December 4, 2025 • 42 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss Meta’s plan to cut resources for building its metaverse, the virtual world that Mark Zuckerberg once framed as the future of the company. Plus, Nvidia CEO Jensen Huang says he’s not sure China would accept more powerful AI chips - even if the US relaxes restrictions on sales. And, a look at the latest earnings from Snowflake, Salesforce and UiPath.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Ed lave Low in sentrances go.
Speaker 2 (00:22):
This is Bloomberg Tech coming up.
Speaker 3 (00:24):
Bloomberg reports Metas considering budget cuts of thirty percent for
its Metaverse group next year. The very group Mark Zuckerberg,
once framed as the future of the company, shares.
Speaker 4 (00:33):
Jumped plus in Vidio CEO Jens and Wang is not
sure China would accept more powerful aichips even the US
relaxes restrictions on the sales.
Speaker 3 (00:43):
We discuss and we break down the latest tech earnings
results from Snowflake and Salesforce, and we were joined by
the UiPath CEO two.
Speaker 4 (00:50):
At first, let's check in on these markets that are
struggling to find direction. Today, Ed, we've been higher, we're
now pushing back lower on the nas that one three
real catalysts were still way to really for next week.
In the Federal Reserve decision, we get still get that
myriad of jobs data that we try to digest.
Speaker 5 (01:06):
We're looking though at pickun just coming off by eighteen percent.
Speaker 4 (01:08):
At one point it broke into positive territory for the
year again. But we're now back to ninety two and
seventy three. But what are you looking at on the
individual stocks?
Speaker 3 (01:15):
Yeah, one single name where the stock does have the direction.
Speaker 2 (01:18):
It's our top story.
Speaker 3 (01:19):
Metaches off their session high that up four percent. Bloomberg
reporting that executives are considering cutting up to thirty percent
of the budget for its Metaverse initiative as long along
with wider cuts. Let's talk more about what Meta's plans
mean for the company with Bloombergs Kurt Wagner, who broke
the story and joins us with the reporting. Sounds like
(01:41):
in the last few weeks. Last month Zuckerberg assembled leadership,
they looked at the budget for next year and Metaverse
is where they want to focus their cuts.
Speaker 2 (01:50):
Bring us your reporting.
Speaker 6 (01:51):
Yes, so this is an annual thing right looking ahead
in twenty twenty six budgets In this case, Mark Zuckerberg
has a nice home in Hawaii where they have a
serious meetings. Executives come in in the month of November,
and to your point, they talk about this year ten
percent cuts sort of across the board, looking at all
the different teams, but that the Metaverse has been asked
(02:12):
to cut much more deeply than that. As much as
thirty percent is currently being discussed, I should point out
it hasn't been decided yet, but a cut of thirty
percent would certainly also come with layoffs. So to your point,
this is an effort that Mark Zuckerberg has touted as
being the future of the company for years. So it's
a pretty meaningful change there.
Speaker 4 (02:32):
Let's go back to when he thought it was the
future of the company. Just take a listen to Mark
Zuckerberg back in twenty twenty one.
Speaker 7 (02:39):
If we all work at it, within the next decade,
the metaverse will reach a billion people, host hundreds of
billions of dollars of digital commerce, and support jobs for
millions of creators and developers.
Speaker 4 (02:53):
Boy a lot has changed since then, and that was
a long time ago, kut, but we still will get
well the idea that will have augmented reality.
Speaker 5 (03:01):
We're still focusing in on the glasses.
Speaker 4 (03:04):
It's just not the actual virtual worlds and working out
that's right.
Speaker 6 (03:08):
And the virtual worlds aren't going away, to be clear,
It's still going to be something that they invest in,
just not quite as aggressively as they had. And what
was explained to me by sources this week. Is that
part of that is that the market has not really materialized.
Speaker 8 (03:23):
You know.
Speaker 6 (03:23):
I think they originally spent a lot of money building
out this Metaverse group, thinking that they would have competition
from others in the industry, rushing towards a metaverse like
product as well. That has not happened. And so it's
not necessarily that Mark Zuckerberg no longer believes in this.
I'm told that he still does. But clearly they have
overspent to try to build this thing, and I think
(03:45):
the ultimate goal is to get to these you know,
AI inspired glasses and ar glasses, and maybe the metaverse
was a stepping stone to that all the way.
Speaker 3 (03:52):
So actually it signals a commitment to AI hardware distinct.
Speaker 2 (03:56):
From metaverse hardware.
Speaker 3 (03:57):
I thought it was really interesting that shares of Losutica,
who they partner with to make the ray band metas,
kind of rose a little bit after the story and
all of the analyst notes and there are many actually
reacting to our reporting say this is probably bullish for
AI spending. At the same time, Bloomberg reporting that Apple's
most senior design executive going to meta right, They're.
Speaker 6 (04:18):
Not giving up on hardware right, that the VR virtual
reality group is expected to be hit by these metaverse cuts, right,
that is the immersive metaverse product. But they are still
investing in in AI glasses, the ray bands that you
mentioned ed. They are still obviously bringing in big talent
and you know, poaching people to design these things. This
(04:38):
is what Mark Zuckerberg talks about on earning sculls AI.
He talks about the glasses. Those things are not going away.
It is the specific kind of immersive virtual stuff that
it looks like they're taking a second look at.
Speaker 4 (04:49):
And reallocation of resources. Kurt Wagner, a huge market moving story.
Thank you for joining us on it. Let's talk more
about the market moves. Natsy Curtains with us just global
chief investment officer at ALTI Team and Global and.
Speaker 5 (05:00):
That see you've actually been writing really.
Speaker 4 (05:01):
Saying that we are currently in an innovation driven bull market.
But what does this move from meta and sort of
the moving around of capital expenditure tell you about where
we are in the cycle.
Speaker 9 (05:13):
I mean, I think the thing is about innovation driven
bull markets and we've had you know, pretty much three
of them before this one, which is they tend to
be characterized by a couple of different risks. You know,
cap expenditure is quite large. Companies need to tap the
debt markets, and they're shifting perceptions of the winners and losers.
So volet you know, these these bull markets last longer,
(05:36):
they go beyond people expect. They tend to come with
productivity improvements, but you do get some shifting perceptions and
shifting priorities. So let's just bring that back to Meta.
You know, they've got a lot of money that they
want to spend on jen AI. The market hasn't liked
the fact they've tapped into the debt market to do that.
You know, they've got less in a way cash flow
(05:56):
than some of the other companies making similar levels of
capex spend. So I think this is a good and
saying reallocation of resources towards AI. Which is the price.
Speaker 3 (06:08):
Nancy, I want to go saying you just said, I
think it's critically important cash flow. If you look at
the reaction to this Bloomberg report on Meta, many would
note that Meta was headed for negative.
Speaker 2 (06:20):
Free cash flow next year.
Speaker 10 (06:21):
That's right.
Speaker 3 (06:21):
This year, the story was about Oracle hitting negative free
cash flow for the first time since nineteen ninety two.
Is that a worrying set of data that you're seeing
on your desk?
Speaker 9 (06:33):
Yeah, because I think the market's being more discerning now.
It's recognizing that some companies have cash flow that can
support this, and some companies really need debt. And Oracle
is a good poster child for not only being late
to cloud spending quite a lot of money being very
tied into the open AI in terms of contracts and
(06:54):
the risks associated with that, but also using debt. And
I think their debt to ever does like four times,
so it's in a completely different category.
Speaker 8 (07:02):
You know.
Speaker 9 (07:02):
It's kind of in the core we've department in terms
of indebtedness, and investors quite rightfully are becoming more discerning
about the risk associated with you know, financial leverage.
Speaker 5 (07:13):
And then there's the risk of the private markets.
Speaker 4 (07:15):
How are you seeing open AI playing as a virtuous
or a vicious circle right now? Is it a single
point of failure or is it the one that you
need to be allocated to.
Speaker 2 (07:25):
It's a little of both.
Speaker 9 (07:26):
Let's face it. Open AI declared code read yesterday the
day before yesterday. Look, it's facing competition. It recognizes that
Gemini is really and if you've used the Gemini three.
It's pretty it's pretty impressive. It's not as friendly as
chat GBT and now it's a personal relationship thing going on,
but it really is quite interesting in terms of nano banana,
(07:49):
you know, the image editor as well as I would
say complex reasoning is really quite good in Gemini three.
So open AIS facing competition, they got to focus. They've
been spread across a lot of different dimensions. I think
they're refocusing now on personalization, reliability, speed, and continuing to
build out that open AI large language model to maintain
(08:10):
their lead.
Speaker 3 (08:10):
Right, Nancy, We came into this morning when we met
as a team, thinking probably we focus on salesforce and
snowflake earnings and then we've got the meta report.
Speaker 8 (08:19):
Right.
Speaker 3 (08:19):
Your thesis is that you have innovation cycles driven by
heavy CAPEX monetization follows. Actually, if you take the different
part of the stack with salesforce and Snowflake, tepid outlook
in terms of profits and top line growth from all
the AI investment. Is that Is that a fair point
I've just made, Yeah.
Speaker 9 (08:40):
Because I think that the problem is in innovation ball
markets as CAPEX starts and you've got to build out
the Capex and the revenue follows, you know, sometimes years later,
sometimes within a couple of years, and so investors have
to extrapolate is the investment really going to deliver the
revenue and profits and the rate of reach and not
everyone's going to get there, And that's the risk of
(09:02):
innovation driven ballmarket. There are some winners, there are some
losers along the way. But you know, I think the
key is you've got to really focus on who is
delivering the revenue today or at least the visibility of that,
and who has the wherewithal? And just an example, you know,
I mean, Alphabet's got what one hundred and fifty billion
(09:23):
of operating income open AIS losing nine billion a year,
so you know, the wherewithal the financial might probably I
think investors are thinking may set with Alphabet at the moment.
Speaker 3 (09:35):
We're going to go very deep later in the program
on the earnings from Salesforce and from Snowflake. But there
was a very interesting across the board. Look Nancy Ko
and Global Chief Investment Officer Lty Team and Global thank
you very much. Like coming up in videos, Gens and
Wang looks to win over Washington on chip export rules,
but could it be too late for the AI chip
maker in China.
Speaker 2 (09:55):
We've got more on that. Next, This is Bloomberg.
Speaker 10 (09:57):
Tech going toe to toe against anyone.
Speaker 11 (10:12):
The American technology industry has nothing to fear. We are mighty,
were fast, or inventive. We'll take anybody on. In the
case of China, we should concede the entire market to them.
They're formidable, But conceding that entire market we are to
go compute for it.
Speaker 5 (10:30):
In Vida CEO Jenson one.
Speaker 4 (10:31):
They're speaking on American AI leadership at the CSIS conference
in Washington yesterday. We also met with President Trump to
discuss export controls on his chips, noting some uncertainty of
a whether China would even accept the processes if restrictions
were indeed eased. Here with the latest is Bloomberg Senior
Tech editor Mike Shephard and Mike we're talking about H
(10:52):
two hundreds in particular here, and it feels as though.
Speaker 5 (10:55):
Maybe Jensen thinks the ship has already had sailed.
Speaker 4 (10:58):
They're limited in one folk on domestic really.
Speaker 12 (11:02):
Yeah, it's unclear exactly where things stand internally inside the
administration on the H two hundred and whether Donald Trump
will give the ultimate green light for those chips to
be sold to China. You'll remember, just a few weeks
ago before the holiday, we broke the news that administration
officials have been deliberating this idea of allowing the H
(11:23):
two hundred to be sold to China, to be exported
to China, and this would be a significant relaxation of
the export controls that have been in place on AI
chips since twenty twenty two and have really hampered in
Vidia's ability to sell into China, which is the world's
second largest AI and chip market right now, and it's
something that he has made a priority. Even though in
(11:45):
Nvidia is not putting the China market on its forecasts
or anything else, yet, he's identified it ad as as
a fifty billion dollar opportunity for the company.
Speaker 3 (11:58):
The baseline assumption is zero China revenue, right, but Jensenmongk's
keeping himself in proximity not just to the Administration, but
to Congress as well. Whether China wants those chips. We'll
talk about that with Peter Elstrom in just a minute.
The Gain AI Act is also a part of this
lobbying effort, and it's an area where maybe in Vidia
is nearer to a win could just explain the basics
(12:19):
of legislation or a piece of it that was omitted
in in Nvidia's favor.
Speaker 12 (12:25):
Oh, of course, and this was actually a big portion
of his visit to Washington. It was another whirlwind day
in the nation's capital for Jensen, who has become a
regular here in Washington, both on Capitol Hill but even
more so at the White House, where he has forged
that close bomb with.
Speaker 2 (12:42):
President Donald Trump.
Speaker 12 (12:43):
What Nvidia has been trying to do is fend off
this gain AI Act, which would prevent or make it
at least very hard for in Nvidia to sell to
China and other US adversary nations without explicit permission from
the US government.
Speaker 10 (13:00):
But he has already get that.
Speaker 12 (13:00):
Look, we don't need these restrictions in place. The Commerce
Department already has the authority to do so, and there
is no competition between customers in China and the customers
here in the US. The bill also would have required
the company to give first DIBs to American buyers. It
looks like lawmakers are going to exclude this provision from
(13:21):
must pass defense legislation that has to be done before
the end of the year. However, we can't consider it
completely dead. Our sense is that Congress may try again.
There is bipartisan support for this idea, and we do
get a sense that some lawmakers still have concerns about
allowing China to have access to some of those advanced
(13:42):
AI chips from Nvidia.
Speaker 3 (13:44):
Bluebogs Mike Sheppard in Washington, DC, thank you. At the
same time, China's ramping up support for domestic chip production
to occupy a vacuum that's been left by Nvidia's forced exit.
According to sources, Beijing based Cambricon is set to try
triple production of AI chips in twenty twenty six, with
plans to deliver half a million AI accelerators, the vast
(14:06):
majority of which are advanced. Bloombo's technology executive editor Peter
Eldstrom joins us cambricn is another example of a domestic
player with an AI accelerator product. It is reliant on Smick,
China's domestic version of TSMC and this is an interesting
piece of reporting. Bring us the details, but also technologically speaking,
(14:29):
the differences of where Cambercorn and Spick are versus Nvidia,
because the scale is completely different.
Speaker 13 (14:36):
Yeah, this is exactly what Jensen Wong is talking about.
This is exactly what he's concerned about within China that
after the Biden administration first decided to cut off shipments
of Nvidio chips into that country, the government and the
companies there saw the market opportunity, they saw their own vulnerabilities,
and they decided to invest very very aggressively in their
own production technologies for chips and also EI designs. So
(15:00):
always really the primary competitor that we have been talking about,
they have quite a bit of momentum in building these
AI chips. They've been used in a number of different
places there. Camera Con is really the second player. It's
sort of like the AMD for that market. They're quite
small at this point. They don't have the kind of
hef that Huawei does in particular, but they are making
a lot of progress. So what our sources have told
(15:20):
us is that their plans are to triple their production
of AI chips into next year. They'll be a pretty
significant second to Huawei and supplying those chips. So to
the broader question about what US export controls due to
this market, as Jensen Wong is talking about, it certainly
has opened it up for domestic production Chinese companies are
being told by Beijing that they should buy domestic chips
(15:42):
whenever possible. They've also turned down this idea that they're
going to buy in Vidia's H twenty chips. They don't
think that those are good enough for the market. So,
as Mike Shepherd was talking about earlier, there may be
a discussion of about H two hundreds, but there's no
putting this genie back in the bottle. China has decided
they are going to make their own chips domestically, and
they're making a lot of progress.
Speaker 4 (16:01):
They're making a lot of progress and designing them, but
then they've got to get them spout out by Smike
and it feels as though ultimately the production that what
you're really garnering isn't very many.
Speaker 13 (16:13):
Yeah, that's a very good point. They are way way
behind the global standards. There is some desperation here that
if you have to produce that lower standards, you will,
But if you look at some of the details, it's
very very interesting. So Smick is still producing these chips
at seven nanimeters, so well behind the three nanimeter that
we see from TSMC at this point. Also, the yields
we got some insights into the yields. Only about twenty
(16:35):
percent of the chips that they're making right now are
actually usable, So that's only one out of five chips
that they produce they're actually able to use. You compare
that with a TSMC, which is up at eighty or
ninety percent yields. Their economics are just totally different. But
it's a sign of how badly Beijing wants to be
able to catch up in this market that they're just
(16:55):
going to eat those costs.
Speaker 2 (16:56):
They're going to eat four.
Speaker 13 (16:58):
Times the cost of what it would cost some other
globally competitive manufacturers to make these chips because they feel
like from a strategic standpoint, they need to make this
progress into.
Speaker 4 (17:07):
Alstrom brilliant reporting, Thank you very much. Indeed, shares of
UiPath having their best day in two years after the
automation software provider reported earnings. They showed accelerating growth in
the third quarter. I'm used to stay found a CEO,
Daniel Dines joins us for more.
Speaker 5 (17:28):
You like the OG.
Speaker 4 (17:29):
You've been doing this for two decades, automating processes.
Speaker 5 (17:32):
You're thinking about repetitive.
Speaker 4 (17:33):
Administ administration and the tasks you can take away from
a human how you're building an AI agents into that.
Speaker 14 (17:43):
Agents are very complementary to our automation engine. We specialize
over the year in bringing rule based automations and AA
agents is bringing something that is much more closer to
human intelligence.
Speaker 10 (17:59):
We've believed that the.
Speaker 14 (18:01):
Key aspect of bringing reliable AI to enterprises is to
have a solid foundation of automation and then AI comes
on the top of it and we connect basically, using
our orchestration technology, we connect AIA agents with robots and humans.
Speaker 3 (18:24):
Daniel, I've been digging into RPA and trying to think about, like,
what is new about RPA in an AI world. I
think that was kind of the root of Caroline's question.
One of the ideas is that there's a potential addressable
market for you where desks with less technical staff can
use your software because it's better at reasoning across documentation
(18:47):
and those kinds of workloads. Just explain how you kind
of grow the business beyond your traditional customer base.
Speaker 14 (18:56):
Well, first of all, within our traditional custom more base,
there is a lot of room for expansion, and we
are seeing tremendous opportunities in healthcare and financial services, so
we really are expanding the reach of our RPA technology
(19:16):
with this new agentic proposition, even for the traditional RPA itself,
we are bringing the power of GENI to make the
development faster and in some instances even more reliable when,
for instance, the applications changes a lot. We are combining
(19:38):
now computer use type of technology with traditional RPA. So
this combination of agentic RPA, API and orchestration is really
what is the crux of our platform and it's resonates
quite well with our with our customers.
Speaker 4 (19:55):
And again talk about that resonating Daniel, because we're hearing
more and more that really the barriers at the moment
adoption or a willingness to pay.
Speaker 5 (20:05):
How are you seeing clients deal with that?
Speaker 14 (20:08):
Because many clients were initially investing mostly in like childboats
and they don't get really the high you know, the outcomes,
They don't have an impact on the bottom line. Eventually,
what do we have ringing on the table is the
capability of delivering autonomous agentic automation and this is even
(20:31):
from RBA. We specialize in bringing this autonomous agent and
now we show to our customers that they can get
significant benefits and that can go directly into the bottom line.
Speaker 3 (20:48):
Daniel our colleagues at Bloomberg Intelligence, that's our in house
analysts are a little bit cautious on your subscription revenues.
If you look at where the street thought they'd be
basically in line slightly and they're worried about the sustainability
of subscriptions.
Speaker 2 (21:04):
Are they right or they wrong?
Speaker 14 (21:07):
Well, I think they are totally wrong, guys. I have
I have yet to see one piece of AI that
was capable of replacing one of our robots. I think
this is the most misunderstanding piece of technology when you
feel that AI can replace RPA.
Speaker 10 (21:26):
R PA, it's a.
Speaker 14 (21:27):
Great last my technology. It's the rule based driven it's fast,
it is reliable, it's precise. It works very well across
regulated industries in healthcare, and AI is just a complement
to it. I would say that a genetic right now.
Actually it helps improving our subscription business.
Speaker 3 (21:49):
Daniel Dines, CEO of vieu iPath. With the earning spread
down well back to Bloomberg Tech. Our top story is
Bloombog's Kirk Wagner reporting that Meta is considering cutting budgets
for its Metaverse initiative by up to thirty percent next
(22:11):
year as part of its back budget planning cycle. That's
all according to our sources. The stock reacting positively to
the report, up four percent at the moment, on track
for its biggest jump since July. Nothing's been decided yet.
There will be an element of layoffs, according to our reporting,
part of a quite broader look at the company and
refocusing from metaverse to AI. But really interesting move in
(22:33):
the stock character.
Speaker 5 (22:34):
Yeah, stock reaction.
Speaker 4 (22:35):
Now, let's get you an analyst reaction, because Bloomberg Intelligence
has been out there writing that these META cost cuts said,
along with potential use of Google's TPUs, we could actually
improve the company's free cash flow at least ten to
twelve billion dollars. Person helping pen that is Bloomberg Intelligence
technist man needs sing and many we've been worrying about
free cash flow Meta the AI capex spend.
Speaker 5 (22:56):
Is this helping offset that concern a bit?
Speaker 10 (22:59):
Yeah?
Speaker 15 (23:00):
And look, I mean based on consensus right now, we
are talking about at least a fifty percent increase in
capex formta next year and no one I think would
mind that given everyone's fees. There will be lift in
revenue from AI down the line in the near term,
and I think they needed some offset because the stock
(23:21):
was very expensive on a free cash flow basis, so
this is a nice offset. And I think the TPU
news was also quite productive in that direction, simply because
they will be spending close to fifty billion dollars on
accelerator chips next year if one hundred and ten billion
dollars the capex number, so some portion allocated to TPUs,
(23:42):
which costs maybe twenty five to thirty percent cheaper. I
think bring down that free cash like help offset that
free cash flow which is going to be negative next year, Mandy.
Speaker 3 (23:54):
But a part of why the stock is pushing higher,
I guess is just the commitment to AI.
Speaker 15 (24:00):
Right.
Speaker 3 (24:00):
The metaverse and Meta's AI ambitions have overlap, but they
are distinct in many ways. My question is, does is
there a Bloomberg Intelligence house view on what the story
is with Meta, metaverse or AI or a hybrid of
the both.
Speaker 15 (24:17):
I mean, I like to think of you know, metaverse
ambitions as a moonshot for Meta and look at you know,
Google's moonshot for examples like self driving very more. That
is a lot real then in terms of driving you know,
tangible revenue top line growth compared to what Meta has
accomplished with that aggregate, you know, seventeen plus billion dollars
(24:39):
in spend over the last three four years, and to me,
it's still a moonshot. And that's where you know, pairing
back and allocating that capital towards probably a more productive
use case in AI where they will see some top
line lift is the right thing to do. And I
think the era of efficiency that Meta had a few
years that maybe repeat, I think in twenty twenty six.
Speaker 4 (25:02):
It's interesting though, because they've been spending a lot on
talent and they've just recommitted to talent when it comes
to hardware and design and then really poaching a key
executive al and Die over at Apple.
Speaker 5 (25:14):
Is that what you want to see more leaning in
maybe to the.
Speaker 4 (25:17):
Virtual reality offerings that we've seen that have been amplified
by AI, the ray Bag glasses for example.
Speaker 15 (25:23):
I mean, I would say at this point virtual reality
would be de emphasized over the glasses, the Raybang glasses,
as you said, and clearly you know, if they want
to distill their model into a smaller version, that would
run most likely on the augmented reality glasses, and that
is a much better form factor than the virtual reality
where they have been subsidizing the hardware costs, but it
(25:46):
really hasn't seen the kind of adoption that they could
see with the Raybang glasses, for example.
Speaker 3 (25:52):
I'm smiling Karra Mandy because like the stock being driven
by metaverse, you just said year of efficiency coming back
twenty twenty six. It's happening all over again. Man Deep
Sing from Bloomberg Intelligence, thank you very much for the research.
Let's turned to Snowflake and look at shares of the company,
one of the big underperformers big decliners. The company issued
(26:14):
operating margin forecasts that fell short of analyst estimates, raising
concerns about the profitability of new AI based tools. Joining
us now is Derek Wood TD Cowen, Managing director, senior
analysts covering the stock. Bring us your core on the
stock and how you've reacted to this earnings print. I'm
trying to understand how real the anxiety is. It's a
(26:35):
big move in the stock and Snowflake finding its its
bottom line in this AI world.
Speaker 8 (26:44):
Yeah, the stock had had a big run into the quarter.
I think expectations were running high. We were a little
cautious thinking that the upside on the top line would
be a little softer than last quarter. We saw that,
we saw a pullback. I think this is a great
opportunity to get back in. In terms of the margin out look, yes,
Q four was below, but the full year was intact,
(27:07):
was in line. We don't typically see the company raise
full year margins int a year and so this was
not a surprise, and the feedback was that they remained
committed to driving margin expansion. They didn't give guidance for
next year, but we absolutely expect margins to continue to
grow next year. So I don't think the Q four
(27:27):
guide should be of concern and remain you know, constructive
on the top line. The Q four guide on revenue
was above and fundamentals remain We're still bullish on it.
Speaker 3 (27:39):
To your point, we were showing a year to date
gain on the name, which is above fifty percent at
this point, and that that is important context. Look, I've
just returned from AWS reinvent in Las Vegas, where you know,
Snowflake comes up, as does Salesforce, right in the context
of two companies that will benefit from a move into
(28:00):
an era of agentic AI. But you know, if you
look again at the stock, the market doesn't seem to
believe that Snowflakes are beneficiary of that, at least right
now in the near term.
Speaker 8 (28:11):
Again near term, their expectations were a little too high,
but you hear to date performance is great. They gave
disclosures of hitting one hundred million in arr from AI
products this quarter. That was one quarter ahead of targets.
And they did just release Snowflake Intelligence, which is their
new agentic AI capability that came out one month ago.
(28:35):
We think that's going to unlock a whole new product
cycle and really accelerate the adoption on AI. And you know,
of course Salesforce has their own agenda with Agent Force,
and we think they both have great swim lanes to
go after.
Speaker 4 (28:50):
It's interesting, let's compare and contrast the context of both
of these stocks, because, as you've rightly pointed out, we've
seen Snowflake up.
Speaker 5 (28:56):
Into the right this year.
Speaker 4 (28:57):
Not so for Salesforce, which has lost about a third
of its market value so far this year. I'm currently
seeing off now about a quarter twenty six percent. Did
it come in with a lack of optimism and therefore
managed to steer that maybe it'll get back to double
digit revenue growth next year.
Speaker 8 (29:15):
Yeah, I mean the compara contrast between these two. The
apps group in software has been under a lot of pressure,
and it's because they're seat based revenue models. People are
concerned about employee headcount, people are concerned about disruption from
AI natives, whereas on the flip side, Snowflake is a
consumption based pricing model. They're in the data infrastructure and
(29:38):
so there has been this big divergence between infrastructure software
and app software and salesforce has fallen in that apps bucket.
But it was encouraging to see the numbers were you know,
we're in line and the guide was inline. But there
were encouraging metrics around agent force and AI that show
some good signs of acceleration. There are thirty five hundred
(29:59):
net new paid agent Force customers sign in Q three.
That was up from two thousand and Q two and
one thousand and Q one, so we are seeing good
acceleration on that front. And the percentage of customers that
are coming back and refueling the tank to buy more
credits and burn you know, as they're burning more consumption
that also went up. So both of these metrics going
(30:21):
in the right direction is highly encouraging on you know,
starting to see some inflection in agent force.
Speaker 4 (30:27):
I mean, Derek, just broadly, are we getting any signs
that software's lunch isn't being eaten by the large language
model providers that they can withstand this.
Speaker 8 (30:39):
There's still a lot to prove, no doubt about that,
and an investor sentiment is super skeptical right now. I mean,
we've always thought that twenty twenty six will be the
year of inflection in the software space around AI. It
takes a lot longer to go through sales cycles new
product development than some of the consumer stuff that we
(30:59):
see taking on so quickly, and so we're hoping that
twenty twenty six is going to be the year where
a lot of these new products kicking to new gear,
people will get through proof of concept, move into production,
start getting more comfortable with new pricing models, and we're
hoping that that is going to turn the corner on
the centiment for investors in the in the in the
(31:20):
in the application software bucket.
Speaker 4 (31:23):
That would a ten kawen great to get your analysis today,
Thank you. Coming up, Anthropics CEO Daria Amade's suggesting some
AI companies taking too much risk by committing to spend
hundreds of billions of dollars to develop and support AI systems. Remember,
he's just committed to spending quite a lot to himself.
Speaker 5 (31:42):
We'll discuss that next.
Speaker 4 (31:42):
This is Blue meg Tech, the CEO of AI startup Anthropic,
(32:06):
So some companies in his industry are making a risky
move by committing so much money to building out the
AI ecosystem, Dara Amiday when he's made in these comments
in an interview at the New York Times deal Book
summit yesterday, Relmerg's AI editor Seth Figman is here to
break down why fifty billion that they've just said they're
going to be spending on data centers.
Speaker 5 (32:23):
An ecosystem is not.
Speaker 4 (32:24):
A yolo, whereas maybe some others in the space are.
Speaker 16 (32:28):
A really modest amount here. I mean, look, it is
an order of magnitude different than the one point fourty
trillion dollars Opening the Eyes compiguring. And while Dario did
not say Opening Eye by name, it was hard not
to feel that that was the target of his criticism.
I think the point that he was trying to make
at a higher level was every AI company right now
is taking on a certain amount of risk and embracing
a certain amount of uncertainty. They are trying to anticipate
what their data center infrastructure needs might be two, three,
(32:50):
four years down the road based on what they're seeing today,
because it takes a long time to build this stuff.
Dario is claiming we're making a measured, though still costly
bet at fifty to sixty billion dollars. Other firms are
just going off the rails and spending a trillion dollars
or more committing to do so. There's a real problem there.
Speaker 3 (33:08):
There's also a sort of methodology difference, which Chef we've
reported on right the idea that Anthropics probably less focused
on building its own infrastructure, you know, leasing capacity, doing
deals with partners.
Speaker 2 (33:19):
Stuff like that.
Speaker 3 (33:21):
Did he explain that kind of technological point of difference
or business plan point of difference.
Speaker 16 (33:26):
I think his emphasis was a bit more on they
are not necessarily trying to be the mass market, consumer
focused company the way that Opening Eye is, which also
relates to Opening Eyes current anxiety about Google's ascendants. Those
are two firms that are equally vying to have a
billion or more users for their aiproducts. What Anthropic is
obviously doing is going after the enterprise market, getting customers
(33:48):
who are willing to spend potentially big dollars to deploy
this internally, and they see that as a higher profit
margin business and one that may not require the extent
of buildout that we've seen other firms do.
Speaker 4 (33:59):
Probably helps with profitability more more in line with the future,
and therefore an IPO more in line with the future.
We have seen a lot of reporting about potentially Anthropic
looking to tap the public markets.
Speaker 16 (34:10):
Yeah, I think a lot of the anxiety this week
for OpenNI I was Google is to send them. But
I think Anthropic is coming out of from the other
angle here, where if they get to the markets first,
if they prove that you can build a credible competitive
AI development business without incurring the same amount of debt
and leading as much money in the next decade, you know,
investors might really gravitate towards that and rethink opening AI's
(34:30):
value here. So they're kind of being hit on both
sides right now.
Speaker 3 (34:34):
I think with Anthropic, it's worth reminding the audience about
who they are beholden to or not beholden to, as
the case may be. When I was in Vegas, I
asked Aws CEO Matt Garman why he hadn't mentioned Anthropic
in his big keynote, given that there's such a big
investment for Amazon, for example, and Fropic gets so much
(34:54):
business through Bedrock and Aws, could you just explain who
their investors are and who they do rely on.
Speaker 16 (35:00):
Yeah, I mean, I think the core backers for Anthropic are,
you know, certainly Amazon and Google, though recently in video
and Microsoft have committed to join the FRAY. So on
the one hand, it was a pretty distinct investor base
from Opening Eye, but recently they're they're kind of overlapping more. Obviously,
Microsoft's a key backer of OPENINGI in video, seems to
be in both, and Google and Amazon have struck some
(35:23):
deals with Opening I infrastructure. So the caveat for everything
Dario says is they're sharing investors, they're sharing partners. They're
also spending a lot of money here, but they're trying
to position themselves as the more measured and cautious compared
to Opening I.
Speaker 2 (35:36):
In this cart bloembag, Seth Figeman, thank you very much.
Speaker 4 (35:47):
Time now for talking tech first up shares and Netflix
under pressure today. Going to CNBC report, the streaming giant
is actually the front runner for Warner Brothers Discovery in
the bidding, with a cash offer that comes some eighty
five of the deal. We understand binding is expected to
wrap up early next week. Plus, Morgan Stanley said to
be considering offloading some of its data center exposure YA,
(36:08):
a significant risk transfer. According to sources, the bank has
helped preliminary talks with this potential other investors about the transfer,
and is also exploring other ways to hedge part of its.
Speaker 5 (36:17):
Data center risk and the EU.
Speaker 4 (36:19):
While it's investigating the rollout of new AI related policies
by Meta's messaging service, WhatsApp, regulators are reportedly weighing interim measures,
including a temporary ban alleging that WhatsApp's AI tools may
soon unfairly blocked rival AI providers from offering their services
through the platform.
Speaker 3 (36:36):
At okay, let's get back to our top story, with
Meta considering potential budget cuts as high as thirty percent
for the Metaverse group next year twenty twenty six.
Speaker 2 (36:48):
Minda Smiley joins us for more on this.
Speaker 3 (36:49):
She's a senior analyst at eMarketer focused on social media.
You know what's interesting about this is the consumer's general
attitude to technology, right, Am I going to use an
AI too every day? Or am I going to jump
head first into the metaverse? It's a big share move.
But I think what I find interesting about your response
(37:11):
is that you don't find it that surprising that there
is being a cut back in the metaverse initiative.
Speaker 17 (37:17):
No, I really don't find it surprising. If anything, I
think people will wonder why it has why these cuts
haven't happened sooner, because I think, you know, even though
AI and social media still remain incredibly popular, the reality
is that a lot of people are actually trying to
spend less time on screens, less time with technology. Even
our own forecasts show that next year, at least in
(37:40):
the US, we do expect people users on social media
to spend less time on these social networks. And so
again that's not to say they still don't spend incredible
amounts of time on social with AI platforms, with technology
in general, but there is a.
Speaker 5 (37:55):
Bigger push to pull back, and.
Speaker 17 (37:56):
So I think even a few years ago it really
wasn't the time for the metaverse clearly, and I think
now it's definitely is not it.
Speaker 3 (38:04):
To recap this reporting is according to sources and it's
thirty percent budget cuts for Metaverse, but that will include
an element of layoffs. I'm trying to understand the difference, right,
Caroline and I have both spent a lot of time
using mixed and virtual reality headsets, and I've spent a
lot of time using RayBan Meta smart glasses. Right through
one you access the AI the smart glasses voice assistant
(38:25):
based AI with camera.
Speaker 2 (38:27):
The other you immerse yourself in a virtual world.
Speaker 3 (38:29):
But why isn't there a sort of recognition of the
overlap of those two domains.
Speaker 17 (38:35):
Yeah, I mean there certainly is some overlap, but I
think again that there's sort of even when you look
at Meta's business overall, right, Like we are seeing how
AI is helping the business incredibly, So it's helping their
bottom line, it's helping their algorithms become more powerful and
keep people on the platform longer. But these loftier goals,
the loftier ideas around super intelligence and even the metaverse
(38:58):
are we're just still not there yet, and I think
the demand isn't even quite there yet to be justifying
these massive amounts of spending. I mean, if we even
see this with smart glasses, I will say I do
think the smart glasses are are having a bit of momentum.
They've had some stumbles recently, but there certainly is a
momentum there. But it's far from you know, a big
portion of Meta's business and likely won't be so for
(39:20):
quite some time. And so yeah, like you said, there
is some overlap. But I still think there's the reality
of what consumers are comfortable with now versus what they're
going to be comfortable with ten twenty years from now,
which is it's just really hard to predict.
Speaker 4 (39:31):
Okay, minda, let's go to therefore, the vast amounts of
money being spent on the AI focus, and that's what's
got investors wild worried about the amount of debt that's
going to have to be deployed, the potential move to negative.
Speaker 5 (39:44):
Cashflow for example.
Speaker 4 (39:46):
Is that wise when you're thinking about the intertwining of
AI with social media? For Meta, when you paid off
because it was more effective and advertisers loved it, but
what about actually our use cases and how superintelligence is
going to win for their business model.
Speaker 10 (40:00):
That's exactly right.
Speaker 17 (40:00):
I mean, we are, like I said, we are seeing
how AI clearly is helping their business. But I think
they are stumbling a lot more with their consumer facing
ventures in this space. I mean even recently when you
look at Meta AI, their standalone app. It of course
METAAI has been you know, worked into all of their
major platforms. You can use it on Instagram, Facebook, WhatsApp,
but the standalone app as of last month only had
(40:23):
about three and a half million figured users globally, So
that's I mean, three and a half million is a
lot of people, but when you look at the billions
and billions of people that use their other platforms, it's
actually quite small. So again, the demand for just like
a pure play AI platform from Meta is still relatively small,
especially when they are competing with CHATGYBT and some of
(40:43):
these other players. And so yeah, there's there's sort of
the business lane and the consumer lane, and I think
the consumer lane they're really having some struggles there.
Speaker 4 (40:51):
But people are really using AI within WhatsApp, within Instagram.
And then there's the issue of competition, whether they're stifling
it over in the you they're worried about perhaps some
policy changes to what's the offering of which companies who
basically integrate in the API. And it looks as though
both Copilot and Microsoft and in the open AI could
be putting back from WhatsApp.
Speaker 17 (41:12):
Yeah, yeah, for sure. I mean I have to say
I wasn't surprised to see that you crack down on that.
We've seen them kind of come down on Meta quite
a bit recently. But it kind of goes back to
my earlier point of when I was saying that Meta
AI doesn't have that many users quite yet. That's why
they're really kind of relying on putting it in their
more mainstream platforms, trying to get people to use it
(41:32):
on WhatsApp, especially in Instagram and Facebook, and so you know, again,
I wasn't surprised to see that they're making that push,
but I'm also not surprised to see that that pushback,
that legal pushback that's happening, especially in an environment where
Meta has really just been under the regulatory microscope lately
here in the US of course that it recently want
its anti trust trial, but when we look into next year,
(41:53):
I think Meta, but also just social platforms in general,
they're facing so much regulatory pressure at the moment.
Speaker 4 (42:00):
Well, on the day we put to the one side
and we see its best to share move since July,
minda Smiley of E Marketer.
Speaker 5 (42:06):
It's great having some time with you. Now. That does
it for this edition of Bloomberg Tech.
Speaker 4 (42:10):
But ed, what a day, what a scoop, What a
market moving story coming from Kurt Wagner.
Speaker 3 (42:15):
Yeah, Kurk's story raises a question for me in the future,
what is the method for using AI?
Speaker 2 (42:20):
Is it smart glasses, is it smartphone? Is it something else?
We're back to that debate. Recap the reporting on the podcast.
Speaker 3 (42:26):
You know where to find it on the Bloomberg terminal
and online on all those platforms listed. From New York
and from San Francisco. This is Bloomberg Tech.
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hyde in New York
and Ed lave Low in sentrances go.
Speaker 2 (00:22):
This is Bloomberg Tech coming up.
Speaker 3 (00:24):
Bloomberg reports Metas considering budget cuts of thirty percent for
its Metaverse group next year. The very group Mark Zuckerberg,
once framed as the future of the company, shares.
Speaker 4 (00:33):
Jumped plus in Vidio CEO Jens and Wang is not
sure China would accept more powerful aichips even the US
relaxes restrictions on the sales.
Speaker 3 (00:43):
We discuss and we break down the latest tech earnings
results from Snowflake and Salesforce, and we were joined by
the UiPath CEO two.
Speaker 4 (00:50):
At first, let's check in on these markets that are
struggling to find direction. Today, Ed, we've been higher, we're
now pushing back lower on the nas that one three
real catalysts were still way to really for next week.
In the Federal Reserve decision, we get still get that
myriad of jobs data that we try to digest.
Speaker 5 (01:06):
We're looking though at pickun just coming off by eighteen percent.
Speaker 4 (01:08):
At one point it broke into positive territory for the
year again. But we're now back to ninety two and
seventy three. But what are you looking at on the
individual stocks?
Speaker 3 (01:15):
Yeah, one single name where the stock does have the direction.
Speaker 2 (01:18):
It's our top story.
Speaker 3 (01:19):
Metaches off their session high that up four percent. Bloomberg
reporting that executives are considering cutting up to thirty percent
of the budget for its Metaverse initiative as long along
with wider cuts. Let's talk more about what Meta's plans
mean for the company with Bloombergs Kurt Wagner, who broke
the story and joins us with the reporting. Sounds like
(01:41):
in the last few weeks. Last month Zuckerberg assembled leadership,
they looked at the budget for next year and Metaverse
is where they want to focus their cuts.
Speaker 2 (01:50):
Bring us your reporting.
Speaker 6 (01:51):
Yes, so this is an annual thing right looking ahead
in twenty twenty six budgets In this case, Mark Zuckerberg
has a nice home in Hawaii where they have a
serious meetings. Executives come in in the month of November,
and to your point, they talk about this year ten
percent cuts sort of across the board, looking at all
the different teams, but that the Metaverse has been asked
(02:12):
to cut much more deeply than that. As much as
thirty percent is currently being discussed, I should point out
it hasn't been decided yet, but a cut of thirty
percent would certainly also come with layoffs. So to your point,
this is an effort that Mark Zuckerberg has touted as
being the future of the company for years. So it's
a pretty meaningful change there.
Speaker 4 (02:32):
Let's go back to when he thought it was the
future of the company. Just take a listen to Mark
Zuckerberg back in twenty twenty one.
Speaker 7 (02:39):
If we all work at it, within the next decade,
the metaverse will reach a billion people, host hundreds of
billions of dollars of digital commerce, and support jobs for
millions of creators and developers.
Speaker 4 (02:53):
Boy a lot has changed since then, and that was
a long time ago, kut, but we still will get
well the idea that will have augmented reality.
Speaker 5 (03:01):
We're still focusing in on the glasses.
Speaker 4 (03:04):
It's just not the actual virtual worlds and working out
that's right.
Speaker 6 (03:08):
And the virtual worlds aren't going away, to be clear,
It's still going to be something that they invest in,
just not quite as aggressively as they had. And what
was explained to me by sources this week. Is that
part of that is that the market has not really materialized.
Speaker 8 (03:23):
You know.
Speaker 6 (03:23):
I think they originally spent a lot of money building
out this Metaverse group, thinking that they would have competition
from others in the industry, rushing towards a metaverse like
product as well. That has not happened. And so it's
not necessarily that Mark Zuckerberg no longer believes in this.
I'm told that he still does. But clearly they have
overspent to try to build this thing, and I think
(03:45):
the ultimate goal is to get to these you know,
AI inspired glasses and ar glasses, and maybe the metaverse
was a stepping stone to that all the way.
Speaker 3 (03:52):
So actually it signals a commitment to AI hardware distinct.
Speaker 2 (03:56):
From metaverse hardware.
Speaker 3 (03:57):
I thought it was really interesting that shares of Losutica,
who they partner with to make the ray band metas,
kind of rose a little bit after the story and
all of the analyst notes and there are many actually
reacting to our reporting say this is probably bullish for
AI spending. At the same time, Bloomberg reporting that Apple's
most senior design executive going to meta right, They're.
Speaker 6 (04:18):
Not giving up on hardware right, that the VR virtual
reality group is expected to be hit by these metaverse cuts, right,
that is the immersive metaverse product. But they are still
investing in in AI glasses, the ray bands that you
mentioned ed. They are still obviously bringing in big talent
and you know, poaching people to design these things. This
(04:38):
is what Mark Zuckerberg talks about on earning sculls AI.
He talks about the glasses. Those things are not going away.
It is the specific kind of immersive virtual stuff that
it looks like they're taking a second look at.
Speaker 4 (04:49):
And reallocation of resources. Kurt Wagner, a huge market moving story.
Thank you for joining us on it. Let's talk more
about the market moves. Natsy Curtains with us just global
chief investment officer at ALTI Team and Global and.
Speaker 5 (05:00):
That see you've actually been writing really.
Speaker 4 (05:01):
Saying that we are currently in an innovation driven bull market.
But what does this move from meta and sort of
the moving around of capital expenditure tell you about where
we are in the cycle.
Speaker 9 (05:13):
I mean, I think the thing is about innovation driven
bull markets and we've had you know, pretty much three
of them before this one, which is they tend to
be characterized by a couple of different risks. You know,
cap expenditure is quite large. Companies need to tap the
debt markets, and they're shifting perceptions of the winners and losers.
So volet you know, these these bull markets last longer,
(05:36):
they go beyond people expect. They tend to come with
productivity improvements, but you do get some shifting perceptions and
shifting priorities. So let's just bring that back to Meta.
You know, they've got a lot of money that they
want to spend on jen AI. The market hasn't liked
the fact they've tapped into the debt market to do that.
You know, they've got less in a way cash flow
(05:56):
than some of the other companies making similar levels of
capex spend. So I think this is a good and
saying reallocation of resources towards AI. Which is the price.
Speaker 3 (06:08):
Nancy, I want to go saying you just said, I
think it's critically important cash flow. If you look at
the reaction to this Bloomberg report on Meta, many would
note that Meta was headed for negative.
Speaker 2 (06:20):
Free cash flow next year.
Speaker 10 (06:21):
That's right.
Speaker 3 (06:21):
This year, the story was about Oracle hitting negative free
cash flow for the first time since nineteen ninety two.
Is that a worrying set of data that you're seeing
on your desk?
Speaker 9 (06:33):
Yeah, because I think the market's being more discerning now.
It's recognizing that some companies have cash flow that can
support this, and some companies really need debt. And Oracle
is a good poster child for not only being late
to cloud spending quite a lot of money being very
tied into the open AI in terms of contracts and
(06:54):
the risks associated with that, but also using debt. And
I think their debt to ever does like four times,
so it's in a completely different category.
Speaker 8 (07:02):
You know.
Speaker 9 (07:02):
It's kind of in the core we've department in terms
of indebtedness, and investors quite rightfully are becoming more discerning
about the risk associated with you know, financial leverage.
Speaker 5 (07:13):
And then there's the risk of the private markets.
Speaker 4 (07:15):
How are you seeing open AI playing as a virtuous
or a vicious circle right now? Is it a single
point of failure or is it the one that you
need to be allocated to.
Speaker 2 (07:25):
It's a little of both.
Speaker 9 (07:26):
Let's face it. Open AI declared code read yesterday the
day before yesterday. Look, it's facing competition. It recognizes that
Gemini is really and if you've used the Gemini three.
It's pretty it's pretty impressive. It's not as friendly as
chat GBT and now it's a personal relationship thing going on,
but it really is quite interesting in terms of nano banana,
(07:49):
you know, the image editor as well as I would
say complex reasoning is really quite good in Gemini three.
So open AIS facing competition, they got to focus. They've
been spread across a lot of different dimensions. I think
they're refocusing now on personalization, reliability, speed, and continuing to
build out that open AI large language model to maintain
(08:10):
their lead.
Speaker 3 (08:10):
Right, Nancy, We came into this morning when we met
as a team, thinking probably we focus on salesforce and
snowflake earnings and then we've got the meta report.
Speaker 8 (08:19):
Right.
Speaker 3 (08:19):
Your thesis is that you have innovation cycles driven by
heavy CAPEX monetization follows. Actually, if you take the different
part of the stack with salesforce and Snowflake, tepid outlook
in terms of profits and top line growth from all
the AI investment. Is that Is that a fair point
I've just made, Yeah.
Speaker 9 (08:40):
Because I think that the problem is in innovation ball
markets as CAPEX starts and you've got to build out
the Capex and the revenue follows, you know, sometimes years later,
sometimes within a couple of years, and so investors have
to extrapolate is the investment really going to deliver the
revenue and profits and the rate of reach and not
everyone's going to get there, And that's the risk of
(09:02):
innovation driven ballmarket. There are some winners, there are some
losers along the way. But you know, I think the
key is you've got to really focus on who is
delivering the revenue today or at least the visibility of that,
and who has the wherewithal? And just an example, you know,
I mean, Alphabet's got what one hundred and fifty billion
(09:23):
of operating income open AIS losing nine billion a year,
so you know, the wherewithal the financial might probably I
think investors are thinking may set with Alphabet at the moment.
Speaker 3 (09:35):
We're going to go very deep later in the program
on the earnings from Salesforce and from Snowflake. But there
was a very interesting across the board. Look Nancy Ko
and Global Chief Investment Officer Lty Team and Global thank
you very much. Like coming up in videos, Gens and
Wang looks to win over Washington on chip export rules,
but could it be too late for the AI chip
maker in China.
Speaker 2 (09:55):
We've got more on that. Next, This is Bloomberg.
Speaker 10 (09:57):
Tech going toe to toe against anyone.
Speaker 11 (10:12):
The American technology industry has nothing to fear. We are mighty,
were fast, or inventive. We'll take anybody on. In the
case of China, we should concede the entire market to them.
They're formidable, But conceding that entire market we are to
go compute for it.
Speaker 5 (10:30):
In Vida CEO Jenson one.
Speaker 4 (10:31):
They're speaking on American AI leadership at the CSIS conference
in Washington yesterday. We also met with President Trump to
discuss export controls on his chips, noting some uncertainty of
a whether China would even accept the processes if restrictions
were indeed eased. Here with the latest is Bloomberg Senior
Tech editor Mike Shephard and Mike we're talking about H
(10:52):
two hundreds in particular here, and it feels as though.
Speaker 5 (10:55):
Maybe Jensen thinks the ship has already had sailed.
Speaker 4 (10:58):
They're limited in one folk on domestic really.
Speaker 12 (11:02):
Yeah, it's unclear exactly where things stand internally inside the
administration on the H two hundred and whether Donald Trump
will give the ultimate green light for those chips to
be sold to China. You'll remember, just a few weeks
ago before the holiday, we broke the news that administration
officials have been deliberating this idea of allowing the H
(11:23):
two hundred to be sold to China, to be exported
to China, and this would be a significant relaxation of
the export controls that have been in place on AI
chips since twenty twenty two and have really hampered in
Vidia's ability to sell into China, which is the world's
second largest AI and chip market right now, and it's
something that he has made a priority. Even though in
(11:45):
Nvidia is not putting the China market on its forecasts
or anything else, yet, he's identified it ad as as
a fifty billion dollar opportunity for the company.
Speaker 3 (11:58):
The baseline assumption is zero China revenue, right, but Jensenmongk's
keeping himself in proximity not just to the Administration, but
to Congress as well. Whether China wants those chips. We'll
talk about that with Peter Elstrom in just a minute.
The Gain AI Act is also a part of this
lobbying effort, and it's an area where maybe in Vidia
is nearer to a win could just explain the basics
(12:19):
of legislation or a piece of it that was omitted
in in Nvidia's favor.
Speaker 12 (12:25):
Oh, of course, and this was actually a big portion
of his visit to Washington. It was another whirlwind day
in the nation's capital for Jensen, who has become a
regular here in Washington, both on Capitol Hill but even
more so at the White House, where he has forged
that close bomb with.
Speaker 2 (12:42):
President Donald Trump.
Speaker 12 (12:43):
What Nvidia has been trying to do is fend off
this gain AI Act, which would prevent or make it
at least very hard for in Nvidia to sell to
China and other US adversary nations without explicit permission from
the US government.
Speaker 10 (13:00):
But he has already get that.
Speaker 12 (13:00):
Look, we don't need these restrictions in place. The Commerce
Department already has the authority to do so, and there
is no competition between customers in China and the customers
here in the US. The bill also would have required
the company to give first DIBs to American buyers. It
looks like lawmakers are going to exclude this provision from
(13:21):
must pass defense legislation that has to be done before
the end of the year. However, we can't consider it
completely dead. Our sense is that Congress may try again.
There is bipartisan support for this idea, and we do
get a sense that some lawmakers still have concerns about
allowing China to have access to some of those advanced
(13:42):
AI chips from Nvidia.
Speaker 3 (13:44):
Bluebogs Mike Sheppard in Washington, DC, thank you. At the
same time, China's ramping up support for domestic chip production
to occupy a vacuum that's been left by Nvidia's forced exit.
According to sources, Beijing based Cambricon is set to try
triple production of AI chips in twenty twenty six, with
plans to deliver half a million AI accelerators, the vast
(14:06):
majority of which are advanced. Bloombo's technology executive editor Peter
Eldstrom joins us cambricn is another example of a domestic
player with an AI accelerator product. It is reliant on Smick,
China's domestic version of TSMC and this is an interesting
piece of reporting. Bring us the details, but also technologically speaking,
(14:29):
the differences of where Cambercorn and Spick are versus Nvidia,
because the scale is completely different.
Speaker 13 (14:36):
Yeah, this is exactly what Jensen Wong is talking about.
This is exactly what he's concerned about within China that
after the Biden administration first decided to cut off shipments
of Nvidio chips into that country, the government and the
companies there saw the market opportunity, they saw their own vulnerabilities,
and they decided to invest very very aggressively in their
own production technologies for chips and also EI designs. So
(15:00):
always really the primary competitor that we have been talking about,
they have quite a bit of momentum in building these
AI chips. They've been used in a number of different
places there. Camera Con is really the second player. It's
sort of like the AMD for that market. They're quite
small at this point. They don't have the kind of
hef that Huawei does in particular, but they are making
a lot of progress. So what our sources have told
(15:20):
us is that their plans are to triple their production
of AI chips into next year. They'll be a pretty
significant second to Huawei and supplying those chips. So to
the broader question about what US export controls due to
this market, as Jensen Wong is talking about, it certainly
has opened it up for domestic production Chinese companies are
being told by Beijing that they should buy domestic chips
(15:42):
whenever possible. They've also turned down this idea that they're
going to buy in Vidia's H twenty chips. They don't
think that those are good enough for the market. So,
as Mike Shepherd was talking about earlier, there may be
a discussion of about H two hundreds, but there's no
putting this genie back in the bottle. China has decided
they are going to make their own chips domestically, and
they're making a lot of progress.
Speaker 4 (16:01):
They're making a lot of progress and designing them, but
then they've got to get them spout out by Smike
and it feels as though ultimately the production that what
you're really garnering isn't very many.
Speaker 13 (16:13):
Yeah, that's a very good point. They are way way
behind the global standards. There is some desperation here that
if you have to produce that lower standards, you will,
But if you look at some of the details, it's
very very interesting. So Smick is still producing these chips
at seven nanimeters, so well behind the three nanimeter that
we see from TSMC at this point. Also, the yields
we got some insights into the yields. Only about twenty
(16:35):
percent of the chips that they're making right now are
actually usable, So that's only one out of five chips
that they produce they're actually able to use. You compare
that with a TSMC, which is up at eighty or
ninety percent yields. Their economics are just totally different. But
it's a sign of how badly Beijing wants to be
able to catch up in this market that they're just
(16:55):
going to eat those costs.
Speaker 2 (16:56):
They're going to eat four.
Speaker 13 (16:58):
Times the cost of what it would cost some other
globally competitive manufacturers to make these chips because they feel
like from a strategic standpoint, they need to make this
progress into.
Speaker 4 (17:07):
Alstrom brilliant reporting, Thank you very much. Indeed, shares of
UiPath having their best day in two years after the
automation software provider reported earnings. They showed accelerating growth in
the third quarter. I'm used to stay found a CEO,
Daniel Dines joins us for more.
Speaker 5 (17:28):
You like the OG.
Speaker 4 (17:29):
You've been doing this for two decades, automating processes.
Speaker 5 (17:32):
You're thinking about repetitive.
Speaker 4 (17:33):
Administ administration and the tasks you can take away from
a human how you're building an AI agents into that.
Speaker 14 (17:43):
Agents are very complementary to our automation engine. We specialize
over the year in bringing rule based automations and AA
agents is bringing something that is much more closer to
human intelligence.
Speaker 10 (17:59):
We've believed that the.
Speaker 14 (18:01):
Key aspect of bringing reliable AI to enterprises is to
have a solid foundation of automation and then AI comes
on the top of it and we connect basically, using
our orchestration technology, we connect AIA agents with robots and humans.
Speaker 3 (18:24):
Daniel, I've been digging into RPA and trying to think about, like,
what is new about RPA in an AI world. I
think that was kind of the root of Caroline's question.
One of the ideas is that there's a potential addressable
market for you where desks with less technical staff can
use your software because it's better at reasoning across documentation
(18:47):
and those kinds of workloads. Just explain how you kind
of grow the business beyond your traditional customer base.
Speaker 14 (18:56):
Well, first of all, within our traditional custom more base,
there is a lot of room for expansion, and we
are seeing tremendous opportunities in healthcare and financial services, so
we really are expanding the reach of our RPA technology
(19:16):
with this new agentic proposition, even for the traditional RPA itself,
we are bringing the power of GENI to make the
development faster and in some instances even more reliable when,
for instance, the applications changes a lot. We are combining
(19:38):
now computer use type of technology with traditional RPA. So
this combination of agentic RPA, API and orchestration is really
what is the crux of our platform and it's resonates
quite well with our with our customers.
Speaker 4 (19:55):
And again talk about that resonating Daniel, because we're hearing
more and more that really the barriers at the moment
adoption or a willingness to pay.
Speaker 5 (20:05):
How are you seeing clients deal with that?
Speaker 14 (20:08):
Because many clients were initially investing mostly in like childboats
and they don't get really the high you know, the outcomes,
They don't have an impact on the bottom line. Eventually,
what do we have ringing on the table is the
capability of delivering autonomous agentic automation and this is even
(20:31):
from RBA. We specialize in bringing this autonomous agent and
now we show to our customers that they can get
significant benefits and that can go directly into the bottom line.
Speaker 3 (20:48):
Daniel our colleagues at Bloomberg Intelligence, that's our in house
analysts are a little bit cautious on your subscription revenues.
If you look at where the street thought they'd be
basically in line slightly and they're worried about the sustainability
of subscriptions.
Speaker 2 (21:04):
Are they right or they wrong?
Speaker 14 (21:07):
Well, I think they are totally wrong, guys. I have
I have yet to see one piece of AI that
was capable of replacing one of our robots. I think
this is the most misunderstanding piece of technology when you
feel that AI can replace RPA.
Speaker 10 (21:26):
R PA, it's a.
Speaker 14 (21:27):
Great last my technology. It's the rule based driven it's fast,
it is reliable, it's precise. It works very well across
regulated industries in healthcare, and AI is just a complement
to it. I would say that a genetic right now.
Actually it helps improving our subscription business.
Speaker 3 (21:49):
Daniel Dines, CEO of vieu iPath. With the earning spread
down well back to Bloomberg Tech. Our top story is
Bloombog's Kirk Wagner reporting that Meta is considering cutting budgets
for its Metaverse initiative by up to thirty percent next
(22:11):
year as part of its back budget planning cycle. That's
all according to our sources. The stock reacting positively to
the report, up four percent at the moment, on track
for its biggest jump since July. Nothing's been decided yet.
There will be an element of layoffs, according to our reporting,
part of a quite broader look at the company and
refocusing from metaverse to AI. But really interesting move in
(22:33):
the stock character.
Speaker 5 (22:34):
Yeah, stock reaction.
Speaker 4 (22:35):
Now, let's get you an analyst reaction, because Bloomberg Intelligence
has been out there writing that these META cost cuts said,
along with potential use of Google's TPUs, we could actually
improve the company's free cash flow at least ten to
twelve billion dollars. Person helping pen that is Bloomberg Intelligence
technist man needs sing and many we've been worrying about
free cash flow Meta the AI capex spend.
Speaker 5 (22:56):
Is this helping offset that concern a bit?
Speaker 10 (22:59):
Yeah?
Speaker 15 (23:00):
And look, I mean based on consensus right now, we
are talking about at least a fifty percent increase in
capex formta next year and no one I think would
mind that given everyone's fees. There will be lift in
revenue from AI down the line in the near term,
and I think they needed some offset because the stock
(23:21):
was very expensive on a free cash flow basis, so
this is a nice offset. And I think the TPU
news was also quite productive in that direction, simply because
they will be spending close to fifty billion dollars on
accelerator chips next year if one hundred and ten billion
dollars the capex number, so some portion allocated to TPUs,
(23:42):
which costs maybe twenty five to thirty percent cheaper. I
think bring down that free cash like help offset that
free cash flow which is going to be negative next year, Mandy.
Speaker 3 (23:54):
But a part of why the stock is pushing higher,
I guess is just the commitment to AI.
Speaker 15 (24:00):
Right.
Speaker 3 (24:00):
The metaverse and Meta's AI ambitions have overlap, but they
are distinct in many ways. My question is, does is
there a Bloomberg Intelligence house view on what the story
is with Meta, metaverse or AI or a hybrid of
the both.
Speaker 15 (24:17):
I mean, I like to think of you know, metaverse
ambitions as a moonshot for Meta and look at you know,
Google's moonshot for examples like self driving very more. That
is a lot real then in terms of driving you know,
tangible revenue top line growth compared to what Meta has
accomplished with that aggregate, you know, seventeen plus billion dollars
(24:39):
in spend over the last three four years, and to me,
it's still a moonshot. And that's where you know, pairing
back and allocating that capital towards probably a more productive
use case in AI where they will see some top
line lift is the right thing to do. And I
think the era of efficiency that Meta had a few
years that maybe repeat, I think in twenty twenty six.
Speaker 4 (25:02):
It's interesting though, because they've been spending a lot on
talent and they've just recommitted to talent when it comes
to hardware and design and then really poaching a key
executive al and Die over at Apple.
Speaker 5 (25:14):
Is that what you want to see more leaning in
maybe to the.
Speaker 4 (25:17):
Virtual reality offerings that we've seen that have been amplified
by AI, the ray Bag glasses for example.
Speaker 15 (25:23):
I mean, I would say at this point virtual reality
would be de emphasized over the glasses, the Raybang glasses,
as you said, and clearly you know, if they want
to distill their model into a smaller version, that would
run most likely on the augmented reality glasses, and that
is a much better form factor than the virtual reality
where they have been subsidizing the hardware costs, but it
(25:46):
really hasn't seen the kind of adoption that they could
see with the Raybang glasses, for example.
Speaker 3 (25:52):
I'm smiling Karra Mandy because like the stock being driven
by metaverse, you just said year of efficiency coming back
twenty twenty six. It's happening all over again. Man Deep
Sing from Bloomberg Intelligence, thank you very much for the research.
Let's turned to Snowflake and look at shares of the company,
one of the big underperformers big decliners. The company issued
(26:14):
operating margin forecasts that fell short of analyst estimates, raising
concerns about the profitability of new AI based tools. Joining
us now is Derek Wood TD Cowen, Managing director, senior
analysts covering the stock. Bring us your core on the
stock and how you've reacted to this earnings print. I'm
trying to understand how real the anxiety is. It's a
(26:35):
big move in the stock and Snowflake finding its its
bottom line in this AI world.
Speaker 8 (26:44):
Yeah, the stock had had a big run into the quarter.
I think expectations were running high. We were a little
cautious thinking that the upside on the top line would
be a little softer than last quarter. We saw that,
we saw a pullback. I think this is a great
opportunity to get back in. In terms of the margin out look, yes,
Q four was below, but the full year was intact,
(27:07):
was in line. We don't typically see the company raise
full year margins int a year and so this was
not a surprise, and the feedback was that they remained
committed to driving margin expansion. They didn't give guidance for
next year, but we absolutely expect margins to continue to
grow next year. So I don't think the Q four
(27:27):
guide should be of concern and remain you know, constructive
on the top line. The Q four guide on revenue
was above and fundamentals remain We're still bullish on it.
Speaker 3 (27:39):
To your point, we were showing a year to date
gain on the name, which is above fifty percent at
this point, and that that is important context. Look, I've
just returned from AWS reinvent in Las Vegas, where you know,
Snowflake comes up, as does Salesforce, right in the context
of two companies that will benefit from a move into
(28:00):
an era of agentic AI. But you know, if you
look again at the stock, the market doesn't seem to
believe that Snowflakes are beneficiary of that, at least right
now in the near term.
Speaker 8 (28:11):
Again near term, their expectations were a little too high,
but you hear to date performance is great. They gave
disclosures of hitting one hundred million in arr from AI
products this quarter. That was one quarter ahead of targets.
And they did just release Snowflake Intelligence, which is their
new agentic AI capability that came out one month ago.
(28:35):
We think that's going to unlock a whole new product
cycle and really accelerate the adoption on AI. And you know,
of course Salesforce has their own agenda with Agent Force,
and we think they both have great swim lanes to
go after.
Speaker 4 (28:50):
It's interesting, let's compare and contrast the context of both
of these stocks, because, as you've rightly pointed out, we've
seen Snowflake up.
Speaker 5 (28:56):
Into the right this year.
Speaker 4 (28:57):
Not so for Salesforce, which has lost about a third
of its market value so far this year. I'm currently
seeing off now about a quarter twenty six percent. Did
it come in with a lack of optimism and therefore
managed to steer that maybe it'll get back to double
digit revenue growth next year.
Speaker 8 (29:15):
Yeah, I mean the compara contrast between these two. The
apps group in software has been under a lot of pressure,
and it's because they're seat based revenue models. People are
concerned about employee headcount, people are concerned about disruption from
AI natives, whereas on the flip side, Snowflake is a
consumption based pricing model. They're in the data infrastructure and
(29:38):
so there has been this big divergence between infrastructure software
and app software and salesforce has fallen in that apps bucket.
But it was encouraging to see the numbers were you know,
we're in line and the guide was inline. But there
were encouraging metrics around agent force and AI that show
some good signs of acceleration. There are thirty five hundred
(29:59):
net new paid agent Force customers sign in Q three.
That was up from two thousand and Q two and
one thousand and Q one, so we are seeing good
acceleration on that front. And the percentage of customers that
are coming back and refueling the tank to buy more
credits and burn you know, as they're burning more consumption
that also went up. So both of these metrics going
(30:21):
in the right direction is highly encouraging on you know,
starting to see some inflection in agent force.
Speaker 4 (30:27):
I mean, Derek, just broadly, are we getting any signs
that software's lunch isn't being eaten by the large language
model providers that they can withstand this.
Speaker 8 (30:39):
There's still a lot to prove, no doubt about that,
and an investor sentiment is super skeptical right now. I mean,
we've always thought that twenty twenty six will be the
year of inflection in the software space around AI. It
takes a lot longer to go through sales cycles new
product development than some of the consumer stuff that we
(30:59):
see taking on so quickly, and so we're hoping that
twenty twenty six is going to be the year where
a lot of these new products kicking to new gear,
people will get through proof of concept, move into production,
start getting more comfortable with new pricing models, and we're
hoping that that is going to turn the corner on
the centiment for investors in the in the in the
(31:20):
in the application software bucket.
Speaker 4 (31:23):
That would a ten kawen great to get your analysis today,
Thank you. Coming up, Anthropics CEO Daria Amade's suggesting some
AI companies taking too much risk by committing to spend
hundreds of billions of dollars to develop and support AI systems. Remember,
he's just committed to spending quite a lot to himself.
Speaker 5 (31:42):
We'll discuss that next.
Speaker 4 (31:42):
This is Blue meg Tech, the CEO of AI startup Anthropic,
(32:06):
So some companies in his industry are making a risky
move by committing so much money to building out the
AI ecosystem, Dara Amiday when he's made in these comments
in an interview at the New York Times deal Book
summit yesterday, Relmerg's AI editor Seth Figman is here to
break down why fifty billion that they've just said they're
going to be spending on data centers.
Speaker 5 (32:23):
An ecosystem is not.
Speaker 4 (32:24):
A yolo, whereas maybe some others in the space are.
Speaker 16 (32:28):
A really modest amount here. I mean, look, it is
an order of magnitude different than the one point fourty
trillion dollars Opening the Eyes compiguring. And while Dario did
not say Opening Eye by name, it was hard not
to feel that that was the target of his criticism.
I think the point that he was trying to make
at a higher level was every AI company right now
is taking on a certain amount of risk and embracing
a certain amount of uncertainty. They are trying to anticipate
what their data center infrastructure needs might be two, three,
(32:50):
four years down the road based on what they're seeing today,
because it takes a long time to build this stuff.
Dario is claiming we're making a measured, though still costly
bet at fifty to sixty billion dollars. Other firms are
just going off the rails and spending a trillion dollars
or more committing to do so. There's a real problem there.
Speaker 3 (33:08):
There's also a sort of methodology difference, which Chef we've
reported on right the idea that Anthropics probably less focused
on building its own infrastructure, you know, leasing capacity, doing
deals with partners.
Speaker 2 (33:19):
Stuff like that.
Speaker 3 (33:21):
Did he explain that kind of technological point of difference
or business plan point of difference.
Speaker 16 (33:26):
I think his emphasis was a bit more on they
are not necessarily trying to be the mass market, consumer
focused company the way that Opening Eye is, which also
relates to Opening Eyes current anxiety about Google's ascendants. Those
are two firms that are equally vying to have a
billion or more users for their aiproducts. What Anthropic is
obviously doing is going after the enterprise market, getting customers
(33:48):
who are willing to spend potentially big dollars to deploy
this internally, and they see that as a higher profit
margin business and one that may not require the extent
of buildout that we've seen other firms do.
Speaker 4 (33:59):
Probably helps with profitability more more in line with the future,
and therefore an IPO more in line with the future.
We have seen a lot of reporting about potentially Anthropic
looking to tap the public markets.
Speaker 16 (34:10):
Yeah, I think a lot of the anxiety this week
for OpenNI I was Google is to send them. But
I think Anthropic is coming out of from the other
angle here, where if they get to the markets first,
if they prove that you can build a credible competitive
AI development business without incurring the same amount of debt
and leading as much money in the next decade, you know,
investors might really gravitate towards that and rethink opening AI's
(34:30):
value here. So they're kind of being hit on both
sides right now.
Speaker 3 (34:34):
I think with Anthropic, it's worth reminding the audience about
who they are beholden to or not beholden to, as
the case may be. When I was in Vegas, I
asked Aws CEO Matt Garman why he hadn't mentioned Anthropic
in his big keynote, given that there's such a big
investment for Amazon, for example, and Fropic gets so much
(34:54):
business through Bedrock and Aws, could you just explain who
their investors are and who they do rely on.
Speaker 16 (35:00):
Yeah, I mean, I think the core backers for Anthropic are,
you know, certainly Amazon and Google, though recently in video
and Microsoft have committed to join the FRAY. So on
the one hand, it was a pretty distinct investor base
from Opening Eye, but recently they're they're kind of overlapping more. Obviously,
Microsoft's a key backer of OPENINGI in video, seems to
be in both, and Google and Amazon have struck some
(35:23):
deals with Opening I infrastructure. So the caveat for everything
Dario says is they're sharing investors, they're sharing partners. They're
also spending a lot of money here, but they're trying
to position themselves as the more measured and cautious compared
to Opening I.
Speaker 2 (35:36):
In this cart bloembag, Seth Figeman, thank you very much.
Speaker 4 (35:47):
Time now for talking tech first up shares and Netflix
under pressure today. Going to CNBC report, the streaming giant
is actually the front runner for Warner Brothers Discovery in
the bidding, with a cash offer that comes some eighty
five of the deal. We understand binding is expected to
wrap up early next week. Plus, Morgan Stanley said to
be considering offloading some of its data center exposure YA,
(36:08):
a significant risk transfer. According to sources, the bank has
helped preliminary talks with this potential other investors about the transfer,
and is also exploring other ways to hedge part of its.
Speaker 5 (36:17):
Data center risk and the EU.
Speaker 4 (36:19):
While it's investigating the rollout of new AI related policies
by Meta's messaging service, WhatsApp, regulators are reportedly weighing interim measures,
including a temporary ban alleging that WhatsApp's AI tools may
soon unfairly blocked rival AI providers from offering their services
through the platform.
Speaker 3 (36:36):
At okay, let's get back to our top story, with
Meta considering potential budget cuts as high as thirty percent
for the Metaverse group next year twenty twenty six.
Speaker 2 (36:48):
Minda Smiley joins us for more on this.
Speaker 3 (36:49):
She's a senior analyst at eMarketer focused on social media.
You know what's interesting about this is the consumer's general
attitude to technology, right, Am I going to use an
AI too every day? Or am I going to jump
head first into the metaverse? It's a big share move.
But I think what I find interesting about your response
(37:11):
is that you don't find it that surprising that there
is being a cut back in the metaverse initiative.
Speaker 17 (37:17):
No, I really don't find it surprising. If anything, I
think people will wonder why it has why these cuts
haven't happened sooner, because I think, you know, even though
AI and social media still remain incredibly popular, the reality
is that a lot of people are actually trying to
spend less time on screens, less time with technology. Even
our own forecasts show that next year, at least in
(37:40):
the US, we do expect people users on social media
to spend less time on these social networks. And so
again that's not to say they still don't spend incredible
amounts of time on social with AI platforms, with technology
in general, but there is a.
Speaker 5 (37:55):
Bigger push to pull back, and.
Speaker 17 (37:56):
So I think even a few years ago it really
wasn't the time for the metaverse clearly, and I think
now it's definitely is not it.
Speaker 3 (38:04):
To recap this reporting is according to sources and it's
thirty percent budget cuts for Metaverse, but that will include
an element of layoffs. I'm trying to understand the difference, right,
Caroline and I have both spent a lot of time
using mixed and virtual reality headsets, and I've spent a
lot of time using RayBan Meta smart glasses. Right through
one you access the AI the smart glasses voice assistant
(38:25):
based AI with camera.
Speaker 2 (38:27):
The other you immerse yourself in a virtual world.
Speaker 3 (38:29):
But why isn't there a sort of recognition of the
overlap of those two domains.
Speaker 17 (38:35):
Yeah, I mean there certainly is some overlap, but I
think again that there's sort of even when you look
at Meta's business overall, right, Like we are seeing how
AI is helping the business incredibly, So it's helping their
bottom line, it's helping their algorithms become more powerful and
keep people on the platform longer. But these loftier goals,
the loftier ideas around super intelligence and even the metaverse
(38:58):
are we're just still not there yet, and I think
the demand isn't even quite there yet to be justifying
these massive amounts of spending. I mean, if we even
see this with smart glasses, I will say I do
think the smart glasses are are having a bit of momentum.
They've had some stumbles recently, but there certainly is a
momentum there. But it's far from you know, a big
portion of Meta's business and likely won't be so for
(39:20):
quite some time. And so yeah, like you said, there
is some overlap. But I still think there's the reality
of what consumers are comfortable with now versus what they're
going to be comfortable with ten twenty years from now,
which is it's just really hard to predict.
Speaker 4 (39:31):
Okay, minda, let's go to therefore, the vast amounts of
money being spent on the AI focus, and that's what's
got investors wild worried about the amount of debt that's
going to have to be deployed, the potential move to negative.
Speaker 5 (39:44):
Cashflow for example.
Speaker 4 (39:46):
Is that wise when you're thinking about the intertwining of
AI with social media? For Meta, when you paid off
because it was more effective and advertisers loved it, but
what about actually our use cases and how superintelligence is
going to win for their business model.
Speaker 10 (40:00):
That's exactly right.
Speaker 17 (40:00):
I mean, we are, like I said, we are seeing
how AI clearly is helping their business. But I think
they are stumbling a lot more with their consumer facing
ventures in this space. I mean even recently when you
look at Meta AI, their standalone app. It of course
METAAI has been you know, worked into all of their
major platforms. You can use it on Instagram, Facebook, WhatsApp,
but the standalone app as of last month only had
(40:23):
about three and a half million figured users globally, So
that's I mean, three and a half million is a
lot of people, but when you look at the billions
and billions of people that use their other platforms, it's
actually quite small. So again, the demand for just like
a pure play AI platform from Meta is still relatively small,
especially when they are competing with CHATGYBT and some of
(40:43):
these other players. And so yeah, there's there's sort of
the business lane and the consumer lane, and I think
the consumer lane they're really having some struggles there.
Speaker 4 (40:51):
But people are really using AI within WhatsApp, within Instagram.
And then there's the issue of competition, whether they're stifling
it over in the you they're worried about perhaps some
policy changes to what's the offering of which companies who
basically integrate in the API. And it looks as though
both Copilot and Microsoft and in the open AI could
be putting back from WhatsApp.
Speaker 17 (41:12):
Yeah, yeah, for sure. I mean I have to say
I wasn't surprised to see that you crack down on that.
We've seen them kind of come down on Meta quite
a bit recently. But it kind of goes back to
my earlier point of when I was saying that Meta
AI doesn't have that many users quite yet. That's why
they're really kind of relying on putting it in their
more mainstream platforms, trying to get people to use it
(41:32):
on WhatsApp, especially in Instagram and Facebook, and so you know, again,
I wasn't surprised to see that they're making that push,
but I'm also not surprised to see that that pushback,
that legal pushback that's happening, especially in an environment where
Meta has really just been under the regulatory microscope lately
here in the US of course that it recently want
its anti trust trial, but when we look into next year,
(41:53):
I think Meta, but also just social platforms in general,
they're facing so much regulatory pressure at the moment.
Speaker 4 (42:00):
Well, on the day we put to the one side
and we see its best to share move since July,
minda Smiley of E Marketer.
Speaker 5 (42:06):
It's great having some time with you. Now. That does
it for this edition of Bloomberg Tech.
Speaker 4 (42:10):
But ed, what a day, what a scoop, What a
market moving story coming from Kurt Wagner.
Speaker 3 (42:15):
Yeah, Kurk's story raises a question for me in the future,
what is the method for using AI?
Speaker 2 (42:20):
Is it smart glasses, is it smartphone? Is it something else?
We're back to that debate. Recap the reporting on the podcast.
Speaker 3 (42:26):
You know where to find it on the Bloomberg terminal
and online on all those platforms listed. From New York
and from San Francisco. This is Bloomberg Tech.
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