic deal and the cursor deal as well, they have the infrastructure. The infrastructure and the capability to build more is extraordinarily valuable. And I think the question will be like, I think he's going to make money on that no matter what. The question is, do they also need to own the model in the application layer?
- [44:53]
Ed Ludlow
To Sarah's point, yes. One said that and philanthropic would pay space x $1.25 billion per month through 29 for compute surrogate of conviction across every part of it. Thank you very much. All right, a lot more to come still in the balance of the program. We breaking down two blockbuster IPOs on the docket to Space X and OpenAI. Maybe this is Bloomberg Tech. Let's get back to Space X. In addition to the company's blockbuster IPO filing, investors are also closely watching tonight's highly anticipated starship launch. The mission marks Space X 12th major starship test flight. A critical milestone as the company pushes to advance its next gen rocket program while preparing for what could become the biggest IPO in history. Bloomberg Sana Pashankar joins us now. You're probably sick of me, right, Sana? Because how many times did I post in the blog, Starship is central to all of this. It said it in the S1 could not be more clear. Let's start with tonight's test. What are we expecting? What does it look like? How long does it run for?
- [46:05]
Sana Pashankar
Right. So today, you know, Starship is slated to take off from the launch pad at Starbase Texas at around 6:30pm ET, 5:30pm Texas time, it's going to take off, ignite its Raptor engines and lift off into space. It is debuting an upgraded version of the vehicle. It's called version three that has upgraded engines. It's supposed to have improved power and capability. It's going to lift off into space, lap around the globe and then eventually splash down into the Indian Ocean. And you know, as you were mentioning at this is a really crucial test for this vehicle that is just, you know, so important for all of Elon Musk's ambitions for Space X and you know, the valuation of the company for the coming ipo.
- [46:51]
Ed Ludlow
Let's talk a little bit about those ambitions. Right. The idea is that Starship is capable of carrying a much greater payload to orbit. So think Starlink, think space based datacenter and humans getting to Mars. Explain it to us.
- [47:05]
Sana Pashankar
Yeah, yeah, totally. So you know, Starship has kind of the payload capacity that will enable something. Let's start with orbital data centers. It will enable an orbital data center of, you know, as many as 1 million spacecraft orbiting the Earth, which is what, you know, Space X has said they want to do. You can't do that to scale as well with the Falcon rockets, their current rockets. You really need to a much larger vehicle that can carry 60 satellites to space. And so, you know, it will, they will need Starship to effectively build these orbital data centers at a timeline and a pace that really makes sense and could actually lead to a profit one day. To get humans to moon, to the moon and Mars, you will also need, you know, that type of capability, that type of thrust. Starship is advertised as the most powerful rocket ever built. And you know, Starship is so important to Space X's ambitions, but it's also key to America's space ambitions because right. Starship has a contract, Space X has a contract with NASA for Starship to land humans on the moon.
- [48:13]
Ed Ludlow
Bloomberg Santa, passion cut. Thank you very much. Fresh off a courtroom win over Elon Musk, the race for the trillion dollar AI Mega I IPO is on. Did you have this on your bingo card? Sources say OpenAI may make a confidential filing as soon as this Friday. Joining us now with the details. Bloomberg sharing Ghafari yesterday afternoon the last thing anyone needed was to see that headline hit. But the timing is interesting. What do we know about an open air path to an ipo?
- [48:42]
Sharing Ghafari
That's right. So an open air filing, it would be a confidential filing signaling could come as soon as Friday or in the Coming weeks. That would obviously put it in close competition with Anthropic which is also expected to potentially file this fall, as well as Space X which is already out there with the S1 listing.
- [49:01]
Ed Ludlow
Yeah, I'm going to let us put Space X to one side for a second. So let's say it's a race Tropic for September, October. What do we know about about that timeline but also the numbers involved. Right. Do we have a sense of valuation or whatever company wants to raise?
- [49:16]
Sharing Ghafari
That's right. So the valuations are already, you know, nearing a trillion. Right. Open Air was last valued valued at over 850 billion just earlier this spring. Anthropic similarly also, you know, in talks to raise at up to 900 valuation as we've reported. So when we're thinking about an IPO months out, you can only, you know, you would hope that for these companies at least they're thinking they want to go further north of that, getting us closer to potentially that trillion mark.
- [49:47]
Ed Ludlow
There's an idea that when Elon Musk was told by the jury in charge he's not allowed to proceed with his suit, it removed an overhang to open. I let them kind of proceed with their ambitions. But why does Open. I want to go public. I know it seems silly, but do they need money? Is it the public perception thing? Is it always been in the public plans?
- [50:04]
Sharing Ghafari
It's a good question because on the one hand These companies like OpenAI and Anthropic can command these massive private financing rounds that we've never seen before, unprecedented levels of cash. However, access to public markets allows them to do that with much more ease frequency. It also allows everyday people to get in on the AI boom, you know, or bust, which is a risk. Right. If it does change. But that also, you know, then potentially is allowing a larger group of sort of retail investors to have a stake in the company, but really large pools of capital being more easy to access without all the funding round song and
- [50:37]
Ed Ludlow
dance I think helps them be a shrink. Afari all over the Open Air and the Anthropic story and will be for the rest of this year. That does it for this edition of Bloomberg Tech. This is what markets look like. Not too much going on at the index level. Basically flat in video is down one and a half percent. But in the background there's still this idea that the big One is coming. SpaceX's IPO. This is Bloomberg Tech.
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