Tech Earnings and Apple's New iPads | Bloomberg Technology

Tech Earnings and Apple's New iPads | Bloomberg Technology

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From the hardware innovation. Money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. I'm Caroline Hyde of Bloomberg's world headquarters in New York, and Ludlow is off. This is Bloomberg Technology coming up. We gauge the health of technology earnings with 80% of s&p 500 companies out with results. And as Buffett cuts his stake, we'll push ahead to Apple's product event as the company prepares to launch new iPads. Plus, we speak to Andrew Weil, founder

of Lucky, as the company announces a brand new range of AI powered products. But first, let's check in on these markets. And look, we have a post Fed feeling of, well, optimism in the markets.

It feels we don't have an awful lot of economic data on the table. We do have some significant bond issuance, ten year yields holding steady with 4.5%. The NASDAQ managing to push up to 6/10 of a percent, notably using the S&P 500, breaking some of those technical levels of where we've seen an average in trade over the last 50 days. So this seems to be some bold moves in risk on attitude.

Not though, in bitcoin, though. Crypto off by 9/10 of a percent. We're seeing 63,155 is currently where we trade. Moving on though, and when it comes to crypto related news, we'll be digging into what's happened with Robinhood. Of course, Wells Notice received a sec looking at particularly its crypto sales that it currently does up 7/10 of a percent, despite of course announcing that the SEC may well be looking into its business. Apple down 7/10 of a percent. This is all post of course, the oracle of Omaha over Warren Buffett saying, look, I'm pulling back on the stake in Apple even though he did shower its praise over the business, really loving the iPhone product. But nevertheless, we look ahead to new products, new iPads.

Wish I had with that in Mark Gurman in a moment, but Nvidia up 2.6%. I want to shine light more broadly on some of the chip makers because we are seeing a lot of movement higher. The stocks, for example, trading higher. NVIDIA still yet to report. That comes May 26, May 22nd. We also get on this week. There is still so much to be said for earnings. The earnings season well underway.

Results are at 8% and the S&P 500 already in technology communication services companies beating corporate estimates. I think 90% of tech and communication services companies actually topped earnings estimates, according to data compiled by Bloomberg. When get all the statistics. Bloomberg's Jess Minton is with us, I'm pleased to say. And just more broadly, it feels as though when companies have beat, have they really outperformed? I mean, Apple was a massive sigh of relief when we saw the stock rally, but how has that been bearing up? So you can actually see this function in B? I go through Gina martin Adam's team over in that function, and you can see basically on the equities there.

So when you're looking at how stocks in aggregate from the S&P 500 have been performing in excess of the broader index, the actually it's basically kind of pales in comparison to how they have been in prior quarters. But nonetheless, because of Apple on Friday, when you see this now, the S&P 500 since earnings season basically got into full swing with Jp morgan back on April 12th. Now it's up close to about 1%. In that span, it had been about lower than 1% prior to Apple's earnings results. So now you're starting to see that pick up a bit just on the back of obviously these big tech bellwethers. But to your point, Caroline, we still have Nvidia coming up on May 22nd. I know. And there was so much optimism baked in.

What about those that have missed? I mean, they've been punished hard, have they? And have there been any themes as to why they've missed? Well, that's a great point too, because a lot of that also has to do with more forward looking guidance. And that's why because as we know, when you do think about first quarter earnings results, that is more backward looking. So when it comes to the guidance, that's where it has been disappointing. And then, of course, because this is a technology program, obviously a lot of traders and investors want to know when those cost cutting efforts that have really helped propel any sort of big tech company or especially anything that is tied to that, especially when you think back to metal at the end of 2020 June when it started its first big job cuts in Toronto there and then another one last spring, how much longer can this continue? So if you look at the buy function, they were on a 12 month aggregate basis. So side analysts are still marking up their projections for technology companies and growth companies, too. But a lot of those laggards like health

care and utilities, those are actually starting to pick up to now, maybe with the effect of AI. Many wanted to see that impact other industry groups. Just lastly, give us a sense of whether companies are really been rewarding shareholders because that felt like why a lot of the reason Apple popped it was because we got a massive buyback.

We're starting to see companies give dividends. I mean, you triggered my memory of the fact that mattered didn't this time, but they did in the previous earnings season. That's always usually music to traders ears there.

But also the big thing about buybacks is also when you look at what's happening with CapEx and reinvesting into those businesses. So just beyond that, so that's something that investors want to see more of. As far as what are companies doing to reinvest beyond just those buyback programs. But we have seen a number of companies, and especially to your point, Caroline, looking at Apple with that historic buyback announcement, of course, it still has to execute those, but we still have when you're thinking about what potential catalysts could come for Apple, obviously, we know in early June we'll have the Worldwide Developers conference, but I know Mark Gurman from Bloomberg is coming up soon. So he's going to talk about the big event tomorrow. We're potentially we could see some more new iPads that are coming out.

Caroline. Mark Lewis. A moment on the con just mention brilliant to have your roundup of what's been happening in terms of earnings season. We actually want to get a real investor's take here as well. Uncle profits with us Executive vice president portfolio manager of an Alger $25 billion in assets under management and Uncle Apple actually one of your biggest holdings. You have been cutting that a little bit

across some of your funds. Warren Buffet doing the same thing. How have you interpreted, for example, a company such as Apple's results and ultimately the growth trajectory of a business like that? Look, Apple is a consumer utility, and one of the things about Apple has been that they have been slower in adopting this cycle. Now, the hope is that at some point they will catch up and they will be a fast follower, which we strongly believe that they will. But in the in the near term, there are other companies that are more immediately investing in and procuring A5 type revenues that is propelling growth. Okay.

Let's talk through some of those names. I mean, we've had from Alphabet, from Amazon, from Mehta, all of them, the CapEx spend they're making, are they building the reward in return for that investment from your perspective? Absolutely. It's the number one thing that we have been looking at through this earnings season has been CapEx and how these companies are spending their CapEx. We wholeheartedly expected them to have a big CAC back CapEx number through 2024 and they're even talking about 2025. And this to us is the leading indicator of what's to come.

And I because they wouldn't be building this CapEx unless they saw the demand trends. I would remind you that during earnings season, both Microsoft and Amazon talked about how they were limited on capacity of GPUs. So this again, I mean, people keep asking like, where is the where's the application? Someone is using those GPUs. They're all used up already.

The hundreds of millions that have always been already been spent. And of course, benefits from the desire for GPUs. It's got to be in video, right? I mean, is that the number one play for you? Have you been looking at well, AMD or indeed looking at the design element with ARM? Yes, I think a lot of boats are going to rise over the next decade and a lot of boats are rising now. So it will it be a winner take all market? It's not going to be a winner take all market. There will be many different winners. Nvidia is going to be the winner take most, however, and we are we are really excited about what Nvidia is doing in terms of not only software development but how they're changing the network in order to make data more, more efficient. So they're reaching out beyond just chips into the enterprise networking and and software as well. So that sets up a really great moat for

them and makes us very bullish on NVIDIA. I mean, it's one of your number one holdings across some of your largest funds. I know that you've also been starting new funds and ETF in particular trying to execute on this theme. Can you talk us through some of the names and perhaps why not automatically consider the air play that you've been adding to? Yeah, So you know, there's two companies in the industrial space, Vertov and Quanta Services, both of which are, you know, they used to be relatively slow growth companies but are now levered to the AI play. Vertov makes cooling systems for data centers and quanta. I actually I joke that these are ditch diggers or they're pole climbers because they effectively distribute or make the transmission for electricity.

Both. Both of these things are going to be have to have radically changing competitive dynamics in that. For example, for for Quanta, we don't have enough electricity, so we expect to see utility CapEx start to rise incrementally over the next 5 to 7 years, all of which will service the people that implement the the transmission lines. For Vertov, you have a very changing,

changing dynamic on the cooling aspect of of the data center and Vertov ends up being the net winner. And that's really interesting because we're hearing again and again that this is a worry, for example, of, you know, Sam Altman been going around the Middle East in particular worrying that the key anxiety, the bottlenecks here are energy and indeed access to GPU. That's why there's been so much reporting of the fact that he's trying to build up other chip makers. Have you been thinking about ultimately that actually being the key bottleneck? Do you agree that energy is going to be the real issue here? Limiting factor? I think that technology is pretty amazing in that as you look forward, I mean, as we stand today, is is energy going to be a bottleneck? It is. However, as you move forward to three and four years, the energy efficiency efforts that are occurring, not only at the chip level but at the data center level are quite significant.

And we think that, you know, the technology on cooling and electricity will. Keep up and not hamper the growth of the industry. So, for example, the if you look at the performance per watt of the B 100, which is in videos newest chip, it's actually significantly more efficient than the older generations.

And so as you move through time, I do believe that the on a performance per watt basis, you end up getting more efficiency that is, than is currently baked in by the market. Where is the market getting too exuberant. Do you believe any view that the hype has made market capitalizations unsustainable in certain names? I don't think the market is exuberant right now. And and, you know, everyone always asks like, are we in a bubble? Are we in an air bubble? And I would say it's much too early.

This is very much like, you know, it's revolutionary in terms of of what is about to happen. So, you know, I just look at the valuations across across the Mag seven this morning. You look at Metta. Metta currently trades at a 10% discount to the market on our 2025 earnings actually might be a 15% discount now that it's pulled back so much. That to me, for a company that is going

to change the way that we interact as consumers with AI and how businesses interact with consumers is not an egregious multiple. You know, you can go down the list with Amazon. Amazon doesn't trade at that egregious a multiple to the market, especially as they're showing leverage. You know you look at Microsoft. Microsoft again, if you look at 2026 numbers, it trades at a 5% free cash flow yield. So to me, these aren't really set up as bubble esque type valuations and we're not terribly exuberant, especially after this pullback. Well said, Uncle Crawford, really great to get your perspective as someone who is holding all of these names, investing in and indeed adding to we thank you, Uncle Crawford of Alger.

A great way to kick off this week. Meanwhile, coming up, Apple preparing to unveil a new lineup of iPads. We're just talking about the product launch called Let Loose. That's tomorrow. They'll be previewing the event next. Meanwhile, let's just look at GameStop, which is moving for no apparent reason. Again, you know, it's the OG meme stock were down some 13% last week. Of course, it was rallying hard.

I mean, ended Friday session up about 29%. This seems to be real Well, desire to be getting in and out on this key meme name. Once again, we'll keep an eye for you. This is betting that technology.

Berkshire Hathaway held its annual meeting of the weekend, of course, and Apple quickly became one of the biggest topics as the meeting unfolded. Warren Buffett here praised the company calling the iPhone one of the greatest products of all time. That was after revealing he kind of stake out a report today, $135.4 billion holding an apple at the end of the first quarter, down 174.3 billion at the year end. Now, meanwhile, whole news when it comes to Apple and Foxconn, which of course assembles the majority of iPhones, posted its strongest monthly sales growth since the start of 2023. And just look at what the impact it had

on the shares, potentially, of course, raising those expectations for iPhones for air server sales. I spoke it all down and push ahead. Tomorrow's event, of course, all regarding the iPad. Bloomberg's Mark Gurman here with us. And Hon Hai, Foxconn, how we want to talk about it. Always a great tell.

We've been worried about its previous earnings, but now it looks that on from a month on month basis, on year on year monthly posting, we're getting record sales for the company. Now, if you look at the prior quarter on highs revenue, their expectations, their forecasts weren't so hot. Right. And then you saw Apple reveal its iPhone sales for the previous quarter last week and you saw the iPhone come in about $5 billion down on a year over year basis. Right. But looking ahead to the June quarter, the current window that we're in, Apple said it expects revenue to grow low single digits. Right. So growing for the first time in a

couple quarters here. And Foxconn's expectations for this quarter as well seems to align with that, given that they still assemble the vast majority of iPhones via Foxconn. Now, it's not only iPhones driving that high revenue, it's also development and manufacturing of air servers for various companies. However, I don't believe that the servers that Foxconn is building are connected to Apple's announcement coming June. For all intents and purposes, the guy from Apple will be on device, at least from the get go, and probably using third party infrastructure, not something they're creating on their own. But one day, I do expect Apple to move to its own air server environments.

Oh, interesting. Okay. And therefore, talk to us about the long term commitment to Apple and indeed perhaps a slight pullback coming from what is its third biggest shareholder, Berkshire Hathaway, saying that we are pulling in, trimming back, but they still seem to believe in Apple as a key tech winner. Yeah, I think Buffett does seem to believe Apple is a key tech winner. I mean, Buffett and his typical process for which stocks he buys, Apple is right up his sleeve, right? You're not going to see Apple grow ten fold or to some significant degree at this point. But you know that it's more likely than not that you're going to get solid returns off this company. You're not going to lose your money.

It's certainly better than putting your money in a bond market or in a mutual fund in most cases. So it is a very safe pick. Apple, I think, for for many quarters to come, despite the fact that it's not going to be a high flyer or anything like that. I mean, $110 billion share buyback, many feeling that that's the a value stock now rather than a growth stock, Mark. But I'm interested in a way from like the arbitrary way in which we describe whether you buy into this stock, we are all caring about the products and the unveilings and we're going to get some.

Yeah, that's right. Tomorrow, Tuesday, 7 a.m. Pacific Time, 10 a.m. Eastern time. Is there let loose iPad public launch. There's going to be a few things coming.

One is a revamped version of the iPad Pro. This will be the most significant update to the company's tablet since the current model was launched in 2018. You're also going to see a new iPad air. Why is that important? Well, in addition to a spec bump, you're getting a bigger iPad air, something closer to the size of a MacBook Air for the screen, a 12.9 inch display. This'll be the first time that Apple's

offering a 12.9 inch iPad at that mid-tier price point. Right. And at that mid-tier product line. So that's a big deal. As Apple looks to make its iPads more like Macs and expand the product line there.

And then you're going to see them rebuild the ecosystem around its iPads with two key new accessories. There's going to be a new magic keyboard, a higher end version that makes the iPad Pro look more like a laptop and use something that's a bit more durable and convenient. The second thing is a pro version of the Apple pencil. So a new higher end SKU of it's Apple pencil silence. That's a really popular accessory that artists and creatives and others like to use for drawing. The new version will have some new gestures so you can squeeze on it to have certain commands.

Apple's home page was updated this morning where you can use an Apple pencil or a virtual pencil to erase the logo on Apple's home page, which might imply that the pencil is finally getting an eraser on the back. Look like a classic number two pencil. And the other thing I've written that we'll have is haptic feedback. So when you use the pencil, it'll vibrate back on your finger so you know what you're doing based on tactile feedback. So that's going to be a pretty nifty update as well. And I think overall for iPad fans,

especially those who have been waiting many, many, many months or even years for a revamped version, that iPad Pro tomorrow is going to be quite an exciting product launch for them. Love playing Mark Gurman Bingo. Of all the things that you've just told us and playing it out tomorrow when they will come to life, we thank you. Bloomberg's Mark Gurman on all things Apple and iPad. Meanwhile, coming up, new bidders come to the forefront to try and save the French tech company Asus. We'll have all the details. That's Bloomberg Technology.

Time now for talking tech. First up, Chinese self-driving firm Momenta, but it's filed confidentially for an IPO in the United States, according to sources, And it may happen as early as this year. Now, the company was founded in 2016 by a team of engineers from Microsoft Research Asia, and its backers include General Motors and Temasek.

Plus, the Biden administration is opening applications for $285 million in federal funding, set up an institute focused on digital twin technology. The chip industry may see this technology can leverage A.I. to help reduce development and manufacturing costs. And Jack Dorsey, well, he's left the board a social networking service, Blue Sky, which he, of course, helped fund and popularized a year ago in the wake of kind of some regret over the sale of Twitter to Elon Musk. Now, the Twitter co-founder took to now ex to tout his new philanthropic grants to open Internet protocols, which he described as, quote, freedom technology. In fact, he said the X is such a freedom technology.

Now, let's turn our attention to the French tech company Atos. Now, it says it has received some full proposals to restore the group to financial health, including one it already rejected from Bain Capital. Now the firm is seeking to reach a deal by the end of the month to inject fresh funds after clients have actually begun to hold off business. The latest bidders to throw their hat into the ring are tech billionaire Daniel Kuczynski and David Lyons. One point. Let's break it all down. And Ben BARTOLONE is with us.

And Benoit, just remind us, this is a company that's thought of incredibly integrity in the tech space in France. And ultimately the government wants to make sure that it survives. Yeah, it's it's been a darling of the French tech scene and a major blue chip index company in France. It used to have a market capitalization of 15 billion. It's now down to 200 million. So it's got lots of problem. And it's in the indeed, a key company. It has 100,000 employees and 10 billion

of revenues last year, many key customers around the world, the I.T. for the Olympic Games, for example, upcoming in Paris this summer, but also key defense activities for just the French defense industry. It also has supercomputers that help the nuclear industry. So the French government, seeing the trouble of the company, finally decided to make a bid on that part of the company to more strategic activities.

Talk us through the rivals here. Some of the key players we mentioned mentioned a couple of billionaires throwing their hats in the ring. Exactly. So one of the bids is actually from the bondholders of the company. They want to be center stage here. They want to be key in deciding who's going to be the winner.

So they are open to partner with an encore shareholder. And this could be either the Czech billionaire, Daniel Kozinski. He's been known to buy sort of unloved assets, assets that need restructuring. He started in energy. He's been to retail in France, already made a bid to buy retailer because he knew it was attached to the credit fund and is teaming up with that tester again to make a bid for for Atlas.

And then there is David Lyon. He's a French entrepreneur. He has a much smaller I.T. company called One Point and is teaming with Butler Industries, another investor in France, to to buy the company and in a plan that he's calling one others. So it's sort of down to a race between these two. We'll see how the race continues. Ben Butler, we thank you so much for the update on the French company.

Meanwhile, coming up, FCC warning Robinhood markets that it faces an enforcement action over its crypto business. Details next. Meanwhile, talking of a tussle over sales, paramount keeping an eye after the $26 billion offer came for the company from Apollo. And Sony is pulling back. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York. Let's get a quick check on these markets because a little bit of optimism out there on the day we're managing to see a higher change. The Nasdaq 100 up 6/10 of a percent after we see, well, perhaps a quiet inning in overall economic data, but a ramp up in discussion coming from the Federal Reserve after we got a little bit more of a tamer comments coming out of the market, trying to even beat back in some of those rate cuts for the rest of the year. We see the MSCI All country world index

on the high side to really we've seen money move into the European assets and indeed Asian on the day Bitcoin, though not finding the love for the risk on feeling we're down to 63,392 currently up just down by just 5/10 percent though so small change. Let's move on and have a look at what else is moving in the world of crypto and individual companies because well, more broadly, we have seen the chip sector doing particularly well on the day. Just seeing in video Rampart, we're seeing Micron getting an upgrade from analysts. That's on the higher side, leading the charge on the stocks. We're seeing generally a feeling of getting back into these chip names ahead of ARM this week. Remember the chip design company coming out with its earnings. Apple on the downside, though, I'm

afraid, Warren Buffett cutting his stake even though he pulled on a lot of love for the company. All eyes on the iPad unveil tomorrow and Robinhood up a quarter of a percent now coming off of some of its highs were trading exactly 18 on the nose. That's after the SEC is one that Robinhood is. Crypto business faces potentially a

lawsuit, a so-called wells notice from staff of the SEC. Let's break it down. When Bloomberg Sonali Basak any detail what it is the SEC doesn't like about robinhood's play in crypto. Let's just talk about crypto in general because what this was was a securities filing that Robinhood made that had about a two paragraph detailing that said they received a wells notice, which we know is essentially an intent for the SEC to sue against the use of its cryptocurrency business. So we don't know exactly all the details behind it, but we do have Robinhood Statement in Return, which says that they firmly believe at Robinhood. Their officials believe that the assets listed on our platform are not securities. We know that the SEC has been looking at

exchanges and brokerages for the listing of what they deem as unregistered securities. But we also know that this has been a massive fight between many players in the industry, as well as their fight against the S.E.C. itself in this pursuit. I mean, yes, you can trade crypto on Robinhood, but most people think of it more of a stock play. I mean, it's interesting that GameStop is back front and center with the meme stock frenzy today, but how important is crypto to Robinhood? So look at the overall assets here.

The assets under custody over at Robinhood. At the end of last year, less than 15% were crypto. But even though it's a small amount of the overall crypto play, the overall also the overall market play. To your point, they're known for

equities and options trading for the most part. That same quarter, the last quarter of last year, you saw equities and options volumes kind of drop off. Here they were negative, whereas crypto trading volumes had risen pretty meaningfully. So even if it's a smaller base, the business has been rising very dramatically and they report on Wednesday after market and you would probably see them really benefiting from that crypto boom in the first quarter of this year. It is volatile revenue, it's a smaller part of their business, but it's been helping them attract new customers.

With that said, investors have also shaken off these worries about the SEC at other platforms as well. And again, these fights have been long because companies have tended to sue back. Let's see how Robinhood handles this situation and look forward to that earnings as well. Sonali Basak Thanks so much for bringing us the latest. Meanwhile, let's go to the latest in

L.A. The Milken Institute Global Conference has just kicked off this weekend in Beverly Hills, where finance chiefs, tech heavyweights, even Elon Musk, they're gathering to discuss everything from, you guessed it, AI to, of course, geopolitics. Now, our own Wall Street Week host, David Westin just sat down with Arvind Krishna, IBM chairman and CEO, to discuss the regulatory landscape for Tech. Tech. Listen. I think every regulator is worried about

three topics, not just safety and regulation. They're worried about innovation. They're worried about competition and they're worried about safety and regulation. So when you take those three together, the airlines have opened really come together to help you foment innovation. So I think that that actually helps the regulators to think about what is going on here.

Well, and, of course, there will be some guardrails that are always put. But in my experience, open technologies have always been safer and more secure than closed technologies. Is one of the risks that maybe you're obviating with your emphasis on open architecture, that some of the I'll call the big guys get an advantage and really have an entrenched position? Well, I use the concept of a walled garden. When you have a walled garden out of those areas, the technology has been more innovative or less innovative. Outside of walled garden has always been

less innovative. And so I think that it's actually helps you create more competition. Does it avoid regulatory locking of a certain one or two players? Likely. But isn't that good for all of us? Are you pro regulation? I am pro regulation as long as it is light touch and allows innovation to happen. I absolutely would be pro regulation if regulation tries to reduce innovation. I think that's the problem.

What about the distinction between regulating the technology as opposed to regulating the uses? We had Sam Parmesan or somebody you know well on who said he thinks regulate the uses, don't regulate the technology because that will impair innovation always. How can you regulate the technology when you don't even know where the technology can go? Two years ago, we had heard of a large language model. If we come out with our technical instruct lab. Six months ago, nobody had heard of that. There will be another one. And another one and another one. So I think trying to regulate the technology implies that the regulator and the and the policy folks believe no more innovation can happen. I think that's a bad bet to make.

Of course, the CEO of IBM, Alvin Kushner, with our own David Westin. Meanwhile, coming up, look, we're going to be joined by Andrew founder. I'm a lucky winner. Exclusive interview on the company's

brand new suite of AI powered products coming up next. This is Bloomberg Technology. Andrew is announcing a brand new range of AI powered defence products. Now the Pulsar family of AI enabled electromagnetic warfare, or E.W.

systems. They base expand on the existing E.W. systems by not only countering known threats with pre-programmed techniques, but by leveraging, you guessed it, artificial intelligence to detect both known and new threats. I've got to break down what this really means. And your founder, Palmer Luckey, joins us now. And a key question is, how is this used?

How is this different? Well, first of all, note that pulsar is already being used by U.S. military customers across multiple continents, multiple cars on fixed sites, on mounted vehicles and on aircraft. So pulsar, while we're announcing it for the first time today ahead of software, it's actually been in existence for years. This is something we haven't been able to talk about but been working on for a long time. It's an AI powered electronic warfare tool that can understand what's going on in the RF domain and then take measures to accomplish your aims within the RF domain. So jamming, hacking, spoofing, controlling, identifying things, countering those things, making sure that your own electronic systems maintain their functionality.

And it's able to do that extremely fast because it's powered by lattice, our A.I. system that powers all Android products. It's able to do what would have previously taken a team of electronic warfare specialists in a building full of equipment, weeks or months to accomplish in just seconds. So to that point and power, of course, preface all of this with from a political perspective, but from a personal perspective right now, it is emotional time when we're discussing war, women discussing warfare. So we're sensitive to that. But where at the moment is this being used in a different kind of what you were just talking about, how it's already been basically been used since 2020? This is the first time you can discuss it. How has artificial intelligence changed the pace with which you can iterate? But also things are changing within warfare. Well, I started in URL because I was concerned that the United States and our allies around the world were losing our technological edge to some of our near peers.

And even now in many areas, Piers. And I think how things have been playing out in Ukraine and around the world have really proven proven that out. A.I. is changing the game in a lot of ways because it allows you to deploy large numbers of systems that are much more intelligent, much more useful way than we've ever been able to do before with even remotely piloted systems, and has been focused on A.I. since the beginning of our company about seven years ago.

You'll notice that our name and all industries is, you know, the acronym is Air. Then that's for a reason. We were we believe that artificial intelligence is going to be changing the nature of warfare long before a lot of people were paying any attention to it. I remember when we were starting our company, it was hard to raise money for AI companies. People weren't taking it seriously.

They saw it as kind of a science fiction gem, but not something that was real. And unfortunately, the reality of the world today has forced people to start paying more attention to what I can do on the battlefield. People are paying attention. A government they have to all the

defense sector in particular. And I mean, I speak to the fact that the Air Force in the United States has got, with the program, understood the impact that you're making and ultimately what brought you one you're now doing a program is sort of seen as a new type, a new force of of defense tech startup. You actually call it a non-traditional defense company.

Can you talk us through the Collaborative Combat Aircraft program? Basically, this is about aircraft that fly alongside those that are manned. Sure. I mean, this is an area where the U.S. Air Force and Secretary Kendall deserve a lot of credit for their vision. They want to deploy AI powered aircraft at scale alongside manned aircraft on a timeline that is relevant to the conflicts that we are trying to deter and that have the ranges and capabilities that we need to be meaningful to the adversaries that we might have to fight.

I'll just name the name. It's China. Kia. The Collaborative Combat Aircraft Program is the program to to to develop and then build over 1000 cars that are going to fly alongside manned aircraft. Loyal wingman, the loyal wingman. They've been called and or I'll just beat out Lockheed Martin, Northrop Grumman and Boeing for a slot on the KIA program. We're going to be using that slot to build production representative aircraft, not prototypes, but production representative aircraft that are going to be ready to go to scale at manufacturing. If we can hit all of our if we can hit all of our milestones and prove that we are as good at building airplanes as we are building.

You went there and you mentioned China. I'm interested as to therefore where you will manufacture and ultimately see deploying of of these particular autonomous fighter jets. Well, they're going to be deployed right here or built right here in the United States where they're going to be deployed. That's up to our customer.

I don't have a ton of insight into where exactly they might do that, though. I've got some ideas. I'm interested where you see that for at the moment, the US taking leadership back or do you still worry since splashy the founding of Agile, whether you do think that US has really reasserted itself, become again the leader. I think that we have a long way to go in certain areas. But the really powerful thing is that we've recognized the areas where we have problems. I think people have been pulled out of their slumber.

They realize that there's areas we can move much faster. We can do things in months, not years, that just were not possible to do within the bureaucracy before, within the previous construct of how we are supposed to get things done. I mean, the Air Force taking a bet on and all on CCAR is just one of many examples of people realizing that business as usual is not something that we have time for, not in the modern timeline, not in the modern threat environment. But what about the competition from the Boeings, from the Lockheed's? Are they not getting with the program, starting up their own internal start ups or indeed making acquisitions? You know, I don't feel like those guys are really the competition. I feel a bit of a kinship with them. Look, I'm not running my business the same way that they're running their business. But at the end of the day, we're all trying to protect the same country. We're all trying to protect the same

values, more or less here and around the world. I'm actually much more worried about the competition from Iran and much more worried about the competition from Russia and China. We've had systems in Ukraine since the second week of the war and the innovation that I've seen coming out of Russia, China and Iran as kind of a coalition of very technologically advanced adversaries. It worries me a lot more than the competition that I have here in the U.S.

There's things that I'm going to build that I do better than Boeing, for example. And there's things that Boeing is going to build that where they're better than me. And I recognize that. And I think we're doing a pretty good

job of finding how we can continue working together with all of these different companies and all these companies that I just mentioned as building on the this program. We're working with all of them in some capacity on other programs. It's actually a little less cutthroat than people would think because of that very strong shared sense of mission that you see in the United States national security apparatus. And you are aligning incentives with allies as well. And we note, of course, an autonomous sub that you've been working with about Australia and actually sort of co-developing and keeping on pace, unheard of kind of in the defense contract space and actually being on time and in budget. But where else might you manufacture,

might you co-develop? It was interesting that one of our own reporters highlighting that the VP of Taiwan was speaking at a US event, would there ever be manufacturing in Taiwan? Well, you're right on the Go shark program. That's an autonomous robotic submarine the size of a school bus that we've been developing with the Royal Australian Navy. And we actually just delivered the first submarine a year ahead of schedule and on budget, which as you mentioned, is rare. It's it's practically unheard of. There are other areas where we're looking to expand. I can't talk about the specifics of it, but I can tell you that I have in Taiwan frequently. I was just there a few months ago.

I'm going back in just a few weeks. Taiwan is obviously one of the key technological partners of the United States, especially in the region. It's critical for United States military security that that Taiwan remains free and independent and democratic. But it's also very important for our economy. I would say there might not be another

country in the world that is really underpinning so much of our way of life when it comes to semiconductors and all of the things that they power throughout our consumer and industrial and defense economy. You talk about how things have changed, certainly from the Ministry of Defense perspective, but what's also changing is the politicization ultimately of companies that are working within warfare. And we certainly see that from protests here among students.

How have you been feeling and is being embraced still by the private sector from a money perspective? Are you raising money? Is it easy to do so? Are you looking to go public? Well, luckily, I think that there is a very big gulf in sophistication around international affairs between the types of people who are funding and are all and the types of people who are skipping class to camp out on campus, on campuses. I think that there's a lot of people who recognize that the United States should have the best technology. The only way to credibly deter warfare is to have a backstop of credible threat of violence. There is no way that you can deter every adversary with the threat of a sternly worded letter or this idea that sanctions are going to cripple their economy, especially in areas where we don't even have the leverage to make that true. I think that on the funding side, we don't have any problems. We've got a lot of money in the bank. We have a very healthy revenue pipeline.

We're on the path to being a publicly traded company and a lot of people are really excited about that because Adderall, in addition to building tools that keep our men and women on the front lines safe, which is something people want to be invested in, is also just a good, credible business with a really good roadmap that's doing well on our existing products. And it's a healthy pipeline of future products. We just announced Pulsar. We just showed off some other new products like Menace X. We're going to be announcing products through the rest of the year. We've got about a dozen products that

we've publicly announced and we've got another dozen that are not even publicly talked about yet, and they're of a similar caliber. And I think that our investors recognize that perspective and existing. I look forward to you coming back and talking about it when they can talk about it publicly. But quickly, IPO 20, 24 or 2025.

Well, I can almost promise you it won't be 2024. If it was, we'd already have to be way down that path. You know, wants to be a publicly traded company for a variety of different reasons. It's something that we've wanted to do

since the very beginning. You know, this is my second company. You might know I started a company called Oculus VR when I was 19. I sold that to Facebook for a few billion dollars. I was there for a few years before I was fired, and I've decided that I want to go on a different path this time. And luckily that aligns with what our customers want us to do, what our investors want us to do.

And I think what the American people want to do, where they want to be able to buy into these companies, not have them operate as private entities beyond reach and beyond control. I'm a lucky guy to sit down with you. Thank you. And you're founder. This is Bloomberg Technology.

Oh, the pleasure of eating cheese. So simple. And if I. Symphony of Phrases Moments. What a song. Simplicity.

Simplicity. Delight. It was created with software from Suna, one of the new crop of AI startups focused on basically building tools to automate the music making process. But while the music era is creeping upon us, not everyone is a fan. Break it All Down with Bloomberg's Rachel Metz, who actually is the joy behind that song that you just heard. And Rachel, when am I going be able to stream it on Spotify? And ultimately, that is the issue here, right? That a lot of I made songs kind of taking away the business of real artists who. I think it's a little bit it's a little bit early to say that definitively, but that is a concern. Absolutely.

Both of artists that see this technology developing of record labels, you know, there are a lot of different stakeholders in the music industry. And as I becomes better and better at making music, they have a lot of concerns about this. Other increasingly express it for sure. What's interesting is perhaps you shine a light on, you know, but also you do, which is actually backed by Andreessen Horowitz. But also some players in the game I think are common, is one of the founders is one of the money behind it as well as United Masters that.

Steve Stoute So they do have backing of some players within music. But it looks as though these companies are trying to ensure that you're not able to say, Please make me a song in. Well, the essence of Billie Eilish, they are trying to be clever about the way in which we basically copy or don't. Yeah. I mean, they want to position themselves as something that anybody can use. And I am anybody and I can use them to

make music. And it is true that it's a very it's a very quick process. Or you can make it as long as complicated as you want, you can bring your own music to it. So it's for anybody, someone who's a professional musician who wants to augment the music making process, or for someone who just wants to type in a quick prompt and get a song about the simple pleasures of eating cheese or any topic, really. But yes, there are some people in the

music industry, such as Carmen. Also was another person who put some money into youdo. So it'll be interesting to see where musicians sort of, you know, come, come in in the coming months and years if they're interested in participating with these companies and using them, or if they say, Hey, wait a minute, I don't want you training on my music, or maybe a little bit of both. I assume, as we've seen with Image Generation, as we've seen with video. Very briefly, Rachel Lawsuit's likely to

happen here. I would. Yes, I would expect so. I spoke to somebody in the music industry and they said that was one of the things they're expecting to see happen. They're expecting to see some deals between the companies and that are building this music, making software and record labels and maybe other stakeholders in the coming months, but also perhaps some lawsuits. And as we know, the music industry has

been quite litigious and is already involved in some lawsuits regarding other types of generative A&R companies and UMG. Just striking that deal would take time. Looking at how to protect artist versus A.I.. It is going to be something we unpack

with your help. Rachel We thank you so much, Rachel. That does it for this edition of Bloomberg Technology. Don't forget to check out our podcast. It's Bring Back.

2024-05-08 17:27

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