ARM IPO | Bloomberg Technology 09/05/2023
CAROLINE: I'M CAROLINE HYDE. ED: I'M ED LUDLOW. SEEKING $5 MILLION. WHY THE OFFERING COULD BE SIGNIFICANTLY SMALLER FROM PREVIOUSLY TARGETED. ED: WE TAKE A LOOK INSIDE WHILE WAY -- QUALITY -- HAIWAY. HOW DIGITAL REGULATION IS GOING TO BE UNVEILED IN TERMS OF THE GATEKEEPERS. LET'S CHECK IN ON THE MARKETS.
WE ARE GETTING REALITY CHECK ON WHAT IS A MACRO PICTURE THAT IS UGLY. THE 10 YEAR YIELD RISING AFTER A DAY OF REST AND PLAY IN THE U.S. TRADE PICKING UP AS WE SEE MORE INVESTMENT. I AM LOOKING AT THE BLOOMBERG DOLLAR INDEX.
DOLLAR HIGHER AT THE MOMENT AS IT TRIES TO FIND WORK SAFETY IN THE CURRENT MACRO PICTURE. ALSO THE FEDERAL RESERVE WILL BE KEEPING HIGHER RATES FOR LONGER. WE LOOK AT WHAT IS HAPPENING IN TERMS OF BITCOIN, WHEN YOU SEE THE DOLLAR OUTPERFORM, DOWN BY ONE THIRD OF A PERCENT. GETTING INTO THE NEEDY GRITTY OF THE MOVERS. ED:
WE WERE TALKING ABOUT HOW THERE IS NOT THAT MUCH ACTION. AIRBNB OF 6%, THE BEST PERFORMER IN THE NASDAQ 100, NEWS THAT IT WILL BE INCLUDED IN THE S&P 500. WITH HUAWEI, WE WILL BRING YOU SOMETHING FASCINATING. A MOVE TO THE DOWNSIDE IS THE THEORY BEING THAT IF HUAWEI GAINS MARKET SHARE IN THE SMARTPHONE, IT WILL BE AT THEIR EXPENSE. NVIDIA A LITTLE ON THE LOW SIDE.
WE HAD A CONVERSATION ABOUT NVIDIA'S VALUATION AND SOME SAY IT IS EXTREME AND OVERDONE. WE ARE COMING OFF OF A LONG WEEKEND. WE HAD THE F1 FILING AND HERE ARE THE NUMBERS. ON THE LOW END $47 AND ON THE HIGH END 51 DOLLARS.
AND RAISING PROCEEDS AND THE EARLY STAGES BUT MUCH LOWER NUMBERS THAN REPORTED. LET'S BRING IN BLOOMBERG'S LEANNA BAKER. WALK THROUGH THE NUMBERS. >> THE NUMBERS CAME IN A LITTLE BELOW WHAT HAD EARLIER BEEN REPORTED. ARM HAD BEEN LOOKING AT EIGHT OR 10.
WE COULD STILL SEE IT GO UP. THERE CAN BE GREAT DEMAND FOR THESE SHARES AND WE COULD SEE THEM RAISE IT. BUT SOFTBANK HAS SCALED BACK THE AMOUNT THEY WANT TO SELL.
THE CEO AND FOUNDER OF SOFTBANK IS VERY LUSH ON ARM. THEY ARE ONLY SELLING 10% IN THE IPO. THAT IS ONE OF THE REASONS THEY ARE NOT LOOKING TO RAISE AS MUCH AS THEY THOUGHT. BECAUSE THERE ARE NOT LOOKING TO RAISE AS MUCH, THE VALUATION IS LOWER.
IT WILL BE VALUED AT CLOSE TO $55 BILLION, DEFINITELY FIRST BIG ELEPHANT OUT OF THE GATE TO HIT THE -- GET THE IPO MARKETS MOVING AGAIN. CAROLINE: SO SOME OF THE ARM CUSTOMERS COMING IN AS INTEGRAL INVESTORS IN THE IPO. WILL THERE BE FLIES IN THE OINTMENT? WHAT ARE THEY? LIANA: THERE ARE QUESTION ABOUT ARM'S PAST -- PATH FORWARD. THEY ARE TRYING TO GET INTO THE DATA CENTER. NOT FULLY AWAY FROM MOBILE. THAT IS DILUTE AND UBIQUITOUS. WILL THE COMPANY BE ABLE TO
FULLY CHANGE ITS BUSINESS MODEL TO SPARK GROWTH, THAT IS THE QUESTION. INVESTORS WILL SEE IF THE INVESTORS WILL BE BACK IN WITH THE PATH FORWARD IS. CAROLINE: RATE SET UP. SHE HAS BUSY WEEKS COMING UP. LET'S EXTEND THIS CONVERSATION.
IT FEELS THAT A KEY QUESTION IS IN CHINA, PARTICULARLY WITH THE MACRO DATA COMING IN ON THE WEAKER SIDE. PIERRE: AS A RULE OF THUMB, AND RM IS EXPOSING THE CHANGE TO CHINA. THE SET UP IS DIFFICULT. ERIN HAS A SUBSIDIARY IN CHINA -- ARM AS A SUBSIDIARY IN CHINA. . . THEY HAVE LICENSEE THAT HAS TO GO THROUGH THE LOCAL COMPANY. IT HAS CREATED DIFFICULTY DUE TO LACK OF CONTROL BUT IT IS MINOR CHINA WANTS TO USE ARM AND YOU KNOW WHAT THE SITUATION IS.
CHINA WANTS TO GROW FROM THE WEST AND IT WILL BE SLOW FROM HOW YOU THINK ABOUT THE VALUATION OF THE BUSINESS TODAY. CAROLINE: TELL US HOW YOU ARE THINKING ABOUT THE VALUATION. WHAT NUMBER ARE YOU LOOKING AT? ."
: -- PIERRE: THE HOLDING INDUSTRY IS USING IT AND CLIENTS PAY A LICENSE FEE TO ARM TO GET THE RIGHT TO START WORKING AND THE ROYALTIES CONTAIN AARON TECHNOLOGY. THE ROYALTIES READ TO ME -- CONTAIN THE TECHNOLOGY. THE ROYALTIES READ TO ME AS PURE PROFITS. ROYALTIES, YOU SEE OVER TIME THE GROWTH OF THE COMPANY. IT HAS HISTORICALLY TRADING HIGHER THAN THE STOCKS.
THAT IS WHAT I AM GOING AT TODAY AND 2027. -- I AM LOOKING AT 20 TO 27. 52 BILLION DOLLARS VERY ATTRACTIVE AND 20% RETURN BETWEEN NOW AND 2026. ED: I AM FASCINATED BY THE MECHANICS OF THIS.
YOU WRITE THAT THE RANGE $47 TO $51 IS ATTRACTIVE TO INVESTORS, NEW INVESTORS TAKING ADVANTAGE OF THE IPO. ALL TOLD, SOFTBANK WILL HOLD ONTO 90% OF THIS COMPANY, WHY? PIERRE: TWO REASONS, THE ONE IS SOFTBANK SEES MORE UPSIDE THAN IC. FOR SOFTBANK, IT IS NOT A MATTER OF MAKING A PROFIT.
AFTER FIVE YEARS AS A PRIVATE COMPANY, THEY HAVE MADE INVESTMENTS AND SOME HAVE WORKED WELL IN SOME LESS WELL. IN NO ARM IS AT A TIME WHERE THEY ARE ATTRACTING TALENT AND CREATING THE RIGHT SET UP AND IT IS ADVANTAGEOUS TO ARM AND IT IS ADVANTAGEOUS TO DO THAT FOR SOFTBANK , TO HAVE LIQUID ASSETS, ASSETS AND WISH SOFTBANK CAN LEVERAGE AND RAISE MONEY FOR FURTHER INVESTMENTS. I DON'T EXPECT SOFTBANK TO LOWER THEIR SHARES IN A STAKE IN ARM ANYTIME SOON. ED: THE GREAT FUN OF A TRADITIONAL IPO IS THAT IT GIVES THE COMPANY AN OPPORTUNITY TO TELL A STORY ABOUT THEMSELVES TO THE WORLD AND THE STORY THAT ARM WANTS TO TELL AS THEY ARE RELEVANT FOR AI AND THEY WILL DO GREAT WITH ALL THE R&D GOING INTO AI. DO YOU BUY THAT STORY? PIERRE: YES, I DO BUT I LIKE TO QUALIFY THAT AS AI DIVERSIFICATION. ALMOST EVERYTHING THAT WILL GROW AT ARM WILL BE FROM AI SO I DO AGREE WITH THAT. INTERESTINGLY, ALL OF THE AI
ARM GET EXPOSED TO IS NOT LIKE THE AI CLUSTERS WE SEE BEING ROLLED OUT TODAY LIKE NVIDIA. IN THAT PART OF AI, VERY LITTLE IF ANY. BUT YOU NEED TO DEAL WITH AI MATTERS AND SERVICES BASED ON AI. ARM IS BRINGING TO THE MARKET A LOOK AT INNOVATION THAT IS RELEVANT TO THAT. THE NUMBER ONE DRIVER OF PRICING POWER OF ARM IS THE NINTH ITERATION. THE NUMBER ONE THING THEY BRING TO THE MARKET IS AI SPECIFIC INSTRUCTION, THE NEXT GENERATION WILL BE BETTER AT DEALING WITH AI WORKLOADS.
FROM THAT ASPECT, AND UNRELATED TO WHAT IS HAPPENING TODAY, ARM IS -- ED: HE IS JOINING US AFTER PUBLISHING HIS REACTION NOTE. GREAT TIMING. COMING UP, WE TAKE A LOOK INSIDE HUAWEI'S NEW PHONE AS IT HOLDS THE MOST ADVANCED CHIP MADE IN CHINA YET. THIS IS BLOOMBERG TECHNOLOGY. ♪ CAROLINE: YOU ARE -- ED: YOU ARE LOOKING AT HUAWEI'S NEW PHONE, LIFTING THE LID ON THE LATEST DOMESTIC PHONE. WE ARE LOOKING AT AN VANCE TO CHIP MADE BY CHINA'S TOP CHIP MAKER. IT MAKES A SIGN THAT THIS EARLY PROGRESS IN BEIJING'S PUSH TO BE OUT U.S. TECHNOLOGY.
THE SPECULATION AND THE RUMOR WAS THAT IT WAS FIVE NANOMETERS. IT IS SEVEN NANOMETERS. TELL US WHAT WE KNOW. >> THREE IS BETTER THAN FIVE WHICH IS BETTER THAN SEVEN.
THREE WOULD BE THE STATE-OF-THE-ART IN TERMS OF A MANUFACTURING CAPABILITY THAT SOMEONE LIKE APPLE WOULD TRY TO ACCESS AT THIS POINT. SEVEN SOUNDS LIKE A LONG WAY BEHIND, TWO OR THREE YEARS, BUT YOU CAN STILL DO A LOT WITH THAT LEVEL OF MANUFACTURING TECHNOLOGY. BUT SHOULD ACTUALLY BE DOING THIS, IS THIS PRESENTING A CIRCUMVENTION OF WHAT THE U.S. IS TRYING TO DO WHICH IS TO GET HUAWEI AWAY FROM ACCESS TO TECHNOLOGY. ED:
WE SHOULD SAY THAT BLOOMBERG WENT TO THE U.S. COMMERCE DEPARTMENT AND ASKED IF THE SEVEN NANOMETER TECH IS WITHIN THE BALANCE AND THEY DID NOT REPLY. CAROLINE: IT IS A QUESTION MARK ON A GLOBAL COUNTDOWN ON CHINA'S ACCESS TO THE SORT OF TECHNOLOGY. DOES IT LEAVE QUESTION MARKS? IAN: THEY ARE NOT GOING TO COMMENT ABOUT INDIVIDUAL ACTIONS THEY TAKE AGAINST A SPECIFIC COMPANY. THAT IS THEIR POLICY. WE FIND OUT WHEN IT GETS ANNOUNCED AND THEY HAVE TAKEN ACTION WE WILL SEE WHAT HAPPENS THERE. WE WOULDN'T EXPECT THEM TO TALK
ABOUT IT RIGHT NOW. ED: WE DID LEARN ABOUT WHERE CHINA IS AT IN ITS TECHNOLOGY COMPETENCE. THERE IS THIS IDEA THAT IT IS SEVEN NANOMETER BUT THIS SO THAT HANDSET OUT QUICKLY AND THAT INDICATES TO US THAT EVEN THOUGH IT IS TWO GENERATIONS FROM THE CUTTING EDGE THAT THEY ARE NOT MAKING SEVEN NANOMETERS AT THE SCALE. IAN: THIS IS A CONVERSATION WE HAD LAST WEEK. YOU CAN MAKE A FEW OF THEM AND YOU ARE GOOD AT THE TECHNOLOGY BUT THE REAL ART IS TO MAKE TENS OF MILLIONS OR HUNDREDS OF MILLIONS OF THESE THINGS. WE REALLY NEED TO SEE WHETHER THEY CAN DO THAT OR NOT. IF THEY CAN COME UP AND IS
DEFINITELY A RED FLAG, WARNING OR WHATEVER YOU WANT TO DESCRIBE IT. IF THEY CAN'T, MAYBE THIS IS A SYMBOLIC THING TO POKE THE SECRETARY OF COMMERCE WHO IS IN CHINA LAST WEEK. CAROLINE: THERE HAVE BEEN SOME GREAT REPORTS OF THE MYTHS AND FACTS. I AM INTERESTED MORE BROADLY ON THE IMPACT OF THE COMPETITION, WHAT HAS BEEN REALITY HAS BEEN THE REACTION. DOES THIS PUT HUAWEI BACK ON THE MAP IF ONLY IN CHINA? IAN: THEY ESSENTIALLY SPUN OFF THE HANDSET IS THIS BECAUSE THEY WERE IN SUCH A DIFFICULT POSITION BECAUSE OF THE SANCTIONS.
THIS IS SYMBOLIC AS SOMETHING TO MARKET AROUND IS SENSATIONAL. LOOK AT THE ATTENTION IT IS GETTING WE ARE TALKING ABOUT IT ON THE OTHER SIDE OF THE WORLD. IT HELPS BUT WE NEED TO SEE THE VOLUME. CAROLINE: BRILLIANT THROUGHOUT. THANK YOU FOR GETTING US UP TO SPEED.
SET TO UNVEIL THE GATEKEEPERS LIST IN THE EU AND THE FORTHCOMING DIGITAL MARKET ACT. WE HAVE BEEN WONDERING WHICH PLATFORMS THAT WILL BE AT CURRENT RISK FOR STRICTER REGULATIONS. THIS IS BLOOMBERG TECHNOLOGY. ♪ CAROLINE: TIME FARK TALKING TECH. FARES -- SHARES OF ACTS ARE DOWN, -- SHARES OF X ARE DOWN. MUSK SAYS THEY HAVE A PERSONAL VENDETTA. HARASSMENT AND STREAM IT -- THEY HAVE SAID THAT HARASSMENT AND EXTREMIST VIEWS HAVE INCREASED SINCE HE TOOK OVER.
A NEW INITIATIVE TO BOOST ECONOMIC DEVELOPMENT IN THE REGION. TICTOC HIRING YOU KATE SECURITY FIRM NCC GROUP TO HELP AUDIT ITS DATA AND -- IS HIRING A U.K. SECURITY FIRM NCC GROUP TO HELP AUDIT ITS DATA. TIKTOK RUNS THE DATA CENTER IN DUBLIN AND IS BUILDING ANOTHER ONE IN IRELAND. ED: BIG TECH IS BRACING FOR THE EUROPEAN UNION'S BIGGEST CLAMPDOWN ON ANTICOMPETITIVE OFFICES WHICH MAY PROVOKE A NEW WAVE OF LEGAL BATTLES BETWEEN REGULATORS HERE IN SILICON VALLEY THERE THE ANNOUNCEMENT WHICH TECH PLATFORMS WILL BE TARGETED UNDER THE EU'S DIGITAL ACT WILL BE RELEASED TOMORROW.
CAROLINE AND I ARE USED TO COVERING THE KIND OF ANTITRUST CASE, THE BATTLE THAT PLAYED OUT IN COURT. NOW THE STORY IN THE E.U.. IS MOVING TO LEGISLATION. EXPLAIN WHAT IS ABOUT TO HAPPEN. >> TOMORROW IS A BIG DAY FOR THE EUROPEAN COMMISSION. THIS IS WHEN THEY, AND SAY WHICH TECH COMPANIES ARE CONSIDERED GATEKEEPERS, CONSIDERED DOMINANT IN THEIR SPACE AND THEY WILL LAYOUT WHICH PRODUCTS OF THE COMPANIES ARE CONSIDERED CORE PLATFORM SERVICES AND THAT IS WHAT THESE COMPANIES WILL HAVE TO REDESIGN TO COMPLY WITH THE RULES. WE HAVE SEEN LOTS OF ANTITRUST CASES FROM THE EUROPEAN COMMISSION FOR ALMOST OVER A DECADE.
WHAT THE EUROPEAN COMMISSION IS TRYING TO DO IS SAY THESE PIECES HAVE OFTEN BEEN UNSUCCESSFUL AND INSTEAD OF DRAGGING THEM TO COURT AFTER THEY HAVE DONE SOMETHING THEY DEEM ANTICOMPETITIVE, THEY SAID LET'S GET THE RULES FROM THE GET-GO. WE WILL SEE BIG RULES COME TO FRUITION TOMORROW. CAROLINE: THIS FOLLOWS FROM THE DIGITAL SERVICES ACT AND THE DIGITAL MARKETS ACT. IT ALWAYS ENDS UP TO BE FINES INSTILLED OR WARNED ABOUT. IS THAT REALLY WHAT IT IS HERE? JILLIAN: DO YOU WANT TO OPERATE ON ONE OF THE BIGGEST MARKETS IS THE STICK. HAD COMPLETE SAY ACTUALLY MAYBE NOT BECAUSE THERE IS TOO MUCH REGULATION HERE ONE PROMINENT EXAMPLE IS THAT META IS NOT RULED OUT THREADS IN THE EUROPEAN. WE DON'T HAVE IT HERE BECAUSE
THEY SAY WE DON'T KNOW HOW THESE KINDS OF RULES ON THE THE DIGITAL MARKETS ACT WILL BE ENFORCED IN ONE IS SAYING THAT THEY WOULD RATHER BE SAFE THAN SORRY AND MAYBE WE SHOULDN'T ROLL OUT IN THE E.U. THEY WILL BE ABLE TO OPERATE IF THEY BREAK THE RULES. THERE REALLY ARE THIS NEW WAVE OF REGULATION. THE EUROPEAN COMMISSION IS TRYING TO WORK WITH COMPANIES SAYING WE ARE TRYING TO MAKE THIS WORK FOR YOU BUT DEFINITELY LOTS OF COURT CASES AND FINES ON THE HORIZON.
ED: IS OFTEN A TWO-WAY STREET WHAT DO THE COMPANIES HAVE TO SAY ABOUT IT? ARE THEY TRYING TO MEET THEM HALFWAY? JILLIAN: A COVERED THE DSA AND LOOKED AT COMPETITIVE BEHAVIOR. THE DSA IS FOCUSING ON HARMFUL CONTENT WE SEE IN DIGITAL WORKPLACES OR ON SOCIAL MEDIA PLATFORMS. WE HAVE SEEN PRODUCTS LIKE TIKTOK AND META CHANGE THEIR PLATFORMS. WE ALSO SEE LOTS OF POTENTIAL COURT CASES ON THE HORIZON. DSA SAW TWO COMPANIES SUE OVER THE RULES AND CERTAIN THEY WILL SEE MORE NOW THAT THE DMA IS GOING INTO EFFECT. CAROLINE:
THE PEOPLE ALWAYS WIN. GREAT TO HAVE YOU ON SHOW APPEARED WE LOOK AHEAD FOR THAT TO BE UNVEILED TOMORROW. LET'S TALK ABOUT GOLDMAN SACHS. THE AI BUBBLE USE MAY BE OVERBLOWN. WHY THE FIRM IS SAYING THAT AI VALUATIONS ARE LESS EXTREME. FROM NEW YORK AND SAN FRANCISCO
ED: WELCOME BACK. CAROLINE: LET'S GET A QUICK CHECK ON THE MARKETS. A LACKLUSTER START AS WE CURRENTLY SEE THE NASDAQ 100 OF ABOUT A 10TH OF A PERCENT. A SWITCH INTO A BUYING MODE AS WE CARRY ON THE DAY. PEOPLE CAUTIOUS TO GET BACK TO THE ABIDING AS WE SEE THE NEW START OF SEPTEMBER. USUALLY A LOT OF BOUNCE IN THE INVESTMENT GRADE.
THE TWO YEAR YIELD IS UP SIX BASIS POINTS. IT WILL PUT PRESSURE ON THE OVERALL U.S. TREASURIES. WE HAVE A MYRIAD OF MACRO DATA, UGLY IN CHINA AND EUROPE. THE DOLLAR OUTPERFORM AS MAY BE A PLACE OF SAFETY AND WORK RATES ARE LIKELY TO HAVE TO BEAT HIGHER THAN LONGER.
BITCOIN DOWN. SOME OF THE CHINA MACRO DATA NOT LOOKING PRETTY. NEWS ON MONDAY WHILE WE WERE HAVING LABOR DAY OFF WAS TESLA OF SOME 4% ON PERHAPS GOOD NUMBERS OUT OF CHINA. WE UNDERSTAND SALES PICKING UP AS A PRICE CUT THEIR WAY. ORACLE UP 2.7 -- TWO PUT 67%. BARCLAYS SAYING THE GROWTH TRAJECTORY BEEN GOOD.
ALUMINA IS THE WORST PERFORMER. JACOB JASON WILL BE TAKING THE REINS AND THEY HAVE ISSUES ON THEIR HANDS ABOUT MAYBE HAVING TO CUT BACK ON THE OVERALL GROWTH TRAJECTORY AND HAVING PROXY BATTLES WITH A BILLIONAIRE ACTIVISTS. COMPANY CURRENTLY LOOKING FOR A CHANGE OF LEADERSHIP. ED: A NOTE FROM GOLDMAN SACHS SAYING AI VALUATIONS ARE NOT EXCESSIVE. THEY WRITE, GIVEN THE VALUATIONS OF THE DOMINANT INCUMBENT COMPANIES ARE HIGH BUT NOT EXCESSIVE.
WE BELIEVE WE ARE STILL GENERALLY IN THE FIRST PHASE OF A TYPICAL TECHNOLOGY WAVE. THAT IS NOT A UNIFORMLY HELD POSITION. GOES TO WHAT WAS BEING TALKED ABOUT ON THE NVIDIA CALL. THEY SEE TWO TRENDS, THE MOVE
TO GENERATOR -- GENERATED AI. GOLDMAN SAYING WE SEE THAT. CAROLINE: GOLDMAN PUT TOGETHER A BASKET OF THE SMALL STOCKS THAT COULD REALLY BENEFIT IN TERMS OF OF IT ABILITY FROM THE PRODUCTIVITY THAT IS LIKELY TO BE GRANTED. AND SING 70% RUN RATE ON SOME STOCKS ON THE BACK OF THAT. I AM INTERESTED TO SEE WHO THE NAYSAYERS ARE, IT HAS BEEN THE LIKES OF THE BANK OF AMERICA SAYING IT IS A BABY BUBBLE BUT WORRIES ABOUT THE VALUATIONS OF WHERE THEY HAD RUN TO. AND ORGAN STANLEY GENERALLY A BEARISH TAKEOFF BUT THEY HAVE BEEN WORRIED ABOUT HOW FAR WE HAVE RUN AND WHETHER TECH CAN WITHSTAND HIGHER RATES. ED:
THERE ARE ONE OR TWO SOFT PIECES THAT WE LOOKED AT. HOW MUCH ARE PEOPLE SPENDING ON R&D PROPORTIONATELY TO OPERATING EXPENSES AND THE COMMITMENTS FROM THOSE WHO WANT TO BENEFIT FROM AI. THAT INVESTMENT DRIVES LEADER GROWTH THAT IS AN INTERESTING PLACE TO FOCUS . SO WHETHER WE ARE TO
ENTHUSIASTIC OF WHETHER WE HAVE A BUBBLE. TO YOUR MIND SIDE, THE VALUATIONS WE ARE TRADING AT. MAN DEEP: THE UPWARD REVISIONS WE HAVE SEEN FOR NVIDIA, WE HAVE TO ASK OURSELVES, ARE THERE ANY OTHER COMPANIES THAT CAN SEE UPWARD REVISIONS LIKE THAT. IT IS TOO EARLY TO SAY THAT COMPANIES ARE ABLE TO UNPACK NEW REVENUE OPPORTUNITIES, ESPECIALLY ON THE SOFTER SIDE OR SERVICES SIDE, RIGHT NOW THEY ARE BUYING CHIPS AND INVESTING AND TRYING TO FIGURE OUT A NEW PRODUCT CAN MONETIZE. COPILOTS IS ONE WAY MICROSOFT
HAS HAD WE CAN MONETIZE THIS BASED ON WE HAVE AND CAN SELL THEM AN ADDITIONAL PRODUCT IN THE FORM OF A COPILOT. OTHERS IT IS NOT SO CLEAR WHETHER THERE ARE CUSTOMERS THAT ARE WILLING TO PAY FOR GENERATED -- GENERATIVE AI. CAROLINE: REVENUE GENERATING. MAN DEEP: IT ADDS -- MANDEEP: YOU HAVE TO BUY THE CHIPS AND INVEST IN ENGINEERS. WHEN THE PRODUCT WILL BE READY
IS THE QUESTION. YOU CAN SEE A HIT FOR SOME COMPANIES INVESTING IN GENERATIVE AI. CAROLINE: IT IS NOT JUST THE NOTES BUT BIG TAKES FROM BUYERS AND PLAYERS IN THE VALUE SPACE. ED: THE SO-CALLED BUBBLE HUNTER OF RESEARCH AFFILIATES. HE MAKES TWO POINTS.
THE FIRST IS THAT HE CALLS IT A MARKET DELUSION, THE IDEA THAT THE VALUATION OF NVIDIA RIGHT NOW REFLECTS THAT THEY WON'T NEED DISPLACED BY ANOTHER PLAYER AND THEY MEAN INCUMBENT AND THAT SECOND OF ALL THE CURRENT MARKET CAP OF NVIDIA NEXT IT A SAFE BET. WHAT DO YOU MAKE OF THOSE TWO POINTS, ITS POSITION IN THE MARKET BUT CURRENT SIZE? MANDEEP: I AGREE WITH THE COMMENT BECAUSE THE COMPANIES INVESTING IN GENERATIVE AI ARE THE ONES WHO ARE ACTUALLY BUYING THE CHIPS AND THAT IS WHAT DROVE THE 100% UPSIDE REVISIONS FOR NVIDIA. HOW DID BEING A FRAGMENTED ENTERPRISE, THEY WOULD BEAT MAKING THOSE SORT OF COMMITMENTS EVEN THOUGH EVERYONE AGREES WITH THE DISRUPTIVE IMPACT OF GENERATIVE AI. THE FACT THAT WE ARE SEEING
THAT BIG LIFT IN SEMICONDUCTOR SPENDING IS THE CONCENTRATED NATURE OF THE BUYERS WHICH IS THE CLOUD PLAYERS. YOU HAVE TO ASK YOURSELF IF EVERYONE IS ABLE TO DEVELOP THAT TECHNOLOGY OVER TIME, THEN IT DOES GET MONETIZED. I GO BACK TO THE REVENUE GENERATION ASPECTS OF HOW YOU ARE GOING TO MONETIZE IT IN SOFTWARE OR SERVICES AND IT IS NOT VERY CLEAR HERE WE ARE STILL AT AN EARLY STAGE IN TERMS OF UNPACKING THAT ON THE SOFTWARE SIDE. ED: THE NVIDIA EARNING CALL, TALKED ABOUT THE TWO BIG TRENDS ABOUT ACCELERATED COMPUTING AND DEMAND FOR GENERATIVE AI TOOLS BUT ALSO CAPITAL EXPENDITURES. HE SAID LOOK AT THE COMMITMENTS ON THE R&D SIDE AND THE SIDE OF THOSE THEY CARE ABOUT.
ARE THOSE DATA POINTS TO TRACK AS WELL TO SEE HOW FAR WE HAVE LEFT TO GO ON THIS TECHNOLOGY WAVE? MANDEEP: ONE IS SPENDING R&D DOLLARS ON GENERATIVE AI. THE QUESTION IS, THE PROPRIETARY DATA AVAILABLE COULD BE FED INTO A LARGE MODEL. FOUNDATIONAL MODEL AND PARAMETERS IN THE MODEL ARE BASED ON LARGE AMOUNTS OF DATA. YOU CAN'T BUILD A LARGE MODEL
ON A SMALL DATA SET. AND WHERE'D YOU GET THAT DATA FROM GIVEN EVERY COMPANY HAS BECOME SO CONSCIOUS ABOUT THEIR DATA AND ALL THE OPEN INTERNET DATA. I THINK THE HEART OF HOW THIS TECHNOLOGY LIES IS IF YOU HAVE ACCESS TO DATA. CAROLINE: YOU ARE SINGING FROM A HIM SHE
I HAVE HEARD CATHIE WOOD SINGH FROM -- HYMN SHEET THAT I HAVE HEARD CATHIE WOOD SING FROM. WHAT NAMES ARE BEING OVERLOOKED? MANDEEP : INTERNET COMPANIES ON THE PROPRIETARY DATA. SOFTWARE COMPANIES DON'T HAVE PROPRIETARY DATA. HAVE CUSTOMER DATA AND THEY CAN'T BUILD LARGE MODELS ON TOP OF THAT. INTERNET PLATFORMS ARE THE ONES COMING UP WITH THE LARGE MODELS AND THEY HAVE AN ADVANTAGE IN TERMS OF REDOING THE NEXT VERSION BECAUSE THEY HAVE ACCESS TO THAT DATA.
SOFTWARE COMPANIES LIKE MICROSOFT PARTNERED WITH OPENAI OPENAI BUILT A LARGE MODEL IN THEY WILL HAVE A HARD TIME FINDING THE NEXT ITERATION BECAUSE EVERYONE IS LIMITING THE USE OF OPEN DATA. CAROLINE: AND A LONG-TERM DISCUSSION ON HOW MUCH THIS CHANGES THE WORLD OF THE INTERNET. COMING UP, WHAT IS HAPPENING IN THE PRIVATE WORLD. FIAT VENTURES DREW GLOVER IS HERE WITH US. THIS IS BLOOMBRG TECHNOLOGY.
ED: A STARTUP THAT USES ARTIFICIAL INTELLIGENCE TO DETECT MONEY LAUNDERING AND OTHER FINANCIAL CRIMES IN INTERNATIONAL TRANSACTION HAS RAISED $57 MILLION. IT COMES AS FINANCIAL INSTITUTIONS REPORT A SHARP RISE IN FRAUD BOOSTED BY NEW AI TOOLS . NEXGEN HEALTH CARE RAISED 13% AFTER BLOOMBERG REPORTED AN ADVANCED TALK TO ACQUIRE THE COMPANY ACCORDING TO SOURCES WHO SAY THE PRIVATE EQUITY FIRM COULD ANNOUNCE A DEAL AS SOON AS THIS WEEK.
PLUS FOUR-TIME NBA CHAMPION AND -- STEPHEN CURRY IS A NEW INVESTOR IN UPWIND, VALUING A CYBERSECURITY STARTED AT $300 MILLION. CAROLINE: HE IS ACTIVE IN THE VC WORLD. IN NEW YORK, DREW GLOVER IS VISITING. THE PARTNER AT BIOT VENTURES -- FIAT VENTURES. NOT MAKES YOU DIFFERENT IS NOT ONLY THE FOCUS ON UNDERREPRESENTED FOUNDERS BUT ALSO THE WAY IN WHICH YOU ADVISED ALONGSIDE. IT IS ALL THE ADVISING AND DISCUSSING ABOUT WATCHING BIG COMPANIES COMING TO MARKET AND WHERE THERE WILL BE MORE EXITS IN THE IPO AREA? DREW: WE ARE THE CONSULTANCY OF THE FIAT VENTURES PART OF THE BUSINESS. WE GET THESE COMPANIES. BUT EARLY STAGE TWO PUBLIC AND WE GET TO INVEST COMPANIES AS WE GET THE RIGHT TO INVEST CONTRACTUALLY.
WE HAVE ALL OF THIS INCREDIBLE DATA IN -- AND EDUCATION WE GET BY DOING WORK ON THE GROUND WITH THESE COMPANIES. ONE THING WE ARE SEEING IS OPTIMISTIC THINGS HAPPENING IN THE PUBLIC OR GET BUT ALSO WE HAVE TO BE THOUGHTFUL IN TERMS OF HOW WE ARE BUILDING PRODUCTS AND STRATEGIES TO BE -- BRING PUBLIC COMPANIES TO THE PUBLIC MARKETS. IN TERMS OF THE TRENDS WE ARE SEEING, I AM HEARING A LOT OF TALK ABOUT GENERATIVE AI AND ONE OF THE BIGGEST THINGS IS EVERYONE WANTS TO SHIFT THEIR BUSINESS TO AN AI FIRST BUSINESS PIER 1 THING WE CONSTANTLY PUSH IS AI IS AN DOUBLE TOOL AND FUTURE BUT NOT ALWAYS THE RIGHT PRODUCT TO SHIFT TO BECAUSE WHAT THESE COMPANIES HAVE IS AN INCREDIBLE AMOUNT OF DATA THAT AI CAN EMPOWER AND CREATE VALUABLE FEATURES TO THEIR PRODUCTS. CAROLINE: WE WERE JUST TALKING TO MANDEEP SINGH ABOUT PROPRIETARY INFORMATION AND THAT THERE MIGHT BE RAISING AS MUCH. ULTIMATELY, HOW IMPORTANT IS IT
FOR AN AREA YOU ARE FOCUSED ON A COMPANY IN THE WORLD OF FINTECH BUT LOOSE GANG -- BUT LOOKING AT PUBLIC MARKETS? DREW: ONE THING WE HAVE SEEN OVER THE LAST YEAR AND A HALF IS MOVING AWAY FROM THE APPLICATION LAYER TO THE INFRASTRUCTURE LAYER. THE APPLICATION LAYER IS CONSUMER FINTECH, IS HE CRAZY GROWTH OVER THE LAST FIVE TO 10 YEARS LIKE CHIME. NOW WE HAVE MOVED TO THIS INFRASTRUCTURE LAYER AND STRIPE WAS AHEAD OF ITS TIME ON IT. THESE ARE THE FINTECH TECHNOLOGIES THAT RUN THE ENTIRE ECOSYSTEM WE KNOW THAT STRIPE IS POWERING BACK AND BUT WE DON'T -- THE BACK END OF SHOPIFY BUT WE DON'T KNOW AT IT IS STRIPE GOOD WE HAD THE OPPORTUNITY WHERE WE WILL SEE EVERY SINGLE ACTION WE MAKE ON EVERY APP WILL BE RUN BY THIS FINTECH STRUCTURE, EVERY TIME WE PURCHASED, GET A LOAN AND REFINANCE DEBT. I BELIEVE STRIPE SEE A BIG
HEADWIND OVER THE NEXT COUPLE OF YEARS AS THEY DECIDE WHAT THE NEXT STEP IS. ED: WITH EVERYTHING THAT HAS HAPPENED IN GENERATIVE AI, DOES THAT PUSH YOU AT FIAT BACK TO FOCUS ON FINTECH? THE REASON I ASK IS LOOK AT SALESFORCE OR NVIDIA, IS BIG INCUMBENTS IN AI THAT DEPLOYED BIG SUMS OF CAPITAL, THEY HAVE MUSCLE IN, AND DATA SHOWS SALESFORCE WAS THE MOST ACTIVE INVESTOR IN THE FIRST HALF OF THIS YEAR. SINCE YOU LOOK AT THAT AND SAY YOU HAVE GENERATIVE AI WE WILL STICK WITH FINTECH? DREW: I THINK GENERATIVE AI WILL BE A MASSIVE ADD TO WHAT IS HAPPENING IN FINTECH. WHAT THEY HAVE THAT MOST UNDER
INDUSTRIES DON'T HAVE IN SPADES IS DATA AND THAT IS CONSUMER DATA, CALL IT DATA ACROSS THE ENTIRE CUSTOMER JOURNEY AND MEAN THE MOMENT THEY DOWNLOAD THE APP TO THE MOMENT THEY FUND A BANK ACCOUNT. BEING ABLE TO TAKE THAT DATA AND ORGANIZE IT THROUGH GENERATIVE AI WILL NOT ONLY ENHANCE THE CUSTOMER EXPERIENCE AND JOURNEY BUT ALSO MAKE IT SO WE CAN ADD ADDITIONAL PRODUCTS AND THE MOST EFFICIENT WAY POSSIBLE. SOME THINGS WE ALWAYS THINK ABOUT, WE HAVE A NUMBER OF COMPANIES WHO DO THIS.
THE HOME LOAN PROCESS IS ONE THAT IS VERY MUCH HUMAN CAPITAL INTENSIVE. ONE THING WE HAVE SEEN AI BE ABLE TO DO IS MAKE IT SO THAT INSTEAD OF BEING A $20,000 PROCESS TO COMPLETE, YOU CAN DO THAT IN 2000 OR 3000 DOLLARS. WE ARE SEEING THEM BE ABLE TO BECOME BETTER BUSINESSES AND HEALTHY BUSINESSES OVER TIME. CAROLINE: ONE AREA OF CONCERN, WE MENTIONED STRIPE AND TAILWINDS, ONE IN EUROPE HAS MADE EVERYONE SIT UP AND WORRY ABOUT OUR ART -- ISN'T ENOUGH CONSOLIDATION. HOW MUCH ARE YOU SEEING WALKABLE AREAS OF FINTECH? DREW: I THINK WHAT WE HAVE SEEN OVER THE LAST CALL IT DECADE IS A LOT OF COMPANIES TRYING TO BUILD THEIR MOAT AROUND BRAND. THAT IS VERY CAPITAL INTENSIVE. YOU NEED THE MARKET TO REALLY
BE COMING AND YOU NEED TO SEE VENTURE DOLLARS LEAVING POCKETS QUICKLY AND THAT HAS SHIFTED. WHAT WE ARE SEEING NOW IN THE PRIVATE MARKETS IS PEOPLE TRYING TO BUILD SUSTAINABLE BUSINESSES AND NOT JUST BRAND. MOVING AWAY FROM THE APPLICATION LAYER TO THE INFRASTRUCTURE LAYER. THESE ARE B TO B BUSINESSES. YOU WON'T SEE THEM ON INSTAGRAM BUT FEEL IN YOUR LIFE AND NOT KNOW THAT YOU ARE EVEN ENGAGING. THESE API DRIVEN TYPES OF BUSINESS MODELS WHERE INSTEAD OF A LARGE COMPANY HAVING TO BUILD A TEAM OF 100 DIFFERENT JUNIORS, THEY DID IS PARTNER WITH A COMPANY AND HELP THAT ENHANCE THEIR TECHNOLOGY VERSUS HAVING TO BUY A TECHNOLOGY.
THAT IS A BIG SHIFT WE ARE SEEING WITH PUBLIC COMPANIES, THEY ARE NO LONGER BUYING THEM AND PICKING UP THE BALANCE SHEET BUT PARTNERING THEM AND EMBEDDING THEM INTO CURRENT STRUCTURE. CAROLINE: GREAT -- ED: GREAT TO SEE YOU. SO MUCH MORE TO COME ON THE SHOW. ED: APPLE TV HAS A BIG BOOST FROM MAJOR LEAGUE SOCCER STREAMING SERVICE AFTER THE ARGENTINE SUPERSTAR MESSI JOINED. THE DATA YOU PROVIDED IS A STAGGERING PAIR JULY 21 WAS THE FIRST GAME, 110 THOUSAND SIGN-UPS FOR MLS SEASON PASS. HOW DOES THAT RELATE TO ANY OTHER PERIOD OF SIGN UP FOR APPLE TV? >> GREAT TO BE HERE AND FUN TO TALK ABOUT THE STORY BECAUSE IT IS SUCH A UNIQUE SITUATION IN THE STREAMING WORLD WHERE -- WHERE WE ARE TWO DECADES INDIRECT TO CONSUMER SUBSCRIPTION SERVICES AND THEY HAVE BECOME QUITE MAINSTREAM AND SUCCESSFUL BUT THIS IS THE FIRST TIME WE HAVE EVER SEEN A MIDSEASON POP LIKE THIS, A VERY UNIQUE STORY BUT A UNIQUE BUSINESS STORY AS WELL FOR APPLE TV+ AND FOR THE MLS.
SEEING A HUGE SURGE IN SUBSCRIPTIONS FIVE MONTHS INTO THE SEASON. CAROLINE: TO THAT POINT, HOW LONG IS THE STICKING POWER AND HOW MUCH CAN THEY DEPEND ON THIS STAR POWER? HOW MANY STARS COULD EVER BE AS AN EQUIVALENT? JONATHAN: THERE IS ONLY ONE LEO MESSI ALL OF JULY WAS GOOD FOR THE SERVICE. IT WAS ABOUT HALF OF THE SIGN-UPS FOR MLS SEASON PASS HAVE COME THROUGH JULY. IT ALSO HAPPENED TO BE APPLE TV+ BIGGEST MONTH. ED: WHAT OTHER DATA DO YOU HAVE AVAILABLE? DO YOU HAVE EVIDENCE OR DATA THAT THEY ALL RETAINED THEIR MEMBERSHIP AND HAVE NOT CANCELED BY SEPTEMBER? JONATHAN: WE TRACK THAT AND WE WILL SEE WHAT HAPPENS OVER THE COURSE OF THE COMING MONTHS. HISTORICALLY, SPORTS SIGN-UPS ACTUALLY RETAIN VERY WELL. YOU MAY THINK PEOPLE ARE JUST
SIGNING UP FOR ONE PARTICULAR GAME BUT PEOPLE WHO SIGN UP FOR SPORTS SEASONS TEND TO STAY FOR THE SEASON AND BECAUSE THEY ARE STAYING ON FOR SEVERAL MONTHS, THE SERVICES HAVE THE OPPORTUNITY TO PRESENT OTHER PROGRAMMING THEY MIGHT BE INTERESTED IN, SO HISTORICALLY THERE RATES FOR THOSE WHO SPINE -- SIGN UP FOR BIG EVENTS ARE LOWER THAN THOSE FOR TYPICAL MEMBERS. CAROLINE: JONATHAN CARSON, BRILLIANT TO HAVE YOUR TAKE. THAT WAS IT FOR THIS EDITION OF BLOOMBRG TECHNOLOGY. ED: YOU CAN FIND OUR PODCAST WHEREVER YOU FIND YOUR PODCASTS.
WE PUBLISHED ALL OF THE BLOOMBERG PLATFORMS AS WELL. FROM CISCO AND OVER IN NEW YORK CITY BLOOMBRG TECHNOLOGY.
2023-09-07 20:45
