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- [00:00]
EY Consulting Representative
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- [01:00]
The Hartford Representative
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- [02:01]
Caroline Hyde
Bloomberg Audio Studios Podcasts Radio News. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.
- [02:21]
Ed Ludlow
This is Bloomberg Tech coming up. Wall can't get enough of Space X with demand from big institutional investors and the biggest IPO in history way oversubscribed.
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Caroline Hyde
Plus Google backstops anthropic data centers as Silicon Valley races to build infrastructure with ever more intertwined deals and Oracle reports
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Ed Ludlow
after the closing bell, it's a race between building data centers and booking AI,
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Caroline Hyde
cloud revenues, AI, AI and space. Space X is over subscribed. IPO is where we have to start Ed, because the geographical reach of the level of demand. We've been mesmerized by this record breaking
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Ed Ludlow
yeah, it's out of this world. I don't apologize for that for one bit the state of play is this right? The order book for institutional investors closes 4pm Eastern today. And as we've reported, there are several long only asset managers basically that want $10 billion worth of shares, $75 billion. Somebody is going to miss out. Now, the retail investor can still place orders I think through Thursday on whatever platforms are available, but they're not guaranteed to get hold of those shares either. So that's the state of play. And believe it or not, there is a roadshow happening in the background and
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Caroline Hyde
we're ever more on that roadshow. That's the entire point. We're understanding the transparency, the business model. We learning much about those orbital data centers?
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Ed Ludlow
Yeah, I think the focus in the pitch has still been. Let us explain. Orbital data centers. That brings us to Today's big number, 250 billion. That's the total amount of Space X IPO orders we've reported this morning, 1 to 5 billion of which is coming from Saudi, Kuwait, other Middle east funds, sovereign funds. That's according to sources. That's the absolute latest. Joining us now to talk all things Space X, its ipo, also the general landscape, Peter Singlehurst, head of private companies at Baillie Gifford. And we just know, you know, Space X is a really important investment for you guys prior to the offering. Let's start there. You know, what does this, the biggest IPO in history represent to you and to the firm and to I guess support the thesis when you first made the investment way back when.
- [04:23]
Peter Singlehurst
I think that the Space X IPO needs to be seen as the culmination of a trend which has been playing out now for 15 years or longer of companies staying private for longer. And this is something that we started to see in 2012 when we first started investing in private companies. Now we didn't think that companies would get this big and stay private this long, but here we are with Space X going public at something like a $1.8 trillion VAL valuation that's 900 times larger and more valuable than Tesla was when it went public in 2012. So on the one hand, this is a story of a truly exceptional company which has compounded its growth at a very high rate. On the other hand, it's a story of a bigger structural trend of companies staying private longer and more and more returns accruing within the high growth private markets.
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Caroline Hyde
And Peter, to that end, when you think about Tesla after it's gone public, it was a volatile ride, but it's 25,000% higher the when it listed. And so Will we see a level of returns, do you think, in the public market, or does that have to be in some ways pushed against all the meat and bones of returns going to have happened to private investors?
- [05:39]
Peter Singlehurst
I think mathematically it's very hard to see how you could see Space X delivering the same kind of returns as a public company as Tesla did. But I think what this speaks to is a requirement for investors to have exposure to growth in both the private and the public markets. The world has been set up to almost divide these things and say there's kind of private growth and there's public growth. And these things are different. And we've taken a different approach. We've sort of taken the view that actually if you want to do growth equity investing, you want to do it properly, you have to do it in the private markets and you have to do it in the public markets. And what our clients are and beneficiaries, who are predominantly pension funds, what they need and what they ask from us is that we give them exposure to the world's best growth stage companies starting in the private markets, earning the returns that we can generate there and then also earning those in the public markets from within our public funds to make sure that they're still capturing that growth even once companies transition into the public markets.
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Ed Ludlow
Peter I think it's important to pose the question, why is Space X going public? And when Elon Musk spoke to Jamie Dimon, he eventually got to the answer, which is they need capital for this growth phase. But what we are seeing outside of just this fixation on IPOs, is a race for capital through equity. How comfortable do you feel as a firm? Baillie Gifford, whatever mechanism it is, raising money at that volume, but it basically then goes directly into capital expenditure. That's what's happening here.
- [07:10]
Peter Singlehurst
You want to invest in companies that are able to deploy capital at high rates of return. So I don't think there's anything wrong per say in investing in capital intensive businesses. And in fact, what you want is a company that can deploy large amounts of capital, but where you can earn high returns on that capital. And ultimately that's what separates a good business from a bad business. It's return on equity. And so when we're looking at a company, whether it's Space X or Anthropic or any other company that we invest in privately or publicly, ultimately what we're asking is how do you get to high returns on equity? And it's building those thesis that then leads us to invest in companies and in the Case of Space X, increasingly that thesis is going to have to rely on AI. They've shown that they can invest capital at high rates of return in rockets, in Starlink. And of course the next leg of that is going to be in, in data center build out, quite possibly in Space.
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Caroline Hyde
But that's where it becomes so fascinating, particularly Peter, for Baillie Gifford, which in the private markets backed Space X on a thesis of space, backed Anthropic on a thesis of AI. And now they're all overlapping in terms of business models. What is your perspective of commoditization or a winner takes all? Or is there room for all of these giant players to be winning in the technology as, as perhaps in the public markets?
- [08:25]
Peter Singlehurst
I think what your question gets to is this very important question of where does value accrue in the AI stack? Now hopefully lots of value is going to accrue to the end customers. That has to happen. Historically we've seen value accruing to the chip manufacturers, initially with Nvidia, but now increasingly to memory manufacturers. But I think what we're also starting to see is value accrue at the foundational model level and I suppose with, with the GROK acquisition and Space X is making a bet not just on the foundational model level, but also on the infrastructure level. And I think what we're seeing with the deal that they did recently with Anthropic is that they have options in terms of how they can monetize in the transition through their own models, but also importantly through the infrastructure itself.
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Ed Ludlow
I have so many questions about this. You know, let's be honest. The hedge that Space X has put in place in the interim is to become a hyperscaler and sell computer. Played a blinder with that. We got the design or at least the renderings of Orbital Data Center. I think the team are going to put them up on the screen now in that presentation that Elon Musk made. Like there's the body, there's the solar arrays, there's the radiator. Which part of the thesis, Peter, is most important to you? Right. It is a long way from the time of 26.5 trillion that they're basically packaging it as enterprise AI. And in the interim this plan for Orbital Data center, like it needs to work. That's what they're telling people on the roadshow.
- [09:52]
Peter Singlehurst
So there's absolutely no question that the, the, the Orbital Data center, so strategic moves that they're making widens the range of outcomes for Space X. On the one hand, if it works, it increases the potential upsides for the business. On the other hand, if this doesn't work, it's going to increase the downside for this company. And investing ultimately is about ranges of outcomes, it's about probabilities and it's about payoffs in those range of outcomes. What we've seen with Space X over the years is that they have continuously tested and validated a series of outlandish hypotheses. The very notion of the business starting off as a private rocket company was itself an outlandish hypothesis that they validated. Then the idea that you could have reusable rockets was also an outlandish hypothesis and they validated it. They did the same with, with Starlink with satellite based broadband. They've done the same with rockets on the scale of starship. And the orbital data center is the next hypothesis that they are seeking to validate. But everybody should be totally aware of the risks that are involved in this. It is unproven. In the event that they prove it, the payoffs will be large. But as we've already touched on, the amount of capital that is going into this means that in the event that they don't validate it, it's going scope of downside in the investment as well. And investors just need to understand the range of outcomes and the payoffs to go with that.
- [11:14]
Caroline Hyde
Can I ask about payoffs, Peter? Because I don't want to go into the granularity of how much Space X exposure you have, etc. But how long do you think you'll hold it and how much do you think it's a worry or an anxiety that all these other big public companies are selling equity into this market at the same time? Alphabet trying to fund its own capex in the equity market Matter might be doing as well. And, and does that take oxygen out the room?
- [11:38]
Peter Singlehurst
I think that's probably part of the thinking that's going on for these different companies trying to raise these large amounts of capital. They're sort of trying to soak up what available capital there is. But to your your first question, different funds within Baillie Gifford are going to be in very different positions. For those funds that have owned space X since 2018, since it was a $30 billion company, those funds have very, very large exposures and large positions in Space X. Now it might make sense post lockup for those funds to start selling down even if they want to maintain a meaningful exposure because ultimately we are beholden to our clients and we have to provide them with a level of diversification within their funds and then of course funds that don't own it, funds that are solely public funds. They then are faced with the question of whether to buy it for that fund. So it might well be that you see different funds within Baillie Gifford doing different things over the coming months and that will be a function of the history and the portfolio context. I think there's universal agreement that SpaceX has been an exceptional company. The real question from here is what is the right price and what is the right position size in space X
- [12:47]
Caroline Hyde
from 30 billion to potentially 1.8 trillion this week. Peter Single has to Bailey Gifford, a joy to have you on about all things Space X and the IPO landscape more broadly. Let's get though also to geopolitical tensions. They are continuing to whipsaw markets. We are down a percentage point Again on the NASDAQ 100s and P is under pressure. You're seeing a really hardware off by 2% if you're looking at the semiconductor index. President Trump is saying that Iran would pay the price for delaying peace negotiations. Let's get you up to speed of Bloomberg's Tyler Kendall, the latest from the White House. What do we need to know?
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Tyler Kendall
Hey Caroline. Well, at this point President Trump is renewing his threat, really just underscoring that this White House has mounting frustration with the ongoing negotiations as the US has repeatedly maintained that they are trying to prioritize a diplomatic solution to end the conflict. Now President Trump's remarks aren't totally clear if this means that we're going to see an end to the cease fire agreement after we saw the worst flare up in fighting between the sides just overnight with both the US And a Iran exchanging strikes after an American military helicopter was shot down after the strike from the US Then on Iranian military assets, we saw Iran put forward some strikes and attempts to hit American military assets. It's really been escalating from here. But our own analysts at Bloomberg Economics say perhaps this is a bid to escalate in a bid to de escalate. And one positive sign for the negotiation front. Iranian state media reported within the last hour that a Qatari delegation has landed in Tehran in a bid to keep diplomacy on track. But Ed and Caroline, I want to highlight this renewed risk that we are seeing moments ago flashing across the Bloomberg terminal. India is now condemning an apparent attack on a commercial vessel near the Strait of Hormuz off the coast of Oman. So definitely still very high intentions contributing to the situation that we're seeing on the ground.
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Ed Ludlow
Bloomberg's Tyler Kendall, thank you Very much. Coming up, Google steps up to Backstop A massive $35 billion financing deal from Tropic. We have the details next. This is Bloomberg Tech. Supermicro is targeting public markets for a massive $7 billion equity raise. Sales to Supermicro servers fitted with a video chips have surged for AI work.
- [15:09]
Scott Carpenter
Close.
- [15:09]
Ed Ludlow
The server manufacturer is moving quickly to fund a staggering $39 billion in orders using the fresh cash injection to pay for the equipment needed to make the servers. That's greasing the wheels. Google is backstopping a massive $35 billion financing deal from Fropic. The creator of Claude is leasing AI chips across five different data centers with help from the long established tech giant Bloomberg. Scott Carpenter joins us now to break down the mechanics. Like, you know, to our audience, what is backstopping mean? I think what we're saying is guaranteeing the funds for it in the event that something goes wrong. But just go with the basics.
- [15:47]
Scott Carpenter
Right. So first of all, Broadcom is providing a huge guarantee on the chips themselves is the biggest part of the 35. Yes, these are, these are Google's TPU's that are going to be involved. So Broadcom is backstopping the debt itself. Now the chips, when they are delivered and they have to be manufactured are going to be used in these five data centers that we identify in the story. The leases on those five data centers are backstopped by Google. So you could think of it as two different forms of guarantees being involved, involved in this to, to put together this deal. There's the Broadcom one and there's the Google ones underneath.
- [16:33]
Caroline Hyde
So in a way, Broadcom saying almost Alphabet is going to get its money from Anthropic for buying the chips. Is that right? Meanwhile, who's getting the money for the leases and who therefore is Alphabet saying like you're good for the money, don't worry. Is that the people actually constructing the data centers, owning the land, it's the
- [16:50]
Scott Carpenter
leases are to fluid stack Anthropic, which is a company that Anthropic has said it's been working with to develop these data centers. So you see how it's, it's complicated. There's many.
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Ed Ludlow
I see how it's complicated.
- [17:04]
Scott Carpenter
Yeah, yeah. I mean to pull off a deal of this magnitude, which I think is the largest private credit deal in history, definitely the largest chip deal, there's a lot of moving pieces. One of the key things is that these chips are not, I mean they need to be created. They don't exist right now. But yeah, there's there's a lot that
- [17:26]
Caroline Hyde
goes into this and who's the manufacturer? I mean, questions around intel versus tsmc. Absolutely fascinating. Scott Carpenter, you broke it down so clearly. We so appreciate it. Meanwhile, let's turn our attention to SoftBank. Its attempt to leverage its massive bets is hitting a bit of a wall. Sources told Bloomberg that talks have stalled with potential creditors to raise at least $6 billion from a margin loan backed by its OpenAI stake, though it's unclear why. The pause comes just weeks after SoftBank slashed its fundraising target from $10 billion and SoftBank shares have tumbled nearly 10%. On the news today. This is the firm weighs alternative funding options. Coming up, we are going to be speaking with Sophia Noble, professor director of the center of Resilience and Digital justice at the ucla, to discuss buyers discrimination within this world of AI. We keep talking more on that next. This is Bloomberg Tech.
- [18:21]
EY Consulting Representative
You have invested in artificial intelligence. Maybe you have pilots or even proofs of concepts that show real promise. The next opportunity is scaling that success across the business. At EY Consulting, we help organizations redesign how work gets done so innovation can move beyond the nascent stage. By addressing architecture, operating models and governance, we help AI deliver real, lasting value at scale. When AI fits how you actually work, that is EY Consulting.
- [18:51]
Mood.com Advertiser
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- [19:42]
Ed Ludlow
Before we had AT&T business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer, even livestream the whole thing. Not good for business. Now with AT&T business, wireless routes are updating on the Fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [20:06]
The Hartford Representative
AT&T business Wireless connecting changes everything.
- [20:13]
Caroline Hyde
This week is OpenAI filed its S1 confidentially. CEO Sam Altman was also out with a sweeping long term vision for generative AIs alignment with humanity. Altman warned that transformative technologies such as AI can concentrate power, stating OpenAI is quote, clear eyed about the risks as it aims to build powerful systems that remain safe, subject to human control. But critics have long voiced concerns about risks such as algorithmic bias inequality. Joining us now, Sophia Noble, UCLA professor, author of the acclaimed book Algorithms of Oppression. Clear eyed. Is that enough? Are we seeing some of the risks being digested and, and answered for within these models?
- [20:54]
Sophia Noble
I don't think so. I don't think we're anywhere near a call for or an ability to realize safe AI. What we see in fact are chat bot technologies and large language models that for the most part don't have markets. I mean, they were built for corporate America to reduce labor costs. But corporate America is moving away from them because they're very expensive, they're not really reliable, they are incredibly negatively impactful on the environment.
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Caroline Hyde
They're moving away from them. You think corporate America is moving away from large language?
- [21:28]
Sophia Noble
I do. We've been seeing studies where companies are saying that it's more expensive for them to use these chat bots because human beings have to check the efficacy and the reliability. There are so many errors, factual errors that are proliferating through these technologies. So if the technology itself is that flawed and it's being pushed now on the public as some type of solution, I think we're in trouble. And of course we know that we have the racial bias, the gender bias, the kind of geographic and political concerns about what comes out of these technologies. I think that we are moving into very dangerous territory trying to bolster our society on large language models.
- [22:15]
Ed Ludlow
Professor Noble, the large body of your work looked at the data issues for commercial search engines. Basically the net result is that the search engines, as per your book's title, reinforce racism.
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Sophia Noble
Yes.
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Ed Ludlow
What, what was the underlying issue in the search engine case study and what is different or the same about the large language models that I think you're saying yield a similar result?
- [22:41]
Sophia Noble
They do. So what we've, we've seen over the last 15, 20 years is that all of the discrimination that's in our society, all of the kind of stereotyping, all of the inequality just gets packaged up and then used to train models.
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Ed Ludlow
So it's within the data.
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Sophia Noble
It's within the data, but it's also the people who are designing the models are really not aware. They don't understand the kind of social, historical, economic processes. These are software engineers who don't even think about, they don't even ask the kinds of questions that let's say a sociologist like I would ask. And so we have discriminatory data that is training models. But what's different now is that these models obfuscate the inequality. They appear to be factual and reliable. And if you don't know, if you don't have deep expertise, you're not going to know that the kinds of things that are being served up in these products are actually faulty. And imagine putting your whole business enterprise, your public institutions, your schools, your libraries, making that the backbone. I mean, that is to me quite dangerous.
- [23:51]
Caroline Hyde
Sophia, we can talk at length about the risks and the problems, algorithms. What about the solutions here? Because we saw. But at least two years ago, I think it was when Alphabet was struggling to ensure that some of the images, AI generated images didn't overcompensate for some of the worries about racism and bias within the algorithm. So what have you seen been done that works? Let's not just beautify the problem, let's, let's give us the solution.
- [24:17]
Sophia Noble
Well, I think that we don't want to give up what it means to have human experts, expertise, human journalists, fact checkers, teachers, thinkers. This is our most powerful asset as human beings are people. And we can't replace people with these kinds of machines. So to me, you know, having deep knowledge in the humanities and social sciences, these are the things that are going to really be important as we go forward in society. And we're over investing, I think, in the wrong things. We need to be investing and putting resources into pro social, pro rights, respecting technology. There's a whole world of small language models and different kinds of very interesting kinds of technologies that women are thinking about that people of color are working on. And these are the least invested in, but they are, I think, the kinds of technologies that are going to, you know, help us find a way forward,
- [25:15]
Ed Ludlow
how conscious of and open about other companies on the issue. And you know, in researching, writing your book, but your ongoing work, how much do they engage with you on it?
- [25:26]
Sophia Noble
The companies for the most part want to deny, deny, deny the most dangerous dimensions of their products. And of course they are only interested in regulation that they're writing. We just saw that landmark ruling against Metta where they knew that their products were harmful, especially to girls and to women. And of course, this includes all of the kind of deep fake technologies that, that these companies are dispute that.
- [25:56]
Ed Ludlow
Right. And we covered that case in detail in the program.
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Sophia Noble
But yeah, well, I think, you know, what we have is more and more litigation against these companies because there's evidence of harm.
- [26:07]
Ed Ludlow
Noble, professor and director of the center of Resilience and Digital Justice@ UCLA, thank you very much for joining us. Coming up on the show, the excitement around Space X's IPO is putting pressure on market operators to make sure this goes smoothly. We get really in the weeds, very technical about what pulling off the biggest IPO in history means for the market. That's next. That's what markets look like. Stay with us. It's half time. And this is Bloomberg Tech.
- [26:47]
Caroline Hyde
Welcome back to Bloomberg Tech. We check in on these markets which are under pressure as we await the biggest IPO in history. The NASDAQ 100 is off by a percentage point. There's geopolitical tensions, risks and sense about yet further conflict. Conflict in the Middle east between Iran, the United States. We see the semiconductor index hardware once again having risen so much gets pulled back somewhat off by 2%. Magnificent Seven also down, but some out format smell just finishing trading in Europe, record high since 1995. We're up another percentage point on ASML and its European trading on the day. But we really do shine a light on what's been happening more broadly in the American indices. And there is some concern that, yeah,
- [27:25]
Ed Ludlow
tech giants are driving us lower, but Space X there is going to be an element of volatility, whatever happens. And outsized demand for Space X shares has market operators stress testing their systems to ensure smooth trading for the largest IPO in history. Bloomberg's Isabel Lee has been speaking with some of those firms. And the way that you put it, third paragraph of a critically important story is when this IPO hits, you're talking millions and millions of orders and with those orders comes millions and millions of messages and transactions. This becomes a technology story. How does that work? What is it that they're stress testing right now?
- [28:03]
Isabel Lee
Thank you for reading. And that's proof that you read the story. But indeed, I think much has been said about the excitement surrounding Space X ipo. But what is often left unsaid is the plumbing that powers this ipo because for the IPO to be successful, the plumbing has to work smoothly. And we talked to a couple of those players, DTCC for one there, the Depository Trust and Clearing Corporation, they like to say that the most important company that no one has ever heard of. Think of them as the central plumbing that is basically in charge of virtually all transactions that processes, clears and settles U.S. financial assets. In the U.S. we also talk to the S and P Equity Bookbuilder. Think of them as like the financial technology used by global investment banks to really power a lot of these underwritings like ipo. So they have been preparing for weeks for this space X IPO for dtcc, they're going to have a watch party over the weekend. For the S and P. They're using AI to make sure that all systems are smooth.
- [28:57]
Caroline Hyde
What are the biggest fears? Is it just slowness or is it anything that could go more deeply awry here as well?
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Isabel Lee
For the tcc, they said it's not one big risk, but it's just how interconnected everything is. So it could be one small broker dealer or maybe one small market maker that may not be as prepared and it'll be just a huge domino effect that will really affect everything because they really are kind of worried about, you know, what happened in Facebook in 2012. And a lot of retail investors were left in the dark as well as investment bankers because it was marred by a lot of technical failures that left some traders really uncertain. So I think they've learned from that. It's been more than a decade since technology has grown leaps and bounds, so they're really preparing for it. At S and P, they have what they call a pre mortem, which is the opposite of post mortem. So they're really ensuring that everything is really going to go smoothly. For example, they made sure that the tripling of order handling capacity is going to be possible in a fourfold improvement in response time. So really lots to digest. But I want to join their watch party over the weekend. They're going to be online 24 7.
- [29:58]
Caroline Hyde
They said we'll start our own. Isabel, who has just been so watchful on this IPO for us. Thank you very much indeed. Meanwhile, the economy, well, it's moving fast and now we may have a clearer way to track how it's changing the way people work. ADP has partnered with the Stanford Digital Economy Lab to launch the Canaries Dashboard. It's a real time indicator designed to show how AI is reshaping different occupations based on actual labor market data. Joining us some more is one of the researchers involved in this project, Neela Richardson, chief economist at adp, former senior economist actually at Bloomberg and Neela, presentation. You are monitoring the present, not the past. But what data do you take in how are you monitoring this?
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Neela Richardson
Well, first of all, we are thrilled because AI is said to be one of the most consequential technologies the world has ever seen, and yet we have very limited ways of measuring impact. And so this is why I'm so excited to partner with Stanford Digital Economy Lab led by Erik Brunjelsen on these AI indicators and namely the canary stash for board, which tracks the impact of AI on occupations in almost real time. This is about moving the conversation about impact from what we think to what we know and what we can measure with the data.
- [31:19]
Ed Ludlow
Neela, there was a section of the labor market that just, just jumped off the screen at me and that is the, the early career workers. These are people aged 22 to 25 and there is a, I don't know how you would put it, a bifurcation. Right, right. Industries that have exposure to AI, industries that have nothing to do with it whatsoever. What is the data telling us there? And if you can, the why?
- [31:41]
Neela Richardson
The why? Well, the important part of this data series is that it is able to categorize over 700 occupations by AI exposure in a very granular way. But it's more than that because it's not just how the AI is affecting occupational occupations, but it's about how AI is affecting workers, people, young careers. So we were able to use the demographics in the ADP payroll data and segment it by early career 22 to 26. And look, you know this as well as anyone has two different roles in a business context. It can augment. That's the old school story. That's the dinosaur story of technology. How do you. Sorry, I automate work? That's the old school story. The new school story, the frontier is how to augment. And so what AI does for early career in AI exposed fields, it looks like it's automating certain tasks. So the trick is, how do we move from automation to augmentation and look for those higher value tasks, higher value work.
- [32:46]
Ed Ludlow
And the result is that in that space employment is contracting.
- [32:49]
Neela Richardson
Contracting, Right. So for AI exposed careers, there is a contraction for early career in like software developers. So let's take software developers. Since the rollout of Chat GPT in November 2022, this dashboard shows there's been a 20% decline in early career software developers. But when you look at older workers, no decline at all. In fact, you're seeing growth that shows you that, that there is a disparate impact here. For skills and tasks that are easily automated, you're seeing an effect that's the early career. But for work where it's more complex, I becomes a helpmate, a coworker, an augmentation tool as opposed to an automation tool.
- [33:31]
Caroline Hyde
Look, this is going to be released every Wednesday after jobs week. So it's monthly data. How are you thinking about when you realize an industry is becoming AI exposed at the moment? You can been so fascinated with the fact that we've got developers, customer services, but we're trying to understand sort of where's the next. How are you seeing low AI exposed operations starting to change or become AI exposed?
- [33:53]
Isabel Lee
That's a great question.
- [33:54]
Neela Richardson
And that's really the purpose and mission of this work. It is to track value creation in real time. And the thing about it is you can't track it in a macro way. You can't track it in the markets.
- [34:04]
Caroline Hyde
Even though total.
- [34:06]
Neela Richardson
Yeah, yeah, market IPO creation. Value creation is very different to how it affects the real economy and what people are really experiencing at work. And so at the task level is where you see value creation and you see that in certain complex jobs. So let's, let's move on from software developers, maybe look at radiologists where AI becomes a really important diagnostic tool and you can see that value creation and delivery, helping them contribute, concentrate on the work that is necessary for human to human interaction as opposed to simply diagnosing different patterns which AI is good at. So the key for employers is how to extend human capability. Not limit it, not replace it, but extend that capability to new tasks and new value creation.
- [34:55]
Ed Ludlow
We have a good case study for that. Bloomberg's Romaine Bostic just spoke to the IBM CEO about this exact point. Let's listen to what he had to say and then you can say if it shows up in the data using
- [35:06]
Dario Amodei
tools now, we can probably add 10 points of profit synergy on day one because the amount of time it used to take to move contracts over, to do all of the sales automation, to do all of the revenue forecasting, all of that now using AI can be shrunk down to literally a few weeks.
- [35:26]
Ed Ludlow
When I listen to that, I just can't draw a conclusion. Are we talking about role elimination? Are we talking about a boost of productivity which Caroline and I were told by SF president Mary Daly last week isn't showing up in the data yet. Like how do you read the corporate speak in this jobs market?
- [35:45]
Neela Richardson
The way I read it is this AI has the ability to reshape work and yet it's still a tool. That decision lies with the employer. And so this data is about empowering employers to make that decision. Is AI going to be your efficiency tool? That is, there's a clear case for that. There's a clear use case that AI is making certain work more efficient. You can do more with less, but I think AI has the potential for more than that. It is a productivity tool in the sense that it enhances work, it makes work better, it makes problems easier to solve and therefore you can tackle more problems. If it's an augmentation tool, that is something completely different. And hopefully data will help employers find that value creation within their own businesses. So right now I think the narrative is really, really wide. The data can help anchor it on the truth of the moment.
- [36:44]
Caroline Hyde
And Arvin would actually say they're hiring more graduates than they have been in the past, more than ever at the moment. So it is interesting where the new graduates coming out and why they're not
- [36:53]
Ed Ludlow
now we have real time data to keep them honest. On. Neela Richardson, chief economist at adp. It's great to have you back on the show. Thank you very much. Now coming up, anthropic CEO Dario Amodei says his company's AI doesn't spell the death of software, but some firms will be losers. That part of the conversation next. This is Bloomberg Tech. Get the news you need in just 15 minutes.
- [37:21]
EY Consulting Representative
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- [37:27]
Ed Ludlow
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- [37:34]
EY Consulting Representative
Plus one conversation on the day's biggest
- [37:36]
Dario Amodei
developments, all in just 15 minutes.
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Ed Ludlow
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EY Consulting Representative
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- [37:49]
Caroline Hyde
Early on others focused on funds, flashy consumer apps. You made a bet on coding and enterprise.
- [37:56]
Isabel Lee
Why did you make that bet?
- [37:57]
Caroline Hyde
Was it, was it a values decision or a business decision?
- [38:01]
Dario Amodei
Look, if you pick a business model that fundamentally conflicts with your values, you're going to have a hard time, right? Either you betray your own values or, or you become irrelevant. And so when we thought about it, we said, look, you know, we've seen the world of social media, the consumer world. It really seems to, you know, encourage engagement, even addiction. You know, the slop we've seen with AI video models, it's like what's going on is it want to maximize the number of minutes that you're, you're paying attention to because that's the advertising revenue driven incentive. Whereas if we look at enterprise, look, I mean, you know, we want to make these models useful to people. We want to use AI to, you know, cure diseases that we couldn't cure before, right? Well that's working with biotech, it's working with pharma, it's working with academic research groups. All of those are enterprises, right? We want to use AI to like, you know, to make energy cheaper and more efficient. That's, that's all enterprise. And so I think it served us well to have this business model that largely aligns with our values.
- [39:04]
Caroline Hyde
Soon after Cloud cowork was released, $285 billion in market value vanished overnight.
- [39:10]
Isabel Lee
Traders called it the SAS apocalypse.
- [39:12]
Dario Amodei
This kind of white collar wipeout story in the software sector.
- [39:16]
The Hartford Representative
Terrifying.
- [39:17]
Caroline Hyde
Some of those are down for nine days in a row. So clearly the tension is building. If AI continues improving at this pace, how much of traditional software gets replaced and how fast?
- [39:28]
Dario Amodei
I think with AI, like the pie is getting bigger, right? So the existing incumbents may be smaller in relative terms. Some of them may, may go down in value, some of them may even, may even go out of business if they don't, if they don't adapt in the right way. But like, I would guess that the software industry gets larger, not smaller. Although there will be some big losers. Those who don't kind of see what's coming, who don't identify the moats they have, they're going to have a really hard time.
- [39:55]
Caroline Hyde
That was Bloomberg's Emily Chang speaking with Anthropic CEO Daria Amadi. And you can catch part one of this two part episode of the Circuit. It comes out later today. It is on Bloomberg TV at 6pm Eastern. And sticking with Anthropic, the company has released a new model called Claude Fable 5 for the capabilities of its mythos AI. But it includes guardrails that prevent it from responding to queries on topics including cybersecurity and biological technology. Now you remember Anthropic initially released Methos only to select organizations after warning that it could exploit cyber vulnerabilities.
- [40:28]
Ed Ludlow
A startup, Poetic, has emerged From Stealth with $50 million in funding and a half a billion dollar valuation right out of the gate. Poetic system helps businesses streamline complex long running tasks. Its founder and CEO Marky Wagner previously launched AI consultancy Double Fi Labs and worked on machine learning at Google and Waymo. And Mark joins us now. This was one of, I guess we call it a coconut round or a mango seed round, but right out the gate, OpenAI Kleiner Perkins founders Fund are backing you what is it they know that we don't yet about poetic. What is poetic up to?
- [41:08]
Marky Wagner
Yes, so a bit about poetic. So poetic is an AI system that can learn and execute extremely complex multi hour processes at some of the biggest companies on the planet with over 99% accuracy and 10 times less tokens. And so what they've seen is they know our customers and they've seen the results and they've seen a lot of AI pilots that have gone well and poorly and you know, we've scaled up every single customer we've had into production in a time when a lot of these things are getting stuck, stuck in demoland. And so that's what they've seen.
- [41:40]
Caroline Hyde
I mean Mark, people describe you to me as the whisperer to some of the most important companies out there and Klein Perkins has put out a blog about them backing you. And they reference Anthony Noto at SoFi, the CEO. Just saying how in weeks your company sort of turned around for processes end to end. How and how are you doing it with not really that much compute, that much token being used at that time.
- [42:06]
Marky Wagner
Yeah, so we have a bit of a different approach than what most folks are doing right now. And so we have this system that is kind of the synthesis of both AI and code. So you know code today is, you know, it's very static and so the automations of the past written in code. If something small changes like a column name, it would break. And on the other hand agents are incredible but they figure out what to do step by step and they can easily go off the rails. We have this system that takes the best of both. So a task is written in English similarly to an operating procedure.
- [42:38]
Caroline Hyde
Right.
- [42:39]
Marky Wagner
And our system will turn that into code under the hood.
- [42:41]
Caroline Hyde
I'm terribly sorry Mark you agna but this President of the United States is talking at this moment. We must go on. Iran CEO Founder Poetic we turn our attention to President Trump at speeds that you wouldn't want to go on. June 10, Bloomberg Invest is back in Hong Kong. We look at the role Hong Kong plays between China and the world as major powers compete and markets realign. As global investors rethink risk, we'll explore the forces driving Asian demand and the future of private capital. Catch exclusive interviews with top newsmakers plus a live recording of Bloomberg's Odd Lots podcast. Visit bloomberg live.com invest Hong Kong to learn more. Supporting sponsor Deutsche Bank.