November 21, 2025 • 43 mins
Bloomberg’s Caroline Hyde discusses the wild ride markets have been on as AI and crypto anxiety hit investors. Plus, OpenAI is teaming up with Foxconn to design AI data center hardware in the US. And Cerebras CEO Andrew Feldman shares his thoughts on the US approval for advanced AI chips to be sold to the Middle East.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Ed Lovelow in sentrancs go.
Speaker 2 (00:22):
This is Bloomberg Tech coming up, AI and crypto anxiety.
It sends stocks on a wild ride amid volatile trading.
Speaker 3 (00:28):
Will have the details.
Speaker 2 (00:29):
This is Open AI teams up with fox Conn design
AI data center hardware in the United States, and we
speak with the CEO of Cerebrus about the US's approval
of selling advanced AI chips to the Middle East. All
of this coming in the context of deepening market anxiety.
After we are whip swored time and time again, let's
(00:50):
just check out what's happened on the markets over the
course of the five trading days. What a week it
has been. It is off by four percent for the Nasdaq.
This is the worst week we seen for the Nasdaq
one hundred April since, of course, the first concerns about
trade tariffs came into the market. We are seeing significant
pressure on some of your biggest AI winners. Let's move
on and see how some of the nazdac key Points
(01:12):
contributors are doing on this day in Vidio off by
two point seven percent and Video is now down eight
percent over the course of five training days, but Oracle
on course for its worst week since March twenty eighteen.
The AI bubble anxiety continues, and we want to dig
into all of that and the market reaction this week
with bluem egxecut's reporter Carmen Rhinikey, who has been across
(01:35):
the story day in day out. Carmen, why are we
seeing this ongoing pressure on some of the biggest winners.
Speaker 4 (01:43):
Yeah, it's really interesting, and like what a week it's been, right,
you know, we have in Video with this blowout innings
report and then two down days immediately following it. Really,
what it seems to be happening is there are so
many macro pressures on the market right now that that's
adding a lot of weight and dragging down the major indexes.
Speaker 5 (02:00):
But at the same time we're seeing.
Speaker 4 (02:02):
That in Video's report, as good as it was, wasn't
enough to quell some of these overall AI fears, right,
and so we're seeing a sell off. We're seeing very
risk off mentality in.
Speaker 5 (02:13):
The markets right now.
Speaker 4 (02:13):
And one thing that has been kind of interesting is
looking at the stocks that are up today, we're actually
seeing Apple outperform and it usually has lately sort of
been opposite of these big AI names because it doesn't
have a huge AI piece of the puzzle. And then
we're also seeing Google up, which is still really big
optimism after Gemini three. So it's just interesting to see
a little bit of the split that's happening there in
(02:35):
the market.
Speaker 2 (02:35):
And much of this, of course has been built into
the worry about yes in Nvidia has the demand people
starting to dig into account's receivable into inventory.
Speaker 3 (02:44):
But that felt like a bizarre.
Speaker 2 (02:46):
To try and in retrospect understand why we were seeing
a sell off rather than seeing that and then seeing
a stock sell off.
Speaker 3 (02:53):
So can you talk to us about how things are
happening in timing wise?
Speaker 5 (02:57):
The timing has.
Speaker 4 (02:58):
Been so interesting, and I think you're totally right that
we you know, I speak to a lot of investors
and people were sort of pulling on different things, but
there was no real, like smoking gun, great answer as
to why you know, we were seeing this sell off.
But we have been seeing the market sort of react
more to things around a fed cut. If there's going
to be a great cut in December. So this morning,
(03:19):
you know, it looked like things were kind of positive,
and then around the Williams comments, but then you know,
we get you mish out, and so it just seems
like there's a ton of macro and that is really
what's moving the market.
Speaker 2 (03:33):
I think one discourse that has been throughout is debt
and debt particularly among players like Core Weave in the
Neo clouds, but Oracle in particular, the CDs.
Speaker 3 (03:43):
The credit to fault swaps of Oracle have become.
Speaker 2 (03:45):
Almost like a way in which we show anxiety in
the great debt parlor of certain companies.
Speaker 3 (03:52):
Is it rational? No one thinks.
Speaker 2 (03:53):
Oracle is suddenly going to default, but it is being
used as some sort of hedge here.
Speaker 4 (03:57):
Yeah, totally. And I mean the stock is just comped,
completely fallen off. You know, it had that huge jump
and then we've erased all of that. And the debt
question is a really big thing on investors' minds, and
I think it really plays into the fears of the
AI bubble or the debate around it being a bubble,
because if these companies start loading up on debt, there's
the potential that it could they could become over lever
(04:19):
that could be a bigger issue down the line. And
you know, with everything as circular as it is, even
though these companies keep addressing it, you know, Jensen spoke
about it in videos calls. Investors are just not convinced yet.
You know, they're just seeing the house of cards. They're
worried about it.
Speaker 2 (04:36):
They need to see the return on aiblu most common.
Rhinochy has been across this story. Have a feeling she'll
continue to be, so we thank her. Let's turn to
the world of digital currencies.
Speaker 3 (04:45):
There's volatility there too.
Speaker 2 (04:46):
Bitcoin on track for its worst month since twenty twenty two.
Look how much it shed twenty five percent of its
value in November alone.
Speaker 3 (04:55):
It's not just bitcoin though, According to data from coin.
Speaker 2 (04:57):
Gecko, the total market value for virtual coins below three
trillion dollars the first time since April.
Speaker 3 (05:03):
James Siefert is with us Bluemeg Intelligence.
Speaker 2 (05:05):
You cover alternative investments and talk us through some of
the selling pressure. You look at it particularly from the
ETF lens, but more broadly, is it institutional money that's
stepping away ever since that big sell off leverage wash
out in October?
Speaker 6 (05:18):
Yeah, So I absolutely think this is still hangovers a
little bit from that October tenth sellout that you just mentioned.
There's no way to know for sure it's institutional or retail,
but there's some big sellers out there. And what I
would say is the ETFs have mostly held strong. I
mean we as on a percentage basis. The amount of
outflows we saw from the ets was way bigger. In April,
it was about six billion that came out. Right now
(05:40):
we're about five point three five point four billion that
have come out of the ETFs, but it's from a
much higher base, so the percentage basis is way smaller,
So most of the selling is happening from, you know,
the actual spot crypto markets. A lot of people like
to look at the ETFs and they think like, oh,
they're causing this problem or they're exacerbating things, but really
they're just a piece of the pie. And right now,
like I said, it's only about five point three billion
(06:01):
that have come out of the ETFs the US spot products,
So for most of this is happening actually to the
coins directly.
Speaker 2 (06:06):
It's interesting that many who have been in this space
for a very long time don't see this as a
particularly anxiety inducing moment because they've seen sell off some
pressure before.
Speaker 3 (06:14):
It's a volatile asset class.
Speaker 2 (06:16):
But when you say exacerbating the situation, how much a
digital asset treasuries exacerbating the situation. The sudden move we
saw for companies to put digital assets on their balance sheet.
Speaker 6 (06:27):
Yeah, so I absolutely do think that the dats are
exacerbating things here. So right, I think they were a
bit of a flywheel on the way up right, they
were trading at a bit of a premium. They're issuing
stock to buy the underlying currencies. They were issuing debt,
preferred stock and vertible debt to buy the underlying currencies.
And when they're trading at a premium, that's spinning in
one direction. Right now, things are spinning the opps direction.
There are some dats out there that are selling underlying
(06:49):
assets we know, with some ethereum ones and things along
those lines. So I think this is And then also
there's a lot of traders out there that are doing
things or they're hedging the underlying asset and hedging against
the actual DAT company themselves, So that whole interaction is
definitely kind of spinning the opposite direction of the way.
Speaker 7 (07:05):
It's been spinning for the last few months.
Speaker 6 (07:07):
And then also there's a lot of concerns about quantum
computing from there's a blogger who everyone kind of respects
in the space has moved up his timelines, and a
lot of people like to say it's fun, it's not
real concern, but people are starting to take the seriously,
including the leader and founder of Ethereum Metallic. So I
think there's a whole bunch of things here that are compounding.
Speaker 7 (07:23):
Obviously you just spoke about it.
Speaker 6 (07:24):
There's a bunch of risk off in AI names and
just equity risk assets in general. And then I think
also maybe this might be we often see a bit
of selling around this time of year, maybe into December,
particularly DTS for tax loss harvesting.
Speaker 7 (07:37):
Maybe that's being pulled forward a little bit.
Speaker 3 (07:39):
That's interesting. What I want to go back to is
the quantum side of the equation.
Speaker 2 (07:43):
Look, we know that the dat situation digital asset treasuries
has been a case in point is Michael Saylor and
what he did with strategy, and people worrying that maybe
that even falls out some of the key benchmarks and
that adds to the selling pressure. But quantum is more
about cryptography and how that might be broken. Briefly, James,
is that what people are worrying about?
Speaker 6 (08:01):
Yeah, I mean I won't pretend to be an expert
on quantum cryptography or cryptography in general, but essentially the
concern is that that quantum computing would be able to
hack the encryptions that basically keep you know, Bitcoin and
other cryptocurrency safe. There are you know, quantum resistant cryptographies
that can be used and are planned to be used
in other cryptocurrencies and even proposals for bitcoin, but they're
not instituted yet. So the concern is is this going
(08:23):
to happen faster than most people are expecting, But the
industry is on top of it. It's just, you know,
it's a genuine concern at this point as far as
I'm concerned.
Speaker 2 (08:32):
As you say, hashtag fud fear, uncertainty, doubt. Haven't had
that acronym in a little while. James Siefert of Bloembag Intelligence,
Thanks so much for breaking things down. Let's get an
investor perspective for you now. Eric Bailey, Executive Managing director
of the Bailey Group at Stewart Partners, joins us now
and fun Fear uncertainty, doubt is that what is ripping through.
Speaker 8 (08:50):
The markets clearly, Yeah, yesterday was certainly eye opening with
the action and the markets, and it shows investors are nervous.
We've seen it pretty much this whole month, and then
yesterday really really was clear that this sell off has
more legs and big parts of the market are in
a correction. In Nvidia now down seventeen percent from its high.
(09:14):
You were talking earlier about Oracle that's down forty percent,
and you're seeing investors are getting more defensive. You're seeing
sectors like utilities, pharmaceuticals outperforming the growth parts of the market,
and so this could continue. Right as we get through
the end of the year. You do see rebalancing, tax selling,
(09:35):
and that could continue as we need a little more clarity,
a little more confidence to come into the market to
get the growth trade back back heading up.
Speaker 3 (09:44):
What more clarity could you wish for?
Speaker 2 (09:47):
We got a retotive amount of clarity coming from the
world's most valuable company, Jensen Wong doing his best to
try and make clear the our line of sight he
has on future revenues. People questioning maybe the inventory build
up now. But we did get a lot of tangible
evidence there. We had people such as Michael Burry saying
who are the auditors on open AI? And yes, there
was a lot of anxiety in the private markets, but
(10:09):
many have pushed back on that sort of concern.
Speaker 3 (10:11):
What charentage do you want to see?
Speaker 7 (10:13):
Eric?
Speaker 8 (10:15):
Yeah, no, you bring up great points. I think, right
it's a valuation issue and right now investors are weighing
what's the value of these names. They're not clearly sold
that the growth can continue, even though you look at
the analyst community, you look at Nvidia, the average price
target is two hundred and fifty. That's a thirty plus
percent move from these levels, so you would think at
(10:37):
these prices it's pretty attractive. So a lot of this is, again,
you know, just market reaction going through kind of a
correction phase. And I think the buyers will come back in.
It's always unclear when and what levels, but I do
see the buying coming back into the markets.
Speaker 2 (10:55):
Is an element of catch affording life. But is the
FED the key question? So are indeed cut in December?
Speaker 9 (11:02):
Yeah?
Speaker 8 (11:03):
The FED adds a level of confidence to investors, and
investors clearly want to see the FED is taking action
that's positive for the economy, and that right now is
clearly with rate cuts, and so a rate cut would
in my view, bringing confidence to the markets and should
help equities, especially growth equities. Growth equities typically do well
(11:25):
as rates come down, and so that would be a
big boost next month.
Speaker 2 (11:30):
Some of these particular numbers that I relate to on
a weekly basis do look really ugly, as I say,
now's that worst week since April video, worst week since
about April, and you see a similar thing for Oracle,
worst week in fact since twenty eighteen.
Speaker 3 (11:44):
But looking at a year to.
Speaker 2 (11:45):
Date basis, we're still in a pretty great spot, right Eric.
Speaker 8 (11:50):
Oh, absolutely yeah. I mean the SMP is still up
north of ten percent. Overseas markets have had an incredible
year up you know, across the board, north of twenty percent.
So investors, right, they have to step back and be
patient and be calm and actually look at these selloffs
as an opportunity because this is where you can make
solid returns right by great companies at lower levels. I mean,
(12:12):
that's the key to investing and not panicking and not
selling when everyone else is selling and take losses and
hurt yourself long term.
Speaker 2 (12:20):
Eric, your thesis with AI do you think it's a
bubble or do you think this is a sort of
capital expenditure that's necessary to read the productivity in the future.
Speaker 8 (12:30):
You know, the numbers you're seeing committed to this space
is certainly eye opening and nervous, and it seems like
it's a few of the big, you know, massive players
in that space, and so it does bring concern. On
the other hand, without a doubt with with these earnings
results we've seen, you know, just from Nvidia and you
saw from Alphabet and the strength there clearly AI you
(12:55):
have to be invested in it a long term. It's
the growth Benjim. And so if you want growth, AI
is the place you want to be.
Speaker 3 (13:03):
Alphabet at a new record high today.
Speaker 2 (13:06):
Bailey of the Bailey Group at Steward Partners, thanks for
your time, Happy weekend. Coming up open AI Well, it's
partnering up with Honhai also known as Boxcon to design
AI data sent to hardware in the United States. Details
next this is Brumberg Tech.
Speaker 10 (13:32):
To keep pushing the frontier. We need to build these
new types of AI infrastructure hardware at scale, and I'm
excited for that to happen in the US and with
Fox con. Fox Cohn's experience building complex infrastructure and hardware
at massive scale makes them the ideal partner for this,
and I'm looking forward to exploring together what this can
look like. We'll share insight into emerging hardware needs across
(13:55):
the AI industry, and Foxcom will use that to design
and prototype new equipment that can be manufactured in America.
Speaker 2 (14:02):
Open Ai CEO Sam Altman joining fox Con also known
as hon Hi Tech Day in Taipei remotely to weigh
in on the company's partnership with of course fox Gone
to design AI data center hardware in the United States.
Speaker 11 (14:15):
Look.
Speaker 2 (14:15):
Under the partnership, fots GONE will co design and develop
data center server racks with open AI and work to
ensure such racks can be manufactured across the United States
look blomeg Texts and Animel Drowders. She caught up with
Honhaigh chairman Jong Nu to discuss the plan and his
goal for scaling up compute capacity.
Speaker 12 (14:33):
Take a listen, the giga wand per week will be
the goal.
Speaker 3 (14:38):
Okay, one giga wa per week.
Speaker 12 (14:41):
That would be SINS goal. But we can start with
one giga wand per.
Speaker 13 (14:45):
Month, So you think you can add one gigawat per
month next.
Speaker 12 (14:50):
Yeah, studying next the second half of the year.
Speaker 13 (14:55):
Second half of the year, So you think you can
add six gigawats next year?
Speaker 12 (15:00):
Sure, it really depends on our starting on our new
way of doing things. It takes time, but eventually we're
going to get there.
Speaker 13 (15:08):
Let's talk about then, this opportunity in the US, because
as you said, the part of this is about making America.
It is very ambitious. What's the capex that you need
to also dedicate to the States.
Speaker 12 (15:21):
The kpex wise is in maybe one to five billion
to star wars to build the factories, to build on
these centers, but to build the working capital required to
build the data center, that's totally different. That requires a
(15:44):
huge amount of money. Yeah, and with that we are
going to work with sol Bank.
Speaker 13 (15:51):
What are the biggest challenges with scaling up.
Speaker 5 (15:54):
In the US?
Speaker 12 (15:56):
Shortage of labor, as I mentioned, is not labor. Cast
is a charge donation labor.
Speaker 3 (16:03):
How do you get around that?
Speaker 13 (16:04):
What are the conversations like and what are the biggest
shortfalls that you see?
Speaker 7 (16:09):
Now?
Speaker 12 (16:09):
We had to work closely with schools and the government,
which we were very familiar When we build our factories,
all over the world. We had to work with local
agencies or local government to get their people ready for
(16:29):
the kind of a job that we we require.
Speaker 2 (16:34):
Hon High Chairman Young New there with our own Annabelle Drulers,
let's break down that agreement between open AI and Honhai
Neuberg's AI. Sir Seth Fiegermann is here. It's interesting timing
giving the anxiety around capital expenditure, and we're hearing about
how Honhaig is using SoftBank perhaps for some of that
capital expenditure and investment.
Speaker 3 (16:52):
Seth, but there.
Speaker 2 (16:53):
Doesn't seem to be any purchase agreements here, right.
Speaker 14 (16:57):
That's right, We really don't have any numbers here. I
mean it is a testament to the scale of a
Bonnie's ambition in particular on the infrastructure front, as well
as fox CON's desire to diversify away from its reliance
on Apple and really gain momentum on the AI. But
I think stepping back from it, the really important to
take away, apart from a lot of the record around
what it means for US manufacturing, is what it means
(17:18):
for open AI as it tries to not just move
faster on the infrastructure front, even in the face of
anxiety about AI spending, but also begin to build more
of remote or competitive advantage on the infrastructure side. We
talk a lot on the show and elsewhere about you know,
how much and how quickly am models are being commodetized,
and whether the compective advantage there. But I think what
you've seen all Menualpennie I do is try to get
(17:40):
certain more ownership over the supply chain for data center
build out and chips in a way they could give
it a different kind of competitive advantage and lower costs
in the long term.
Speaker 2 (17:49):
Again, it's a foreign company investing in the United States.
One to five billion dollars is what they're thinking is
spending to grow fox CON's US manufacturing footprint. But here
this seems to be about the understanding of inefficiencies within
data centers, right, what can go wrong, and how open
AI can lend a hand on telling them that that's right.
Speaker 14 (18:07):
I mean, look, most people are probably more consumed by
thinking about the models that we use in the chatbots,
but they're talking about a lot of the key components
that go into setting up and operating data centers, from
the data center server racks, to cooling and power equipment
to the cabling. These are not the sexiest things, but
they're essential as trying to build out a massive scale
of data centers here and abroad.
Speaker 2 (18:29):
Meanwhile, open Ai is trying to field a ton of
questions right now. They are of course under some duress
about how they're raising funds in and of themselves to
spend on all the data center build out. You had
Michael Burry like questioning auditors, and it seems as though
they've got some clarity from that and ft reporting set
But how much pressure is Sam Altman and team feeling.
Speaker 3 (18:49):
At this moment.
Speaker 14 (18:50):
Immense And we're gonna given mentioning what they feel from
Google now, which seems to have built a model though
either rivals or outcompetes anything. They're opening eye paralize on
the market, which gets back to again, they want have
a competitive advantage not just on the model side, but
on the infrastructure that supports it. And increasingly they're tying
themselves to all different corners of the market and all
different key players and tech to make it they're too
big to fail.
Speaker 2 (19:11):
Seth Figerman. Yeah, great context, thanks for bringing it. Happy
weekend shares of Ubisoft. They're climbing today in Paris as
Trading resumed up to week long suspension for the gaming
company Look. It had delayed its second quarter results after
auditors found it improperly recorded revenue from a partnership who
(19:34):
was soft helped reassure investors today by saying it will
pay off debts with funds from an investment it received
earlier this year from ten Cent Holdings. Meanwhile, Meta is
making a big.
Speaker 3 (19:45):
Push into AI.
Speaker 2 (19:46):
We know that, and to assist in that expansion, the
social media giant is actually adding another business to its portfolio,
Power Trading, hoping to help plant developers by committing to
long term energy contracts who most Wiley Griffin covers Meta
extraordinaries story. The amount of diversification these companies are having
to do to fulfill the energy and requirements for data centers.
Speaker 15 (20:07):
It truly is amazing, and it comes back to this
idea that Mark Zuckerberg has pitched as front loading capacity,
bringing on the energy they anticipate, the compute they anticipate
for that big day that they are gunning towards, which
is the idea of super intelligence. But in the interim
you Meta anticipates a lot more energy needed and so
(20:30):
it is going to enter this power trading market in
an effort to ensure that long term capacity.
Speaker 2 (20:35):
There was a great interview you did with ov Perek,
who is heading up Electricity Trading or META. Why is
she indicating this move and what ultimately is she thinking
about doing to build this out.
Speaker 15 (20:48):
Yeah, so she said that too few buyers are willing
to commit to long term electricity contracts that would justify
building new power plants. So, really, the AI demands are
clashing with the demands of the grid and META is
taking matters into its own hands here by becoming a
power trader. It would essentially lock in these long term
deals to support its AI ambitions.
Speaker 2 (21:12):
It's interesting that sudden analysts out there, you talk to
the managed to direct to a power modeling from Habitat
saying that this is actually a natural extension of tech
companies investors understanding that that we're all going to become
basic infrastructure companies, energy companies, raised in companies too.
Speaker 15 (21:28):
Yeah, it's a kind of managing a risk that we've
seen in other industries. It allows you to lock in
energy and then if you have too much, you can.
Speaker 16 (21:36):
Ultimately sell it back. And Meta is not alone here.
Speaker 15 (21:38):
So we've seen Apple, Microsoft, other big players make this
attempt to so Meta isn't alone, and I think that's
a reassuring thing to investors. The other very interesting comment
you heard from Mark Zuckerberg on the last quarterly earnings
call was that they're thinking about managing that kind of
risk when it.
Speaker 16 (21:57):
Comes to excess compute as well.
Speaker 15 (22:00):
So we're watching closely to see if they make any
moves to diversify into.
Speaker 16 (22:04):
That API business, that cloud business, to sell that too.
Speaker 2 (22:07):
Look, everyone's a hyperscaler, everyone's a cloud provider. Now everyone's
an energy trader too. Bloomberg's Riley Griffin. Fascinating, Thank you
very much, indeed, welcome back to Bloomberg Tech.
Speaker 3 (22:22):
Let's check in on these markets.
Speaker 2 (22:23):
Let's give you what we did for the week, because
it's been under pressure for the course of the week.
On the day then AzaC is actually trading higher. We're
up about a tenth of a percent on the course
of the week, though we are lower to the tune
of three percent. Let's call it the worst week since April,
since the real torrid anxiety around trade tariffs really hit
the market. We look at individual movers and when you're
(22:44):
thinking under the hood, which are the key players have
been dragged to the downside. Today is a day of
volatility as we think about what the Fed does in
December on the week's anxiety of AI bubble or not,
about whether we can afford the capital expenditures.
Speaker 3 (22:54):
And video is off by nine tens percent.
Speaker 2 (22:56):
Again after stellar numbers, after more than sixty percent grow
in terms of revenue yesterday for the fiscal quarter just gone,
and pointing to the fiscal quarter to come. And yet
that line of sight on half a trillion dollars worth
of revenue not enough to cool market anxieties.
Speaker 3 (23:10):
Instead, we're talking about accounts, receivables, what they're owed by
their customers.
Speaker 2 (23:14):
What are the owed bi oracle, What is the oracle
having to do in terms of debt issuance. That's what
the market is questioning. We're off by six percent. It's
having its worst week since March twenty eighteen. We're off
by six percent on the day. Let's talk about all
of this, the big tech binge on debt, that's what
people are talking about. While in the absence of a
leverage underpinning the AI build out has long been used
(23:37):
to dismiss bubble concerns, but there has since been a
bit of an uptick in borrowing and it's starting to
change the narrative. Your most tech equity reporter around, Valastelica
is here and look, we're not talking that Alphabet or
Amazon or Microsoft are suddenly gonna go broke. Here they
have huge cash on hand. But why are Oracle CDs
in the line of fire?
Speaker 7 (23:57):
Hey, good morning, thanks for having me.
Speaker 9 (23:59):
So yeah, Oracle is really sort of the focus when
people are starting to pay attention to the debt that
is being issued by all of these tech companies. I
think the five big spenders on AI, which is Microsoft, Alphabet, Amazon, Meta,
and Oracle together they have raised more than one hundred
billion in debt this year. That is more than three
times the average over the past decade. Or so Oracle
(24:20):
in particular, because they are seen as having one of
the weaker balance sheets of them, They're going to have
negative cash flow this year. That's expected to deepen in
the coming years as they invest aggressively into their cloud business,
which has been a big benef sharry of AI. But
if you look at their credit, the fault swaps for
the next five years, which is really being used as
a kind of proxy for AI risk. Those have skyrocketed
(24:43):
over the past couple of months. I think they are
around forty four basis points in September, they're over one
hundred now. So this just shows you how people are
growing concerned about all of this capex. When is it
going to pay off? What is this doing to the
balance sheets of all these big tech companies, and really
how should that impact the way we are valuing them.
Speaker 3 (25:01):
Rating companies are keeping an eye and.
Speaker 2 (25:04):
I think Oracle has been put on negative watch in
case it does need a downgrade from its debt issuance.
But what's interesting is there's have a lot of creative
financing around this. Look there was eighteen billion dollars issued
by Oracle, and there was thirty eight billion dollars of
bonds issued for Oracle Data Centers, but not BI Oracle
at all. And then we think about the private credit
markets and what Blue OU's been up to with Meta.
(25:25):
How much is this actually not being seen at the moment.
Speaker 9 (25:29):
That's a great question. I think this kind of gets
to the bigger picture concerns right now about just all
of this spending, how it's being done. We've seen so
much these circular financing deals you've seen this off balance
sheet debt, all of these things, it just seems like
they add to the risk of the market or people
are saying like, we don't really know the full picture
of all this stuff. We have one of the biggest,
(25:49):
most important companies in AI, which is Open AI. They're private,
we don't have as much information about them as we
do public companies. When you get all that, it's like,
this is just more things that are people are uncertain
of about numbers you can't fill in, and that just
causes people to think, maybe this is more risky than
we thought. This is a good opportunity to be taking
risk off the table when you see all these things
sort of building on each other.
Speaker 2 (26:11):
Ryan Vastelica always a must read, some of the most
best stories throughout the week.
Speaker 3 (26:15):
We really appreciate it.
Speaker 2 (26:16):
Look, let's talk about some of that anxiety in the
private markets.
Speaker 3 (26:20):
Concerns about an AI bubble.
Speaker 2 (26:21):
They swell there to Rebecca Lynn, managing director at Canvas Prime,
is one who's saying, we are in a bubble. Look,
you're here to tell us a little bit about what's
impacting your investing approach, and first give us your thesis
and why it's obviously an AI bubble.
Speaker 17 (26:35):
Right, Well, I think we can debate whether we're in
a bubble or not, you know, for the for the
better part of the day, I definitely think we're in
a bubble. But what's more interesting I think to talk
about is how we as early stage investors react and
how we invest in incredible companies that will be the
next you know, sort of five trillion dollar companies, and
(26:56):
how we execute on that no matter where we are
in this hype.
Speaker 2 (26:59):
Cycle, Rebecca, for example, those that would say we're not
in a bubble or not in similar to dot com,
is that actually a lot of these companies are very profitable.
In Nvidia, very profitable, Alphabet, Amazon, all the likes, but
open Aye and the private side, we know that thus
far they haven't been profitable because I'm having to invest
so much.
Speaker 3 (27:17):
So let's time on touch the private side.
Speaker 2 (27:19):
What security you getting from the companies you want to
invest in that they are keeping pace with growth trajectory
on the bottom line and the top line.
Speaker 5 (27:28):
Very interesting.
Speaker 17 (27:29):
So what we're doing is we're really having to dig
in and the companies we invest in on the customers
and go in and talk to their core customers and
ask questions questions I haven't had to ask, honestly, and
since I've been an in venturer, like, let me see
all of your contracts for every single deal that you
have signed up. Because what we're seeing in private markets
(27:51):
is the arr is probably the most overused term in
the English language, and so people are misused. Let's just
say misused.
Speaker 3 (28:01):
That's what you're trying to get.
Speaker 2 (28:02):
The idea that you look at what revenue've had in
the month past and you can extraculate that out on
a twelve month basis.
Speaker 5 (28:08):
Exactly, or annual recurring revenue.
Speaker 17 (28:10):
How much have they contracted with these with their customers,
And when a company gives you that number, you really
have to peel back the onion.
Speaker 5 (28:17):
You have to go and talk to the customers.
Speaker 17 (28:19):
You have to look at the contracts, and then the
contracts oftentimes what they're accounting as annual recurring revenue is
not at all. They're things like pilot revenue or you know,
very like installation revenue. Things like that very ephemeral revenue,
or the revenue could go away with a thirty day
out clause at any point in time. So we really
look for companies where customers have used, are using the
(28:43):
company not just as a trial or an R and
D experiment, but are really using that company and count
on that company for their day to day operations, either
in financial services or healthcare.
Speaker 2 (28:54):
I think back to the lessons learned in FTX and
when we all suddenly realized this company that everyone appiled
into thinking it was a winning formula was actually I
think using quick books in terms of its own accounting methodology.
How much have investors vcs become so savvy to the
cult of a personality, to the CEO, to a story
(29:17):
that is of growth but actually really trying to peel
that on you and as you say you're doing.
Speaker 17 (29:21):
Yeah, I mean it's just what we stay focused on.
I tell my team, do the right deal, not the
hype deal.
Speaker 5 (29:26):
And it's hard.
Speaker 17 (29:27):
It's hard when they bring a company in and you know,
people are piling in at you know, five hundred million
dollars valuations with really no revenue, and they're great, they're
great firms. We call them the big box firms here
in Silicon Valley. Who have you raised hundreds of you know,
or over a billion two billion dollars in to invest
and they just have a fundamentally different problem. Right now,
I think they're not doing a lot of the diligence.
(29:48):
They can't do that really deep diligence because they simply
have too much capital to deploy.
Speaker 5 (29:54):
And when I talk to my my.
Speaker 17 (29:56):
You know, brethren over there that they'll say things like you,
you know, our job is in part just deploying capital,
and so I think sometimes unfortunately they skip over the
part that I think is the most important part of
the job, which is diligence and governance on these deals
and really diving deep to say is this a company
that can make it for the long term and really
(30:17):
return a lot of capital, or is this a company
that might be running on quick books.
Speaker 3 (30:21):
Like you said, the thing is you're in the Series
A and Series B.
Speaker 2 (30:25):
I think of just the extraordinary numbers that we were
talking about. A potential project that Bezos is launching with
initial seed funding of six billion dollars. You've got Mara
Marati raising a company's funding at potentially a fifty billion
dollar valuations. What's being reported by Bloomberg when ultimately a
seed round was giving her evaluation a twelve billion in
(30:47):
rate two billion on that?
Speaker 3 (30:48):
What are the numbers that you're seeing to get into these.
Speaker 17 (30:51):
Rounds, well, I think first of all, what you have
to realize is that you know, the large majority of
capital is going into a handful of deals. I think
sixty two percent of all the money that went in
last year and adventure or actually this year.
Speaker 5 (31:03):
Is going into eight deals.
Speaker 17 (31:04):
And so I actually see that as an opportunity and
it's a feature, not a bug in terms of what
I'm doing.
Speaker 5 (31:11):
And we are seeing deals.
Speaker 17 (31:13):
We're seeing series as that we were interested in initially
with sub five sub ten million dollars of actual revenue
going for five hundred million plus invaluation. But I think
the more interesting thing I actually walked away from two
deals in the last I would say thirty days that
had that profile. But even if you could get comfortable
(31:34):
with the valuation, what people really aren't talking about right
now are the governance issues. And so in both of
the deals I walked away from, the founder demanded in
the series a complete and total board control, not just
in voting shares, but on every major decision that the
company could make going forward. And what I've seen, and
(31:55):
you know, I was around for the dot com bubble,
and as an operator, I've been investing through multiple cycles,
and what I've learned is that that is a recipe
for a disaster in most situations. And so I'm actually
more concerned with the lack of governance going on right
now even than the actual evaluations and the money going in.
Speaker 2 (32:13):
People not talking about it, but you're talking about it,
and you're talking about it on this show. We so
appreciate that you do. We love the right deal, not
the hype deal. Rebecca Lynn, come back soon, we hope.
Managing director at Canvas Prime, thank you. Coming up, We're
going to be speaking with the CEO of Cerebra Assistance,
Andrew Feldman. The US approves the selling of advanced AI
chips in the Middle East, how it affects his startup.
(32:36):
And we're watching, of course, publicly traded shares to Netflix, Paramount,
Comcast initial offers have been put on the table for
the Warner Brothers Discovery.
Speaker 3 (32:44):
Paramount wants the whole thing.
Speaker 2 (32:45):
Remember up one point three percent of Paramounts guidance today,
Comcast up almost two percent of Netflix under pressure.
Speaker 3 (32:50):
This is Bloomberg Tech.
Speaker 2 (32:58):
Let us check in on chips stops because it has
been a wild week. It's been a wild day as well,
we are currently off in negative territory. If you're looking
at the Semiconductor index, the Philly one, we're currently flat,
just down on the socks as we see apply Materials
trying to do its best to lift us higher. But
on the downside, broad come from a point's perspective. In
video off by five tens percent. This is the question
(33:19):
mark we still have about how much customers owen video
and indeed their ventury backclock is being thought about. But
AMD off by two percent TSMC even being dragg lower
by one point four percent, as we still question some
of that anxiety in the market regarding AI bubble or not.
Speaker 3 (33:34):
But this is all is.
Speaker 2 (33:35):
This week we saw the US actually approved the sale
of advanced AI chips into the UAE into Saudi Arabia.
That's boosting the Gulf nation's AI expansion efforts so should
be a key area of demand. Andrew Fellman, CEO of
Cerebra System is praising the move, saying we're grateful for
the administration's decision which allows us to scale US built
wafer scale AI systems into one of the world's fastest
(33:56):
growing AI hubs.
Speaker 3 (33:57):
Andrew joins US now for more so.
Speaker 2 (34:00):
You of course, have the CS three system, new class
of AI supercomputer. You want to be able to ship
it more into partners. You have G forty two. You're
working with the UAE.
Speaker 3 (34:08):
How much will you be working with Saudi Arabia.
Speaker 18 (34:13):
I think we've begun working with Saudi Arabia. We do
have salespeople on the ground in the Kingdom. It is
a new effort for us, and it's not as far
along as we are in the UAE in some other territories,
but it's an exciting opportunity. And I think the move
by this administration to allow our allies and our partners
(34:34):
in the Middle East to gain access to advanced a
compute is a good one and thoughtful. And I think
having US technology from chips to software to the full
stack in the hands of our allies is good policy.
Speaker 2 (34:51):
Hands of our allies, you have CS three system, which
he says quickly, easily clustered together, you make it the
largest AI supercomputers the allies are in the Middle East,
but there's always been worry that it would be a
backdoor into China. How do you make sure that your
IP has protected?
Speaker 18 (35:05):
Andrew Okay, I think we work closely with G forty two.
There are strategic partner and we have been working with
them for more than three years now, and they have
developed a restricted Technology environment, an approach that sort of
surrounds the technology with security. I think it is both
(35:27):
forward looking and extremely sort of rigorous. We're really confident
that it will keep the technology both physically from being
transported to China as well as used by by Chinese agents,
and so we're very confident. We've visited facilities, we've seen
(35:49):
the restricted Technology environment in action. I think they're doing
an extraordinary amount of work to earn the President's.
Speaker 2 (36:01):
You do have that relationship with G forty two. How
does the relationship of expansion sales groups on the ground
in Saudi Arabia square with that relationship. How many sales
do you think you're going to be able to get
right away?
Speaker 18 (36:11):
Andrew, I think sales in any territory take a little
bit of time. You have to build relationships, you have
to build credibility and legitimacy. But I think our success
with G forty two, the work we're doing with other
customers like Meta, like IBM, the work we're doing with
large enterprises like Mayo Clinic and Galas of Smith Klein
(36:34):
and the work we're doing with leading AI startups like
Mistral and Cognition. All of these make entry into new
markets a little bit easier. You have examples you can
point to, You have large customers that they or partners
they can buy from. And I think this is what
it means to be expanding quickly in a global environment.
Speaker 2 (36:56):
It's the US government doing enough to help startups such
as your Visa VI Nvidia, which in many ways gets
a lot of the voice support from the administration.
Speaker 18 (37:06):
Briefly of course, and sort of they've gone through this
process too, right. They weren't always a giant company. I
think it's taken them twenty twenty five years to earn
their position at the top. And so you know, we
have extraordinary access. We do a big business with the
(37:26):
Department of Defense with the DOE. Actually, I was with
Jensen and Lisa Sue of a m D with Secretary Wright.
The DOE is is a leading organization for US AI policy.
It's been I think you always want more, but I'm
(37:50):
proud of what we've been able to accomplish with the government.
Speaker 2 (37:53):
Andrew Felman come back soon. We hope revers system. CEO
appreciate you joining on the day. Canvas Affinity suite of
creative tools, well it's topped two million tantos since it's
launched just free software a few weeks ago. The free
product offering is part of canvas increasing effort. We need
(38:15):
to challenge rivals like Adobe. Let's talk about this with
camas Co foundery Cliff Obect Cliff, extraordinary level of uptake.
Speaker 3 (38:24):
Were you expecting that?
Speaker 11 (38:27):
To be honest? And thanks for having me first and foremost.
We've been absolutely blown away by the level of uptake.
It probably really speaks to the creative community screaming out
for choice and us delivering on it. But yeah, we'll
be absolutely blown away with the pickup so far.
Speaker 2 (38:43):
Affinity is about professional design in many ways, but how
are you seeing being adopted more broadly and who is
it that really wants to lean into this type of sophistication.
Speaker 11 (38:53):
So Canva is a design tool. When we launched Canva,
there were only professional design tools.
Speaker 7 (39:00):
So we launched Canvas to.
Speaker 11 (39:01):
Enable the ninety to ninety nine percent of the world
who couldn't design, to be able to design and express
their creativity. And what we did with the acquisition of
Affinity we acquired that company and we just launched it
one hundred percent for free, and that really gives creative
freedom and the ability to create and design to the
other one to ten percent of the organization. So now
(39:21):
we have both professional designers and everyone else able to
design for free and with ease and not let the
tools or cost get in the way of people achieving
their goals through visual communication.
Speaker 2 (39:33):
Now I'm looking at some analysis that was put out,
one analyst calling it from a virt visual suite to
a comprehensive.
Speaker 3 (39:40):
Creative operating system.
Speaker 2 (39:41):
They say that launches Canva into beyond the tool for
simple graphics and to challenge Adobe's long standing market dominance.
Speaker 3 (39:48):
Is that what you're doing, you're challenging Adobe here.
Speaker 11 (39:52):
I think we really just think about how do we
help organizations achieve their visual communication goals. How do we
People don't wake up in the morning wanting to create
a social media graphic or wanting to create a presentation.
They wake up wanting to achieve a goal. Whether that's
a small business trying to raise money, whether that's a
large organization trying to win more customers or deploy great
(40:13):
marketing content to grow their business and revenue. We're really
in the business of helping businesses achieve their goals. And
that's quite a complex process in a large organization to
create on brand content at scale, and we really have
connected all of that complexity through the Creative operating system
and help businesses deliver on that promise.
Speaker 2 (40:33):
The promise is being born out with the statistics and
the money. The rolls in three and a half billion
in terms of annual revenue uses two hundred and sixty million,
You've been profitable for eight years.
Speaker 3 (40:41):
All of this seems to hint that you're.
Speaker 2 (40:43):
On the path becoming a public company, Is that right, Cliff, Uh.
Speaker 11 (40:47):
Yeah, it's probably imminent in the next couple of years, that's.
Speaker 3 (40:50):
For sure, eminent.
Speaker 2 (40:51):
And what therefore do you need to streamline before that?
How much a you're thinking about your talent. I know
you've done a raise where you're able to offer a
qui to those that have been working with you, But
how are you able to get the right talent in
the door and retain them at this moment?
Speaker 11 (41:07):
I mean, cam is one of the fastest growing companies
in the world right now, and so that helps is
a great product, solving real problems for customers and delivering
lots and lots of value. So people are excited to
work at a company that really helping that company that
is helping their customers achieve their goals and is delivering
on that success and is growing fast. And we've hired
(41:29):
an incredible leadership team over the last well since the
start of Camevra, and a lot of our leaders have
been with us for eight plus years. But we have
also brought in a really great c suite of folks
like our CFO Kelly who came from Zoom, and a
bunch of others to really sort of like pad out
that leadership muscle in the lead up to an Ipol
and beyond.
Speaker 2 (41:48):
You are really augmented by Ai many ways. But some
would say that open ai is a key competitive of yours.
How do you see that with Sora, how do you
see innovation as your lifeblood?
Speaker 11 (42:00):
Open Ai are an absolutely fantastic partner of ours. And
you can even start a design within chat GPT now,
So if you're creating a presentation outline, you can simply
say you can I please have that as a Canva design,
and it will give you that Canva design straight into
Chat GPT and then you can click through to Canva
for the final mile of editing, collaboration, deployment, and then
(42:21):
understanding how that content actually performs in the world. So
we have an absolutely fantastic partnership with open Ai and
we really build the tools around the models like Sora.
So in order to create a video, there's a lot
more than just PROMPTU short clip. You need to create character, consistency, audio,
there's so much more. So we really create that end
to end workflow that enables video creation, design creation, and
(42:44):
now were the first company in the world that's launched
a layered design model that really generates a Canva design
that you can edit straight away rather than having to
every time you make a change, redesign or re recreate
that image or piece of content.
Speaker 3 (43:00):
Nomenon.
Speaker 2 (43:00):
I know you're off to trying to next enjoy that trip,
Cliff Overreckt and the CEO co founder, thanks for joining us.
That does it for this edition of Bloomberg Tech.
Speaker 3 (43:08):
What a week. Check in on the markets as we
go to break.
Speaker 2 (43:11):
We're higher on the day, but it's been a sell
off of a week. As a Bloomberg Tech
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Ed Lovelow in sentrancs go.
Speaker 2 (00:22):
This is Bloomberg Tech coming up, AI and crypto anxiety.
It sends stocks on a wild ride amid volatile trading.
Speaker 3 (00:28):
Will have the details.
Speaker 2 (00:29):
This is Open AI teams up with fox Conn design
AI data center hardware in the United States, and we
speak with the CEO of Cerebrus about the US's approval
of selling advanced AI chips to the Middle East. All
of this coming in the context of deepening market anxiety.
After we are whip swored time and time again, let's
(00:50):
just check out what's happened on the markets over the
course of the five trading days. What a week it
has been. It is off by four percent for the Nasdaq.
This is the worst week we seen for the Nasdaq
one hundred April since, of course, the first concerns about
trade tariffs came into the market. We are seeing significant
pressure on some of your biggest AI winners. Let's move
on and see how some of the nazdac key Points
(01:12):
contributors are doing on this day in Vidio off by
two point seven percent and Video is now down eight
percent over the course of five training days, but Oracle
on course for its worst week since March twenty eighteen.
The AI bubble anxiety continues, and we want to dig
into all of that and the market reaction this week
with bluem egxecut's reporter Carmen Rhinikey, who has been across
(01:35):
the story day in day out. Carmen, why are we
seeing this ongoing pressure on some of the biggest winners.
Speaker 4 (01:43):
Yeah, it's really interesting, and like what a week it's been, right,
you know, we have in Video with this blowout innings
report and then two down days immediately following it. Really,
what it seems to be happening is there are so
many macro pressures on the market right now that that's
adding a lot of weight and dragging down the major indexes.
Speaker 5 (02:00):
But at the same time we're seeing.
Speaker 4 (02:02):
That in Video's report, as good as it was, wasn't
enough to quell some of these overall AI fears, right,
and so we're seeing a sell off. We're seeing very
risk off mentality in.
Speaker 5 (02:13):
The markets right now.
Speaker 4 (02:13):
And one thing that has been kind of interesting is
looking at the stocks that are up today, we're actually
seeing Apple outperform and it usually has lately sort of
been opposite of these big AI names because it doesn't
have a huge AI piece of the puzzle. And then
we're also seeing Google up, which is still really big
optimism after Gemini three. So it's just interesting to see
a little bit of the split that's happening there in
(02:35):
the market.
Speaker 2 (02:35):
And much of this, of course has been built into
the worry about yes in Nvidia has the demand people
starting to dig into account's receivable into inventory.
Speaker 3 (02:44):
But that felt like a bizarre.
Speaker 2 (02:46):
To try and in retrospect understand why we were seeing
a sell off rather than seeing that and then seeing
a stock sell off.
Speaker 3 (02:53):
So can you talk to us about how things are
happening in timing wise?
Speaker 5 (02:57):
The timing has.
Speaker 4 (02:58):
Been so interesting, and I think you're totally right that
we you know, I speak to a lot of investors
and people were sort of pulling on different things, but
there was no real, like smoking gun, great answer as
to why you know, we were seeing this sell off.
But we have been seeing the market sort of react
more to things around a fed cut. If there's going
to be a great cut in December. So this morning,
(03:19):
you know, it looked like things were kind of positive,
and then around the Williams comments, but then you know,
we get you mish out, and so it just seems
like there's a ton of macro and that is really
what's moving the market.
Speaker 2 (03:33):
I think one discourse that has been throughout is debt
and debt particularly among players like Core Weave in the
Neo clouds, but Oracle in particular, the CDs.
Speaker 3 (03:43):
The credit to fault swaps of Oracle have become.
Speaker 2 (03:45):
Almost like a way in which we show anxiety in
the great debt parlor of certain companies.
Speaker 3 (03:52):
Is it rational? No one thinks.
Speaker 2 (03:53):
Oracle is suddenly going to default, but it is being
used as some sort of hedge here.
Speaker 4 (03:57):
Yeah, totally. And I mean the stock is just comped,
completely fallen off. You know, it had that huge jump
and then we've erased all of that. And the debt
question is a really big thing on investors' minds, and
I think it really plays into the fears of the
AI bubble or the debate around it being a bubble,
because if these companies start loading up on debt, there's
the potential that it could they could become over lever
(04:19):
that could be a bigger issue down the line. And
you know, with everything as circular as it is, even
though these companies keep addressing it, you know, Jensen spoke
about it in videos calls. Investors are just not convinced yet.
You know, they're just seeing the house of cards. They're
worried about it.
Speaker 2 (04:36):
They need to see the return on aiblu most common.
Rhinochy has been across this story. Have a feeling she'll
continue to be, so we thank her. Let's turn to
the world of digital currencies.
Speaker 3 (04:45):
There's volatility there too.
Speaker 2 (04:46):
Bitcoin on track for its worst month since twenty twenty two.
Look how much it shed twenty five percent of its
value in November alone.
Speaker 3 (04:55):
It's not just bitcoin though, According to data from coin.
Speaker 2 (04:57):
Gecko, the total market value for virtual coins below three
trillion dollars the first time since April.
Speaker 3 (05:03):
James Siefert is with us Bluemeg Intelligence.
Speaker 2 (05:05):
You cover alternative investments and talk us through some of
the selling pressure. You look at it particularly from the
ETF lens, but more broadly, is it institutional money that's
stepping away ever since that big sell off leverage wash
out in October?
Speaker 6 (05:18):
Yeah, So I absolutely think this is still hangovers a
little bit from that October tenth sellout that you just mentioned.
There's no way to know for sure it's institutional or retail,
but there's some big sellers out there. And what I
would say is the ETFs have mostly held strong. I
mean we as on a percentage basis. The amount of
outflows we saw from the ets was way bigger. In April,
it was about six billion that came out. Right now
(05:40):
we're about five point three five point four billion that
have come out of the ETFs, but it's from a
much higher base, so the percentage basis is way smaller,
So most of the selling is happening from, you know,
the actual spot crypto markets. A lot of people like
to look at the ETFs and they think like, oh,
they're causing this problem or they're exacerbating things, but really
they're just a piece of the pie. And right now,
like I said, it's only about five point three billion
(06:01):
that have come out of the ETFs the US spot products,
So for most of this is happening actually to the
coins directly.
Speaker 2 (06:06):
It's interesting that many who have been in this space
for a very long time don't see this as a
particularly anxiety inducing moment because they've seen sell off some
pressure before.
Speaker 3 (06:14):
It's a volatile asset class.
Speaker 2 (06:16):
But when you say exacerbating the situation, how much a
digital asset treasuries exacerbating the situation. The sudden move we
saw for companies to put digital assets on their balance sheet.
Speaker 6 (06:27):
Yeah, so I absolutely do think that the dats are
exacerbating things here. So right, I think they were a
bit of a flywheel on the way up right, they
were trading at a bit of a premium. They're issuing
stock to buy the underlying currencies. They were issuing debt,
preferred stock and vertible debt to buy the underlying currencies.
And when they're trading at a premium, that's spinning in
one direction. Right now, things are spinning the opps direction.
There are some dats out there that are selling underlying
(06:49):
assets we know, with some ethereum ones and things along
those lines. So I think this is And then also
there's a lot of traders out there that are doing
things or they're hedging the underlying asset and hedging against
the actual DAT company themselves, So that whole interaction is
definitely kind of spinning the opposite direction of the way.
Speaker 7 (07:05):
It's been spinning for the last few months.
Speaker 6 (07:07):
And then also there's a lot of concerns about quantum
computing from there's a blogger who everyone kind of respects
in the space has moved up his timelines, and a
lot of people like to say it's fun, it's not
real concern, but people are starting to take the seriously,
including the leader and founder of Ethereum Metallic. So I
think there's a whole bunch of things here that are compounding.
Speaker 7 (07:23):
Obviously you just spoke about it.
Speaker 6 (07:24):
There's a bunch of risk off in AI names and
just equity risk assets in general. And then I think
also maybe this might be we often see a bit
of selling around this time of year, maybe into December,
particularly DTS for tax loss harvesting.
Speaker 7 (07:37):
Maybe that's being pulled forward a little bit.
Speaker 3 (07:39):
That's interesting. What I want to go back to is
the quantum side of the equation.
Speaker 2 (07:43):
Look, we know that the dat situation digital asset treasuries
has been a case in point is Michael Saylor and
what he did with strategy, and people worrying that maybe
that even falls out some of the key benchmarks and
that adds to the selling pressure. But quantum is more
about cryptography and how that might be broken. Briefly, James,
is that what people are worrying about?
Speaker 6 (08:01):
Yeah, I mean I won't pretend to be an expert
on quantum cryptography or cryptography in general, but essentially the
concern is that that quantum computing would be able to
hack the encryptions that basically keep you know, Bitcoin and
other cryptocurrency safe. There are you know, quantum resistant cryptographies
that can be used and are planned to be used
in other cryptocurrencies and even proposals for bitcoin, but they're
not instituted yet. So the concern is is this going
(08:23):
to happen faster than most people are expecting, But the
industry is on top of it. It's just, you know,
it's a genuine concern at this point as far as
I'm concerned.
Speaker 2 (08:32):
As you say, hashtag fud fear, uncertainty, doubt. Haven't had
that acronym in a little while. James Siefert of Bloembag Intelligence,
Thanks so much for breaking things down. Let's get an
investor perspective for you now. Eric Bailey, Executive Managing director
of the Bailey Group at Stewart Partners, joins us now
and fun Fear uncertainty, doubt is that what is ripping through.
Speaker 8 (08:50):
The markets clearly, Yeah, yesterday was certainly eye opening with
the action and the markets, and it shows investors are nervous.
We've seen it pretty much this whole month, and then
yesterday really really was clear that this sell off has
more legs and big parts of the market are in
a correction. In Nvidia now down seventeen percent from its high.
(09:14):
You were talking earlier about Oracle that's down forty percent,
and you're seeing investors are getting more defensive. You're seeing
sectors like utilities, pharmaceuticals outperforming the growth parts of the market,
and so this could continue. Right as we get through
the end of the year. You do see rebalancing, tax selling,
(09:35):
and that could continue as we need a little more clarity,
a little more confidence to come into the market to
get the growth trade back back heading up.
Speaker 3 (09:44):
What more clarity could you wish for?
Speaker 2 (09:47):
We got a retotive amount of clarity coming from the
world's most valuable company, Jensen Wong doing his best to
try and make clear the our line of sight he
has on future revenues. People questioning maybe the inventory build
up now. But we did get a lot of tangible
evidence there. We had people such as Michael Burry saying
who are the auditors on open AI? And yes, there
was a lot of anxiety in the private markets, but
(10:09):
many have pushed back on that sort of concern.
Speaker 3 (10:11):
What charentage do you want to see?
Speaker 7 (10:13):
Eric?
Speaker 8 (10:15):
Yeah, no, you bring up great points. I think, right
it's a valuation issue and right now investors are weighing
what's the value of these names. They're not clearly sold
that the growth can continue, even though you look at
the analyst community, you look at Nvidia, the average price
target is two hundred and fifty. That's a thirty plus
percent move from these levels, so you would think at
(10:37):
these prices it's pretty attractive. So a lot of this is, again,
you know, just market reaction going through kind of a
correction phase. And I think the buyers will come back in.
It's always unclear when and what levels, but I do
see the buying coming back into the markets.
Speaker 2 (10:55):
Is an element of catch affording life. But is the
FED the key question? So are indeed cut in December?
Speaker 9 (11:02):
Yeah?
Speaker 8 (11:03):
The FED adds a level of confidence to investors, and
investors clearly want to see the FED is taking action
that's positive for the economy, and that right now is
clearly with rate cuts, and so a rate cut would
in my view, bringing confidence to the markets and should
help equities, especially growth equities. Growth equities typically do well
(11:25):
as rates come down, and so that would be a
big boost next month.
Speaker 2 (11:30):
Some of these particular numbers that I relate to on
a weekly basis do look really ugly, as I say,
now's that worst week since April video, worst week since
about April, and you see a similar thing for Oracle,
worst week in fact since twenty eighteen.
Speaker 3 (11:44):
But looking at a year to.
Speaker 2 (11:45):
Date basis, we're still in a pretty great spot, right Eric.
Speaker 8 (11:50):
Oh, absolutely yeah. I mean the SMP is still up
north of ten percent. Overseas markets have had an incredible
year up you know, across the board, north of twenty percent.
So investors, right, they have to step back and be
patient and be calm and actually look at these selloffs
as an opportunity because this is where you can make
solid returns right by great companies at lower levels. I mean,
(12:12):
that's the key to investing and not panicking and not
selling when everyone else is selling and take losses and
hurt yourself long term.
Speaker 2 (12:20):
Eric, your thesis with AI do you think it's a
bubble or do you think this is a sort of
capital expenditure that's necessary to read the productivity in the future.
Speaker 8 (12:30):
You know, the numbers you're seeing committed to this space
is certainly eye opening and nervous, and it seems like
it's a few of the big, you know, massive players
in that space, and so it does bring concern. On
the other hand, without a doubt with with these earnings
results we've seen, you know, just from Nvidia and you
saw from Alphabet and the strength there clearly AI you
(12:55):
have to be invested in it a long term. It's
the growth Benjim. And so if you want growth, AI
is the place you want to be.
Speaker 3 (13:03):
Alphabet at a new record high today.
Speaker 2 (13:06):
Bailey of the Bailey Group at Steward Partners, thanks for
your time, Happy weekend. Coming up open AI Well, it's
partnering up with Honhai also known as Boxcon to design
AI data sent to hardware in the United States. Details
next this is Brumberg Tech.
Speaker 10 (13:32):
To keep pushing the frontier. We need to build these
new types of AI infrastructure hardware at scale, and I'm
excited for that to happen in the US and with
Fox con. Fox Cohn's experience building complex infrastructure and hardware
at massive scale makes them the ideal partner for this,
and I'm looking forward to exploring together what this can
look like. We'll share insight into emerging hardware needs across
(13:55):
the AI industry, and Foxcom will use that to design
and prototype new equipment that can be manufactured in America.
Speaker 2 (14:02):
Open Ai CEO Sam Altman joining fox Con also known
as hon Hi Tech Day in Taipei remotely to weigh
in on the company's partnership with of course fox Gone
to design AI data center hardware in the United States.
Speaker 11 (14:15):
Look.
Speaker 2 (14:15):
Under the partnership, fots GONE will co design and develop
data center server racks with open AI and work to
ensure such racks can be manufactured across the United States
look blomeg Texts and Animel Drowders. She caught up with
Honhaigh chairman Jong Nu to discuss the plan and his
goal for scaling up compute capacity.
Speaker 12 (14:33):
Take a listen, the giga wand per week will be
the goal.
Speaker 3 (14:38):
Okay, one giga wa per week.
Speaker 12 (14:41):
That would be SINS goal. But we can start with
one giga wand per.
Speaker 13 (14:45):
Month, So you think you can add one gigawat per
month next.
Speaker 12 (14:50):
Yeah, studying next the second half of the year.
Speaker 13 (14:55):
Second half of the year, So you think you can
add six gigawats next year?
Speaker 12 (15:00):
Sure, it really depends on our starting on our new
way of doing things. It takes time, but eventually we're
going to get there.
Speaker 13 (15:08):
Let's talk about then, this opportunity in the US, because
as you said, the part of this is about making America.
It is very ambitious. What's the capex that you need
to also dedicate to the States.
Speaker 12 (15:21):
The kpex wise is in maybe one to five billion
to star wars to build the factories, to build on
these centers, but to build the working capital required to
build the data center, that's totally different. That requires a
(15:44):
huge amount of money. Yeah, and with that we are
going to work with sol Bank.
Speaker 13 (15:51):
What are the biggest challenges with scaling up.
Speaker 5 (15:54):
In the US?
Speaker 12 (15:56):
Shortage of labor, as I mentioned, is not labor. Cast
is a charge donation labor.
Speaker 3 (16:03):
How do you get around that?
Speaker 13 (16:04):
What are the conversations like and what are the biggest
shortfalls that you see?
Speaker 7 (16:09):
Now?
Speaker 12 (16:09):
We had to work closely with schools and the government,
which we were very familiar When we build our factories,
all over the world. We had to work with local
agencies or local government to get their people ready for
(16:29):
the kind of a job that we we require.
Speaker 2 (16:34):
Hon High Chairman Young New there with our own Annabelle Drulers,
let's break down that agreement between open AI and Honhai
Neuberg's AI. Sir Seth Fiegermann is here. It's interesting timing
giving the anxiety around capital expenditure, and we're hearing about
how Honhaig is using SoftBank perhaps for some of that
capital expenditure and investment.
Speaker 3 (16:52):
Seth, but there.
Speaker 2 (16:53):
Doesn't seem to be any purchase agreements here, right.
Speaker 14 (16:57):
That's right, We really don't have any numbers here. I
mean it is a testament to the scale of a
Bonnie's ambition in particular on the infrastructure front, as well
as fox CON's desire to diversify away from its reliance
on Apple and really gain momentum on the AI. But
I think stepping back from it, the really important to
take away, apart from a lot of the record around
what it means for US manufacturing, is what it means
(17:18):
for open AI as it tries to not just move
faster on the infrastructure front, even in the face of
anxiety about AI spending, but also begin to build more
of remote or competitive advantage on the infrastructure side. We
talk a lot on the show and elsewhere about you know,
how much and how quickly am models are being commodetized,
and whether the compective advantage there. But I think what
you've seen all Menualpennie I do is try to get
(17:40):
certain more ownership over the supply chain for data center
build out and chips in a way they could give
it a different kind of competitive advantage and lower costs
in the long term.
Speaker 2 (17:49):
Again, it's a foreign company investing in the United States.
One to five billion dollars is what they're thinking is
spending to grow fox CON's US manufacturing footprint. But here
this seems to be about the understanding of inefficiencies within
data centers, right, what can go wrong, and how open
AI can lend a hand on telling them that that's right.
Speaker 14 (18:07):
I mean, look, most people are probably more consumed by
thinking about the models that we use in the chatbots,
but they're talking about a lot of the key components
that go into setting up and operating data centers, from
the data center server racks, to cooling and power equipment
to the cabling. These are not the sexiest things, but
they're essential as trying to build out a massive scale
of data centers here and abroad.
Speaker 2 (18:29):
Meanwhile, open Ai is trying to field a ton of
questions right now. They are of course under some duress
about how they're raising funds in and of themselves to
spend on all the data center build out. You had
Michael Burry like questioning auditors, and it seems as though
they've got some clarity from that and ft reporting set
But how much pressure is Sam Altman and team feeling.
Speaker 3 (18:49):
At this moment.
Speaker 14 (18:50):
Immense And we're gonna given mentioning what they feel from
Google now, which seems to have built a model though
either rivals or outcompetes anything. They're opening eye paralize on
the market, which gets back to again, they want have
a competitive advantage not just on the model side, but
on the infrastructure that supports it. And increasingly they're tying
themselves to all different corners of the market and all
different key players and tech to make it they're too
big to fail.
Speaker 2 (19:11):
Seth Figerman. Yeah, great context, thanks for bringing it. Happy
weekend shares of Ubisoft. They're climbing today in Paris as
Trading resumed up to week long suspension for the gaming
company Look. It had delayed its second quarter results after
auditors found it improperly recorded revenue from a partnership who
(19:34):
was soft helped reassure investors today by saying it will
pay off debts with funds from an investment it received
earlier this year from ten Cent Holdings. Meanwhile, Meta is
making a big.
Speaker 3 (19:45):
Push into AI.
Speaker 2 (19:46):
We know that, and to assist in that expansion, the
social media giant is actually adding another business to its portfolio,
Power Trading, hoping to help plant developers by committing to
long term energy contracts who most Wiley Griffin covers Meta
extraordinaries story. The amount of diversification these companies are having
to do to fulfill the energy and requirements for data centers.
Speaker 15 (20:07):
It truly is amazing, and it comes back to this
idea that Mark Zuckerberg has pitched as front loading capacity,
bringing on the energy they anticipate, the compute they anticipate
for that big day that they are gunning towards, which
is the idea of super intelligence. But in the interim
you Meta anticipates a lot more energy needed and so
(20:30):
it is going to enter this power trading market in
an effort to ensure that long term capacity.
Speaker 2 (20:35):
There was a great interview you did with ov Perek,
who is heading up Electricity Trading or META. Why is
she indicating this move and what ultimately is she thinking
about doing to build this out.
Speaker 15 (20:48):
Yeah, so she said that too few buyers are willing
to commit to long term electricity contracts that would justify
building new power plants. So, really, the AI demands are
clashing with the demands of the grid and META is
taking matters into its own hands here by becoming a
power trader. It would essentially lock in these long term
deals to support its AI ambitions.
Speaker 2 (21:12):
It's interesting that sudden analysts out there, you talk to
the managed to direct to a power modeling from Habitat
saying that this is actually a natural extension of tech
companies investors understanding that that we're all going to become
basic infrastructure companies, energy companies, raised in companies too.
Speaker 15 (21:28):
Yeah, it's a kind of managing a risk that we've
seen in other industries. It allows you to lock in
energy and then if you have too much, you can.
Speaker 16 (21:36):
Ultimately sell it back. And Meta is not alone here.
Speaker 15 (21:38):
So we've seen Apple, Microsoft, other big players make this
attempt to so Meta isn't alone, and I think that's
a reassuring thing to investors. The other very interesting comment
you heard from Mark Zuckerberg on the last quarterly earnings
call was that they're thinking about managing that kind of
risk when it.
Speaker 16 (21:57):
Comes to excess compute as well.
Speaker 15 (22:00):
So we're watching closely to see if they make any
moves to diversify into.
Speaker 16 (22:04):
That API business, that cloud business, to sell that too.
Speaker 2 (22:07):
Look, everyone's a hyperscaler, everyone's a cloud provider. Now everyone's
an energy trader too. Bloomberg's Riley Griffin. Fascinating, Thank you
very much, indeed, welcome back to Bloomberg Tech.
Speaker 3 (22:22):
Let's check in on these markets.
Speaker 2 (22:23):
Let's give you what we did for the week, because
it's been under pressure for the course of the week.
On the day then AzaC is actually trading higher. We're
up about a tenth of a percent on the course
of the week, though we are lower to the tune
of three percent. Let's call it the worst week since April,
since the real torrid anxiety around trade tariffs really hit
the market. We look at individual movers and when you're
(22:44):
thinking under the hood, which are the key players have
been dragged to the downside. Today is a day of
volatility as we think about what the Fed does in
December on the week's anxiety of AI bubble or not,
about whether we can afford the capital expenditures.
Speaker 3 (22:54):
And video is off by nine tens percent.
Speaker 2 (22:56):
Again after stellar numbers, after more than sixty percent grow
in terms of revenue yesterday for the fiscal quarter just gone,
and pointing to the fiscal quarter to come. And yet
that line of sight on half a trillion dollars worth
of revenue not enough to cool market anxieties.
Speaker 3 (23:10):
Instead, we're talking about accounts, receivables, what they're owed by
their customers.
Speaker 2 (23:14):
What are the owed bi oracle, What is the oracle
having to do in terms of debt issuance. That's what
the market is questioning. We're off by six percent. It's
having its worst week since March twenty eighteen. We're off
by six percent on the day. Let's talk about all
of this, the big tech binge on debt, that's what
people are talking about. While in the absence of a
leverage underpinning the AI build out has long been used
(23:37):
to dismiss bubble concerns, but there has since been a
bit of an uptick in borrowing and it's starting to
change the narrative. Your most tech equity reporter around, Valastelica
is here and look, we're not talking that Alphabet or
Amazon or Microsoft are suddenly gonna go broke. Here they
have huge cash on hand. But why are Oracle CDs
in the line of fire?
Speaker 7 (23:57):
Hey, good morning, thanks for having me.
Speaker 9 (23:59):
So yeah, Oracle is really sort of the focus when
people are starting to pay attention to the debt that
is being issued by all of these tech companies. I
think the five big spenders on AI, which is Microsoft, Alphabet, Amazon, Meta,
and Oracle together they have raised more than one hundred
billion in debt this year. That is more than three
times the average over the past decade. Or so Oracle
(24:20):
in particular, because they are seen as having one of
the weaker balance sheets of them, They're going to have
negative cash flow this year. That's expected to deepen in
the coming years as they invest aggressively into their cloud business,
which has been a big benef sharry of AI. But
if you look at their credit, the fault swaps for
the next five years, which is really being used as
a kind of proxy for AI risk. Those have skyrocketed
(24:43):
over the past couple of months. I think they are
around forty four basis points in September, they're over one
hundred now. So this just shows you how people are
growing concerned about all of this capex. When is it
going to pay off? What is this doing to the
balance sheets of all these big tech companies, and really
how should that impact the way we are valuing them.
Speaker 3 (25:01):
Rating companies are keeping an eye and.
Speaker 2 (25:04):
I think Oracle has been put on negative watch in
case it does need a downgrade from its debt issuance.
But what's interesting is there's have a lot of creative
financing around this. Look there was eighteen billion dollars issued
by Oracle, and there was thirty eight billion dollars of
bonds issued for Oracle Data Centers, but not BI Oracle
at all. And then we think about the private credit
markets and what Blue OU's been up to with Meta.
(25:25):
How much is this actually not being seen at the moment.
Speaker 9 (25:29):
That's a great question. I think this kind of gets
to the bigger picture concerns right now about just all
of this spending, how it's being done. We've seen so
much these circular financing deals you've seen this off balance
sheet debt, all of these things, it just seems like
they add to the risk of the market or people
are saying like, we don't really know the full picture
of all this stuff. We have one of the biggest,
(25:49):
most important companies in AI, which is Open AI. They're private,
we don't have as much information about them as we
do public companies. When you get all that, it's like,
this is just more things that are people are uncertain
of about numbers you can't fill in, and that just
causes people to think, maybe this is more risky than
we thought. This is a good opportunity to be taking
risk off the table when you see all these things
sort of building on each other.
Speaker 2 (26:11):
Ryan Vastelica always a must read, some of the most
best stories throughout the week.
Speaker 3 (26:15):
We really appreciate it.
Speaker 2 (26:16):
Look, let's talk about some of that anxiety in the
private markets.
Speaker 3 (26:20):
Concerns about an AI bubble.
Speaker 2 (26:21):
They swell there to Rebecca Lynn, managing director at Canvas Prime,
is one who's saying, we are in a bubble. Look,
you're here to tell us a little bit about what's
impacting your investing approach, and first give us your thesis
and why it's obviously an AI bubble.
Speaker 17 (26:35):
Right, Well, I think we can debate whether we're in
a bubble or not, you know, for the for the
better part of the day, I definitely think we're in
a bubble. But what's more interesting I think to talk
about is how we as early stage investors react and
how we invest in incredible companies that will be the
next you know, sort of five trillion dollar companies, and
(26:56):
how we execute on that no matter where we are
in this hype.
Speaker 2 (26:59):
Cycle, Rebecca, for example, those that would say we're not
in a bubble or not in similar to dot com,
is that actually a lot of these companies are very profitable.
In Nvidia, very profitable, Alphabet, Amazon, all the likes, but
open Aye and the private side, we know that thus
far they haven't been profitable because I'm having to invest
so much.
Speaker 3 (27:17):
So let's time on touch the private side.
Speaker 2 (27:19):
What security you getting from the companies you want to
invest in that they are keeping pace with growth trajectory
on the bottom line and the top line.
Speaker 5 (27:28):
Very interesting.
Speaker 17 (27:29):
So what we're doing is we're really having to dig
in and the companies we invest in on the customers
and go in and talk to their core customers and
ask questions questions I haven't had to ask, honestly, and
since I've been an in venturer, like, let me see
all of your contracts for every single deal that you
have signed up. Because what we're seeing in private markets
(27:51):
is the arr is probably the most overused term in
the English language, and so people are misused. Let's just
say misused.
Speaker 3 (28:01):
That's what you're trying to get.
Speaker 2 (28:02):
The idea that you look at what revenue've had in
the month past and you can extraculate that out on
a twelve month basis.
Speaker 5 (28:08):
Exactly, or annual recurring revenue.
Speaker 17 (28:10):
How much have they contracted with these with their customers,
And when a company gives you that number, you really
have to peel back the onion.
Speaker 5 (28:17):
You have to go and talk to the customers.
Speaker 17 (28:19):
You have to look at the contracts, and then the
contracts oftentimes what they're accounting as annual recurring revenue is
not at all. They're things like pilot revenue or you know,
very like installation revenue. Things like that very ephemeral revenue,
or the revenue could go away with a thirty day
out clause at any point in time. So we really
look for companies where customers have used, are using the
(28:43):
company not just as a trial or an R and
D experiment, but are really using that company and count
on that company for their day to day operations, either
in financial services or healthcare.
Speaker 2 (28:54):
I think back to the lessons learned in FTX and
when we all suddenly realized this company that everyone appiled
into thinking it was a winning formula was actually I
think using quick books in terms of its own accounting methodology.
How much have investors vcs become so savvy to the
cult of a personality, to the CEO, to a story
(29:17):
that is of growth but actually really trying to peel
that on you and as you say you're doing.
Speaker 17 (29:21):
Yeah, I mean it's just what we stay focused on.
I tell my team, do the right deal, not the
hype deal.
Speaker 5 (29:26):
And it's hard.
Speaker 17 (29:27):
It's hard when they bring a company in and you know,
people are piling in at you know, five hundred million
dollars valuations with really no revenue, and they're great, they're
great firms. We call them the big box firms here
in Silicon Valley. Who have you raised hundreds of you know,
or over a billion two billion dollars in to invest
and they just have a fundamentally different problem. Right now,
I think they're not doing a lot of the diligence.
(29:48):
They can't do that really deep diligence because they simply
have too much capital to deploy.
Speaker 5 (29:54):
And when I talk to my my.
Speaker 17 (29:56):
You know, brethren over there that they'll say things like you,
you know, our job is in part just deploying capital,
and so I think sometimes unfortunately they skip over the
part that I think is the most important part of
the job, which is diligence and governance on these deals
and really diving deep to say is this a company
that can make it for the long term and really
(30:17):
return a lot of capital, or is this a company
that might be running on quick books.
Speaker 3 (30:21):
Like you said, the thing is you're in the Series
A and Series B.
Speaker 2 (30:25):
I think of just the extraordinary numbers that we were
talking about. A potential project that Bezos is launching with
initial seed funding of six billion dollars. You've got Mara
Marati raising a company's funding at potentially a fifty billion
dollar valuations. What's being reported by Bloomberg when ultimately a
seed round was giving her evaluation a twelve billion in
(30:47):
rate two billion on that?
Speaker 3 (30:48):
What are the numbers that you're seeing to get into these.
Speaker 17 (30:51):
Rounds, well, I think first of all, what you have
to realize is that you know, the large majority of
capital is going into a handful of deals. I think
sixty two percent of all the money that went in
last year and adventure or actually this year.
Speaker 5 (31:03):
Is going into eight deals.
Speaker 17 (31:04):
And so I actually see that as an opportunity and
it's a feature, not a bug in terms of what
I'm doing.
Speaker 5 (31:11):
And we are seeing deals.
Speaker 17 (31:13):
We're seeing series as that we were interested in initially
with sub five sub ten million dollars of actual revenue
going for five hundred million plus invaluation. But I think
the more interesting thing I actually walked away from two
deals in the last I would say thirty days that
had that profile. But even if you could get comfortable
(31:34):
with the valuation, what people really aren't talking about right
now are the governance issues. And so in both of
the deals I walked away from, the founder demanded in
the series a complete and total board control, not just
in voting shares, but on every major decision that the
company could make going forward. And what I've seen, and
(31:55):
you know, I was around for the dot com bubble,
and as an operator, I've been investing through multiple cycles,
and what I've learned is that that is a recipe
for a disaster in most situations. And so I'm actually
more concerned with the lack of governance going on right
now even than the actual evaluations and the money going in.
Speaker 2 (32:13):
People not talking about it, but you're talking about it,
and you're talking about it on this show. We so
appreciate that you do. We love the right deal, not
the hype deal. Rebecca Lynn, come back soon, we hope.
Managing director at Canvas Prime, thank you. Coming up, We're
going to be speaking with the CEO of Cerebra Assistance,
Andrew Feldman. The US approves the selling of advanced AI
chips in the Middle East, how it affects his startup.
(32:36):
And we're watching, of course, publicly traded shares to Netflix, Paramount,
Comcast initial offers have been put on the table for
the Warner Brothers Discovery.
Speaker 3 (32:44):
Paramount wants the whole thing.
Speaker 2 (32:45):
Remember up one point three percent of Paramounts guidance today,
Comcast up almost two percent of Netflix under pressure.
Speaker 3 (32:50):
This is Bloomberg Tech.
Speaker 2 (32:58):
Let us check in on chips stops because it has
been a wild week. It's been a wild day as well,
we are currently off in negative territory. If you're looking
at the Semiconductor index, the Philly one, we're currently flat,
just down on the socks as we see apply Materials
trying to do its best to lift us higher. But
on the downside, broad come from a point's perspective. In
video off by five tens percent. This is the question
(33:19):
mark we still have about how much customers owen video
and indeed their ventury backclock is being thought about. But
AMD off by two percent TSMC even being dragg lower
by one point four percent, as we still question some
of that anxiety in the market regarding AI bubble or not.
Speaker 3 (33:34):
But this is all is.
Speaker 2 (33:35):
This week we saw the US actually approved the sale
of advanced AI chips into the UAE into Saudi Arabia.
That's boosting the Gulf nation's AI expansion efforts so should
be a key area of demand. Andrew Fellman, CEO of
Cerebra System is praising the move, saying we're grateful for
the administration's decision which allows us to scale US built
wafer scale AI systems into one of the world's fastest
(33:56):
growing AI hubs.
Speaker 3 (33:57):
Andrew joins US now for more so.
Speaker 2 (34:00):
You of course, have the CS three system, new class
of AI supercomputer. You want to be able to ship
it more into partners. You have G forty two. You're
working with the UAE.
Speaker 3 (34:08):
How much will you be working with Saudi Arabia.
Speaker 18 (34:13):
I think we've begun working with Saudi Arabia. We do
have salespeople on the ground in the Kingdom. It is
a new effort for us, and it's not as far
along as we are in the UAE in some other territories,
but it's an exciting opportunity. And I think the move
by this administration to allow our allies and our partners
(34:34):
in the Middle East to gain access to advanced a
compute is a good one and thoughtful. And I think
having US technology from chips to software to the full
stack in the hands of our allies is good policy.
Speaker 2 (34:51):
Hands of our allies, you have CS three system, which
he says quickly, easily clustered together, you make it the
largest AI supercomputers the allies are in the Middle East,
but there's always been worry that it would be a
backdoor into China. How do you make sure that your
IP has protected?
Speaker 18 (35:05):
Andrew Okay, I think we work closely with G forty two.
There are strategic partner and we have been working with
them for more than three years now, and they have
developed a restricted Technology environment, an approach that sort of
surrounds the technology with security. I think it is both
(35:27):
forward looking and extremely sort of rigorous. We're really confident
that it will keep the technology both physically from being
transported to China as well as used by by Chinese agents,
and so we're very confident. We've visited facilities, we've seen
(35:49):
the restricted Technology environment in action. I think they're doing
an extraordinary amount of work to earn the President's.
Speaker 2 (36:01):
You do have that relationship with G forty two. How
does the relationship of expansion sales groups on the ground
in Saudi Arabia square with that relationship. How many sales
do you think you're going to be able to get
right away?
Speaker 18 (36:11):
Andrew, I think sales in any territory take a little
bit of time. You have to build relationships, you have
to build credibility and legitimacy. But I think our success
with G forty two, the work we're doing with other
customers like Meta, like IBM, the work we're doing with
large enterprises like Mayo Clinic and Galas of Smith Klein
(36:34):
and the work we're doing with leading AI startups like
Mistral and Cognition. All of these make entry into new
markets a little bit easier. You have examples you can
point to, You have large customers that they or partners
they can buy from. And I think this is what
it means to be expanding quickly in a global environment.
Speaker 2 (36:56):
It's the US government doing enough to help startups such
as your Visa VI Nvidia, which in many ways gets
a lot of the voice support from the administration.
Speaker 18 (37:06):
Briefly of course, and sort of they've gone through this
process too, right. They weren't always a giant company. I
think it's taken them twenty twenty five years to earn
their position at the top. And so you know, we
have extraordinary access. We do a big business with the
(37:26):
Department of Defense with the DOE. Actually, I was with
Jensen and Lisa Sue of a m D with Secretary Wright.
The DOE is is a leading organization for US AI policy.
It's been I think you always want more, but I'm
(37:50):
proud of what we've been able to accomplish with the government.
Speaker 2 (37:53):
Andrew Felman come back soon. We hope revers system. CEO
appreciate you joining on the day. Canvas Affinity suite of
creative tools, well it's topped two million tantos since it's
launched just free software a few weeks ago. The free
product offering is part of canvas increasing effort. We need
(38:15):
to challenge rivals like Adobe. Let's talk about this with
camas Co foundery Cliff Obect Cliff, extraordinary level of uptake.
Speaker 3 (38:24):
Were you expecting that?
Speaker 11 (38:27):
To be honest? And thanks for having me first and foremost.
We've been absolutely blown away by the level of uptake.
It probably really speaks to the creative community screaming out
for choice and us delivering on it. But yeah, we'll
be absolutely blown away with the pickup so far.
Speaker 2 (38:43):
Affinity is about professional design in many ways, but how
are you seeing being adopted more broadly and who is
it that really wants to lean into this type of sophistication.
Speaker 11 (38:53):
So Canva is a design tool. When we launched Canva,
there were only professional design tools.
Speaker 7 (39:00):
So we launched Canvas to.
Speaker 11 (39:01):
Enable the ninety to ninety nine percent of the world
who couldn't design, to be able to design and express
their creativity. And what we did with the acquisition of
Affinity we acquired that company and we just launched it
one hundred percent for free, and that really gives creative
freedom and the ability to create and design to the
other one to ten percent of the organization. So now
(39:21):
we have both professional designers and everyone else able to
design for free and with ease and not let the
tools or cost get in the way of people achieving
their goals through visual communication.
Speaker 2 (39:33):
Now I'm looking at some analysis that was put out,
one analyst calling it from a virt visual suite to
a comprehensive.
Speaker 3 (39:40):
Creative operating system.
Speaker 2 (39:41):
They say that launches Canva into beyond the tool for
simple graphics and to challenge Adobe's long standing market dominance.
Speaker 3 (39:48):
Is that what you're doing, you're challenging Adobe here.
Speaker 11 (39:52):
I think we really just think about how do we
help organizations achieve their visual communication goals. How do we
People don't wake up in the morning wanting to create
a social media graphic or wanting to create a presentation.
They wake up wanting to achieve a goal. Whether that's
a small business trying to raise money, whether that's a
large organization trying to win more customers or deploy great
(40:13):
marketing content to grow their business and revenue. We're really
in the business of helping businesses achieve their goals. And
that's quite a complex process in a large organization to
create on brand content at scale, and we really have
connected all of that complexity through the Creative operating system
and help businesses deliver on that promise.
Speaker 2 (40:33):
The promise is being born out with the statistics and
the money. The rolls in three and a half billion
in terms of annual revenue uses two hundred and sixty million,
You've been profitable for eight years.
Speaker 3 (40:41):
All of this seems to hint that you're.
Speaker 2 (40:43):
On the path becoming a public company, Is that right, Cliff, Uh.
Speaker 11 (40:47):
Yeah, it's probably imminent in the next couple of years, that's.
Speaker 3 (40:50):
For sure, eminent.
Speaker 2 (40:51):
And what therefore do you need to streamline before that?
How much a you're thinking about your talent. I know
you've done a raise where you're able to offer a
qui to those that have been working with you, But
how are you able to get the right talent in
the door and retain them at this moment?
Speaker 11 (41:07):
I mean, cam is one of the fastest growing companies
in the world right now, and so that helps is
a great product, solving real problems for customers and delivering
lots and lots of value. So people are excited to
work at a company that really helping that company that
is helping their customers achieve their goals and is delivering
on that success and is growing fast. And we've hired
(41:29):
an incredible leadership team over the last well since the
start of Camevra, and a lot of our leaders have
been with us for eight plus years. But we have
also brought in a really great c suite of folks
like our CFO Kelly who came from Zoom, and a
bunch of others to really sort of like pad out
that leadership muscle in the lead up to an Ipol
and beyond.
Speaker 2 (41:48):
You are really augmented by Ai many ways. But some
would say that open ai is a key competitive of yours.
How do you see that with Sora, how do you
see innovation as your lifeblood?
Speaker 11 (42:00):
Open Ai are an absolutely fantastic partner of ours. And
you can even start a design within chat GPT now,
So if you're creating a presentation outline, you can simply
say you can I please have that as a Canva design,
and it will give you that Canva design straight into
Chat GPT and then you can click through to Canva
for the final mile of editing, collaboration, deployment, and then
(42:21):
understanding how that content actually performs in the world. So
we have an absolutely fantastic partnership with open Ai and
we really build the tools around the models like Sora.
So in order to create a video, there's a lot
more than just PROMPTU short clip. You need to create character, consistency, audio,
there's so much more. So we really create that end
to end workflow that enables video creation, design creation, and
(42:44):
now were the first company in the world that's launched
a layered design model that really generates a Canva design
that you can edit straight away rather than having to
every time you make a change, redesign or re recreate
that image or piece of content.
Speaker 3 (43:00):
Nomenon.
Speaker 2 (43:00):
I know you're off to trying to next enjoy that trip,
Cliff Overreckt and the CEO co founder, thanks for joining us.
That does it for this edition of Bloomberg Tech.
Speaker 3 (43:08):
What a week. Check in on the markets as we
go to break.
Speaker 2 (43:11):
We're higher on the day, but it's been a sell
off of a week. As a Bloomberg Tech
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