AI Anxiety Grows, HP Announces Job Cuts
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This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.

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and i'm jackie davalis in san francisco this is bloomberg technology coming up the nasdaq trying to shake off what is the worst week in almost four months earnings fail to inspire and ai anxieties grow we dig into all angles plus job cuts back in big tech we hear from the ceo of hp after the company announced further headcount reductions and bitcoin down 25 from all-time highs we dig into the worsening crypto route in the wake of president trump's latest tariff threats

and a key hack. But first, we check in on these markets. And the Nasdaq actually trying to shake off what has been a dismal week. We're off now higher by three quarters of a percent on the week.

down about five. And that's as we see overall the anxieties build about what the political consequences are on AI, on tariffs from China, and more broadly whether or not we can see those exports going into the broader world and into allies as well. We're focusing on Bitcoin off by four-tenths percent. The 83,000 number is where we've got to be focusing on. Really, we've come well off of those highs. We're worried about the macro, we're worried about tariffs, we're also worried about certain hacks and indeed what's happening with meme coins over in Argentina. We'll dig into that in a moment. Move on to what

happening in one of the biggest points drags throughout the week. It has been Nvidia. We are down 8.6%. That is significant when you've got a more than $3 trillion market capitalization on a stock. We've fallen as we see Jensen Huang unable to re-inspire, reinvigorate the idea that this is a company that is the only one you need to really bear fruit for the generative AI transition, Jackie. And a lot of that has political consequences.

Let's get to those political anxieties now as the UK is seeking a narrow trade agreement with the US focused on technology and AI rather than a full free trade deal. Trump's willingness to open a trade dialogue marks a breakthrough for the UK which has pursued deeper ties with the US since voting to exit the European Union in 2016. Bloomberg's Mike Shepherd joins us now. Mike, this isn't the deal that people were expecting but it has big implications for AI. What are they?

Well, it really does, Jackie, because Donald Trump has made AI and U.S. dominance in this field a big priority. And we saw this right from the start as he took office. He signed executive orders.

essentially insisting that the U.S. find a way and craft policies that would spearhead innovation and that would clear clunky regulations out of the way. And he also had this big meeting in the Oval Office where Sam Altman and Masayoshi Son and Larry Ellison all came together to unveil the Stargate project

of investments in data centers that would help propel this bid for U.S. dominance in the area. Now, the U.K. matters because what they are offering is, in a way, a European toehold for the U.S. If the U.S. companies like Microsoft and Amazon and other hyperscalers want data centers in Europe but don't want those pesky EU regulations,

the UK could be a good alternative. And that was what Starmer was, in essence, pitching. Now, the to-be-sure is that, look, these discussions are in the early stages. There's a lot that could go wrong. And we could see some friction emerge, including over the question of online content moderation. That was a little bit of a clash yesterday between J.D. Vance and Starmer yesterday. But we'll want to watch this space for sure. Mike, the broader context,

is as we have CEO after CEO start to speak out about potential restrictions on exports of AI and chips, in particular we think of the AI diffusion rule. I spoke with Andy Jassy, the CEO of Amazon, just yesterday. We were going to get into all of that, but I'm interested in your take more broadly on how this UK dialogue fits in with what these corporate giants are currently telling the Trump administration to do.

Well, in a way, the AI diffusion rule would put the UK in the catbird seat when it comes to getting access to that kind of investment abroad from the big US companies and from other companies. They would say, hey, look, we would be in that first tier of access under this AI diffusion rule. And to catch viewers up, the AI diffusion rule sets up

three categories of access to advanced AI chips. The last category is U.S. adversaries like Russia and China. In the middle are most countries, including a number of U.S. allies like Saudi Arabia, Switzerland, the UAE, where we still do a fair amount of business. The first tier is a rarefied group of very close allies like France and like the U.K. Now, the difference is that the U.K. would allow U.S. companies to put

plants and facilities there, but without as many regulations. And when it comes to being able to buy chips in the UK, it would be a lot easier because they would have that velvet rope like access to make those purchases without too many restrictions from the US government. Mike Sheppard breaking down the political...

context of all of this. Let's get into the investor context now. Lei Xu is with us, Chief Investment Officer at Allianz Bernstein. Of course, we're talking the impact of tariffs, we're talking about tech sector and AI, the growth narrative that currently is questioned. Have you been questioning it more this week?

We always question, obviously, especially since we have had two years of straight up. But I think a lot has happened and there's a fair amount of volatility in the market because of a lot of the headline risk that you just mentioned.

But that said, we actually remain quite constructive still in terms of backdrop of what's needed to build out for the future of AI. So yes, we did question and we always do. But based on fundamental research, we are actually quite constructive on the outlooks.

Leigh, let's talk about one of the things that was really hanging over a lot of the tech giants that have reported in recent weeks and NVIDIA as well. That was DeepSeq. It caused a lot of concerns about whether we would need any of these chips, as many of them to begin with. How do you feel about that DeepSeq concern after seeing NVIDIA's report this week? So when...

There are two parts to it. When we think about DeepSeq, what we believe is that DeepSeq actually, rather than just saying, oh, this is a model that requires a few million dollars, this is actually a step function and inflection point in the adoption of inferencing, which inherently is actually far more compute-intensive

than all previous models because what DeepSeq is, is a reasoning model. In simple terms, it just, you ask a question, it will take longer for an AI to answer, but it will give you a much better answer after they thought about it.

What we think is that with DeepSeq and with the OpenAI's O1 Pro that's out there, we are stepping into test time scaling, which is a reasoning model. Both of those are inherently far more compute intensive. The more the adoption of inferencing, the more the need for compute. That's one. When we think about DeepSeq, rather than just reading the headline, we actually got more constructive because of inferencing.

And then when we look at the immediate results, we're not here to comment on individual stock, obviously. But what we are really seeing is that we're still at the very early stage of adopting rack scale compute, which is a huge system level compute. It's very hard to do. It would take time to do. And they're still in the ramping phase, but we are on track. So despite a lot of the headline noise, we remain constructive based on these two things.

One sort of fly in the ointment that I think Jensen Huang wasn't really able to satisfy the investor base on was ultimately China exposure, but more broadly political implications to getting his technology out even to allies. This is something Microsoft then went out and put out a note, Brad Smith writing to the Trump administration saying please reverse the AI diffusion role. I got to speak with Andy Jassy from Amazon yesterday about it. Just have a listen to what he said.

I don't know how this administration feels about it, but I would say that we share the concern that it has limitations on certain countries who are natural allies of the US, who just to be able to do their business and those companies to be able to get done what they want to get done on top of these technology infrastructure platforms like AWS, they're going to need more chips. And so I think if we don't do it, we're going to basically give up that business.

AWS doesn't have a big knock from his perspective in terms of worrying about revenue, but more broadly, are you optimistic that we're going to get a more business-friendly federal government that's going to allow for easier exports, or does not that matter in your thesis for future growth?

Certainly, that's a consideration. In fact, I think a lot of these political headlines is precisely the reason that you're seeing this gyration in the marketplace. The volatility is high. But when we just look at the fundamental level, and if you look at these giants, the tech giants, and the amount of spending that they are actually doing in the U.S., and I would put China almost separately as their own ecosystem, that what they're trying to do.

I do think despite the volatility we see in the market, there's actually ample demand, even when we just look at the U.S., what we need to do and how constrained we still are on the supply side, in fact. So we actually think, yeah, headline aside, we still feel fine.

Let's talk about where that demand comes from as well in some of these AI applications. A big one is agents, and we heard from Salesforce earlier this week that it wasn't seeing the kind of demand it really wanted to see. I know you can't talk about specific stocks, but AI agents overall have been a big part of the narrative in terms of what's going to drive the AI rally forward. Are you concerned at all about that adoption really sticking over the next coming months?

I think when we think about a huge technology change and then innovation such as this, when it's transformational, perhaps it would take a little bit of time for it to actually play out. With that said, things are constantly evolving. DeepSeq, that just came out of nowhere, right? It took us by surprise. That marked an inflection point, in our opinion, in inferencing.

Aside from AI agents, I certainly think we're seeing adoption broadly. This is in fact one of the fastest adoption that we're seeing at the enterprise level. It will have huge disruptive impact at the enterprise IT infrastructure. And on top of that, what we are also looking at is the new form factor that will be coming out. A lot of companies are exploring automation and humanoid and the Internet of Things and where AI will play a huge part of it.

If we actually, in fact, deep-seek, in our opinion, marketing inflection in adoption and inferencing, and we're going to see a lot more adoption going forward. This will be an important year for a lot of companies for us to see what's going to happen. But we are optimistic that we will see more than what's currently publicly known in the market.

I mean, look at the response of some of the Chinese giants to DeepSea. Can you have Alibaba committing so much money, a Tencent coming out with its latest model over in China? I want to bring it back here to the U.S. just to finish this off because we started this week questioning capacity when Microsoft had that TD Coward note out and everyone's wondering about whether they're actually cutting some of their leases and data centers. More broadly, what gives you the confidence to say that capacity really is going to be built out here in the U.S.?

We're early and we're capacity constrained. While a lot of the attention has been focused on Microsoft potentially cutting and we're not here to comment, we don't know. But that said, let's think about Stargate and let's think about CoreWeave. They're the names that, it's not everyday names that we're still talking about yet in the public arena.

And those are companies that are still building out. So if we just focus on where we are in the build-out cycle, how constrained we are, and let's not forget that we are still at the very beginning of a product cycle that NVIDIA is trying to roll out. Building out the entire data center with this massive scaled compute. We're so early. So we actually, we feel...

Despite all the headlines, we feel pretty good actually. You know, volatility is part of the market and I think with all the headlines at the policy level, there's a healthy amount of fear in the market. That's Lei Chu from Alliance Bernstein. Thanks for joining us. Coming up, we'll hear from HP CEO Enrique Torres as the company plans to slash over 1,000 jobs. This is Bloomberg. ♪

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The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further.

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And with Azure AI Foundry, you can build your way. The future is yours to build, no strings attached. From ready-to-code tools to full flexibility, it's all in one place. The future's in your hands. So learn more at developer.microsoft.com slash AI.

Key earnings after the bell, and we dig into the reaction today on the street. We're seeing Dell and HP under pressure, significant pressure, off by more than 5% for Dell. Once again, questioning long-term margins that have been ultimately eroded a little bit as they see NVIDIA take more and more of the lion's share of how they get their servers into the market. PC is still under pressure there, but ultimately they are spending...

in the forward-looking future still a ramp up, but we're worrying about the near-term guidance for this particular company. Same with HP. It's forward guidance, once again, under pressure from a margin perspective. This is they try to strip out costs by reducing yet more people. They've already been laying off 7,000. Now they can get rid of another 1,000 to 2,000 roles as they reorientate their supply chain and they reorientate into AI. We actually got to speak with the CEO of HP, Enrique Louros. Just hear what he had to say.

Moving manufacturing to the yes is one of the scenarios that we are contemplating. We haven't made any decisions yet. It's not only the assembly that we will be doing, it's what will it take to bring all the different components, all the different suppliers that we have and have the manufacture here. And this is going to be a much longer process and it's part of the evaluation that we are doing.

That was HP CEO Enrique Lórez. Now let's take a look at Tesla. Shares are down for the seventh straight day, the longest streak in the red in nearly a year. Weak sales have dragged Tesla stock down about 40 percent from its late 2024 high. Bloomberg's David Welch joins us now. David, thank you so much for joining us.

Tesla's run-up has really been driven just as much from investor exuberance as much as fundamentals. But why don't you walk us through what we know about those fundamentals right now? - Yeah, so what drove it up over, I think, the past year was a lot of hype, but also a lot of interest in their AI and autonomous vehicle plans that Elon Musk has, you know, he's made a lot of hay out of that, and they did have a demo of the vehicle, and I think that generated excitement.

I think investors by and large are looking at their EV business as maybe it's capped out for a bit. The only new vehicle coming would be a Model 2, which could do some volume because it's cheap, but it's going to be a lower margin vehicle. And in a lot of markets, particularly Europe, as we saw the other day, they're under a lot of pressure. There are some consumers who don't like Elon Musk's

political position now that he's de facto part of the Trump administration and I think that's hurting their sales. There's also a lot more competition with other EV companies. I think General Motors, I think Hyundai and Kia are gaining share in the US and I think you're seeing some of that in other markets as well where European automakers have more EVs so they've got more competition there. And the other part of this that we really haven't talked about is EV credits. Tesla's made a lot of money on those over the years. If the Trump administration

does water down the greenhouse gas and fuel economy rules that make automakers buy EV credits from Tesla. And Donald Trump has talked about that. There was a proposal from Senator Moreno on that, that would lower those standards. That's less income in the auto business from selling credits that Tesla has. A lot of pressure here, and we don't have really a catalyst in the way of autonomous vehicles that's obvious yet that'll push it back up.

The shares trading a little bit higher today, as maybe the macro picture turns a little bit higher for the broader market, David. But indeed, it has been off by more than 14% over the course of this week, the worst week since October 2023. But as we note with this company, as we do so often, it's not often fundamentally driven. A lot of this, even with earnings that come out that disappoint, the exuberance that comes from Elon Musk gets the retail investors back in and makes institutional investors hold. Is there anything that makes you signal that?

that this is something long-term shifting that february numbers will be as bad in europe and that ultimately the shares will continue to reflect on a fundamental basis yeah look i i think the increased competition and a bit of declining growth in the eb market particularly in the us but other places as well there's still growth it's just not as fast and you have more competition so

I think as long as investors are focused more on Tesla's EV sales and the ability to generate cash and earnings from that, you're going to have pressure on the stock. Once we actually see some more progress with his robotaxis, which is really what drove the last rally, and it's apparent that those vehicles are going to be ready, they're going to be working, they're going to be generating revenue. Tesla always has delays with new technologies.

that I think would rally the stock. But right now, I think it's trading on what's happening with their electric vehicle business and not on the hype and enthusiasm over robot taxis. To be fair, analysts still pretty enthusiastic. 32 buys, 13 sells. David Welch, thanks so much.

Apollo Global Management is in talks to lead a roughly $35 billion financing package for Meta to help develop data centers in the United States. All according to sources. Now, the funding conversations are at an early stage and there's no guarantee a deal will be complete. Bloomberg Intelligence Senior Analyst Mandip Singh joins us for more. And it's more and more interesting. In fact, just before we come to you, Mandip, we've got to go into the White House where President Trump is indeed present.

welcoming Ukrainian leader Volodymyr Zelenskyy to the White House. They were going into behind closed doors meetings, lunch, and there will be a press conference at 1 p.m. New York time. Plenty to discuss when it comes to rare minerals.

but we bring it back from the White House, from Washington and politics, back to what's happening from a data center perspective across the United States. Bloomberg Intelligence Senior Analyst Manip Singh. Manip, tell us about how we're going to see these more novel financing arrangements happen while even Meta is committing more than $65 billion to AI infrastructure.

Yeah, and apparently, you know, $65 billion may not be enough in terms of the ambitions that Meta has when it comes to, you know, adding data center capacity. I mean, look, when it comes to these AI data centers, you're not just talking about, you know, procuring the chips. You have to think in terms of, you know, getting a LAN, then, you know, power requirements, transmission lines.

cooling. There are so many things that the hyperscalers, even though they operate at pretty big scale, haven't really thought about it from that perspective. And I think that's where a company like Apollo may be a good partner in terms of just making sure they get all the help they need in terms of the scale of these data centers and

I think power is a big constraint right now and all these companies are trying to figure out what is it that they need help with when it comes to getting the power.

Precisely what Andy Jassy was so concerned about yesterday as well from Amazon's perspective. Bloomberg Intelligence Senior Analyst Mandeep Singh, thanks so much. Now let's move straight to OpenAI, which has just rolled out an early version of a new AI model called GPT 4.5 to select users. This after hitting stumbling blocks in developing the AI system last year. Let's get to it with Rachel Metz and...

Sam Altman, a busy man, he's just become a father for the first time, and then he also manages to post on X about the latest developments. And it's interesting that he's been blaming in some parts a GPU lack here.

Yes. Well, I think some of that was in terms of rolling it out, rolling it out to more people more quickly, and that may be the case. I mean, this is a model that is really large in software terms, and it is really computationally heavy. That makes it really expensive, and that means it costs a ton of money to make, and it sounds like it's costing a lot of money to run as well. Rachel, there's a lot of these models out there. How do people even know which ones to choose?

This is a great question. And I think increasingly they're not 100% sure, especially if you're like a casual user. If you're more of a user with a specific use case, like you do research or you're a coder, you might say, okay, I know I like this OpenAI model or this anthropic model, et cetera, et cetera. But OpenAI is actually trying to make this simpler by adding

having their models in the future, not this one, but in the future, they're going to have them more sort of combined and have it be more automated, which model you end up using depending on your query. And that's something I think we should expect to see more of. That's Bloomberg's Rachel Metz. Thanks so much for joining us. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York.

And I'm Jackie Davalos in San Francisco. Quick check on these markets because we're trying to stage a bit of a comeback, but it's not going to be able to offset what is the worst week for the NASDAQ 100 since September. We've taken a dive, particularly yesterday when NVIDIA was off by more than 8%. Today, NVIDIA pushes us from a points perspective higher, as does Tesla, but little inroads being made in what has been a big sell-off throughout the week as we worry about

the tariffs, the political anxiety around AI and the ability to export, and more broadly, some of the macro data that we got in the United States. So off by 4.75%. Look at another key risk asset or choice, as we call it here on the show, Bitcoin. Boy, have we seen a sell-off since the highs back in January. We're off by 12% over the course of this week. Yeah, we're used to volatility.

down 25% from its highs back in January. And there are a myriad of things that have led us lower. Let's talk about that sell-off a little bit more with Bloomberg's Emily Nicole. And yes, many will want to point to the macro, even if sometimes we want to say, look, we've got away from macro pulls and pushes on this asset, but still it is living and dying by sentiment. But there are some idiosyncratic issues that have been plaguing the sector as well.

Yeah, it's really a mixed bag. I mean, if you think about where Bitcoin was at this time at the end of last year, we really did start to think that it was pulling away slightly from macro just because it was having such a great time after Trump's election. And as well, and kind of even at the start of this year, it was still having a really good time going up to a record high on his inauguration day.

That has changed dramatically though and it definitely couldn't escape what's going on in macro markets right now. In Asia trading and in Europe trading today, it was really suffering down as much as 25% at one point. Sorry, not 25%, but 25% on the year, but down quite considerably. And then it's now kind of recovered that to now be about flat on the day. So, you know, we really can't rule out how much of that is macro, how much of that is other parts of the crypto markets taking its toll. But as you said, it's a volatile asset. It moves with everything.

Emily, talk to us about some of the potential catalysts on the horizon that could turn the tides for crypto.

So we've got a few things coming up. Obviously, there's an unlock happening for Solana next month, which might be something that could bump that cryptocurrency up. It's definitely been struggling after all of the meme coin scandals we've seen in the last month or so. So that could be a positive catalyst. And for Bitcoin, there's the perennial, you know, will there be a U.S. strategic Bitcoin reserve on the horizon? It's something that Trump promised on the campaign trail. We've not had concrete evidence that is coming yet, but you never know, it could. And if it did, that would probably provide a big bump up as well.

The ETFs themselves have also been a bit of a toll for Bitcoin. They've been something that propelled its price higher over the last year. And then this week with major outflows, they've been something that have held it down. So there are plenty of catalysts to look out for. But whether or not they're going to be those that take it back up to what we were seeing in January is another matter.

That's Bloomberg's Emily Nicole. Thanks so much for joining us. Caroline? It's time for Talking Tech. And first up, TikTok is investing more in Thailand. Planning to spend $8.8 billion building AI data centers across the country over the next five years. The prime minister of Thailand says the new infrastructure will help develop its AI, content creation, and human resource skills. Plus Skype, companies, and the like.

Coming to an end, Microsoft is saying farewell to the internet calling and chat service as people of course turn to Zoom and smartphone native apps. Microsoft said Skype's daily user count fell to just 36 million in 2023, while Teams has risen to 320 million monthly users.

And Netflix, weighing relocating its Los Angeles base. The company is leasing space in Hollywood buildings owned by Hudson Pacific Properties. But the area struggles with crime, with homelessness. One option for Netflix could be buying the landlord's interest in the buildings. Jackie.

Now let's get back to this week's earnings and entertainment with Paramount and Warner Brothers Discovery and all eyes on Paramount's Sky Down Steel, which could close in the first half of this year. Laura Martin, Senior Entertainment Analyst at Needham, joins us now. Laura, before we get into some of the particulars of that deal, I want to get your thoughts on what we learned from earnings this week. Streaming ended up being a bright spot. Are you surprised about that?

I did. Linear continues to get smaller, but streaming is getting big enough in these companies, true of Disney too, where streaming is getting big enough that when you're looking at overall TV, at Disney it's growing, in Warner and Paramount it's still approaching the crossover point, but pretty soon, I would say by the end of 25, streaming will be big enough in all three of these companies to actually offset the linear declines.

We also learned that it takes money. There's a lot of investment and it takes time to really make this content land for streaming audiences. Are you concerned that that could actually weigh on profit margins going forward?

You know, I am mostly because of sports. What's happening is the biggest viewing and the biggest customer acquisition genre is sports, and sports fees are going through the roof. So that really is what weighs, in my mind, on over-the-top profitability. Not to mention that you're competing much more with Amazon, and eventually I think Apple gets into this market, and they sort of have unlimited checkbooks, which could drive up pricing for everything in the streaming world.

When you read your note, Laura, you're always so straight to the point. What we worry about with Paramount, no financial visibility. We've got shrinking year-on-year profitability. You're worried about the scale perhaps being too small. At the moment, we've got a lot to worry about across the entire legacy media. Do we see the consolidation continue to happen?

You know, I think we have to. I think it's a decent question for both Paramount, which has an $8 billion market cap, and Warner Brothers, which has a $26 billion market cap. Can you compete with Amazon, Apple, even Disney and Netflix? Like, Netflix is $250 billion of capitalization. So can you really compete if you're under $100 billion? I think it's a real open question because this television ecosystem and film ecosystem...

is sort of moving into larger hands and they can destroy you with their cash flow. They can just cut price. - They can perhaps just erode with a price perspective, but they've actually been jacking up prices instead and Warner Brothers does seem to give this glimpse that they're building with Max. It's working and they're able to perhaps if they get their movies straight and winning formulas, maybe there's a future here, Laura. Did you get any sort of silver linings to some of these numbers?

Well, so on Warner Brothers, you know, they did give us updated guidance for 25 and we showed no revenue growth for 25 or 26. So flat revenue and earnings and cash flow still negative for is an enterprise level. So I just don't know. We have a hold here on both these stocks. I just don't know why you need to rush and invest in these now because I don't see a turn where the fundamentals are driving positive returns on invested capital. They don't even have revenue growth here yet.

Laura, Caroline brings up a good point. I feel like every month I'm seeing one of my streaming services prices go up yet again. How much are companies relying on price hikes to really pad some of those margins?

You know, they are, and they're using ad-driven tiers to try to get people to take, like the average household in America takes five services. Well, the only way a lot of homes can afford that is if they take the ad-driven tier of Netflix, which is like $7, and it's not $20, which is ad-free. So that allows them with that incremental $13 they used to be paying for Netflix before it had an ad tier.

That $13 lets them buy Paramount and Max. And so we're getting lower churn because people aren't swapping out as rapidly, but they are taking the ad-driven service, which really in many services earns more than the non-ad-driven services. So part of why they're increasing price on the ad-free service is they're trying to drive you to the ad-driven services where they actually make more money.

What else is going to eventually differentiate some of these companies for you as an investor? Is it really just going to be the content or is there another way that they can get creative to set themselves apart?

Well, so this is another thing about scale. Bundling's a big deal. Being able to bundle across properties the way Disney does with its parks or the way Disney does with Hulu, with its entertainment assets like Hulu, Disney+, what will be ESPN flagship. Like, bundling is really great at lowering churn. The bigger your company, the more likely you can find a bundle to use where you don't give away margin to a third party. So again, that's a problem that both Paramount and Warner Brothers have.

Warner better than Paramount. But the point is, it's nothing compared to Amazon, which can put Amazon Prime Video in the bundle with its shipping. Like that's the ultimate awesome bundle. Nobody churns out, nobody wealthy churns out of Amazon Prime Video because they're paying for Prime for shipping and they're getting Amazon Prime Video for free essentially. And you've got to buy on Amazon $250.

And the Bond News, Laura Martin from Needham. Thanks so much. Coming up, we got the details of a new collaboration aiming to speed up development and commercialization of quantum, quantum computing. Rigetti CEO is going to be joining us. This is Bloomberg Technology. This is a message from sponsor Intuit TurboTax. Taxes was dealing with piles of paperwork and frustrating forms and then waiting and wondering and worrying if you were going to get any money back.

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Now this is taxes. Intuit TurboTax. Get an expert now on TurboTax.com. Only available with TurboTax Live Full Service. Real-time updates only on iOS mobile app. See guarantee details at TurboTax.com slash guarantees.

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Quantum computer developer Rigetti and Taiwan-based server manufacturer Quanta Computer have announced a strategic partnership. The two companies aim to accelerate development and commercialization of superconducting quantum computing through a combined $500 million investment. For more on this, we're joined by Rigetti's CEO Subodh Kulkarni. This is a really major moment for computing. I've never seen so many announcements come out of so many tech giants in one month. But let's talk a

about what this deal means for your business. - Thank you for having me here. It's an exciting time for quantum computing. A lot of new developments are happening as you can see from multiple announcements from ourselves as well as some other companies. It's an exciting emerging technology with tremendous potential. It's fundamentally going to change the way we do computing significantly faster

but also significantly cheaper in terms of energy utilization. So a lot of excitement about quantum computing and what potential things we can do with quantum computing.

This particular announcement with Quanta Computer, we are really excited. Combined, as you said, with $500 million, we believe we can accelerate the timelines to commercialization. Quanta Computer, obviously, is a well-known large company. They are the number one manufacturer of CPU and GPU servers in the world, along with laptops and other hardware things in electronics.

We feel really good about what we bring to the table and what they bring to the table. We are a tech dev company based here in the Bay Area in Berkeley. We have a fab in Fremont. Quanta brings their high volume capability, low manufacturing cost capability. Together we can advance superconducting quantum computing much faster and bring it to the commercial market sooner.

That enthusiasm has been priced into your shares of late. We've seen an extraordinary moving market capitalization. Just back in November of last year, it was about $250 million. And now you say you're going to be investing that amount over the next five years. Just where does this money come from? And is it right to capitalize on this moment in this way?

It's a good question. Since November, indeed, many quantum company stocks have been very volatile. They have been on the upswing. A lot of it is, I believe, because of exciting technology development announcements that are coming not only from us, but other companies like Google, VeloChip announcement. You saw Microsoft announcement last week, Amazon announcement yesterday. There's a lot of exciting stuff going on that is bringing enthusiasm about quantum computing.

We have managed to raise money in November, December of last year. So at the end of the year, we had about $220 million cash in our debt. That gives us a runway for three, four years, which may be good enough to take us to cash flow positive situation.

We certainly will continue to look at the capital markets to see whether there's opportunities to raise money, but right now we feel pretty good about our current cash position. Certainly with Quanta Computer bringing another $250 million to the table, we feel pretty good about taking the current cash all the way to commercialization. So it's an exciting time. We are looking at a potential opportunity here. I mean, the opportunity is mind-boggling. We are talking about hundreds of billions of dollars of market opportunity.

10, 15 years from now, but still you need to start doing partnerships and investments now to see that materially happen. Let's just talk about that opportunity and the exuberance coming from other big players. I sat down with Andy Jassy yesterday and talked about their latest quantum chip announcement. Here's just what he said about the excitement in the space.

Quantum computing is very high potential. It has the chance to solve some very computationally intense problems, and I still think it's realistically a few years away from having a real shot at solving those problems, but you have to solve

a bunch of these challenges that relate to quantum computing along the way. And one of them really is around error correction on the qubits. And that's what OSLIT does. It's a very unique, inventive way to do error correction on the qubits that makes a meaningful difference. And we're excited about that milestone.

I'm interested in your take on the different methodologies here. Cat qubits being announced over at Amazon, how they reduce errors and the cost of errors. Google just throwing more qubits at the situation. You've got Microsoft inventing a whole new type of technology, architecture, and indeed substance. Can you win in all those scenarios?

Well, quantum computing is indeed complex and there are many challenges to be solved. We certainly are very much in the R&D mode right now. We need to perfect the technology. A lot of us are working hard at solving those problems. Andy's statement is right on. We need to improve the fidelity of the chip. We also need to include error correction. And that's what Amazon's announcement yesterday was about, error correction. So there's a lot of things that we need to continue to improve.

The superconducting quantum computing technology that we are all part of, ourselves, along with IBM, Google, Microsoft, Amazon, also the government of China, the main challenges we have right now to commercialization are what we call improving our fidelity and also incorporating error correction. But at the same time, increasing the qubit count and improving the gate speed, there are probably 100 things we need to continue to improve on. That is what we do day in and day out.

All of us feel pretty good that we will be able to continue the improvement and get to the point where in another four to five years, we will start seeing quantum computers start showing up in your data centers doing practical applications. We call that quantum advantage. So our timeline is roughly about four to five years from now is when we think quantum computers will really come into data centers and start making a meaningful difference for all of us. But the point is right on. There are many things we need to solve right now.

Same time frame as Andy Jassy has. Rigetti CEO, Sibode Kulkarni. Fascinating to have you on. Please come back. U.S. robotic startup Firefly Aerospace is going to attempt a lunar landing on Sunday. It's the first in a series of upcoming missions aimed at expanding commercial activity on the moon. The company's lander called Blue Ghost is carrying tools and experiments for NASA. Jackie.

In more space news, NASA is aiming to launch two missions atop a SpaceX Falcon 9 rocket on Sunday. SPHERE-X aims to map the cosmos, while the Punch mission will measure solar winds. Let's bring in Ezinne Uzo-Okoro, senior fellow at the Harvard Belfer Center. Ezinne, talk to us about what these missions are actually going to tell us that we don't already know about the cosmos outside of Earth.

Life wouldn't exist without basic ingredients like water and carbon dioxide. And Spherix is going to use infrared light to map the sky in our continued search for life by finding molecules that are frozen in interstellar clouds of gas and dust where stars and planets form.

And what Spherix does, because other telescopes have shown a science of water and carbon dioxide before, is it goes further with three-dimensional data that scientists can then use to observe how the composition of water ice changes in different environments. And this occurs at least 9 million times, making it the largest survey ever.

of these materials in space, which will also result in the most colorful cosmic map we've ever seen. So that's exciting. And there's so much we continue to learn about the lunar surface. And so it's really an interesting mission to see Firefly go up and collect more data.

How is the U.S. stacking up in terms of space exploration right now? It's great that it's going up on a SpaceX Falcon 9. Obviously, Elon Musk's relationship to Washington is really close these days. Is more going to come out of that in a way that puts us ahead in the space race by any means?

You know, that's unclear, but generally what we've seen is SpaceX as a company has been the primary launch provider for the U.S. government for quite a while now. And what you see is, you know,

There isn't any signs of other companies catching up, but we continue to encourage and ensure that we have multiple options. But the company as a whole is doing very well and continues to do so.

What's so great about your background is you've contributed to more than 60 NASA missions, to policy as well coming on space, isn't it? And just when we're thinking about the opportunities, for example, what's happening with Firefly, the moon, another attempt at this landing that perhaps wasn't nailed on the previous attempt in recent year, how much is this really going to push us forward from a U.S. perspective here in the space race? I think that, well...

If you look at what we've done so far collectively as a space community in the U.S., we continue to push the frontiers of space and we continue to be the preeminent leader in space. And this is just another example of that progress. And so what it does is it continues to ensure that our allies are excited to work with us. It continues to show even some of our strategic competitors. So we...

continue to have the edge in space. And at this time, we have an opportunity to continue to work with other nations. And so there are more collaborative attempts today versus 40, 60 years ago when it was predominantly a tightly watched space race between two nations. Briefly, with the Blue Ghost Land of Firefly, when it gets on the moon, what do you hope it shows us? What industry does it open up with moon experiments?

So first, researchers are going to be, lunar researchers are going to be very, very excited about the outcomes because this data will give us just a lot more information about the lunar surface. We have not spent as much time as we'd like there. As you know, the Chinese have been to the far side of the moon twice, and this gives us an opportunity to have a better edge in the other side of the lunar surface.

Japanese company, iSpace, also eyeing landing in April as well. This is quite the focus on the moon at the moment. Ezine Izoakori, it's great to catch up with you. Senior Fellow at Harvard Belfer Center. Great to see you. Meanwhile, let's tie it up because that does it for this edition of Bloomberg Technology. Don't forget to check out our podcast. You'll find it on the terminal as well as online on Apple, Spotify and iHeart. And tune in to all those space race accomplishments this weekend. This is Bloomberg Technology.

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