November 13, 2025 • 43 mins
Bloomberg’s Caroline Hyde and Ed Ludlow speak with Cisco CEO Chuck Robbins after the company raised its outlook and showed progress capturing more of the global AI spend. Plus, their conversation with Disney CFO Hugh Johnston on the media giant’s plan to invest in its content slate and streaming bundling. And Tesla is developing support for Apple's CarPlay system in its vehicles, according to sources, working to add one of the most highly requested features by customers.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hide in New York
and ever though in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up. Cisco shares gain after
boosting it's twenty twenty six forecast, showing progress in its
efforts to capture more AI spending. We're going to discuss
with the CEO plus shares of Disney.
Speaker 3 (00:34):
They're falling today as the company invests in its content
slate and stream bundling. Our conversation with the Disney CFO Hugh.
Speaker 2 (00:40):
Johnson, and ten Cent strikes a deal with Apple under
which the iPhone maker takes a fifteen percent cut for
purchases in we chat, minigames and apps.
Speaker 3 (00:50):
First free checking on these markets and maybe a little
bit of chot as we try to discern when we
get the government data and what that will show the
Federal Reserve, canondean do or do not when it comes
to cutting in the future. The market a little bit
uncertain at the moment. It seems as though that lifting
of a government shutdown have been priced in. We're currently
off by one point four percent. We're dragged down by
the key names in Magnificent seven. But ed, you're looking
(01:13):
at the company that's adding the most in points upside.
Speaker 2 (01:16):
Yeah, one of the big movers to the upside is
Cisco shares currently up around four percent. They'd open much
higher than that. The key bit is they're trading at
their highest level since the year two thousand, after the
company raised its outlook and showed progress on capturing more of.
Speaker 4 (01:31):
The global AI spend.
Speaker 2 (01:32):
Let's get the details with Cisco's CEO, Chuck Robins. Chuck,
in the year two thousand, Cisco is one of the
original four horsemen of technology. Based on the numbers you
gave and what you said on the call, do you
feel like customers, the new ones and investors now understand
(01:52):
Cisco's place in this new AI era.
Speaker 5 (01:56):
Well, first of all, thanks for having me, and you know,
I'm super proud of what teams have accomplished. We had
a record quarter and set ourselves up for what's likely
going to be the best year we've ever had. So
it was just a great performance. And as I've been
asked a lot over the last twenty four hours to
reflect back on two thousand and it's kind of an
interesting comparison, but I think that, Look, the hyperscalers are
(02:20):
some of the most advanced customers in the world. They
do the deepest analysis of the technology before they make decisions,
and I think that their decisions to continue spending more
with us speaks volumes about the innovation and the technology
that our teams are building right now. So I'm really
proud of them, and I think it'll just extend into
the enterprise over time.
Speaker 2 (02:41):
Chuck, who are some of those new customers that you've
been able to sign in the air context.
Speaker 5 (02:47):
Well, we're just talking about the major hyperscalers, primarily in
the United States, but we've also announced these sovereign deals
in the Middle East with G forty two and the
Emirates as well as Humane in Saudi There's a lot
of work going on in the neo cloud space. We're
seeing sovereign players start popping up now in parts of
Europe as well as Southeast Asia and India. So it's
(03:10):
a broad swath of customers. But the one point three
billion that we talked about is strictly the top hyperscalers
that we're doing business with.
Speaker 4 (03:17):
So you're talking about five companies and.
Speaker 3 (03:20):
They're good for the money, as you can tell from
the cash flow that they.
Speaker 6 (03:23):
Have chuck not two hundred million dollars.
Speaker 3 (03:25):
That you are expanding into sovereign, you are expanding into
enterprise and neoclouds. How do you bake in some of
the risks that the market just cannot get enough of
talking about this circular economy.
Speaker 5 (03:36):
Well, so we did talk about the fact that we
have over two billion dollars now in our pipeline through
the end of the fiscal years over the next three
quarters in neo cloud, sovereign cloud, and enterprise, and we
see that continue to accelerate. We took two hundred million
dollars in orders in Q one, and it's just it's
a natural way the technology technologies have been evolving over
(03:58):
the last decade. More they start in the hyperscalers, they
move through the telco space in this case the neo
clouds and the sovereign players, and then into the enterprise.
And it's happening exactly that way. And our bread and
butter over the years has been in the enterprise. And
we have lots of technolo knowlogy, We have a partner ecosystem,
we have full stack solutions, we have security, we have
(04:19):
all the things that they're looking forward to actually build
out AI workloads and deal with AI with confidence.
Speaker 3 (04:26):
Let's just go to that security a little bit of
a fly in the ointment. Let's say, I know you've
talked clearly about perhaps how the booking of revenue can
be misinterpreted, but how are you going to sell that
more holistically? How do you think the security part of
the offering can really start firing on all cylinders.
Speaker 5 (04:41):
Well, I started by saying clearly we're not pleased with
where we are yet, but I will say over the
last two to three years, we've made a lot of progress.
It's a major decision for customers to make big platform decisions.
In security, We've had a lot of great wins. I'm
proud of what the teams have built. And we saw
our next generation our walls, we saw mid teens growth
(05:02):
and orders there. We saw double digit arr growth and Splunk.
We saw our new and refreshed products on the security
side continue to show growth. And the issue we had
in the quarter was really it's an accounting issue around
how cloud delivered Splunk versus on prem delivered Splunk. The
cloud stuff is radable and realize revenues realized over the
(05:22):
life of the term, and the on prem stuff gets
recognized immediately, and we just had a major shift in
how our customers consume it, which is great for us
in the long term that they're buying more cloud based solutions,
but it creates a little bit of a challenge on
revenue during the quarter. The good news is the networking
business is doing incredibly well and can cover that for us.
Speaker 2 (05:43):
Chuck, it is fair to say at a minimum that
the Cisco of today isn't the same as the Cisco
of two thousand. What you've done is kind of been
open about the product lineup and you've used M and
A to change the footprint of the company. What's your
latest thinking on that, the products that you offer and
what you need to do, either organically or inorganically to
offer what the world of AI wants.
Speaker 5 (06:06):
I think the big things that we did we obviously
introduced a lot more software into our portfolio in areas
that are strategic, like security, and this Plunk acquisition has
been a great one. I think the other thing that's
worth calling out is is this investment that we started
in twenty sixteen to be clear on our silicon strategy
that is absolutely the reason that we're having success today
(06:28):
in the hyperscaler space. If we did not have our
silicon and develop and design our own silicon, we wouldn't
be participating at all. It's just black and white. And
so as we as we look at both internal innovation
as well as or inorganic opportunities. We're very focused on security,
We're very focused on AI. We've made some tech and
(06:52):
talent deals. Anything that can help us accelerate our solutions
in those areas we're open to look at.
Speaker 2 (07:00):
Chuck, I do not apologize for this next question. Are
we or are we not in an AI bubble?
Speaker 5 (07:09):
Oh, it's just it's so funny. Look, the customers that
are buying the predominant amount of this technology have incredible
balance sheets, have incredible cash flow, have incredible profitability. I
think Caroline said it. They actually pay their bills and
and so, and they view it as an existential issue
(07:29):
for them. That's that's a really key element. They don't
view this as something that's nice to have. They don't
view it as something that is okay if we if
we're successful, great, if we're not great. They view it
as existential, which you see with the level of spending
that they're putting into it. So it's it's a lot
and it's moving fast. And but the difference between now
(07:51):
in two thousand is that these are massive companies with
strong financial performance and they believe in this one hundred percent.
So I don't think it's going to change. We haven't
gotten into physical AI. We have, we're just getting into
synthetic training. Yeah, we haven't gotten into robotics. We haven't
gotten into the enterprise in a big way yet, and
so there's a there's a huge opportunity ahead for all
(08:13):
of us. I believe.
Speaker 3 (08:14):
Well, Chuck Blouemberg Intelligence Analysis says, your projections are conservative.
Speaker 6 (08:18):
Briefly are the conservative?
Speaker 5 (08:21):
Well, I think you said that last quarter, so you've
proved to be correct ninety days ago. But look, I
think based on what we know today we're ninety days
into the year, were taking what we have in our backlog,
what we see in the forecast. But again we got
we have three more quarters to play out. Lots of
things can change, the world's very dynamic, but we're very
(08:42):
confident in the numbers that we put up yesterday.
Speaker 3 (08:45):
Cisco CEO Chuck Robins always a joy to catch up
with the thanks for spending time. Meanwhile, as I'm going
to look at some other shares on the move, JD
dot Com, Tencent, I want to shine light on these
ad rs. They're under water a little bit like the
rest of the market. But JD dot Com actually relieve
many an investor with a few fifteen percent increase in revenue,
managing to show that maybe the investment in the food
area is really building more broadly into the overall merchandise sales.
(09:07):
We're looking at Tencent social media app more cautious in
AI spending, but it's making it work in terms of
selling its overall products and the gaming strength really coming
to bear. We're seeing again a fifteen percent increase in
revenue there as well. But fifteen percent is an interesting
number end because it's a theme in the next story.
Speaker 2 (09:23):
Ten cents US shares trading tropic because at one point
we're hiring the session. Ten Cent has struck a deal
with Apple that we'll see the iPhone maker handle payments
and take a fifteen percent cut of purchases in we chat,
minigames and apps doing both. Global tech editor Petere Elstrom
joins us for more that there's one of several stories
actually about ten Cent today, but.
Speaker 4 (09:42):
Let's start with the Apple one. What do we need
to know?
Speaker 7 (09:46):
Yeah, so ten Cent in Apple have been in this
standoff for a number of different years. Tencent offers a
bunch of different services, including games, but they also offer
we Chat, which is really the original super app. It's
a messaging app, but you can do many other things
within it too. Now, Tencent has wanted to offer different
services and games through this super app, and they've allowed
(10:08):
developers to circumvent the Apple Store to avoid some of
the fees that you would typically pay by using the
Apple Store. Apple hasn't liked that. They want everybody to
go through their Apple Store, where they take a thirty
percent cut of most things that are going on. So
we understand from our sources, the sub bloomberg Scoop that
they've reached an agreement now where customers within the ten
(10:28):
Cent we Chat ecosystem are going to pay a fee
of fifteen percent to Apple, so about half of their
usual fee. But they'll begin to reach some sort of
truce between Tencent and Apple as they collaborate on games
and other kinds of services.
Speaker 6 (10:41):
So to push us forward, is this good for Apple?
Speaker 3 (10:43):
Because they can start to well reap more rewards from
these companies that are super apps.
Speaker 6 (10:48):
Or is this a concern.
Speaker 3 (10:49):
Because everyone else is going to be looking at a
fifteen percent number.
Speaker 7 (10:53):
Yeah, it's a very good question. Certainly, Apple faces this
kind of pressure in many different markets. It's not just China.
In China it's a little bit different though, because they
don't have the kind of market power that they do
in places like the United States or Europe for that matter,
or they can just take their thirty percent cut. Regulators
are looking at those fees. They'd like to bring them down,
but in China they haven't been able to make that
much progress because there are these alternatives like ten cents,
(11:17):
ecosystem and other kinds of areas too. So this is
at least an altre for them into a China market
that they really haven't been able to tap that effectively
in the past.
Speaker 3 (11:27):
Peter Elstrom, all across the world of te tencent we
so appreciated. Meanwhile, coming up, we're all across Disney falling
today after what.
Speaker 6 (11:34):
Some investors are calling we're underwhelming forecast. More on that next.
Speaker 3 (11:37):
Meanwhile, check out shares of Verizon. We have breaking news
coming from the Wall Street Journal talking about how there
could be some fifteen thousand job cuts to come. Remember,
we've had a relatively new CEO in place, Bloomberg reporting
earlier that layoffs could be announced as soon as next week,
according to people familiar, as we have a major step
in the transformation led by the new CEO, Dan Shulman
(12:00):
in New York.
Speaker 6 (12:00):
Is a really bad tag.
Speaker 2 (12:14):
Shares of Disney really falling today after posting fourth quarter
earnings that missed estimates and projecting forecasts that underwhelmed Wall
Street were down almost ten percent.
Speaker 4 (12:23):
We spoke with Hugh Johnston Disney.
Speaker 2 (12:25):
CFO earlier today to walk through those results.
Speaker 8 (12:29):
I thought it was a good quarter overall, and frankly
versus Wall Street, we beat expectations by six cents. So,
as you noted, the experiences business did very very well,
six percent revenue growth thirteen percent of wide growth was terrific.
Sports did very strongly while we were launching the new
DTC product, which is off to a great start. And
(12:52):
then in terms of experience the entertainment business, it was
largely just the overlap of the film slate that drove
the numbers. I know, the linear business looked a little
bit soft, but that's primarily due to the fact that
we had India in the numbers last year where we
made eighty four million bucks and wasn't in the numbers
this year. Take that out Apple Staples basis. Overall, I
(13:14):
thought the quarter was good and it actually allows us
to end the year with a lot of momentum as
we think about where we are right now. We grew
EPs nineteen percent for the year and nineteen percent Keeger
for the last three years, and that's why we both
guided to double digit EPs growth in twenty six and
on top of that, doubled the share of purchase and
(13:36):
increased the dividend by fifty percent.
Speaker 4 (13:38):
You good morning. On that momentum.
Speaker 2 (13:40):
The focus for a lot is streaming, right and you
have the confidence to say streaming is going to continue
to be profitable through twenty twenty six. What are the
factors behind that? What allows you to have the confidence
to have such visibility into how that streaming business is
going well?
Speaker 8 (13:58):
Of course, streaming all we begins with the quality of
the content that we have and the quality of the
slate that we have going forward. So if you think
about the film slate we have right now, number one.
We obviously have Zootopia two, followed by Avatar, followed Bright,
the Double Wars product two, followed by Toy Story five, Milana,
(14:21):
and then we've got an Avengers movie as well. So
if I look at all of that playing its way
into the streaming service, certainly feel good about those ten
pole events. In addition to that, our TV side continues
to perform very strongly. The ratings are great, the number
of hit shows are great. And then on top of that,
we're investing in the product in a significant way, creating
(14:43):
a unified app, and in addition to that, improving our
recommendation engines and improving the navigation withinside within the DTC app.
Put all of that together and what we really see
is just a huge opportunity for growth Spire to grow
that business double digits along with the double digit margins
(15:04):
we expect to achieve this coming year. And as a result,
I think we're going to continue to see that business
do really well and be a real growth driver for Disney.
Speaker 3 (15:11):
But the profitability who streaming operating income for the first
quarter of twenty twenty six, you got to be three
hundred and twenty five million dollars. That's a lot less
than the street was anticipating.
Speaker 6 (15:20):
Why is that?
Speaker 8 (15:22):
I think it's primarily due to the fact that we're
investing in product in the business, and we're investing in
in bundling. So we all know that bundling ultimately is
a very profitable thing to invest in. It increases retention,
reduces churn, increases engagement. And that's not a theory. We
have proof on that, Hugh, Is.
Speaker 2 (15:43):
This the last earnings report and quarter before Disney's board
names a successor to Bob Eiga's CEO.
Speaker 4 (15:51):
That's a great question.
Speaker 8 (15:52):
So what the board has previously indicated, and I will
say the board has been about as transparent as any
CEO succession I have ever seen in my long career.
What the board is indicated is that will take place
sometime during the first calendar quarter of twenty six. We
report in next February. Whether that'll be before or after,
(16:15):
I'll be up to the board. But we should have
it done by the end of March.
Speaker 3 (16:21):
Part of our conversation with Disney's CFO, Hugh Johnson, let's
stay on Disney, stink a little deeper into the numbers.
Ether Rangon Athams with us BlueBag Intelligence senior media analyst.
You've been writing the overall view for fiscal twenty twenty
six is strong within guidance, maybe conservative, given multiple levers,
including the launch of two new cruises, multiple blockbuster theatrical releases,
and greater operating leverage at streaming driven by price increases.
(16:44):
But getha, the market's not giving any sort of optimism here.
Why are they beating up so hard on Disney?
Speaker 9 (16:52):
Yeah, I think after Caroline, you'll come off of fiscal
twenty twenty five delivering nineteen percent EPs growth. You know,
you obviously have some very solid momentum in the business. Yes, granted,
fiscal you know, first quarter of twenty twenty six looks
a little light. They're dealing with a lot of different
cost issues, whether it's on the studio side, in terms
of launch costs for you know, cruises, So there's a
(17:13):
little bit of all of that that they have to
contend with. But I think, you know, the street was
really expecting. I think something much more specific and much
more concrete, something better than just double digit EPs growth
for twenty twenty six, especially when they have the benefit
of a lot of different catalysts that come in fiscal
twenty twenty six.
Speaker 2 (17:32):
I mean the stock's down ten percent, right, that puts
it on track for its biggest drop since November of
twenty twenty two. You heard the final question asked and
answered to Hew of what happens next with succession?
Speaker 4 (17:46):
Is that the overhang on the stock here.
Speaker 6 (17:49):
I think a little bit ed.
Speaker 9 (17:50):
I mean, you know, we know that, you know, the
Disney succession issue has really been you know, bungled so
many times right now, it's this has been an ongoing
question for them for almost a decas I would say,
you know, it seems like things are moving in the
right direction. It's kind of turning into I think a
two horse race between Dana Walden, who heads the creative
division at Disney, as well as Josh Tomorrow, who heads
(18:12):
the parks. And this has kind of been the eternal
question for Disney. Do you have somebody who is at
the head of creative who can talk to talent, who
can talk to all of those Hollywood executives, or do
you need somebody who you know, heads the parks, who
you know which is basically sixty percent of the company's profit.
I really don't know how it's going to shake out.
Maybe they have a co CEO structure like Netflix, like
Spotify is doing, but again we have to wait and
(18:34):
watch till the end of March.
Speaker 2 (18:36):
Keeth Rang and Eathan of Bloomberg Intelligence. Great to have
you back on Bloomberg Tech. Thank you so much.
Speaker 4 (18:48):
Breaking news from Bloomberg.
Speaker 2 (18:50):
Tesla is developing support for Apple's car Play system in
its vehicles.
Speaker 4 (18:55):
That's, according to sources.
Speaker 2 (18:56):
Working to add one of the most highly requested features
by Tesla customers, and in car Play would mark a
pretty stunning reversal for Tesla and its CEO, Elon Musk,
who have long ignored please to implement the popular feature.
We're going have much more detail later this hour with
Bloomberg's Mark German. Cara, you've got another one of our
top stories.
Speaker 4 (19:15):
Yeah.
Speaker 3 (19:15):
Everyone reading about the sec findings revealed that Michael Burry's
Scion Asset Management has terminated its registration status, raising the
possibility that Barry could be shuttering his hedge fund or
closing it to outside investors at least now. The move
comes just one month after Burry warned about marketing exuberants,
particularly in AI. For more, Bloomberg's Tom Metcalf joins us
he'd cover financials banking and what really do you think
(19:38):
this is signaling that he just couldn't bet against this
so called AI bubble.
Speaker 4 (19:44):
Yeah, look, I think.
Speaker 10 (19:45):
Your speculations is probably on the nose in terms of
the you know, this fund might well be closed in
it and you know that's what you know. You read
his message and he's always been saying he just cannot
read this market. It's extremely exuberant, and you know, it
was hard to interpret these he was offering of like
pictures of his character from the big short, for example,
you do get a sense of the frustration.
Speaker 4 (20:05):
And obviously he put.
Speaker 10 (20:06):
Out some shorts on Palenteer and n Video quite recently.
Speaker 4 (20:11):
They would disclose in the thirteen f's.
Speaker 10 (20:12):
So it's very interesting that, you know, relatively small fund
but very closely followed, and you know the fact that
he's potentially taken a step does suggest perhaps even a
Michael Burry is starting to lose faith in trying to
time this bubble.
Speaker 3 (20:27):
I know that's what's so interesting really about the timing
of it. He hinted that there's better things to come
November the twenty fifth, So I'm sure we've not seen
the end of this ride. But what clarification did we
get in terms of the bets he's made against the
likes of Palenteer that has just defied fundamentals for so long.
Speaker 10 (20:47):
Yeah, and that was one of the things he points
out in his post, which which basically one one image
in the post said, I've sort of de registered the
firm without clarifying any further what that precisely means. But
the other kind of lays out the precise nature of
that bet he had against Palenteer. So in the post
he says he spent about nine point two million dollars
(21:08):
effectively betting on Palenteer shares would sell, would fall. Sorry,
And as part of that he's got I think until
twenty twenty seven the option to sell those Palenteer shares
that I think it was fifty dollars, so, you know,
for a fund which is about you know, one hundred
and fifty million AUM at least it was in March.
Speaker 4 (21:24):
That's a pretty sort of striking bet. But yeah, of course,
as you.
Speaker 10 (21:28):
Look at Palenteer shares, it's sort of he's on the
wrong side of it at the moment.
Speaker 6 (21:32):
Tom.
Speaker 3 (21:32):
I think it's so greatly remind us that it is
a relatively small fund. And the reason it has outside
interest is because many have read the Michael Lewis book,
many have watched the movie.
Speaker 6 (21:41):
But why do we listen to what Michael Barry does?
Speaker 4 (21:46):
Well?
Speaker 10 (21:46):
I think you know, the way he presents his theories
and stuff is always entertaining for one, but most principally
you know, it's that incredible win he had back in
the financial crisis, right, He really was out front and
center on that huge effort to to you know, quintuple
his investors' money. So I think whatever he says people
who sit up and listen. And you know, he has
(22:07):
built this social media following. I think also with the honesty, right, Like,
he's made bets and when they've gone wrong, he's been
happy to kind of hold his hands up.
Speaker 4 (22:14):
So it's always been interesting to follow him the most.
Speaker 3 (22:17):
Tom Metcalf following him for us, we so appreciate it.
Welcome back to Blomberg Tech. Let's take a quick check
on these markets, shall we, Because in fact, we're on
sell off mode on the NASAQ more broadly, off by
one and.
Speaker 6 (22:32):
A half percent.
Speaker 3 (22:33):
We've got anxiety around actually the government reopening that's already
priced in. But what does that mean in terms of data?
What does that mean in terms of the Federal Reserve
its ability to cut into this market.
Speaker 6 (22:42):
We're up by one and a half percent.
Speaker 3 (22:43):
Some of the biggest tech names are on the downside.
Speaker 6 (22:46):
Let's go to where the earnings.
Speaker 3 (22:47):
Have led us, because one of the key names in
the red is indeed Disney. We're off by almost ten percent.
We're having a significantly poor day.
Speaker 6 (22:54):
Worst in several years for Disney.
Speaker 3 (22:55):
This is as they actually pointed to still double digit
earing for share growth into the fiscal twenty two six,
but revenue was flat for their fourth quarter and actually
owners for share dropped.
Speaker 6 (23:04):
A little bit.
Speaker 3 (23:05):
Maybe people wanting to see more of a narrative around
the growth is they inject more investment into streaming, as
they invest into their slate, as they invest into marketing
and the like. We're looking at Cisco up by four
and a half percent. Boy, Chuck Robbins on a tear
as we see this company now trade at the highest
since the previous bubble two thousand. Of course, Cisco currently
(23:25):
up four point six percent as they managed to beat
and raise in terms of their earnings and they managed
to just really show the AI path that they're currently
navigating and sell into, in particular to hyperscalis this is
where we want to go to the questioning around AI.
Speaker 6 (23:40):
Is it a boom? Is it a bubble?
Speaker 3 (23:41):
Well, it's certainly fueling records in VC funding public markets,
as you've seen growth there and indeed in infrastructure, But
the questions are abound. Is in an AI bubble? How
far can it run? And what if it pops? Pellet
Butteri's with US partner at Axcel and one of the
authors of the firm's latest AI report published which just
there is still more room in AI spending, he joins us. Now,
(24:04):
so bluntly, is the rebubble?
Speaker 4 (24:08):
Well, I mean, this is the question.
Speaker 11 (24:11):
I think it's interesting to put that in context. So
if you look at the NASDAQ in the past fifteen years,
like with every platform shift, which is every five years,
so you ad mobile, cloud and AI, the nasdack is doubled.
So basically where we are right now, where the NASAK
is is basically in line with historical trends. So yes,
(24:33):
with every platform shift, you know you're seeing frosty evaluation
and we're clearly seeing that with AI, and not all
companies are going to be winners. But we're seeing tremendous
opportunities here for value creation and we think that the
winners are going to take a large share of that
value creation. So it's all about picking the right companies.
Speaker 3 (24:55):
Well, if we look at the public markets, the winners
have been clear, and you call them as the super
six that have really been generating real cash. That was
something that Chuck Robins just said to us. Look, my
biggest demand has been coming from the hyperscalers and they're
pretty good for the money. But then in the private markets,
all winning bats have sort of been on a certain
few names Open AI for example, Philip, Where else are
(25:17):
you seeing the money being allocated to, particularly in Europe?
Speaker 11 (25:21):
Yeah, I think it's it's worth looking at where the
venture funding is going in terms of you know, cloud
and THEI. I mean the total for Europe and Israel
and the US about one hundred and eighty four billion
dollars for this year. Sixty percent of that is going
into the models, so that's open AI on Tropic X,
(25:42):
but the rest forty percent is going into a new
generation of AI native native application that are growing very
very fast and that are very exciting. So you have
the Cursor, the Perplexity, the DECA going in the US,
you have the Sairah, the lover Ball and eight ten
and Synthesia in Europe. And what's very interesting here is
(26:03):
that if you look at the model side, yes, the
majority of the vast majority of the funding is going
into US company, but if you look at the AI
native application side, actually the Europe fares very well against
the US because it's thirty billion in Europe versus forty
five in the US, so that's about two third. And
Europe had shown that it can really generate its shares
(26:26):
of winner in this category.
Speaker 3 (26:29):
And you've been backing some of those winners in particular.
I think of Lovable for example, that everyone has been
very excited about the way in which vibe coding has
taken over absolutely everything. But how do you know that
you're not paying too much when getting into those rounds?
Speaker 11 (26:44):
Well, I mean, I think this is a question we
ask ourselves every time we, you know, we invest. I
think what we're trying to understand is like how far
can this business run? I think if you look at Lovable, yeah,
I mean it's vibe coding. What does vibe coote means
that means that any human on earth can start to quote,
I mean, we feel that is a pretty pretty large market. Uh,
(27:07):
and these you know this. It can be vibe coders
who are creators, and there can be vibe coders who
are in the enterprise and who are trying to very fastly,
you know, very quickly developed mockups of new products. So
we actually think there's a lot of room to run
in the case of Locoble. And as I said, I mean,
(27:28):
I think evaluation are where they are today, but I
think if you look at the value creation for the winners,
I think the opportunity we're seeing and that are unlocked
with AI, I think are much bigger than what we
have seen in the past because the productivity improvement potential
that EI is giving goes well beyond what any of
(27:49):
the previous platform shifts have generated.
Speaker 3 (27:52):
Some of these companies are scaling so fast, and I
feel like we've had the CEO since you're on, plenty
of times to talk about how he is just driving
forward in enterprises at such scale and the ability to
produce AI real video that feels incredibly realistic, Philip. But
I'm interested as to you in your past and in
(28:13):
the companies that you've helped navigate have gone public. You've
seen it with Docusti, and we've seen it with u iPath.
How will we see these companies eventually tap the public
markets because they're getting enormous without needing.
Speaker 11 (28:23):
To well, I mean, I think at some point, you know,
getting public is in the natural path for for companies.
And I think the bar to go public now is
much higher than it was, you know, five years ago.
So to go public, you want companies to be you know,
probably in the five hundred to seven hundred million in
(28:47):
in annual recurring revenues.
Speaker 12 (28:49):
Uh.
Speaker 11 (28:50):
So there's still room for this company to grow into
you know, into these numbers.
Speaker 10 (28:55):
Uh.
Speaker 11 (28:55):
And you know, getting public is just like a financing milestone.
So the fact that they remain private is not something
that is preventing them to grow because they have access
to the capital they need on the private market side
as well.
Speaker 3 (29:08):
What's been interesting is a lot of these AI native applications,
whether they've been snapped up for aqua higher purposes or
they've been snapped up for the underlying technology for they
have been snapped up and by some of these super
six as you mentioned, is that M and A trend
going to continue, and how are you ensuring that all
the founders protect the rest of the employee base they've
(29:28):
been growing?
Speaker 11 (29:30):
Well, I mean I think they're they're you know, a
lot of the mn A that we have seen so
far have been more on the model development side, with
the Big six trying to kind of snap really big talents.
I think on the application side, I think the founder
that we're seeing extremely ambitious. They have global ambition and
(29:54):
and they won't they won't see how you know, how much,
you know, how fast and how big they're their business
can be. So we haven't seen this as as any
source of concern right now. And as I said, given
that they have access to the capital that they need
to you know, to run the business, and that they
also have the opportunity to potentially sell some stock along
(30:16):
the way through through seculary sale, there is everything that's
needed to keep them motivated to build a big global businesses.
Speaker 3 (30:25):
Do they have to come to American capital markets? So indeed,
American venture capital two scale, if they are European, if
there Israeli.
Speaker 11 (30:34):
Based, well, I mean I think there's there are two
different things. There is the market that you address and
there's where the capital is coming from. I think what
we've seen of Europe and Israel is great, great talent,
great team, great engineering.
Speaker 4 (30:51):
Resources.
Speaker 11 (30:52):
And so what companies are doing is they are basically
building their product and engineering team in Europe and Israel.
And if they're selling software, I mean the biggest market
for every dollar span of software fifty cents is spent
in the US. So then they have to develop their
go to market in the US. So I think from
a market standpoint, yes, if you want to be a
global leader in software and AI, you have to be
(31:15):
a leader in.
Speaker 4 (31:16):
The US market.
Speaker 11 (31:17):
Now, in terms of you know where the capital is
coming from, I think there are big pools of capital
on both sides of the ocean, and European companies that
have been raising rounds of similar size than the US,
so they have access to the same pockets of capital,
whether it's from Europe or it's from the US.
Speaker 3 (31:38):
With global scape, which is the enormous amount of research
that you've managed to bring to US, and you analyze
trends and innovation and you go global and you think
about funding levels, where aren't we talking about enough?
Speaker 11 (31:52):
Well, I mean, I think what's going to be interesting
to see is you know, how far can the models go?
I think so far we have seen a pretty pretty
steep curve of innovation on the model side, and I
think the big question is when are we you know,
is that improvement curve going to continue to accelerate or
(32:14):
at some point are we going to tap out with
the current architecture and uh and then you know, I
think if we tap out, then there's been there's going
to be a plateau until we get to the next
level of architecture. But I think if I look at
where we are right now, we're just scratching the surface
in terms of deploying the technology that we have today.
(32:35):
So I have you know, probably any if you look
at the enterprise, uh, we we haven't reached the S
curve in terms of the agenttic adoption for for different reasons.
We think that's going to happen in the next in
the next couple of years. So I think we have
plenty of room to grow and plenty of plenty of
(32:55):
opportunities for for a company to improve their productivity using
a knowledge.
Speaker 6 (33:00):
Is Philibertary of ACCEL.
Speaker 3 (33:02):
We are so appreciative of you coming on talking about
the wealth of research that Accel has just done.
Speaker 6 (33:07):
I appreciate it.
Speaker 3 (33:09):
Now let's go into another area of AI, because AI
has been fueling chip makers, in particular the memory side
of the equation.
Speaker 6 (33:16):
But then we've just.
Speaker 3 (33:16):
Had results out of Japan's Kyoxia holdings, and it's putting
pressure on sand Disk because you say, off by thirteen percent,
Western Digital of by almost four percent. Particular City is
out there writing that these Japanese results were somewhat negative.
The market may react negatively to the way that near
term earnings are undershooting consensus that there is a strength
of demand for solid state drives for AI inference. So
(33:39):
for now people trimming back on some big AI winners
of late. But coming up we talk more about key
mag seven names Tessa in particular.
Speaker 6 (33:47):
Working to add Apple car Plays support to it vehicles.
While that next this is briom leg Tech.
Speaker 3 (34:09):
We've got to get back to that news that Tesla
is developing support for Apple's car.
Speaker 6 (34:13):
Play system in vehicles according to sources. Take a look
at the shares Actually.
Speaker 3 (34:16):
Apple managed to turn from negative into positive on the news.
Tesla still much in the red, off by six percent,
but Bloomberg's Mark German joining us now help break the story,
and I think the context is so interesting here because
this feels a real about face. Why would now be
the right time for the two companies to work together.
Speaker 13 (34:34):
Yeah, this is absolutely a huge reversal for Tesla. There's
two things going on here. One, as we've discussed on
this show many times, Tesla sales have not been as
hot as they have been in years prior. There are
a lot of new ed players. There's a lot of
pressure on the company, particularly in China, to up its
saled game. We saw some executives leading earlier this year
(34:54):
because sales.
Speaker 4 (34:55):
Have not been so hot.
Speaker 13 (34:57):
What is the most in demand feature in e these
right now when making purchase decisions. Well, it's Apple car Play.
Speaker 4 (35:04):
People like to walk.
Speaker 13 (35:05):
Into their car and have their iPhone interface projected onto
their infotainment system. I use it in my car. People
are not buying Tesla's because of it. In some cases,
people are buying other cars because of the well integrated support.
Tesla wants to hit every lever it could to improve sales.
You do that with car Play, right, and I would
(35:25):
expect them to go down the list of all the
requests that people have for wanting to buy a new
car and hit those one by one to help sales.
It's time for Tesla to do that as good as
their infotainment system is. The second thing, of course, is
Elon Musk's one trillion dollar pay package, which includes some metrics,
particularly around selling a certain number of vehicles and integrating
(35:47):
car play could potentially help with that. And so I
think this is a good thing for Tesla. They have
engineers developing support for this, testing support for this, and
we anticipate a rollout unless it is canceled, of course,
which Evon Musk is known to do with some features
late in development in the coming months.
Speaker 3 (36:04):
Mark, you worked with ed on this story, and I'm
interested is to well, what is in it for Apple?
More broadly, Elon in many ways had refused to do
deals because he didn't want the sharing of data, particularly
when Apple was basically building a competitor. At one point
Apple backed away from that. Now, how do they win
by getting car play within it Tesla?
Speaker 13 (36:24):
You know, from Apple's perspective, this is something that they
don't really have to participate in. There's no agreements behind
the scenes. Apple provides this functionality. It provides developer tools
for car makers to integrate this into their cars, so
there's no money exchanged here. It's really car play, a
iPhone ecosystem feature. If consumers rely on their iPhone for
(36:46):
use of their car, for Apple, that keeps people buying iPhones,
upgrading iPhones, keeping them locked into the ecosystem. So that's
the business play for them. And Tesla right has a
you know, over a third of the used market. They
are a gigantic player in terms of car sales globally
as well in aligning Tesla with the iPhone brand, and
(37:09):
that's great for Apple, whether they're making money directly on
in or not.
Speaker 3 (37:12):
Do you think Elon's going to continue to criticize Apple
on his ex platform and the.
Speaker 13 (37:15):
Like, Oh, I'm sure of it. But you know, his
relationship with Apple has taken a turn since Apple stopped
developing its own competitor. He relies on them very heavily
now for distribution of grock and X, so it's pretty
critical for him to be on Apple's good.
Speaker 3 (37:31):
Side, romain on Apple's good side. We'll continue to see
how the rollout continues and if indeed it does happen
as you said, sometimes Eno Musk can be prone to
u turns. Mark German we so appreciate it. Now it's
time for talking tech. First up, JP Morgan is Lenny's
managers use AI to help write performance reviews. Now the
max's new guidelines allow supervisors to use an internal chatbot
(37:53):
to drop their evaluations, but caution that the technology is
quote not a substitute.
Speaker 6 (37:58):
The human judgment. Us Google spacing a new EU probe.
The European Commission alleges the.
Speaker 3 (38:04):
Tech gilt and unfairly demotes certain news results, violating the
Digital Markets Act. The investigation could add another eleven billion
dollars to Googles, growing it tally of fines in Europe
and delivery startup go pack as race to one of
fifty million dollars an evaluation of eight and a half billion.
But that's down for fifteen billion dollars in its twenty
twenty one funding round so all, according to sources. Now,
(38:25):
the company says the new funding will help accelerate its
investment in AI.
Speaker 14 (38:37):
I don't believe we're in an AI bubble, and the
reason for that is we're going through a natural transition
from an old computing model based on general purpose computing
to accelerated computing. We also know that AI has now
become good enough because of reasoning capability, research capabilities, its
ability to think it's now generating tokens and now generating
(38:57):
intelligence that's worth paying for.
Speaker 3 (39:00):
That, of course, was in video CEO Jensen Wang speaking
with our own Ed Ludlow at GtC, just brushing off
those concerns about an AI bubble. But the scale of
spending for data centers and of course by AI startups
continues to raise eyebrows, so we wanted to dig into
it with Brianna Doherty, she's analyst with Bloomberg Intelligence. You've
been putting out some great rethinking of whether open ai
(39:23):
has scale, has the financial wherewithal, and whether there's risk
within this.
Speaker 6 (39:27):
It's been some of the most red analysis I've seen.
Speaker 3 (39:30):
What is your takeaway as to the circular financing and
whether this is a concern.
Speaker 12 (39:34):
I think that there's clearly a lot happening right and
the integration that we're having between the private markets as
well as the public markets is clearly something to be watching,
and it's a space that we follow very very closely.
We think that actually what we've been seeing with open
aized relationships is the fact that they're broadening them, They're
creating structures that are allowing them to potentially IPO long term.
That's obviously something that's been talked about, I think over
(39:56):
the last couple of weeks especially and what we're thinking
when we look at these companies. So we've got a
few hecticorns that we watch very closely, and actually hecticorns,
I'm pretty sure it's a term. Over one hundred billion dollars,
that's what we call them. We've got three of them
in the data set that we track, over twelve actually
decacorns that we also track really really closely in our
data sets Open AI, Anthropic XAI. Naturally right now, at
(40:19):
their current implied valuations, they would rank in the top
thirty if they were public and in our Bloomberg Benchmark
AI Index, which has over one hundred and twenty equities
in it. So the scale these companies is huge. The
partnerships there forming are critical, and we do think we're
not in the bubble camp. We do think that there's
a lot of opportunity down the road. As it relates
(40:39):
to this.
Speaker 3 (40:40):
When someone then sits set a dinner table with you
at a cocktail party and they're saying, I cannot see it.
I just Why on earth is AMD giving it stock
to open AI to seal these sorts of deals. What
is your general narrative as to why we can avoid
some sort of bubble? Is it just the sheer revenue
that could scale for open AI? But you do have
to have a belief, Yeah, I.
Speaker 6 (41:01):
Think you do have to have a certain bit of belief.
Speaker 4 (41:02):
Right.
Speaker 12 (41:02):
I think what we've seen is even over the last year,
we've seen opening eyes implied valuation more than double, right,
I mean, naturally a lot has happened in that AI ecosystem.
And actually, something that we've been really focused on, and
Jensen actually said something the other day about this as well,
is we're not just talking about where we are right
now with AI. We're talking about an AI to quantum continuum, right,
We're talking about this continued acceleration and where we're going
(41:25):
to see and continue to prove it. Right. So, even
if it's that you're thinking, Okay, well, what if some
cost come down, or what if the power needs come down, Well,
the demand elasticity is just so strong that for every
little bit of efficiency you gain, you're going to gain
some extra demand that's going to drive a next new evolution.
So we're really looking at this as continuum and investing
through that type of disruption. I mean, it's not easy,
(41:46):
it's not without tension. So while there's tons of opportunity,
we are flagging. We've talked about this previously, about this
potential tension that can come with that. In twenty twenty six.
We're seeing over the last few weeks we get a
lot of pullbacks, right, We see a lot of optimism.
What we're seeing is investor's fear of missing note right,
really wanting the innovation, but also every now and then
pivot into a risk off. And that tension is something
that we think is going to persist through twenty twenty six.
Speaker 3 (42:08):
So ride the volatility, expect the volatility when you're thinking
about the fundamental analyiso only briefly look Michael Berry basically
having to shut up shop on his hedge fund. It
would see the reporting is leading us there on his
negative bets on some of these companies.
Speaker 6 (42:22):
You think it's impossible.
Speaker 12 (42:23):
Briefly, nothing's impossible, yeah, right, and yes it does make
for good dinner side conversations. What we're like and the
way we approach this is we look very much the
theme holistically, right, It's one of the reasons why we
say picking single individual winners and losers is really tough
when you're talking about investing through disruption. We really look
at benchmark industries. That's one of the reasons why, you know,
(42:44):
the way we create our work is very much looking
at that benchmark approach, understanding that as these systems evolve,
you're going to find new connections, new correlations, and that's
really a way to continue investing through disruption without that nability, vulnerability.
Speaker 6 (42:57):
And amazing analysis.
Speaker 3 (42:59):
Go read it and Doherty a Bloomberg intelligence that does
it for this edition of Bloomberg Tech.
Speaker 6 (43:03):
Check out the podcast
Speaker 9 (43:06):
M hm hm
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hide in New York
and ever though in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up. Cisco shares gain after
boosting it's twenty twenty six forecast, showing progress in its
efforts to capture more AI spending. We're going to discuss
with the CEO plus shares of Disney.
Speaker 3 (00:34):
They're falling today as the company invests in its content
slate and stream bundling. Our conversation with the Disney CFO Hugh.
Speaker 2 (00:40):
Johnson, and ten Cent strikes a deal with Apple under
which the iPhone maker takes a fifteen percent cut for
purchases in we chat, minigames and apps.
Speaker 3 (00:50):
First free checking on these markets and maybe a little
bit of chot as we try to discern when we
get the government data and what that will show the
Federal Reserve, canondean do or do not when it comes
to cutting in the future. The market a little bit
uncertain at the moment. It seems as though that lifting
of a government shutdown have been priced in. We're currently
off by one point four percent. We're dragged down by
the key names in Magnificent seven. But ed, you're looking
(01:13):
at the company that's adding the most in points upside.
Speaker 2 (01:16):
Yeah, one of the big movers to the upside is
Cisco shares currently up around four percent. They'd open much
higher than that. The key bit is they're trading at
their highest level since the year two thousand, after the
company raised its outlook and showed progress on capturing more of.
Speaker 4 (01:31):
The global AI spend.
Speaker 2 (01:32):
Let's get the details with Cisco's CEO, Chuck Robins. Chuck,
in the year two thousand, Cisco is one of the
original four horsemen of technology. Based on the numbers you
gave and what you said on the call, do you
feel like customers, the new ones and investors now understand
(01:52):
Cisco's place in this new AI era.
Speaker 5 (01:56):
Well, first of all, thanks for having me, and you know,
I'm super proud of what teams have accomplished. We had
a record quarter and set ourselves up for what's likely
going to be the best year we've ever had. So
it was just a great performance. And as I've been
asked a lot over the last twenty four hours to
reflect back on two thousand and it's kind of an
interesting comparison, but I think that, Look, the hyperscalers are
(02:20):
some of the most advanced customers in the world. They
do the deepest analysis of the technology before they make decisions,
and I think that their decisions to continue spending more
with us speaks volumes about the innovation and the technology
that our teams are building right now. So I'm really
proud of them, and I think it'll just extend into
the enterprise over time.
Speaker 2 (02:41):
Chuck, who are some of those new customers that you've
been able to sign in the air context.
Speaker 5 (02:47):
Well, we're just talking about the major hyperscalers, primarily in
the United States, but we've also announced these sovereign deals
in the Middle East with G forty two and the
Emirates as well as Humane in Saudi There's a lot
of work going on in the neo cloud space. We're
seeing sovereign players start popping up now in parts of
Europe as well as Southeast Asia and India. So it's
(03:10):
a broad swath of customers. But the one point three
billion that we talked about is strictly the top hyperscalers
that we're doing business with.
Speaker 4 (03:17):
So you're talking about five companies and.
Speaker 3 (03:20):
They're good for the money, as you can tell from
the cash flow that they.
Speaker 6 (03:23):
Have chuck not two hundred million dollars.
Speaker 3 (03:25):
That you are expanding into sovereign, you are expanding into
enterprise and neoclouds. How do you bake in some of
the risks that the market just cannot get enough of
talking about this circular economy.
Speaker 5 (03:36):
Well, so we did talk about the fact that we
have over two billion dollars now in our pipeline through
the end of the fiscal years over the next three
quarters in neo cloud, sovereign cloud, and enterprise, and we
see that continue to accelerate. We took two hundred million
dollars in orders in Q one, and it's just it's
a natural way the technology technologies have been evolving over
(03:58):
the last decade. More they start in the hyperscalers, they
move through the telco space in this case the neo
clouds and the sovereign players, and then into the enterprise.
And it's happening exactly that way. And our bread and
butter over the years has been in the enterprise. And
we have lots of technolo knowlogy, We have a partner ecosystem,
we have full stack solutions, we have security, we have
(04:19):
all the things that they're looking forward to actually build
out AI workloads and deal with AI with confidence.
Speaker 3 (04:26):
Let's just go to that security a little bit of
a fly in the ointment. Let's say, I know you've
talked clearly about perhaps how the booking of revenue can
be misinterpreted, but how are you going to sell that
more holistically? How do you think the security part of
the offering can really start firing on all cylinders.
Speaker 5 (04:41):
Well, I started by saying clearly we're not pleased with
where we are yet, but I will say over the
last two to three years, we've made a lot of progress.
It's a major decision for customers to make big platform decisions.
In security, We've had a lot of great wins. I'm
proud of what the teams have built. And we saw
our next generation our walls, we saw mid teens growth
(05:02):
and orders there. We saw double digit arr growth and Splunk.
We saw our new and refreshed products on the security
side continue to show growth. And the issue we had
in the quarter was really it's an accounting issue around
how cloud delivered Splunk versus on prem delivered Splunk. The
cloud stuff is radable and realize revenues realized over the
(05:22):
life of the term, and the on prem stuff gets
recognized immediately, and we just had a major shift in
how our customers consume it, which is great for us
in the long term that they're buying more cloud based solutions,
but it creates a little bit of a challenge on
revenue during the quarter. The good news is the networking
business is doing incredibly well and can cover that for us.
Speaker 2 (05:43):
Chuck, it is fair to say at a minimum that
the Cisco of today isn't the same as the Cisco
of two thousand. What you've done is kind of been
open about the product lineup and you've used M and
A to change the footprint of the company. What's your
latest thinking on that, the products that you offer and
what you need to do, either organically or inorganically to
offer what the world of AI wants.
Speaker 5 (06:06):
I think the big things that we did we obviously
introduced a lot more software into our portfolio in areas
that are strategic, like security, and this Plunk acquisition has
been a great one. I think the other thing that's
worth calling out is is this investment that we started
in twenty sixteen to be clear on our silicon strategy
that is absolutely the reason that we're having success today
(06:28):
in the hyperscaler space. If we did not have our
silicon and develop and design our own silicon, we wouldn't
be participating at all. It's just black and white. And
so as we as we look at both internal innovation
as well as or inorganic opportunities. We're very focused on security,
We're very focused on AI. We've made some tech and
(06:52):
talent deals. Anything that can help us accelerate our solutions
in those areas we're open to look at.
Speaker 2 (07:00):
Chuck, I do not apologize for this next question. Are
we or are we not in an AI bubble?
Speaker 5 (07:09):
Oh, it's just it's so funny. Look, the customers that
are buying the predominant amount of this technology have incredible
balance sheets, have incredible cash flow, have incredible profitability. I
think Caroline said it. They actually pay their bills and
and so, and they view it as an existential issue
(07:29):
for them. That's that's a really key element. They don't
view this as something that's nice to have. They don't
view it as something that is okay if we if
we're successful, great, if we're not great. They view it
as existential, which you see with the level of spending
that they're putting into it. So it's it's a lot
and it's moving fast. And but the difference between now
(07:51):
in two thousand is that these are massive companies with
strong financial performance and they believe in this one hundred percent.
So I don't think it's going to change. We haven't
gotten into physical AI. We have, we're just getting into
synthetic training. Yeah, we haven't gotten into robotics. We haven't
gotten into the enterprise in a big way yet, and
so there's a there's a huge opportunity ahead for all
(08:13):
of us. I believe.
Speaker 3 (08:14):
Well, Chuck Blouemberg Intelligence Analysis says, your projections are conservative.
Speaker 6 (08:18):
Briefly are the conservative?
Speaker 5 (08:21):
Well, I think you said that last quarter, so you've
proved to be correct ninety days ago. But look, I
think based on what we know today we're ninety days
into the year, were taking what we have in our backlog,
what we see in the forecast. But again we got
we have three more quarters to play out. Lots of
things can change, the world's very dynamic, but we're very
(08:42):
confident in the numbers that we put up yesterday.
Speaker 3 (08:45):
Cisco CEO Chuck Robins always a joy to catch up
with the thanks for spending time. Meanwhile, as I'm going
to look at some other shares on the move, JD
dot Com, Tencent, I want to shine light on these
ad rs. They're under water a little bit like the
rest of the market. But JD dot Com actually relieve
many an investor with a few fifteen percent increase in revenue,
managing to show that maybe the investment in the food
area is really building more broadly into the overall merchandise sales.
(09:07):
We're looking at Tencent social media app more cautious in
AI spending, but it's making it work in terms of
selling its overall products and the gaming strength really coming
to bear. We're seeing again a fifteen percent increase in
revenue there as well. But fifteen percent is an interesting
number end because it's a theme in the next story.
Speaker 2 (09:23):
Ten cents US shares trading tropic because at one point
we're hiring the session. Ten Cent has struck a deal
with Apple that we'll see the iPhone maker handle payments
and take a fifteen percent cut of purchases in we chat,
minigames and apps doing both. Global tech editor Petere Elstrom
joins us for more that there's one of several stories
actually about ten Cent today, but.
Speaker 4 (09:42):
Let's start with the Apple one. What do we need
to know?
Speaker 7 (09:46):
Yeah, so ten Cent in Apple have been in this
standoff for a number of different years. Tencent offers a
bunch of different services, including games, but they also offer
we Chat, which is really the original super app. It's
a messaging app, but you can do many other things
within it too. Now, Tencent has wanted to offer different
services and games through this super app, and they've allowed
(10:08):
developers to circumvent the Apple Store to avoid some of
the fees that you would typically pay by using the
Apple Store. Apple hasn't liked that. They want everybody to
go through their Apple Store, where they take a thirty
percent cut of most things that are going on. So
we understand from our sources, the sub bloomberg Scoop that
they've reached an agreement now where customers within the ten
(10:28):
Cent we Chat ecosystem are going to pay a fee
of fifteen percent to Apple, so about half of their
usual fee. But they'll begin to reach some sort of
truce between Tencent and Apple as they collaborate on games
and other kinds of services.
Speaker 6 (10:41):
So to push us forward, is this good for Apple?
Speaker 3 (10:43):
Because they can start to well reap more rewards from
these companies that are super apps.
Speaker 6 (10:48):
Or is this a concern.
Speaker 3 (10:49):
Because everyone else is going to be looking at a
fifteen percent number.
Speaker 7 (10:53):
Yeah, it's a very good question. Certainly, Apple faces this
kind of pressure in many different markets. It's not just China.
In China it's a little bit different though, because they
don't have the kind of market power that they do
in places like the United States or Europe for that matter,
or they can just take their thirty percent cut. Regulators
are looking at those fees. They'd like to bring them down,
but in China they haven't been able to make that
much progress because there are these alternatives like ten cents,
(11:17):
ecosystem and other kinds of areas too. So this is
at least an altre for them into a China market
that they really haven't been able to tap that effectively
in the past.
Speaker 3 (11:27):
Peter Elstrom, all across the world of te tencent we
so appreciated. Meanwhile, coming up, we're all across Disney falling
today after what.
Speaker 6 (11:34):
Some investors are calling we're underwhelming forecast. More on that next.
Speaker 3 (11:37):
Meanwhile, check out shares of Verizon. We have breaking news
coming from the Wall Street Journal talking about how there
could be some fifteen thousand job cuts to come. Remember,
we've had a relatively new CEO in place, Bloomberg reporting
earlier that layoffs could be announced as soon as next week,
according to people familiar, as we have a major step
in the transformation led by the new CEO, Dan Shulman
(12:00):
in New York.
Speaker 6 (12:00):
Is a really bad tag.
Speaker 2 (12:14):
Shares of Disney really falling today after posting fourth quarter
earnings that missed estimates and projecting forecasts that underwhelmed Wall
Street were down almost ten percent.
Speaker 4 (12:23):
We spoke with Hugh Johnston Disney.
Speaker 2 (12:25):
CFO earlier today to walk through those results.
Speaker 8 (12:29):
I thought it was a good quarter overall, and frankly
versus Wall Street, we beat expectations by six cents. So,
as you noted, the experiences business did very very well,
six percent revenue growth thirteen percent of wide growth was terrific.
Sports did very strongly while we were launching the new
DTC product, which is off to a great start. And
(12:52):
then in terms of experience the entertainment business, it was
largely just the overlap of the film slate that drove
the numbers. I know, the linear business looked a little
bit soft, but that's primarily due to the fact that
we had India in the numbers last year where we
made eighty four million bucks and wasn't in the numbers
this year. Take that out Apple Staples basis. Overall, I
(13:14):
thought the quarter was good and it actually allows us
to end the year with a lot of momentum as
we think about where we are right now. We grew
EPs nineteen percent for the year and nineteen percent Keeger
for the last three years, and that's why we both
guided to double digit EPs growth in twenty six and
on top of that, doubled the share of purchase and
(13:36):
increased the dividend by fifty percent.
Speaker 4 (13:38):
You good morning. On that momentum.
Speaker 2 (13:40):
The focus for a lot is streaming, right and you
have the confidence to say streaming is going to continue
to be profitable through twenty twenty six. What are the
factors behind that? What allows you to have the confidence
to have such visibility into how that streaming business is
going well?
Speaker 8 (13:58):
Of course, streaming all we begins with the quality of
the content that we have and the quality of the
slate that we have going forward. So if you think
about the film slate we have right now, number one.
We obviously have Zootopia two, followed by Avatar, followed Bright,
the Double Wars product two, followed by Toy Story five, Milana,
(14:21):
and then we've got an Avengers movie as well. So
if I look at all of that playing its way
into the streaming service, certainly feel good about those ten
pole events. In addition to that, our TV side continues
to perform very strongly. The ratings are great, the number
of hit shows are great. And then on top of that,
we're investing in the product in a significant way, creating
(14:43):
a unified app, and in addition to that, improving our
recommendation engines and improving the navigation withinside within the DTC app.
Put all of that together and what we really see
is just a huge opportunity for growth Spire to grow
that business double digits along with the double digit margins
(15:04):
we expect to achieve this coming year. And as a result,
I think we're going to continue to see that business
do really well and be a real growth driver for Disney.
Speaker 3 (15:11):
But the profitability who streaming operating income for the first
quarter of twenty twenty six, you got to be three
hundred and twenty five million dollars. That's a lot less
than the street was anticipating.
Speaker 6 (15:20):
Why is that?
Speaker 8 (15:22):
I think it's primarily due to the fact that we're
investing in product in the business, and we're investing in
in bundling. So we all know that bundling ultimately is
a very profitable thing to invest in. It increases retention,
reduces churn, increases engagement. And that's not a theory. We
have proof on that, Hugh, Is.
Speaker 2 (15:43):
This the last earnings report and quarter before Disney's board
names a successor to Bob Eiga's CEO.
Speaker 4 (15:51):
That's a great question.
Speaker 8 (15:52):
So what the board has previously indicated, and I will
say the board has been about as transparent as any
CEO succession I have ever seen in my long career.
What the board is indicated is that will take place
sometime during the first calendar quarter of twenty six. We
report in next February. Whether that'll be before or after,
(16:15):
I'll be up to the board. But we should have
it done by the end of March.
Speaker 3 (16:21):
Part of our conversation with Disney's CFO, Hugh Johnson, let's
stay on Disney, stink a little deeper into the numbers.
Ether Rangon Athams with us BlueBag Intelligence senior media analyst.
You've been writing the overall view for fiscal twenty twenty
six is strong within guidance, maybe conservative, given multiple levers,
including the launch of two new cruises, multiple blockbuster theatrical releases,
and greater operating leverage at streaming driven by price increases.
(16:44):
But getha, the market's not giving any sort of optimism here.
Why are they beating up so hard on Disney?
Speaker 9 (16:52):
Yeah, I think after Caroline, you'll come off of fiscal
twenty twenty five delivering nineteen percent EPs growth. You know,
you obviously have some very solid momentum in the business. Yes, granted,
fiscal you know, first quarter of twenty twenty six looks
a little light. They're dealing with a lot of different
cost issues, whether it's on the studio side, in terms
of launch costs for you know, cruises, So there's a
(17:13):
little bit of all of that that they have to
contend with. But I think, you know, the street was
really expecting. I think something much more specific and much
more concrete, something better than just double digit EPs growth
for twenty twenty six, especially when they have the benefit
of a lot of different catalysts that come in fiscal
twenty twenty six.
Speaker 2 (17:32):
I mean the stock's down ten percent, right, that puts
it on track for its biggest drop since November of
twenty twenty two. You heard the final question asked and
answered to Hew of what happens next with succession?
Speaker 4 (17:46):
Is that the overhang on the stock here.
Speaker 6 (17:49):
I think a little bit ed.
Speaker 9 (17:50):
I mean, you know, we know that, you know, the
Disney succession issue has really been you know, bungled so
many times right now, it's this has been an ongoing
question for them for almost a decas I would say,
you know, it seems like things are moving in the
right direction. It's kind of turning into I think a
two horse race between Dana Walden, who heads the creative
division at Disney, as well as Josh Tomorrow, who heads
(18:12):
the parks. And this has kind of been the eternal
question for Disney. Do you have somebody who is at
the head of creative who can talk to talent, who
can talk to all of those Hollywood executives, or do
you need somebody who you know, heads the parks, who
you know which is basically sixty percent of the company's profit.
I really don't know how it's going to shake out.
Maybe they have a co CEO structure like Netflix, like
Spotify is doing, but again we have to wait and
(18:34):
watch till the end of March.
Speaker 2 (18:36):
Keeth Rang and Eathan of Bloomberg Intelligence. Great to have
you back on Bloomberg Tech. Thank you so much.
Speaker 4 (18:48):
Breaking news from Bloomberg.
Speaker 2 (18:50):
Tesla is developing support for Apple's car Play system in
its vehicles.
Speaker 4 (18:55):
That's, according to sources.
Speaker 2 (18:56):
Working to add one of the most highly requested features
by Tesla customers, and in car Play would mark a
pretty stunning reversal for Tesla and its CEO, Elon Musk,
who have long ignored please to implement the popular feature.
We're going have much more detail later this hour with
Bloomberg's Mark German. Cara, you've got another one of our
top stories.
Speaker 4 (19:15):
Yeah.
Speaker 3 (19:15):
Everyone reading about the sec findings revealed that Michael Burry's
Scion Asset Management has terminated its registration status, raising the
possibility that Barry could be shuttering his hedge fund or
closing it to outside investors at least now. The move
comes just one month after Burry warned about marketing exuberants,
particularly in AI. For more, Bloomberg's Tom Metcalf joins us
he'd cover financials banking and what really do you think
(19:38):
this is signaling that he just couldn't bet against this
so called AI bubble.
Speaker 4 (19:44):
Yeah, look, I think.
Speaker 10 (19:45):
Your speculations is probably on the nose in terms of
the you know, this fund might well be closed in
it and you know that's what you know. You read
his message and he's always been saying he just cannot
read this market. It's extremely exuberant, and you know, it
was hard to interpret these he was offering of like
pictures of his character from the big short, for example,
you do get a sense of the frustration.
Speaker 4 (20:05):
And obviously he put.
Speaker 10 (20:06):
Out some shorts on Palenteer and n Video quite recently.
Speaker 4 (20:11):
They would disclose in the thirteen f's.
Speaker 10 (20:12):
So it's very interesting that, you know, relatively small fund
but very closely followed, and you know the fact that
he's potentially taken a step does suggest perhaps even a
Michael Burry is starting to lose faith in trying to
time this bubble.
Speaker 3 (20:27):
I know that's what's so interesting really about the timing
of it. He hinted that there's better things to come
November the twenty fifth, So I'm sure we've not seen
the end of this ride. But what clarification did we
get in terms of the bets he's made against the
likes of Palenteer that has just defied fundamentals for so long.
Speaker 10 (20:47):
Yeah, and that was one of the things he points
out in his post, which which basically one one image
in the post said, I've sort of de registered the
firm without clarifying any further what that precisely means. But
the other kind of lays out the precise nature of
that bet he had against Palenteer. So in the post
he says he spent about nine point two million dollars
(21:08):
effectively betting on Palenteer shares would sell, would fall. Sorry,
And as part of that he's got I think until
twenty twenty seven the option to sell those Palenteer shares
that I think it was fifty dollars, so, you know,
for a fund which is about you know, one hundred
and fifty million AUM at least it was in March.
Speaker 4 (21:24):
That's a pretty sort of striking bet. But yeah, of course,
as you.
Speaker 10 (21:28):
Look at Palenteer shares, it's sort of he's on the
wrong side of it at the moment.
Speaker 6 (21:32):
Tom.
Speaker 3 (21:32):
I think it's so greatly remind us that it is
a relatively small fund. And the reason it has outside
interest is because many have read the Michael Lewis book,
many have watched the movie.
Speaker 6 (21:41):
But why do we listen to what Michael Barry does?
Speaker 4 (21:46):
Well?
Speaker 10 (21:46):
I think you know, the way he presents his theories
and stuff is always entertaining for one, but most principally
you know, it's that incredible win he had back in
the financial crisis, right, He really was out front and
center on that huge effort to to you know, quintuple
his investors' money. So I think whatever he says people
who sit up and listen. And you know, he has
(22:07):
built this social media following. I think also with the honesty, right, Like,
he's made bets and when they've gone wrong, he's been
happy to kind of hold his hands up.
Speaker 4 (22:14):
So it's always been interesting to follow him the most.
Speaker 3 (22:17):
Tom Metcalf following him for us, we so appreciate it.
Welcome back to Blomberg Tech. Let's take a quick check
on these markets, shall we, Because in fact, we're on
sell off mode on the NASAQ more broadly, off by
one and.
Speaker 6 (22:32):
A half percent.
Speaker 3 (22:33):
We've got anxiety around actually the government reopening that's already
priced in. But what does that mean in terms of data?
What does that mean in terms of the Federal Reserve
its ability to cut into this market.
Speaker 6 (22:42):
We're up by one and a half percent.
Speaker 3 (22:43):
Some of the biggest tech names are on the downside.
Speaker 6 (22:46):
Let's go to where the earnings.
Speaker 3 (22:47):
Have led us, because one of the key names in
the red is indeed Disney. We're off by almost ten percent.
We're having a significantly poor day.
Speaker 6 (22:54):
Worst in several years for Disney.
Speaker 3 (22:55):
This is as they actually pointed to still double digit
earing for share growth into the fiscal twenty two six,
but revenue was flat for their fourth quarter and actually
owners for share dropped.
Speaker 6 (23:04):
A little bit.
Speaker 3 (23:05):
Maybe people wanting to see more of a narrative around
the growth is they inject more investment into streaming, as
they invest into their slate, as they invest into marketing
and the like. We're looking at Cisco up by four
and a half percent. Boy, Chuck Robbins on a tear
as we see this company now trade at the highest
since the previous bubble two thousand. Of course, Cisco currently
(23:25):
up four point six percent as they managed to beat
and raise in terms of their earnings and they managed
to just really show the AI path that they're currently
navigating and sell into, in particular to hyperscalis this is
where we want to go to the questioning around AI.
Speaker 6 (23:40):
Is it a boom? Is it a bubble?
Speaker 3 (23:41):
Well, it's certainly fueling records in VC funding public markets,
as you've seen growth there and indeed in infrastructure, But
the questions are abound. Is in an AI bubble? How
far can it run? And what if it pops? Pellet
Butteri's with US partner at Axcel and one of the
authors of the firm's latest AI report published which just
there is still more room in AI spending, he joins us. Now,
(24:04):
so bluntly, is the rebubble?
Speaker 4 (24:08):
Well, I mean, this is the question.
Speaker 11 (24:11):
I think it's interesting to put that in context. So
if you look at the NASDAQ in the past fifteen years,
like with every platform shift, which is every five years,
so you ad mobile, cloud and AI, the nasdack is doubled.
So basically where we are right now, where the NASAK
is is basically in line with historical trends. So yes,
(24:33):
with every platform shift, you know you're seeing frosty evaluation
and we're clearly seeing that with AI, and not all
companies are going to be winners. But we're seeing tremendous
opportunities here for value creation and we think that the
winners are going to take a large share of that
value creation. So it's all about picking the right companies.
Speaker 3 (24:55):
Well, if we look at the public markets, the winners
have been clear, and you call them as the super
six that have really been generating real cash. That was
something that Chuck Robins just said to us. Look, my
biggest demand has been coming from the hyperscalers and they're
pretty good for the money. But then in the private markets,
all winning bats have sort of been on a certain
few names Open AI for example, Philip, Where else are
(25:17):
you seeing the money being allocated to, particularly in Europe?
Speaker 11 (25:21):
Yeah, I think it's it's worth looking at where the
venture funding is going in terms of you know, cloud
and THEI. I mean the total for Europe and Israel
and the US about one hundred and eighty four billion
dollars for this year. Sixty percent of that is going
into the models, so that's open AI on Tropic X,
(25:42):
but the rest forty percent is going into a new
generation of AI native native application that are growing very
very fast and that are very exciting. So you have
the Cursor, the Perplexity, the DECA going in the US,
you have the Sairah, the lover Ball and eight ten
and Synthesia in Europe. And what's very interesting here is
(26:03):
that if you look at the model side, yes, the
majority of the vast majority of the funding is going
into US company, but if you look at the AI
native application side, actually the Europe fares very well against
the US because it's thirty billion in Europe versus forty
five in the US, so that's about two third. And
Europe had shown that it can really generate its shares
(26:26):
of winner in this category.
Speaker 3 (26:29):
And you've been backing some of those winners in particular.
I think of Lovable for example, that everyone has been
very excited about the way in which vibe coding has
taken over absolutely everything. But how do you know that
you're not paying too much when getting into those rounds?
Speaker 11 (26:44):
Well, I mean, I think this is a question we
ask ourselves every time we, you know, we invest. I
think what we're trying to understand is like how far
can this business run? I think if you look at Lovable, yeah,
I mean it's vibe coding. What does vibe coote means
that means that any human on earth can start to quote,
I mean, we feel that is a pretty pretty large market. Uh,
(27:07):
and these you know this. It can be vibe coders
who are creators, and there can be vibe coders who
are in the enterprise and who are trying to very fastly,
you know, very quickly developed mockups of new products. So
we actually think there's a lot of room to run
in the case of Locoble. And as I said, I mean,
(27:28):
I think evaluation are where they are today, but I
think if you look at the value creation for the winners,
I think the opportunity we're seeing and that are unlocked
with AI, I think are much bigger than what we
have seen in the past because the productivity improvement potential
that EI is giving goes well beyond what any of
(27:49):
the previous platform shifts have generated.
Speaker 3 (27:52):
Some of these companies are scaling so fast, and I
feel like we've had the CEO since you're on, plenty
of times to talk about how he is just driving
forward in enterprises at such scale and the ability to
produce AI real video that feels incredibly realistic, Philip. But
I'm interested as to you in your past and in
(28:13):
the companies that you've helped navigate have gone public. You've
seen it with Docusti, and we've seen it with u iPath.
How will we see these companies eventually tap the public
markets because they're getting enormous without needing.
Speaker 11 (28:23):
To well, I mean, I think at some point, you know,
getting public is in the natural path for for companies.
And I think the bar to go public now is
much higher than it was, you know, five years ago.
So to go public, you want companies to be you know,
probably in the five hundred to seven hundred million in
(28:47):
in annual recurring revenues.
Speaker 12 (28:49):
Uh.
Speaker 11 (28:50):
So there's still room for this company to grow into
you know, into these numbers.
Speaker 10 (28:55):
Uh.
Speaker 11 (28:55):
And you know, getting public is just like a financing milestone.
So the fact that they remain private is not something
that is preventing them to grow because they have access
to the capital they need on the private market side
as well.
Speaker 3 (29:08):
What's been interesting is a lot of these AI native applications,
whether they've been snapped up for aqua higher purposes or
they've been snapped up for the underlying technology for they
have been snapped up and by some of these super
six as you mentioned, is that M and A trend
going to continue, and how are you ensuring that all
the founders protect the rest of the employee base they've
(29:28):
been growing?
Speaker 11 (29:30):
Well, I mean I think they're they're you know, a
lot of the mn A that we have seen so
far have been more on the model development side, with
the Big six trying to kind of snap really big talents.
I think on the application side, I think the founder
that we're seeing extremely ambitious. They have global ambition and
(29:54):
and they won't they won't see how you know, how much,
you know, how fast and how big they're their business
can be. So we haven't seen this as as any
source of concern right now. And as I said, given
that they have access to the capital that they need
to you know, to run the business, and that they
also have the opportunity to potentially sell some stock along
(30:16):
the way through through seculary sale, there is everything that's
needed to keep them motivated to build a big global businesses.
Speaker 3 (30:25):
Do they have to come to American capital markets? So indeed,
American venture capital two scale, if they are European, if
there Israeli.
Speaker 11 (30:34):
Based, well, I mean I think there's there are two
different things. There is the market that you address and
there's where the capital is coming from. I think what
we've seen of Europe and Israel is great, great talent,
great team, great engineering.
Speaker 4 (30:51):
Resources.
Speaker 11 (30:52):
And so what companies are doing is they are basically
building their product and engineering team in Europe and Israel.
And if they're selling software, I mean the biggest market
for every dollar span of software fifty cents is spent
in the US. So then they have to develop their
go to market in the US. So I think from
a market standpoint, yes, if you want to be a
global leader in software and AI, you have to be
(31:15):
a leader in.
Speaker 4 (31:16):
The US market.
Speaker 11 (31:17):
Now, in terms of you know where the capital is
coming from, I think there are big pools of capital
on both sides of the ocean, and European companies that
have been raising rounds of similar size than the US,
so they have access to the same pockets of capital,
whether it's from Europe or it's from the US.
Speaker 3 (31:38):
With global scape, which is the enormous amount of research
that you've managed to bring to US, and you analyze
trends and innovation and you go global and you think
about funding levels, where aren't we talking about enough?
Speaker 11 (31:52):
Well, I mean, I think what's going to be interesting
to see is you know, how far can the models go?
I think so far we have seen a pretty pretty
steep curve of innovation on the model side, and I
think the big question is when are we you know,
is that improvement curve going to continue to accelerate or
(32:14):
at some point are we going to tap out with
the current architecture and uh and then you know, I
think if we tap out, then there's been there's going
to be a plateau until we get to the next
level of architecture. But I think if I look at
where we are right now, we're just scratching the surface
in terms of deploying the technology that we have today.
(32:35):
So I have you know, probably any if you look
at the enterprise, uh, we we haven't reached the S
curve in terms of the agenttic adoption for for different reasons.
We think that's going to happen in the next in
the next couple of years. So I think we have
plenty of room to grow and plenty of plenty of
(32:55):
opportunities for for a company to improve their productivity using
a knowledge.
Speaker 6 (33:00):
Is Philibertary of ACCEL.
Speaker 3 (33:02):
We are so appreciative of you coming on talking about
the wealth of research that Accel has just done.
Speaker 6 (33:07):
I appreciate it.
Speaker 3 (33:09):
Now let's go into another area of AI, because AI
has been fueling chip makers, in particular the memory side
of the equation.
Speaker 6 (33:16):
But then we've just.
Speaker 3 (33:16):
Had results out of Japan's Kyoxia holdings, and it's putting
pressure on sand Disk because you say, off by thirteen percent,
Western Digital of by almost four percent. Particular City is
out there writing that these Japanese results were somewhat negative.
The market may react negatively to the way that near
term earnings are undershooting consensus that there is a strength
of demand for solid state drives for AI inference. So
(33:39):
for now people trimming back on some big AI winners
of late. But coming up we talk more about key
mag seven names Tessa in particular.
Speaker 6 (33:47):
Working to add Apple car Plays support to it vehicles.
While that next this is briom leg Tech.
Speaker 3 (34:09):
We've got to get back to that news that Tesla
is developing support for Apple's car.
Speaker 6 (34:13):
Play system in vehicles according to sources. Take a look
at the shares Actually.
Speaker 3 (34:16):
Apple managed to turn from negative into positive on the news.
Tesla still much in the red, off by six percent,
but Bloomberg's Mark German joining us now help break the story,
and I think the context is so interesting here because
this feels a real about face. Why would now be
the right time for the two companies to work together.
Speaker 13 (34:34):
Yeah, this is absolutely a huge reversal for Tesla. There's
two things going on here. One, as we've discussed on
this show many times, Tesla sales have not been as
hot as they have been in years prior. There are
a lot of new ed players. There's a lot of
pressure on the company, particularly in China, to up its
saled game. We saw some executives leading earlier this year
(34:54):
because sales.
Speaker 4 (34:55):
Have not been so hot.
Speaker 13 (34:57):
What is the most in demand feature in e these
right now when making purchase decisions. Well, it's Apple car Play.
Speaker 4 (35:04):
People like to walk.
Speaker 13 (35:05):
Into their car and have their iPhone interface projected onto
their infotainment system. I use it in my car. People
are not buying Tesla's because of it. In some cases,
people are buying other cars because of the well integrated support.
Tesla wants to hit every lever it could to improve sales.
You do that with car Play, right, and I would
(35:25):
expect them to go down the list of all the
requests that people have for wanting to buy a new
car and hit those one by one to help sales.
It's time for Tesla to do that as good as
their infotainment system is. The second thing, of course, is
Elon Musk's one trillion dollar pay package, which includes some metrics,
particularly around selling a certain number of vehicles and integrating
(35:47):
car play could potentially help with that. And so I
think this is a good thing for Tesla. They have
engineers developing support for this, testing support for this, and
we anticipate a rollout unless it is canceled, of course,
which Evon Musk is known to do with some features
late in development in the coming months.
Speaker 3 (36:04):
Mark, you worked with ed on this story, and I'm
interested is to well, what is in it for Apple?
More broadly, Elon in many ways had refused to do
deals because he didn't want the sharing of data, particularly
when Apple was basically building a competitor. At one point
Apple backed away from that. Now, how do they win
by getting car play within it Tesla?
Speaker 13 (36:24):
You know, from Apple's perspective, this is something that they
don't really have to participate in. There's no agreements behind
the scenes. Apple provides this functionality. It provides developer tools
for car makers to integrate this into their cars, so
there's no money exchanged here. It's really car play, a
iPhone ecosystem feature. If consumers rely on their iPhone for
(36:46):
use of their car, for Apple, that keeps people buying iPhones,
upgrading iPhones, keeping them locked into the ecosystem. So that's
the business play for them. And Tesla right has a
you know, over a third of the used market. They
are a gigantic player in terms of car sales globally
as well in aligning Tesla with the iPhone brand, and
(37:09):
that's great for Apple, whether they're making money directly on
in or not.
Speaker 3 (37:12):
Do you think Elon's going to continue to criticize Apple
on his ex platform and the.
Speaker 13 (37:15):
Like, Oh, I'm sure of it. But you know, his
relationship with Apple has taken a turn since Apple stopped
developing its own competitor. He relies on them very heavily
now for distribution of grock and X, so it's pretty
critical for him to be on Apple's good.
Speaker 3 (37:31):
Side, romain on Apple's good side. We'll continue to see
how the rollout continues and if indeed it does happen
as you said, sometimes Eno Musk can be prone to
u turns. Mark German we so appreciate it. Now it's
time for talking tech. First up, JP Morgan is Lenny's
managers use AI to help write performance reviews. Now the
max's new guidelines allow supervisors to use an internal chatbot
(37:53):
to drop their evaluations, but caution that the technology is
quote not a substitute.
Speaker 6 (37:58):
The human judgment. Us Google spacing a new EU probe.
The European Commission alleges the.
Speaker 3 (38:04):
Tech gilt and unfairly demotes certain news results, violating the
Digital Markets Act. The investigation could add another eleven billion
dollars to Googles, growing it tally of fines in Europe
and delivery startup go pack as race to one of
fifty million dollars an evaluation of eight and a half billion.
But that's down for fifteen billion dollars in its twenty
twenty one funding round so all, according to sources. Now,
(38:25):
the company says the new funding will help accelerate its
investment in AI.
Speaker 14 (38:37):
I don't believe we're in an AI bubble, and the
reason for that is we're going through a natural transition
from an old computing model based on general purpose computing
to accelerated computing. We also know that AI has now
become good enough because of reasoning capability, research capabilities, its
ability to think it's now generating tokens and now generating
(38:57):
intelligence that's worth paying for.
Speaker 3 (39:00):
That, of course, was in video CEO Jensen Wang speaking
with our own Ed Ludlow at GtC, just brushing off
those concerns about an AI bubble. But the scale of
spending for data centers and of course by AI startups
continues to raise eyebrows, so we wanted to dig into
it with Brianna Doherty, she's analyst with Bloomberg Intelligence. You've
been putting out some great rethinking of whether open ai
(39:23):
has scale, has the financial wherewithal, and whether there's risk
within this.
Speaker 6 (39:27):
It's been some of the most red analysis I've seen.
Speaker 3 (39:30):
What is your takeaway as to the circular financing and
whether this is a concern.
Speaker 12 (39:34):
I think that there's clearly a lot happening right and
the integration that we're having between the private markets as
well as the public markets is clearly something to be watching,
and it's a space that we follow very very closely.
We think that actually what we've been seeing with open
aized relationships is the fact that they're broadening them, They're
creating structures that are allowing them to potentially IPO long term.
That's obviously something that's been talked about, I think over
(39:56):
the last couple of weeks especially and what we're thinking
when we look at these companies. So we've got a
few hecticorns that we watch very closely, and actually hecticorns,
I'm pretty sure it's a term. Over one hundred billion dollars,
that's what we call them. We've got three of them
in the data set that we track, over twelve actually
decacorns that we also track really really closely in our
data sets Open AI, Anthropic XAI. Naturally right now, at
(40:19):
their current implied valuations, they would rank in the top
thirty if they were public and in our Bloomberg Benchmark
AI Index, which has over one hundred and twenty equities
in it. So the scale these companies is huge. The
partnerships there forming are critical, and we do think we're
not in the bubble camp. We do think that there's
a lot of opportunity down the road. As it relates
(40:39):
to this.
Speaker 3 (40:40):
When someone then sits set a dinner table with you
at a cocktail party and they're saying, I cannot see it.
I just Why on earth is AMD giving it stock
to open AI to seal these sorts of deals. What
is your general narrative as to why we can avoid
some sort of bubble? Is it just the sheer revenue
that could scale for open AI? But you do have
to have a belief, Yeah, I.
Speaker 6 (41:01):
Think you do have to have a certain bit of belief.
Speaker 4 (41:02):
Right.
Speaker 12 (41:02):
I think what we've seen is even over the last year,
we've seen opening eyes implied valuation more than double, right,
I mean, naturally a lot has happened in that AI ecosystem.
And actually, something that we've been really focused on, and
Jensen actually said something the other day about this as well,
is we're not just talking about where we are right
now with AI. We're talking about an AI to quantum continuum, right,
We're talking about this continued acceleration and where we're going
(41:25):
to see and continue to prove it. Right. So, even
if it's that you're thinking, Okay, well, what if some
cost come down, or what if the power needs come down, Well,
the demand elasticity is just so strong that for every
little bit of efficiency you gain, you're going to gain
some extra demand that's going to drive a next new evolution.
So we're really looking at this as continuum and investing
through that type of disruption. I mean, it's not easy,
(41:46):
it's not without tension. So while there's tons of opportunity,
we are flagging. We've talked about this previously, about this
potential tension that can come with that. In twenty twenty six.
We're seeing over the last few weeks we get a
lot of pullbacks, right, We see a lot of optimism.
What we're seeing is investor's fear of missing note right,
really wanting the innovation, but also every now and then
pivot into a risk off. And that tension is something
that we think is going to persist through twenty twenty six.
Speaker 3 (42:08):
So ride the volatility, expect the volatility when you're thinking
about the fundamental analyiso only briefly look Michael Berry basically
having to shut up shop on his hedge fund. It
would see the reporting is leading us there on his
negative bets on some of these companies.
Speaker 6 (42:22):
You think it's impossible.
Speaker 12 (42:23):
Briefly, nothing's impossible, yeah, right, and yes it does make
for good dinner side conversations. What we're like and the
way we approach this is we look very much the
theme holistically, right, It's one of the reasons why we
say picking single individual winners and losers is really tough
when you're talking about investing through disruption. We really look
at benchmark industries. That's one of the reasons why, you know,
(42:44):
the way we create our work is very much looking
at that benchmark approach, understanding that as these systems evolve,
you're going to find new connections, new correlations, and that's
really a way to continue investing through disruption without that nability, vulnerability.
Speaker 6 (42:57):
And amazing analysis.
Speaker 3 (42:59):
Go read it and Doherty a Bloomberg intelligence that does
it for this edition of Bloomberg Tech.
Speaker 6 (43:03):
Check out the podcast
Speaker 9 (43:06):
M hm hm
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