Bloomberg Technology 09/01/2023
>> FROM THE HEART WHERE INNOVATION MONEY AND POWER COLLIDE IN SILICON VALLEY AND BEYOND, THIS IS BLOOMBERG TECHNOLOGY WITH CAROLINE HYDE AND ED LUDLOW. ♪ ED: I'M IN SAN FRANCISCO AND CAROLINE HYDE IS OFF TODAY, THIS IS BLOOMBERG TECHNOLOGY. COMING UP, ARM REPAIRS FOR ITS IPO WITH A ROADSHOW AND WE WILL DISCUSS WITH OUR TEAM AND SPEAK TO ROSS GERBER. PLUS, FULL EARNINGS COVERAGE AHEAD. DELL SOARS TO A RECORD HIGH ON A PC RECOVERY WHILE BROADCOM FALLS, WE TALKED AI IN EARNINGS.
TESLA REVAMPS THE MODEL3 AND SLASHES PRICING FOR ITS PREMIUM VEHICLES AND ALL OUT PUSH TO BOOST SALES. WE WILL BRING YOU THOSE DETAILS OUT OF CHINA. A CHECK ON MARKETS AND IT'S ALL ABOUT THE JOBS DATA. NONFARM PAYROLLS GREW 187,000 IN AUGUST. WE OPEN IN EQUITY
MARKETS AND THE TECHNOLOGY SECTOR HIGHER IN THE FRIDAY SESSION BUT WE CHANGE DIRECTION. THE LOGIC IN THE FIRST INSTANCE WAS IT SIGNALED THE FED WILL NOT RAISE INTEREST RATES FURTHER FOR THE TIME BEING BASED ON THIS DATA SET. THE NASDAQ 100 IS SLIGHTLY SOFTER IN THE SEMICONDUCTOR INDEXES SLIGHTLY LOWER IN BROADCOM IS PART OF THAT STORY WHICH WE WILL COVER LATER AND YIELDS HAVE CHANGED DIRECTIONS. BITCOIN IS HOLDING AT AROUND 26,000 U.S. DOLLARS PER TOKEN. THESE ARE THE INDIVIDUAL STOCK MOVERS WE WILL COVER TODAY. ARSON INDIVIDUAL STORIES WITHIN THAT, TESLA DOWN 4.6%.
BASICALLY SLASHING PRICES ON THE HIGH END IN CHINA AND FINALLY, THIS NEXGEN MODEL3 IS NOW IN CHINA AND WE HAD THE DETAILS. DELL IS NOW UP 22% WHICH IS AN ASTONISHING REACTION TO A CONFUSING STORY. WE WILL GO TO OUR REPORTER IN NEW YORK TO DISCUSS THEIR EARNINGS IN THE CONTEXT OF AI AND BROADCOM IS DOWN 6%. THEY BASICALLY LOOKED AT THE FISCAL FOURTH-QUARTER FORECAST FOR SALES, NINE POINT $27 BILLION IN THE STREET SAYS AI IS GAINING TRACTION FOR YOU, WHY IS THAT NOT REFLECTED IN YOUR SALES ? ONE FUTURE COMPANY THAT MAKE AND UP IN PUBLIC MARKETS HIS ARM, ONE OF THE MOST ANTICIPATED STOCK LISTINGS OF THE YEAR AND IT'S LOOKING TO SET A DATE FOR ITS IPO WITH THE ROADSHOW KICKING OFF AFTER THE LABOR DAY HOLIDAY IN THE U.S. WITH THE LATEST DETAILS, LEONA BLAKE. WHAT DO WE KNOW?
>> THE DATE WILL BE SEPTEMBER 13 FOR THE PRICING OF THE IPO. TRADING IS NOT EXPECTED TO START UNTIL THE NEXT DAY WHICH IS SEPTEMBER 14. THIS IS RIGHT AROUND THE CORNER AND WHILE ARM IS AIMING TO LIST ON THOSE DAYS, IT COULD ALWAYS MOVE THE TIMELINE FOR THE IPO WHICH IS ALWAYS UNCERTAIN AND IT DEPENDS ON HOW MEETINGS WITH INVESTORS GO. THE MEETINGS WILL START NEXT WEEK WHEN THE ROADSHOW LAUNCHES. THE FIRST SIGNAL OF THE
ROADSHOW LAUNCHING WILL BE EARLY TUESDAY WHERE WE EXPECT A FILING TO COME OUT FOR ARM TO UPDATE ITS PERSPECTIVES AND IT WILL PUBLISH FOR THE FIRST TIME A PRICE RANGE OF WHERE THEY WILL BE MARKETING SHARES. ED: WE TALK ABOUT ARM AS THE STARTING GUN FOR A SERIES OF TECHNOLOGY IPO'S WE ARE ANTICIPATING. ALSO, THE SIZE AND SCOPE OF THIS IS IMPORTANT. WHAT ARE THE NUMBERS WE THINK IN TERMS OF MONEY BEING RAISED AND VALUATION? >> WE REPORTED YESTERDAY FOR THE FIRST TIME THAT SOFTBANK IS SORT OF SCALING BACK HOW MUCH IT WILL RAISE.
THIS IS BECAUSE OF THE PROSPECT OF THE COMPANY. THEY ARE VERY BULLISH ON THE COMPANY. THE SOFTBANK CEO DOES NOT WANT TO PART WITH MORE THAN 10% OF ARM. THEY OWN 100% AND ORIGINALLY, THE VICIOUS FUND LOST A LOT OF MONEY. THEY OWN A 25% STAKE IN ARM. RECENTLY, THAT STOCK WAS SOLD BACK TO SOFTBANK. SOFTBANK HAS PUT ON MORE SHARES ARE FOR THAT REASON, ARM WILL RAISE POTENTIALLY TO -- BETWEEN FIVE AND $7 BILLION WHICH IS LOWER THAN WHAT WAS ORIGINALLY PUBLISHED.
IT'S A BIT COMPLICATED BUT THE MAIN POINT IS THAT SOFTBANK WILL CASH OUT HERE WITH PROCEEDS BUT NOT AS MUCH AS WE ORIGINALLY THOUGHT. ED: IT IS COMPLICATED BUT IT IS THE ONE WE ARE WATCHING IN THE WORLD OF TECHNOLOGY. THANK YOU FOR GIVING US THE LATEST DETAILS. AFTER THE LONG WE CAN IN THE U.S., WE ARE WAITING FOR SOME
MOVEMENT ON ARM. ROSS GERBER JOINS US NEXT FROM GERBER KAWASAKI. IT'S AN ASTONISHING BUSY WEEK. LET'S START IN THE JOBS DATA AND WE ALWAYS FRAME IT AS JOBS DATA, WHAT WILL THE FED DO AND HOW DOES THAT IMPACT THE TECHNOLOGY SECTOR? WHAT IS YOUR REACTION TO THE NUMBERS THIS MORNING? >> I'VE BEEN SAYING THIS FOR SO LONG. THE FED IS DONE.
ALL THEY ARE GOING TO DO IS CREATE MORE IN BALANCE IN OUR ECONOMY BY ATTACKING JUST A FEW INDUSTRIES BECAUSE THAT'S ALL RATES DO. WHEN YOU LOOK AT HOUSING AND THE BANKING SECTOR AND THE RISKS OF THE FED CONTINUING TO RAISE RATES ON THE TREMENDOUS LOSSES THE FED IS NOW TAKING ON ITS OWN PORTFOLIO AND THE TAXPAYERS ARE PAYING, IT REALLY DOESN'T MAKE SENSE. ALL THE NUMBERS ARE TRENDING IN THE RIGHT DIRECTION, WE HAVE RESTRICTED RANGES NOW AND BUSINESSES CAN'T BORROW AND INDIVIDUALS CAN'T BUY HOUSES. IT'S CERTAINLY AFFECTING THE ECONOMY IN MANY COUNTIES ARE DONE HIRING. WE ARE SEEING A VERY GOOD ENVIRONMENT OF THE FED JUST LAYS OFF HERE AND LET'S THINGS WORK ITSELF OUT. I THINK THE NEXT MOVE IS LOWER FOR THE FED NEXT YEAR. ED:
THE STORY OF 2023 HAS BEEN ARTIFICIAL INTELLIGENCE DRIVING THIS EQUITY MARKET HIGHER AND THERE ARE SPECIFIC NAMES WE WILL GET INTO BUT THE FED HAS ALWAYS BEEN IN THE BACKGROUND. WHEN YOU ASSESS YOUR INVESTMENT PRIORITIES, WHICH ARE YOU FOCUSED ON MORE, THE OPPORTUNITY IN AI OR THE IMPACT OF HIGHER RATES ON VALUATIONS? >> YOU'VE GOT TO REALLY COMPETING FORCES HERE WITH RATES BEING SUPER ATTRACTIVE WITH CLIENTS COMING IN WHO SAY IT'S EASY FOR ME TO MAKE THEM 8% BY BUYING BONDS. MANY CLIENTS, THAT'S THE RETURN THEY ARE SHOOTING FOR. IT'S GREAT IF YOU ARE A CONSERVATIVE AND OLDER AND YOU WE HAVEN'T SEEN RATES LIKE THIS IN 20 YEARS.
ON THE OTHER HAND, THE MAXIMUM RETURN ON THESE BONDS IS MAYBE 5, 6, SEVEN, 8% WHERE EQUITIES HAVE AVERAGED 10% PER YEAR IN THE S&P 500. IF YOU ON THE NASDAQ SMALL CAP WE CAN EXPECT MUCH HIGHER RATES OF RETURN. IF THE FED IS AT THE TOP OF THE RATE RAISING CYCLE AND WE'VE ALREADY VALUED IN THE EFFECT ON THE MARKET AND VALUATIONS AND THE NEXT MOVE FOR RATES ARE TO STAY THE SAME OR LOWER, WE EXPECT EARNINGS WILL DRIVE THE NEXT MOVE IN MARKETS. IT WILL NOT BE LIKE A PE
EXPANSION. THAT'S WHAT INVESTORS HAVE TO UNDERSTAND. THE MARKETS MOVE HIGHER AND EARNINGS MOVE HIGHER AND STAY WITH INDIVIDUAL SECURITIES AS WELL. ED: LET'S HAVE SOME FUN. I WANT TO TALK TO YOU ABOUT
NVIDIA. YOU HAVE A LOT TO SAY ABOUT THAT NAME AND IN PARTICULAR, ITS ASSOCIATION OR RELEVANCE TO TESLA AND A COMPARISON BETWEEN THE TWO, WHAT IS YOUR THESIS? >> TESLA IN AUTONOMY WAS WHERE NVIDIA AND TESLA ORIGINALLY MET. TESLA USED TO USE NVIDIA CHIPS TO BUILD THEIR AUTONOMY SYSTEMS IN THE MODEL S BACK IN THE DAY AND NVIDIA STARTED DESIGNING THEIR OWN SHIPS BECAUSE NVIDIA SAID WE WILL NOT DESIGNED SPECIFICALLY FOR TESLA. OVER THE YEARS, THE TWO COMPANIES HAVE NOT COMPETED BUT CONTINUED TO DEVELOP HARDWARE AND SOFTWARE FOR AUTONOMY. WITH THAT, MANY OF THE NVIDIA CHIPS WERE USING CRYPTO AND NO CLOUD AND NOW AI. FOR THE FIRST TIME, WE SEE A CONVERGENCE OF ACTUAL APPLICATIONS WHICH IS GENERATIVE AI AND CHATGPT AND AUTONOMY OF DISH AND AUTONOMOUS DRIVING AND IT HAS DRIVEN THIS MASSIVE INVESTMENT FOR ALL OF THE MAJOR TECH COMPANIES TO UPGRADE THEIR DATABASES AND THEIR SYSTEMS TO BEING INTELLIGENT.
THEY HAD TO BUY NVIDIA CHIPS TO DO SO. BOTH COMPANIES REPRESENT THE BEST OF AMERICAN INNOVATION, TECHNOLOGY AND OPPORTUNITY OVER THE NEXT DECADE. I AM SUPER BULLISH ON THESE TWO COMPANIES. THEY ARE TWO OF MY TOP THREE HOLDINGS IN MY FUND AND I THINK INVESTORS, EVEN THOUGH VALUATIONS ARE VERY HIGH, YOU HAVE TO THINK OVER THE NEXT 5-10 YEARS OF WHAT WILL DRIVE GROWTH AND'S ALWAYS BEEN TECHNOLOGY IN AI IS A TREMENDOUS LEAP FORWARD IN TECHNOLOGY. ED: IF YOU THINK ABOUT SPECIFIC PRODUCTS, WE HAVE TALKED ABOUT THE H 100 AND A 100 GPU SERIES FOR OBVIOUS REASONS. THEY ARE THE CHIP OF CHOICE FOR AI.
LESS ABOUT JOJO AND TESLAS PROPRIETARY SILICON. DO YOU ASSIGN A LOT OF THE POTENTIAL FOR TESLA ON THAT COMPETENCE IN SILICON >>? ABSOLUTELY, THAT'S IN THE VALUATION TESLA. YOU LOOK AT RIVIAN WHICH IS A GREAT TV MAKER BUT IT'S VALUATION IS 5% OF TESLA. WHEN YOU THINK ABOUT WHY IS TESLA SUCH A VALUABLE COMPANY, IS BECAUSE OF ITS TECHNOLOGY THAT CENTERS A LOT AROUND AI DOJO CHIPS. IT'S MACHINE LEARNING AND
ABILITY TO TRAIN THE CARS THROUGH AI CLUSTERS. THEY JUST BOUGHT A HUGE NVIDIA H100 CLUSTER. THEY ARE NOT REALLY CHIPS, THEY ARE MASSIVE MACHINES THAT YOU ADD TO YOUR DATABASE. WHEN YOU LOOK AT SALESFORCE WHICH HAD GREAT NUMBERS AND YOU START ADDING AI TO THIS PLATFORM, IT'S GOING TO BE A GAME CHANGER FOR SALESFORCE AND ITS USERS. I THINK THERE IS SO MANY
COMPANIES IN BIG TECH THAT COULD BENEFIT FROM THIS. NVIDIA AND ULTIMATELY TESLA ARE THE ROADS TO REACHING THESE EFFICIENCIES THROUGH AI AND AUTONOMY. ED: WE TALKED THIS WEEK ABOUT SALESFORCE CAN CHARGE 7400 PER USER. >> WE SPEND SO MUCH. ED: I WANT TO GET TO DISNEY AND CHARTER BECAUSE DISNEY IS A NAME YOU HOLD AND FOLLOW CLOSELY. WHAT DO YOU MAKE OF THAT SPAT? >> I FEEL LIKE BEING A DISNEY LONG-TERM SHAREHOLDER, YOU FEEL LIKE YOU ARE GETTING KICKED IN THE HEAD OVER AND OVER AGAIN.
IT'S ABOUT WHY YOU WATCH CABLE TV. THE ONLY REASON I WATCHED SPECTRUM IS FOR SPORTS. IT'S ABSURD THAT YOU ARE CUTTING OFF SPORTS FROM YOUR SUBS WHEN CABLE IS DYING AND THE ONLY REASON PEOPLE WATCH CABLE IS FOR SPORTS PRETTY MUCH. WE ARE IN THIS NEW PERIOD OF TIME BETWEEN LINEAR CABLE -- AND THIS VERSION OF STREAMING AND WHO'S PAYING FOR WHAT AND WHERE IS JUST PLAYING OUT. PEOPLE ONLY WANT TO WATCH SPORTS AREA THAT'S THE BOTTOM LINE, THAT AN TAYLOR SWIFT. ED: YOU ARE A PRIVATE INVESTOR IN THE ENTITY KNOWN AS X.
I REPORTED YESTERDAY THAT SPECIFICALLY, THE BIOMETRIC DATA POLICY UPDATE ONLY APPLIES TO PREMIUM STRIVERS. IT INVOLVES -- PREMIUM SUBSCRIBERS. IT HAS A DOUBLE THAT EVOCATION THROUGH PICTURES -- A DOUBLE VERIFICATION. WHAT DO YOU AS AN INVESTOR AND
USER MAKE OF THAT PRIVACY POLICY UPDATE? >> YOU COULD ARGUE TWO SIDES OF THIS COIN WITH EVERY DECISIONX MAKES. PART OF HIS GREAT. PROFILES SHOULD ACTUALLY CORRESPOND TO ACTUAL HUMAN. CHECKING THE CURRENT VERIFICATION SYSTEM IN MY MIND DOESN'T REALLY WORK.
IT'S KIND OF GOOD BUT NOT GREAT. THIS IS SIMILAR TO WHAT THE BITCOIN COMPANIES WERE DOING WHEN YOU SIGNED UP. YOU WOULD HAVE TO DO THE SAME THING AND SEND A PICTURE OF YOURSELF WITH ID AND THAT WOULD VERIFY YOU FOR TAXES.
THIS IS NOT AN UNCOMMON THING FOR PEOPLE IN THE DIGITAL WORLD TO DO. FOR A SOCIAL MEDIA PLATFORM AND ONE THAT'S BUILDING IN AI PLATFORM, IT'S A LITTLE BIT BIG BROTHERISH AND SCARY NOW THAT I'M TRUSTING ELON MUSK WITH MY BIOMETRIC DATA AND COULD GET PUSHBACK. THERE IS A PLUS AND MINUS TO THIS THING. I DON'T KNOW HOW QUICK I AM TO UPLOAD MY DRIVERS LICENSE TO TWITTER YET. I GET IT. I THINK SOME OF THESE THINGS IT'S MEANT TO MEANT PURITY OF THE PLATFORM BETTER BUT PEOPLE ARE NOT THAT EXCITED TO GIVE AWAY BIOMETRIC DATA TO TWITTER EITHER OR X. ED: ROSS GERBER, I THINK I THREW A DOZEN DIFFERENT NAMES AND STORIES AT YOU. WHAT A FAST START TO THE SHOW,
THANK YOU SO MUCH. SO MUCH MORE AHEAD, THIS IS BLOOMBERG TECHNOLOGY. ED: PRESIDENT BIDEN SPEAKING OUTSIDE THE WHITE HOUSE, RESPONDING TO THE AUGUST NONFARM PAYROLL NUMBER COMING IN AT 187000 AND THE ESTIMATE WAS FROM -- WAS FOR 170,000. HE SAID THE HIGHEST AGE OF WORKING SHARE AMERICANS ARE IN THE WORKFORCE SINCE HIS PRESIDENCY AND SINCE HE TOOK OFFICE, THE ECONOMY HAS ADDED A RECORD NUMBER OF JOBS, 13.5
MILLION JOBS SINCE HE TOOK OFFICE AND REFLECTING THAT INCOMES ARE AT THE HIGHEST LEVEL SINCE PRIOR TO THE PANDEMIC, PUTTING EMPHASIS ON THE IMPACT IN THE NEAR-TERM AND LONG-TERM THAT THE INFLATION REDUCTION ACT WILL HAVE ON THE ECONOMY AND EMPHASIZING THE ROLE OF THE MIDDLE CLASS ON THE -- UNDER BIDENOMICS. AND MENTIONING THE JOB CREATION AND SUPPORT ELECTRIC VEHICLES WILL HAVE IN AMERICA'S ECONOMY. SPEAKING OF WHICH, THE BIG NEWS OVERNIGHT BEING THAT TESLA REVAMPED THE MODEL 3 SEDAN WITH A SLEEKER LOOK AND LONGER-RANGE WEALTH FLASH -- WELL SLASHING PRICES OF ITS PREMIUM VEHICLES IN AN ALL-OUT PUSH TO BOOST ITS OWN SALES. I'M DELIGHTED TO BE JOINED ON SET BY DONNA HOLD.
WE START WITH THE MODEL THREE BUT THAT'S ONLY IN CHINA AND EUROPE NOT IN THE U.S.? >> I KEPT REFRESHING THE TESLA WEBPAGE TO SEE IF IT WAS IN THE U.S. BUT IT'S JUST CHINA AND EUROPE WHICH MAKES SENSE. THEY RETOLD THE CHINA FACTORY FIRST. ED: WE'VE BEEN WAITING ON THAT ONE. IT'S MORE OF A SURPRISE POTENTIALLY THE CONTINUAL DOWNWARD PRICE OF THE MODELS AND X, THE MOST EXPENSIVE TESLA OFFERINGS.
>> IT'S A TINY SHARE OF THEIR OVERALL SALES BUT BY SLASHING THE PRICES, THEY NOW QUALIFY FOR THE $7,500 TAX CREDIT UNDER THE INFLATION REDUCTION ACT IN THE UNITED STATES. THIS IS AN ALL-OUT PUSH BY ELON MUSK TO CHASE VOLUME. HE TELECAST TO EVERYONE THAT THAT'S WHAT HE WOULD DO. ED: I THINK THE LINE FROM ELON MUSK HAS ALWAYS BEEN THAT THEY ARE WILLING TO SACRIFICE PROFIT TO PROTECT GROWTH. EXPLAIN THAT TO US.
>> THEY ARE WILLING TO SACRIFICE PROFIT MARGINS OR GROSS MARGINS TO MAINTAIN THEIR MARKET SHARE. ED HAS PUT THE OTHER AUTOMAKERS ON THEIR BACK HEEL SO HOW DO YOU COMPETE WITH TESLA ON PRICE? ED: WE CAN QUICKLY REEF BLACKED -- REFLECT ON THE BIG BREAKING NEWS THAT IS FEDERAL PROSECUTORS ARE LOOKING INTO THIS PROCUREMENT ORDER WE REPORTED A YEAR AGO. THE SUBPOENAS HAVE BEEN ISSUED AND THIS IS THE LATEST TWIST AND TURN THE DISSENTERS -- BUT IT CENTERS AROUND OMI DASHER. >> HE'S AN INTERESTING CHARACTER IN THAT HE SEEMS TO WORK AT ALL OF ELON MUSK COMPANIES. HE IS THE ARCHITECT. AT ONE POINT, HE HAD A VP ROLE AT SPACEX AND EVEN THOUGH HE IS AT THE CENTER OF THIS PROBE BECAUSE HE APPARENTLY ORDERED PEOPLE AT TESLA TO ORDER THE SPECIAL FOR A HOUSE ELON MUSK WAS BUILDING. HE IS STILL IN FLOYD -- HE IS STILL EMPLOYED AND WHERE THIS SUBPOENA IS HEADED IS INTERESTING. ED:
IT WAS REPORTED THESE SUBPOENAS WERE ISSUED AND ONE CENTERED ON COMMUNICATION TO OTHER EXECUTIVES AND WE WILL CONTINUE TO REPORT ON THAT. THANK YOU VERY MUCH. THE OTHER TOP STORY IS DELL WITH SHARES HITTING A RECORD TODAY AFTER REPORTING BETTER THAN EXPECTED SALES OF PERSONAL COMPUTERS AND DATA CENTER HARDWARE. IT IS FUELING HOPES OF RECOVERY IN THE MARKET FOR CORPORATE TECHNOLOGY. BRODY FORD IS WITH US FROM NEW YORK. THIS IS AN ASTONISHING SHARE REACTION. LET'S START WITH WHAT THE SELL SIDE IS SAYING ABOUT THIS.
>> WE HEAR THAT PHRASE BETTER THAN FEARED AND I CANNOT THINK OF A BETTER EXAMPLE THAN THIS. SALES ARE DOWN 13% BUT WE THOUGHT IT WAS GOING TO BE 18% SO THIS IS VERY GOOD. IT'S UP 25% AND WHAT WE ARE SEEING HERE IS THAT THE DEMAND FOR PCS IN PARTICULAR BUSINESS PCS ARE STABILIZING QUICKER THAN WE THOUGHT AS WELL AS GETTING A LITTLE UPLIFT ON THE SERVER BUSINESS DUE TO AI OR A MACROENVIRONMENT.
THAT'S PART OF IT AS WELL SO ACROSS THE BOARD, SALES WERE A LITTLE BETTER THAN EXPECTED. WE SAW HP A COUPLE OF DAYS AGO SAYING THE RECOVERY WILL TAKE LONGER THAN WE THOUGHT AND DEALT WITH THE OTHER SIDE OF THE COIN WHICH IS SURPRISING MANY FOLKS. OFTEN THE TWO RESULTS TRACK EACH OTHER CLOSELY. ED: IT IS NOT SURPRISING THAT THERE IS AN AI DISCUSSION IN THE CONTEXT OF DELL. WHAT THEY SAID IS THIS IS A LONG-TERM TAILWIND. WHAT IS THE AI STORY FORD DELL?
-- WHAT IS THE AI STORY FOR DELL? >> WE TALK ABOUT THE CLOUD SO MUCH WE FORGET SOME COMPANY STILL USE SERVERS. DELL SELLS THEM AND THEY SELL THEM WITH A BUNCH OF THOSE NICE NVIDIA GPU'S IN THERE AND THEY SAY YOU WANT TO RUN SOME ON PREMISE GENERATIVE AI SOLUTIONS, THIS IS THE ONE FOR YOU. THEY SAID THEY HAD $2 BILLION IN BACKLOGGED ORDERS WITH A SPECIFIC TYPE OF SERVER WHICH IS MARKETED TO BE GOOD FOR AI.
ESSENTIALLY, THEY SAY THAT LONG-TERM, MORE AI WORKLOADS AND MORE NEED FOR SERVERS, MORE STOCK GROWTH. ED: A BUSY WEEK FOR YOU. THERE ARE PLENTY OF EARNINGS AND THANK YOU VERY MUCH. THE OTHER BIG BURNING STORIES
AND THE CHIP SECTOR. INVESTORS WERE INITIALLY UNDERWHELMED WITH THE BROADCOM RESULTS OUT YESTERDAY. SOME ANALYSTS WAIT. AND WHY THAT MIGHT BE >> IT'S NOT A BAD RESULT. PEOPLE WERE HOPING FOR MORE GIVEN ALL THE RECENT HYPE AROUND AI. ED: THAT WAS THE BERNSTEIN SENIOR ANALYST. LET'S TURN TO ONE OF
OUR INTERNAL EXPERTS IN THE CHIP SECTOR. IAN KING, WE TALKED ABOUT WHAT THE AI STORY WOULD BE AND WHAT WAS IT IN THE END? >> IT WAS AS PROMISED. THE UNFORTUNATE THING WAS HOW THAT REFLECTED ON THE OVERALL COMPANY. THE CEO SAID ALL OF OUR UPSIDE IS COMING FROM THIS LARGE LANGUAGE MODEL BUILDOUT WE ARE SEEING.
EVERYTHING ELSE WAS KIND OF FLAT AT BEST. HE DESCRIBED IT AS A SOFT LANDING BUT OBVIOUSLY, THE MARKET TOOK IT AS THE DEMAND FOR SEMICONDUCTORS IS NOT FANTASTIC. ED: WE TALKED ABOUT THE TECHNOLOGY STORY AND UNDERSTANDING WHAT EACH CHIPMAKER DOES IN THE AI SUPPLY CHAIN. EXPLAIN THE BROADCOM OFFERING IN THE DATA CENTER CONTEXT. >> THEY HAVE TWO BIG MEAN PLAYERS HERE.
ONE IS THAT THEY DOMINATE THE MARKET FOR CHIPS THAT DECIDE WHERE THE TRAFFIC GOES BASICALLY. ONE COMPUTER HAS INFORMATION AND NEEDS TO GET TO ANOTHER AND THE SWITCH CHIP IS WHAT THEY EXPOSED WITH FAST DECISIONS TO SEND THAT DATA AROUND. THE OTHER PLAY THEY HAVE IS GOOGLE. WE'VE HEARD ABOUT TPU"S AND WHO MAKES THEM A DESIGNED THEM, IT'S BROADCOM. ED: AN IMPORTANT PART OF THIS BUSINESS IS APPLE.
IT MAKES SHORT DISTANCE COMMUNICATIONS LIKE WI-FI AND BLUETOOTH. IF AI IS DOING WELL BUT SALES GROWTH IS KIND OF LOW SINGLE DIGITS, WHAT DOES THAT TELL US ABOUT THE SMARTPHONE BUSINESS? >> THERE IS AN INTERESTING COMMENT YESTERDAY AND IT'S SAID OUR WIRELESS DIVISION IS DEFYING GRAVITY. WHAT HE MEANT WAS OVERALL, THINGS ARE NOT GREAT.
WE HAVE SEEN THE NUMBERS BUT DEMAND IS KIND OF OK FOR THAT DIVISION. THEY WILL SEE SOME GROWTH INTO THIS QUARTER. WE WILL SEE A NEW IPHONE AND NEW PRODUCTS USING BROADCOM CHIPS BUT OVERALL, NOT FANTASTIC. ED:
IAN KING, ANOTHER BUSY PERSON THIS EARNINGS SEASON IN THE CHIP SECTOR. LET'S MOVE FROM THE TECH SPACE TO ONE OF OUR OTHER FAVORITES, RISK ASSETS WHICH IS BITCOIN. LET'S GET THE PULSE IN THE VC SPACE. THE STILL MARKED FOUNDER AND MANAGING PARTNER, THE FIRM HAS $85 MILLION BUT FOCUSES ON BITCOIN COMPANIES. THE NEWS WHICH IS NOT SURPRISING IS THE SEC KIND OF PUNTING A DECISION ON ETF APPLICATIONS FOR MANY NAMES. WHAT HAVE YOU MADE OF EVERYTHING THAT'S HAPPENED IN THE LAST 7-10 DAYS? >> BTC BITCOIN HAS TWO DISTINCT PATHS. THE BITCOIN ASSET IN THE
BITCOIN CRITICAL TECHNOLOGIES INCLUDING BITCOINS LIGHTNING NETWORK, ITS PAYMENT PROTOCOL. THE GRAYSCALE VICTORY OVER THE SEC EARLIER THIS WEEK IS SIGNIFICANT FOR THE MATURATION AND ADOPTION OF BTC THE APP. IT MAKES THE ADOPTION OF BITCOIN MORE LIKELY. IT LIMITED THE ARGUMENTS OF THE SEC TO ADVANCE IN THE FUTURE IN DENYING SPOT ETF'S.
WHAT THE COURT FOUND TO BE CHALLENGING OR PROBLEMATIC WAS THE APPROVAL OF BITCOIN FUTURES ETF WHILE THE SEC CONTINUED TO REJECT THE BITCOIN SPOT ETFS. THE ARGUMENT IS THAT SHARING AGREEMENTS WERE INSUFFICIENT OR THAT THERE WAS A POTENTIAL FOR THE PRACTICES AND MANIPULATION IN THOSE MARKETS. WHAT THAT MEANS IS FOR BTC -- FOR THE SEC TO CONTINUE REJECTING THE SPOT ETF, THEY WILL HAVE TO FORM A NEW ARGUMENT AND ONE HAS TO BE DISTINCT IN ITS PROPERTIES FOR FUTURE ETF'S. THAT MOVES UP THE TIMELINE FOR WHICH WE EXPECT TO SEE A SPOT ETF. ED: WE CONSIDER THE BASICS OF WHY THIS IS HAPPENING, THE ARGUMENT FROM THOSE THAT HAVE FILED APPLICATIONS IS THAT THE ETF WOULD GIVE RETAIL AND INSTITUTIONAL INVESTORS A MECHANISM TO HAVE EXPOSURE. YOU ARE A VC THAT INVESTS IN BITCOIN COMPANIES. HOW DO YOU PLAY THIS
LONGER-TERM STORY? WHERE DO YOU INVEST TO BENEFIT IN THE LONGER RUN IF A BITCOIN SPOT ETF BECOMES AUTHORIZED? >> THE EXPECTATION ON A SPOT ETF WILL BECOME AUTHORIZED EXISTS IN A SORT OF ECOSYSTEM OF ACTIVITY IN WHICH WE SEE BTC FOR THEIR FINANCIAL EYES. WE ARE INVESTING THEIR. AN EXAMPLE OF THIS IS THAT WE RECENTLY MADE AN INVESTMENT IN A COMPANY CALLED MEANWHILE WHICH IS THE FIRST COMPANY TO OFFER A BTC DENOMINATED WHOLE LIFE INSURANCE POLICY WHICH HAS THE EFFECT OF FURTHER FINANCIAL AID WITH BITCOIN AS AN ASSET. AT THE SAME TIME, THERE IS ADVANCEMENT HAPPENING IN BITCOIN PAYMENT TECHNOLOGIES INCLUDING TO FACILITATE INTRODUCTION OF BITCOIN PAYMENT TECHNOLOGY THAT WORKS SPECIFICALLY TO MATCH THE NEEDS OF OTHER TRENDS WE'VE SEEN IN THE TECH FIELD AND IN PARTICULAR AI. ED: LET'S GO THERE. BITCOINS LIGHTNING NETWORK WAS SOMETHING WE DISCUSSED HEAVILY, NOT IN 2023 OR THE END OF LAST YEAR BUT IN PRIOR YEARS AND NOW WITH AI, HOW DO YOU SEE AI PUTTING THEM BACK INTO FOCUS ON THE UNDERLYING TECHNOLOGY FOR BITCOIN? >> WHAT EXCITED ME IS THAT BITCOIN DEVELOPED SLOWLY AND PURPOSELY. BITCOIN TECHNOLOGY AND LIGHTNING NETWORK IN PARTICULAR WAS DEVELOPED TO SOLVE LOCAL SCALE PROBLEMS. IT WASN'T DEVELOPED TO INTRODUCE A QUICK
TREND WORK SERVED AS SPECULAR BEHAVIOR OR GAMBLING BUT IT WAS MEANT TO SERVE AS A PAYMENT INFRASTRUCTURE THAT WAS SECURE AND SCALABLE. AS AI HAS BECOME COMMERCIALIZED, WE ARE SEEING PRODUCTS LIKE CHATGPT AND OTHERS FLOURISH AND BECOME POPULAR AND FRAUD AND PAYBACKS A BEEN A PROBLEM FOR THOSE COMPANIES. ONE OF THE ADVANTAGES OF THE BITCOIN LIGHTNING NETWORK IS A PAYMENT SOLUTION. SETTLEMENT IS INSTANT. IF YOU ARE INSTANTLY TRANSMITTING VALUE OR A PRODUCT, YOU CAN INSTANTLY SETTLE THAT TRANSACTION AND MITIGATE OR COMPLETELY ASSUAGE THE RISK OF A CHARGEBACK AND THAT SORT OF FRAUD. IN ADDITION TO THAT, BECAUSE THE LIGHTNING NETWORK WAS PURPOSEFUL, IT SCALES WITHOUT THE CONSTRAINTS OF THE UNDERLYING BLOCKCHAIN. THAT MEANS THAT ACTIVITY IN THE UNDERLYING BITCOIN BLOCKCHAIN DOESN'T CURTAIL THE AMOUNT OF TRANSACTIONS PER SECOND THAT ARE POSSIBLE IN THE LIGHTNING NETWORK. FOR AI, IT'S ABSENTLY
NECESSARY. THEY NEED TO SCALE MILLIONS OF TRANSACTIONS PER SECOND IN ORDER TO SERVICE THE NEEDS OF AI COMPANIES AND LIGHTNING NETWORK CAN UNIQUELY DO THAT. ED: STILL MARK FOUNDER, WE APPRECIATE YOUR EXPLANATION WITH A FIRM GRASP ON THE UNDERLYING TECHNOLOGY, THANK YOU AND HAVE A GOOD LONG WEEKEND. COMING UP, WE WILL LOOK AT THE
LATEST HEALTH TECH TRENDS WITH THE FOUNDERS FUND PARTNER AND THE SWORD HEALTH CEO COMING UP. WE ARE ALSO SEEING BREAKING NEWS CROSSING THE TERMINAL -- THE NEW YORK TIMES IS REPORTING THAT META, THE PARENT COMPANY OF FACEBOOK, MAY ALLOW FACEBOOK AND INSTAGRAM USERS IN THE EUROPEAN UNION TO PAY TO AVOID ADVERTISING. THAT IS COMING FROM THE NEW YORK TIMES. IT BRIEFLY PUSH THE SHARES HIGHER WHICH HAD BEEN NEGATIVE AND PUSH IT INTO POSITIVE TERRITORY AS THE HEADLINES BROKE AND WE ARE NOW FLAT AS A PANCAKE ON THE META PLATFORMS THIS FRIDAY. THIS IS BLOOMBERG TECHNOLOGY. ED: ON TODAY'S VC SPOTLIGHT, WE TAKE A LOOK AT THE LATEST TRENDS IN HEALTH TECH INVESTMENT.
LET'S BRING IN THE FOUNDER AND CEO OF SWORD HEALTH. THIS IS REALLY INTERESTING, THE TECHNOLOGY YOU ARE TRYING TO GROW AND COMMERCIALIZE IS CENTERED IN THE SOFTWARE APPROACH TO PAIN MANAGEMENT. EXPLAIN SWORD TO US BROADLY SPEAKING. >> BASICALLY, WE BELIEVE THAT IF YOU HAVE PHYSICAL PAIN, IF YOU HAVE LOW BACK PAIN AS AN EXAMPLE AND THE BEST SOLUTION TO YOUR PROBLEM IS NOT PILLS OR PAINKILLERS OR SURGERIES OR INJECTIONS. IT SHOULD BE HIGH-QUALITY
PHYSICAL THERAPY. THAT'S THE SOLUTION. THE PROBLEM WE GET IS THE WAY WE DEAL WITH PHYSICAL THERAPY, IT'S 100% LABOR-INTENSIVE WHICH REALLY LIMITS AND IS A BOTTLENECK IN TERMS OF ACCESS TO CARE. WE DEVELOPED THIS AI SOLUTION THAT BASICALLY REPLICATES WHAT THE HUMAN PHYSICAL THERAPIST WILL DO IN A CLINIC BUT THEN YOU CAN DO YOUR SESSIONS INDEPENDENTLY AT HOME AT 7:00 A.M. IN YOUR PAJAMAS AFTER BREAKFAST WITHOUT THE THERAPIST AND WITHOUT AN AI SOLUTION AND EVERYTHING YOU DO IS SUPERVISED BY A MEMBER OF ERIC COMMUNITY.
WE HAVE THIS HUMAN MODEL AS TO HOW WE ARE CHANGING AND TAKING PHYSICAL PAIN. ED: THIS IS AN INTERESTING CASE STUDY BECAUSE WE HAVE ONE OF YOUR BIGGEST INVESTORS WITH US AS WELL. WHY DID SWORD FIT WITHIN YOUR INVESTMENT THESIS WHEN YOU CONSIDER HOW TO PLAY HEALTH TECH? >> WE WERE ORIGINALLY THINKING ABOUT THIS AS INVESTMENT PIECES IN MY PRIOR FIRM COASTAL VENTURES IN 2018. WE ANALYZED THE GENERAL HEALTH CARE LANDSCAPE AND STUMBLED ACROSS THE FACT THAT MUSCULOSKELETAL CARE WHICH IS PHYSICAL THERAPY AND HAS A WIDE RANGE OF THINGS WAS THE LARGEST SPEND HEALTH CARE IN IT WAS ONE OF THE AREAS WHERE THERE IS LIMITED APPLICATIONS OF TECHNOLOGY. THEY WERE INDIVIDUAL TOOLS YOU CAN SEE IN BRICK AND MORTAR PHYSICAL THERAPY BUSINESSES BUT VERY LITTLE PRACTICAL INFORMATION. THERE WAS NO REAL TECHNOLOGY THAT SHOWED AN IMPROVED CLINICAL OUTCOME. WHEN WE MET THE TEAM IN LATE
2018, 2 THINGS STOOD OUT -- THEY HAD TRUE SCIENTIFIC PROOF OF THEIR METHODOLOGY BEING MORE EFFECTIVE THAN A BRICK-AND-MORTAR CLINIC. EVERYBODY ELSE WAS TRYING TO REPLICATE BRICK-AND-MORTAR AND THEY ARE PROVING IT. THE ACTUAL SOLUTION WAS NOT BASICALLY PUT PHYSICAL THERAPISTS BEHIND A ZOOM CRANE TECHNOLOGY THAT ALLOWED YOU TO DO YOUR KNEE AND LOWER BACK THERAPY WHICH MAKES IT MORE CONVENIENT THAN HAVING TO GO IN PERSON TO A CLINIC. ED: I WANT TO KNOW WHAT IT'S LIKE GROWING THE BUSINESS AND COMMERCIALIZING. IN YOUR LATEST ROUND IN NOVEMBER OF 2021, YOU HAD A $2 BILLION VALUATION. THEN YOU HAD A LOT OF MOMENTUM SO WHAT DOES THAT LOOK LIKE? EXPLAIN HOW YOU GROWN.
>> THE REASON WHY WE ARE STILL GROWING VERY FAST SINCE 2021 IN SPITE OF THESE ECONOMIC CHALLENGES THAT EVERYONE IS FACING IS ONE OF ERROR KEYVALUE POSITIONS IS WE DRIVE COST EFFICIENCIES. IF YOU ARE A LARGE EMPLOYER IN THE U.S. RIGHT NOW AND YOU WANT TO DRIVE EFFICIENCY, YOU CAN REDUCE YOUR HEADCOUNT WHICH IS ONE WAY BUT IN TERMS OF HEALTH CARE, IT'S NOT LIKE YOU CAN DENY THERAPY TO ONE OF YOUR EMPLOYEES. YOU ARE STILL ON THE HOOK FOR THAT SO WHAT WE ALLOW YOU TO DO IS INSTEAD OF A SURGEON FOR YOUR LOW BACK PAIN, YOU CAN USE SWORD AND YOU'RE ABLE TO TREAT THAT PATIENT MUCH MORE EFFICIENTLY WITH A HIGHER LEVEL OF CARE AND REALLY REDUCE THE COST. THE WAY WE DISPLAY THIS IS WE CONGRATULATE -- WE CONTRACTUALLY GUARANTEED TO OUR CLIENTS THAT THIS WILL HAPPEN SO IT'S A NO-BRAINER TO ADOPT. ED: ONE CONSIDERATION WHEN YOU INVEST IN A HEALTH CARE STARTUP IS EXPOSURE OR RISK WITH THE U.S. HEALTH CARE SYSTEM INSURANCE
AND WHERE IT FITS IN WITH HOW THE SYSTEM WORKS. EXPLAIN QUICKLY HOW YOU THOUGHT ABOUT THAT? >> IN THIS PARTICULAR SITUATION, BECAUSE IT IS A LARGE BUCKET OF SPEND, YOU GO AFTER INDIVIDUAL EMPLOYERS LIKE FORTUNE 500 COMPANIES. INTERNALLY, THEY HAVE SUPER SOPHISTICATED MEDICAL TEAMS WITH HUNDREDS OF THOUSANDS AND MILLIONS OF EMPLOYEES AND THEY MAY AS WELL BE THEIR OWN INDIVIDUAL HEALTH CARE NETWORK. RELATIVE TO COMMERCIALIZATION
IS A, IN THE UNITED STATES, YOU CAN GO AFTER INDIVIDUAL EMPLOYERS ONE AT A TIME. IT'S VERY COST CONSCIENTIOUS. WALMART ULTIMATELY IS DELIVERING THEIR BOTTOM LINE TO INVESTORS RATHER THAN BEING FUNDED BY PUBLIC DOLLARS. THE COMBINATION OF THE TWO LETS IT GO FROM NO U.S. COMMERCIALIZATION AT THE END OF 2019 TO NOW BEING OVER $100 MILLION RUN RATE BASED IN THE UNITED STATES. ED: FASCINATING GLOBAL CONVERSATION. THANK YOU BOTH, THIS IS BLOOMBERG TECHNOLOGY.
ED: FOR MOST ARTIFICIAL INTELLIGENCE COMPANIES COMMIT ADDINGDOT AI IS AN IMPORTANT PART OF INDICATING YOU ARE A PLAYER IN THAT FIELD. HOWEVER, IT HAPPENS TO BE THE INTERNET COUNTRY CODE FOR THE CARIBBEAN ISLAND OF ANGUILLA. THAT IS BRINGING IN TENS OF MILLIONS OF DOLLARS FOR THAT ISLAND. JOINING ME IS RACHEL METZ. THIS IS A CRAZY STORY. SO THERE ARE AI COMPANIES ALL AROUND THE WORLD CUTTING CHECKS TO THIS TINY LITTLE ISLAND? >> YES, IN A MANNER OF SPEAKING. THE ANGUILLA COUNTRY CLAUDE TOP LEVEL DOMAIN, THE TWO LETTERS AT THE END, .AI, ALL DIFFERENT COUNTRIES AND TERRITORIES HAVE
TWO LETTERS ASSIGNED DECADES AGO'S BACK IN THE 90'S AS THE INTERNET WAS FIRST GETTING ITS LEGS. ANGUILLA HAS HAD THIS FOR A LONG TIME. AT A CERTAIN POINT, I THINK IT WAS AROUND 2009, THEY OPENED DOT AI DOMAIN REGISTRATION TO PEOPLE OUTSIDE THE COUNTRY SO IT COULD BE PEOPLE WHO DIDN'T LIVE THERE OR HAD A BUSINESS THERE. REVENUE FROM THAT HAS RISEN STEADILY. BUT THIS PAST YEAR, ONCE
CHATGPT RELEASED, IT TOOK OFF LIKE HOT CAKES. ED: YOU'VE BEEN SPEAKING TO SOME OF THE OFFICIALS IN THIS TINY ISLAND NATION WHO ARE DEALING WITH THIS. WHAT ARE THE NUMBERS? WHAT IS LIFE LIKE FOR THEM? >> THE PERSON I SPOKE TO ACTUALLY MOVE FROM THE U.S. TO ANGUILLA IN THE 1990'S NOT TO BE IN CHARGE OF THE DOMAIN REGISTRATION BUT HE HAPPENED TO LAND IN THAT SPOT. WHEN PEOPLE REGISTERED AT THE DOMAINS WITH COMPANIES LIKE GO DADDY, MONEY GOES FROM THOSE COMPANIES TO THIS MAN. HE SENDS IT ONTO THE ANGUILLA GOVERNMENT.
HE'S BEEN WATCHING THIS AND HAS A FRONT SEAT OF THIS AND HE THINGS THE COUNTRY -- THE TERRITORY WILL SEE 25-30,000,000 DOLLARS IN REVENUE WHICH IS HUGE. ED: CHECK OUT HER STORY ON BLOOMBERG.COM. THAT DOES IT FOR THIS EDITION OF BLOOMBERG TECHNOLOGY. YOU CAN CHECK OUT OUR PODCAST AND IT'S BEEN A MASSIVE WEEK FOR EARNINGS AND AIN EVERY THING IN BETWEEN.
2023-09-03 12:18
