Apple's Big US Investment, Musk's Federal Worker Orders
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From the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. Live from New York, I'm Caroline Hyde.

And I'm Jackie Davalos in San Francisco. This is Bloomberg Technology. Coming up, Apple to spend $500 billion in the U.S. and boost hiring as it seeks relief from Trump's tariffs. Plus, Microsoft cancels some leases for U.S. data center capacity, according to TD Cowan analysts. Has the company's AI computing strategy changed? We discuss.

And a look at how Elon Musk's federal worker orders to justify their jobs is dividing the Trump administration. But first, we check in on markets that once again fall. We were down hard on Friday. We continue on the lower side of by nine tenths percent, bouncing off our lows, but still near the intraday woes of the day on the Nasdaq 100. Dig in to what's the point higher and the drags more broadly. Apple has been bouncing around on the back of its news that we're currently up six tenths percent on the juggernaut that

is going to be investing $500 billion here in the United States and indeed adding 20,000 jobs.

Less than 40 billion per year increase on previous spending habits. Is this all that new? We're going to discuss. But Microsoft, really the watchword of the day when it comes to a points drag, we're off by more than a percentage point. This is as Microsoft is potentially in an oversupply position coming to its data center capacity. A Friday note from TD Cowan. Via channel checks, they say they are avoiding leases in the US, totaling a couple of hundred megawatts. They're checking on the fact that there might be a pullback

in converting certain statements of qualification. In a note today, they say they may be shifting workloads, reallocating from the US from abroad. Microsoft has thus far declined to comment on this particular note, but they do reiterate their spending target. Let's talk it through with one of the analysts on those notes, TD Cowen's Michael Elias. It is great to have you on, Michael, and talk to us about the nuance. You have been speaking to potential suppliers here and with channel checks. What have you discovered?

Yes. So I'd flag for you that going back to September of 2024, we started to identify a slight pullback on the part of Microsoft related to activity that they had in certain markets in the U.S. That continued into October of 2024. And as we highlighted in a report that we published in January, we really did see Microsoft take a step back from the market in a more meaningful way related to data set up leases that they were in process on. Not things that had been signed, but things that they were working on.

You know, this is a continuation of that. You know, we're seeing them pare back on some of the incremental leasing activity that they previously were contemplating. But I really want to emphasize here, you know, as we think about the activity levels of Microsoft, what we're seeing is we're still seeing them being active. It seems like we're seeing a shift in the location in which they're looking to take capacity.

You know, there's been talk from the Microsoft CEO around inference and the need for to generate revenue. And we're seeing them look for capacity in and around their existing cloud availability zones. Now, I'll leave it to you to interpret, you know, what that could potentially mean. But I want to emphasize that we are still seeing them be active in the market and in areas where we've seen signed leases be impacted. It really has more to do with power delays at the facility level

rather than a wholesale pullback from leases that they had signed. Michael, our own Bloomberg intelligence analyst noted this morning that this report, along with Satya Nadella's comments on a podcast last week, suggested that perhaps they're shifting their strategy more toward renting rather than building from scratch. How do you view this strategy? Can you hear me? Yes. How would you view this strategy?

You know, so what I would say to you is that historically we've seen a mix of data center leasing and self-builds be done. The two of them are part of the go-to-market around data centers. We've seen more leasing historically out of the third-party data center operators with Microsoft than we have historically, and I think that's a function of the accelerated demand needs associated with AI. Now,

Over time, do we think that Microsoft could shift more to a self-build strategy? There's a potential for that, certainly...

and accelerate the development pipeline. But one of the messages that I want to be clear here for your viewers is that we're still seeing broad demand strength in terms of overall data center demand, right? We see Microsoft is in the market, albeit to a lesser degree. We're seeing Oracle be very active, particularly on the heels of Stargate project. We're seeing in terms of Google, they're ramping their demand, same with Meta, while Amazon is steady. All in all, we're seeing very strong data center demand.

That's TD Cowan analyst Michael Elias. Thank you so much for joining us. Now let's look at other stories today. Apple planning to hire 20,000 new workers and produce AI servers here in the U.S. That's along with a $500 billion domestic investment over the next four years. Bloomberg intelligence analyst Anurag Rana joins us now to discuss. Anurag, break down what Apple's plans are for this investment.

So when you look at it, unlike the other big tech companies, Apple's not ramped up its capex so far because they believe in going out and renting some of this stuff from other cloud providers, whether that's AWS or Google or the other vendors that are out there.

What it seems to me now that because of the importance of AI for their products and services, they want to do some of this in-house. They talked about AI servers, so we anticipate that to be an area. Second, we think it could be the AI models itself, they could spend a lot of money on R&D over there. And the third is semiconductor manufacturing, not manufacturing, but designing, and then use those designs to get those ships manufactured with TSMC, for example.

The crux here for many, Anurag, is how much things have changed or not. Can you just give us a view of whether this is, as certain analysts would note, once again, Tim Cook being a rather good politician, or is this a general change in direction for Apple?

I think it is a little bit of both. I think the bigger dollar amount is a bit staggering, to be frank. Now, some of that would go into a fund. They'll go into some R&D initiative. So some of them may not actually fall down to the capex line the way a financial analyst would look at it because it could be an operating expense, for example.

But the AI server part will definitely hit CapEx, and these guys generate about $100 billion of them. So there is an impact on the free cash flow line for investors. But I think it's a mix of both. There is a need for more high-tech stuff to be in the U.S. But it's been very difficult to do the low-end stuff in the U.S., in my view. But AI servers and AI-related investments are of importance.

Anurag, do you have a sense of how much this is just lip service to kind of fend off perhaps some of the threat of tariffs for the company?

I think it's a from an AI side of it, they are behind. I don't think anybody would say that Apple has any of the leading large language models or even small language models. Right now they have said, okay, they're going to use OpenAI for their particular products when it comes to, you know, you ask Siri a question, it goes to OpenAI. We think down the road they would use other models as well. It's possible they're going to use Google's model, but

they should be making an effort to put their own models in there as well. Now, that's not easy. You can understand how much money it's taken OpenAI to come up with these models over the last several years. So I think if they are serious about AI in their products, they'll have to spend some money.

Bloomberg Intelligence's Anna Ragrana, we thank you. Let's get all of this and the context of ongoing tariff concerns in the market. Ipek Oskar-Deskia is with us, Senior Market Analyst at Swisscode. Look, we analyze the Apple spending here in the U.S. in the context of U.S.-China relations. We think about AI spend and what's happening over in China and Alibaba in the context of China and U.S. relations. Ipek, how much of this is a concern going forward?

Well, right now we obviously do have a world that has shifted its focus on geopolitical tension. So the technology war is just going to get more heated up from this point on. Especially, we thought last year that the Chinese delay was accumulating, but this year with China coming back on the international front,

uh... platform with new a_i_ models and there is going to be some potential in this trip war and the trade war and geopolitical tensions to take another turn now for apple we actually think that uh... it is it looks in the actual context of things that it looks like more of a political decision to us and we believe that the geopolitically

lead motivations and business investments could eventually destroy long-term, medium to long-term value for a company like Apple. Ibaq, what does this mean for earnings coming up next, I mean this week? NVIDIA, major infrastructure player, chip making, now you have tariffs as part of another added layer of uncertainty. What are you expecting on that front later this week?

Well, you know what, we expect Nvidia to put strong earnings later this week. And we actually believe that the high concentration of big technology names in Nvidia's client book is going to be a hedge. It's going to turn into something positive for Nvidia, at least in the short term and in the context of geopolitical tensions, because Nvidia has made around 50% of its revenues from big U.S. technology companies.

that actually pledged to continue to spend big on AI. So we think that NVIDIA is in quite a protected position from this geopolitical tensions point of view. NVIDIA was hit pretty hard earlier this year when Deepsea came onto the scene. How much of those concerns have actually died off at this point?

Well, we were talking about DeepSeek a lot, actually, and it comes down to the same thing I just said. The concentration of big technology sucks in NVIDIA's client, but could eventually turn into a positive thing that could protect NVIDIA's revenues from, well, cheaper options like DeepSeek is pretending to have. This being said, DeepSeek also said...

Odyssey is also believed to have used cheaper models of Nvidia chips in order to build its own model, which means that Nvidia is not necessarily hit negatively by the news. It is just that its most premium chips could

see their on-demand plateau, but even that, in the short run, we think that big technology companies in the U.S. has got the NVIDIA's back covered. This being said, in the medium to long run, these companies, these big technology companies from the U.S. are working on their own custom-made chips, and that is a risk factor.

Apec, it feels as though the pressure on Nvidia spills over from Fridays when we're worried about ultimately compute capacity demand. The note coming from TD Cow and the issues of whether we're thinking that Microsoft is in some sort of overcapacity state here. Just weigh in on whether Wednesday and the numbers out of Nvidia might put that to rest or not.

Well, we believe that the earnings are going to be strong. We estimate that the revenues are going to be between 38 to 40 billion US dollar range, closer to the top range, so closer to 40 billion US dollars on the launch of Blackwell chips and on strong AI demand from the big technology clients.

We also think actually that the forecasts are going to be optimistic due to the Stargate projects and the new pledges from the big technology companies to continue spending on AI. This being said, the overall market conditions start looking less favorable.

favorable right now than they did last year. And in the sense, the investors might become a little pickier on the profit margins, on the concentration of big technology clients, on competition, but also on the supply chain and capacity constraints. So where are we going to fall further? The Nasdaq is currently trading in the lowest since February the 3rd. If you're looking at the Nasdaq 100, it feels as though China and compute capacity is just going to keep pushing pressure on these valuations.

Definitely. We also think that the investors now start seeing potential in China and with high valuations in the U.S. technology stocks and this valuation gap, there is potential for more funds to feed into the Chinese technology stocks, even more so as...

two major risks for the Chinese technology, big technology companies has faded. The first one is the fact that the chip war has delayed the AI progress of the Chinese technology companies but hasn't stopped it. And the second is the waning risk of government where Xi Jinping actually showed his support to the Chinese big technology leaders.

Yipeg, what's kind of the time horizon that investors should keep in mind if we're really going to start seeing signs of China really starting to catch up to American AI players? I mean, in terms of efficiency and most efficient models, I think that we are not there just yet. We need to wait at least a few quarters, I will say two to three quarters in order to see what the Chinese AI models are worth. But in terms of

business and revenues, it's not the best models, the most efficient models that are going to make the biggest revenues. It is how these AI tools are going to feed into services. And in this sense, the Chinese technology giants like Alibaba and Tencent, they do have huge platforms. They do have a huge reach within China and beyond China that could eventually turn their AI tools into profits without them being as efficient as the U.S. peers.

That's Ipek Oskar-Dishkaya. Thanks so much for joining us. Elon Musk has sent emails to over 2 million federal workers over the weekend, asking them to defend their work or risk losing their job, with a deadline to respond by today. Now, this order is actually facing pushback from other powerful figures within the Trump administration, with several agencies telling their employees to refrain from responding on the email. Bloomberg's Max Chavkin weighs in for more. Who is pushing back?

We're seeing pushback from a number of federal agencies, the FBI being one of them and the Department of Defense. We've also seen some agencies like the Social Security Administration say, yeah, you should respond to this e-mail.

If you need any guidance, let us know. So I'd say this is probably the pushback that we're seeing where certain agencies are saying, don't do this. Meanwhile, Musk is tweeting very loudly all weekend about how easy it is to respond to this email, how reasonable it is. I'd say this is one of the more significant fissures we've seen with Elon Musk and other figures within the Trump administration.

Max, Elon Musk did this before at Twitter. As we've been mentioning on the show for the last couple weeks, there's a lot that we can draw from how he handled that situation. When he did this back then, did he actually consider the responses he was getting back from employees, or did he just go ahead and fire them anyway? Well, this is like a slogan that he used to challenge people at Twitter. Most memorably, he used it in a tweet at the then-CEO of Twitter, Parag Agarwal.

who was sort of trying to push back gently against Musk. He said, "What have you done this week?" Now it's become this kind of, like I said, it's almost like a slogan. And Musk has made clear, it doesn't seem like he even so much cares what people say. In fact, he was suggesting that employees use a large language model chatbot.

to respond to the note. It's like he wants them to know that he is running his Twitter playbook, and that Twitter playbook involves mass layoffs and also this kind of super aggressive chaos driven, let's attack the previous regime. And we're seeing all of that. You can also see why if you're Kash Patel, the new director of the FBI, you might not love some other person kind of stirring the pot in this way.

also there's the element of risk. The FBI does really important and secret work that perhaps they shouldn't be having to vindicate or distribute on a note, right? I mean, the email did say, please don't reveal any classified information. So I suppose on some level Elon Musk thought about that.

But yes, one of the reasons we've seen from agencies and people in government in a management perspective are saying, don't respond to this, is the risk that you send something that you shouldn't have sent. Many jobs in the federal government deal with sensitive or even secret or top secret information. And so yes, that would be a concern as well.

Again, it's super unclear what the goal here is beyond just creating a pretext to let more people go. And that is the thing that Elon Musk has said over and over again. It's what he wants to do.

That's Bloomberg's Max Chafkin. Thanks so much for joining us. Let's get to D.C. for more on Musk's impact, this time on the Consumer Financial Protection Bureau. The agency is one of Musk's first targets, where hundreds of workers have already lost their jobs. Bloomberg's Tyler Kendall joins us now. This blitz at the CFPB is well underway, Tyler. What kind of response has this generated from Republican lawmakers?

Well, Republican lawmakers, of course, have long targeted the CFPB, saying that it poses undue of regulations that they would like to see more streamlined. And we should note that there's new Bloomberg News reporting that there also seems to be some concern among the affidavits

acting head of the CFPB, the current OMB director, Russ Voigt. Bloomberg News saying that he appears to be voicing some concerns that this process might be happening a little too quickly here and that that could open this up to legal scrutiny, which at the end of the day, if it's not upheld in court, that could mean none of these changes end up being enacted. We should note that a spokesperson for Voigt does say that no such tensions exist, but it doesn't mean that there aren't still legal questions moving forward here, particularly considering we're not

quite sure what legal basis Elon Musk has, considering his role as an advisor to President Trump to enact such widespread job cuts. Although it does appear that he does have the backing from the White House, considering that just last month, President Trump suggested that he wouldn't mind if the CFPB was eliminated.

Whether or not they're indeed worried about the haphazard nature in which they're trying to take down and shut off the CFPB, there is a note in that same story that the Cato Institute is pointing out here that basically you're taking away the police of Wall Street. You're taking away the police of big tech. How is Wall Street responding? Because I know you've spoken to Jamie Dimon on this.

Right. Thanks, Caroline. Well, I caught up with him on Capitol Hill a couple of weeks ago, and I asked him what his message to consumers would be if there is no CFPB in place. And he said that ultimately he feels that other regulators would pick up the slack, whether that be the SEC, the OCC, or the Fed, and that ultimately he supports a holistic approach to restructuring financial regulators. But we should say on the other side of this, of course, there is big criticism, such as Senator Elizabeth Warren of

the ranking member on Senate banking. This is largely considered to be her brainchild. She tomorrow is hosting a panel, a forum, to look at the way forwards here to see what sort of remedies they could implement in order to protect consumers. We should note she did invite Elon Musk to appear at the forum, but we are not expecting him to be in attendance. Tyler Kendall, we thank you from Washington.

Now coming up, Procis agrees to buy Just Eat in an all-cash deal. The Dutch tech investor is on a path to become a food delivery giant. More on that next, but first, just check out what's happening in the world of crypto. It's affecting a lot of the single names that are related to the space. We're currently at $94,500, let's call it. That is well off our $106,000 highs. We're currently trading...

at the lowest since the start of January. We've got Robinhood falling, MicroStrategy, some of the other crypto-related names under pressure today. That's, of course, as the rest of the market remains concerned around China. This is Bloomberg Technology.

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Time now for Talking Tech and first up, Process is set to buy Just Eat for $4.3 billion in an all-cash deal, making it the fourth largest food delivery company globally. Process CEO Fabrizio Bluisi is looking for new sources of growth. He spoke about the deal earlier on Bloomberg.

Many of the technology companies in Europe, they should be valuing more and they should be investing more. So I think this is the right price for the Just Eat shareholders because we're paying a good premium. But at the same time, as I just told you, the leader company in China is a $100 billion company. The leader company in the US is a $100 billion company. We are investing in Just Eat at the right price based on DCF. This is the right price to create a real big global leader.

Plus, database company MongoDB says it's acquiring Voyage AI for $220 million. The cash and stock deal is meant to help MongoDB customers build artificial intelligence-powered applications to deploy them for high-stakes uses. And Tesla is preparing a software update for customers over in China that will offer driver assistance similar to a full self-driving feature in the United States. It will let Tesla owners who have paid 64,000 yuan for FSD, well, they can use driver-assisted features on the city streets. Jackie.

Coming up, Victoria Espinel from the Business Software Alliance will join us to talk about AI regulation under Trump and more. This is Bloomberg. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York.

And I'm Jackie Davalos in San Francisco. A quick check on these markets because they are under pressure again from the NASDAQ broader perspective. But we dig into some of the key points movers underneath the hood. Apple on the higher side committing $500 billion over the next four or five years. We're going to be getting 20,000 new jobs in the future.

the United States. Yes, this does really focus on the server building side of things. BI really showing that this is a shift in focus, even if perhaps it's just only a little uptick from previous investment rounds. You're looking at Microsoft down 1.2%. Are we seeing overcapacity in data center capacity for the Microsoft more broadly? That is what TD Cowan asserts.

Microsoft saying they are committed to that $80 billion spend. We're under pressure. Move on to the individual names that we'll also keep an eye on when it comes to Palantir. Now trading its lowest since back at the beginning of February. We're down 7%. It still trades at 171 times future earnings. This is an extraordinary valuation, but with cuts...

coming at the Department of Defense. Is Palantir more broadly under pressure? The market thinks so. NVIDIA off by a quarter percent. Remember, their numbers come on Wednesday. Can they vindicate the AI compute demands that are really being questioned in the market? Let's talk about AI demands and let's talk about Alibaba. The Chinese company is pledging more than 53 billion on AI infrastructure over the next three years. The goal marks one of China's

biggest AI infrastructure budgets. Alibaba looks towards becoming a leader in the space. Bloomberg Intelligence analyst, Vandeet Singh, showing a big sell-off. Look, 53 billion seems peanuts in comparison to Microsoft and the others, but it is notable in China. Yeah.

And look, when you look at a company like Alibaba, cloud business is about a $16 billion run rate. So compare that to Microsoft around $80 billion and Amazon AWS at over $100 billion. So it's still relatively small. But it's heading in the right direction in terms of growth rate. So remember, cloud growth had decelerated across the board. In the case of Alibaba, it's picking up.

and it's driven by AI. So it's not surprising that Alibaba and I expect Tencent to do the same in terms of ramping up CapEx because they've seen the playbook in the West in terms of companies investing in CapEx and that translating into cloud growth. Mandeep, it's not just about cutting a check. Talk to us about some of the challenges that Alibaba could face as it undertakes such a significant investment.

I mean, look, when it comes to Alibaba and Tencent, there's always that overhang in terms of what could happen in terms of the CCP and change in regulations. So clearly that threat is there.

I look at the CapEx opportunity they have in terms of ramping up their cloud business, and it's pretty obvious. There is a lot of demand from local companies like DeepSeek to consume cloud compute. And I think that's why this trend probably is one of the

is probably one of the earliest innings if I can think of, you know, if you go back in time in terms of how Microsoft and Amazon and Google have seen their cloud growth accelerate over the past four quarters, I would expect something similar from these companies. - But they can get out

access to the most powerful, most expensive chips. And Alibaba, look at the move today on the back of what Trump is announcing, wanting to curtail even further China's ability to buy technology, to be able to push into chips. Yeah, look, I think if they're investing in CapEx, they are looking to source whatever compute they can get. They may not get the latest BlackVault chips, but whatever compute they can get to build that big cluster and really ramp that up,

because ultimately your companies are going to use open source models, they are going to leverage AI, and what you need is compute. So as a cloud business, I think you're somewhat insulated at least from what's going on at the geopolitical level. And there could be restrictions, but they are the best position to build that large size cluster to satisfy the needs of the companies.

That's Bloomberg Intelligence Analyst Mayandeep Singh. Thanks for joining us. The Trump administration's focus on trade continues to impact tech companies. Apple is seeking relief from President Trump's tariffs on goods imported from China with more investments in the U.S. Trump also signed a memorandum on Friday to counter digital services taxes some countries imposed on U.S. tech giants.

All of this as the U.S. is competing to lead the way in AI and quantum computing. Here to unpack the impact of these developments is Victoria Espinel, CEO of the Business Software Alliance. Victoria, it's pretty clear that President Trump has declared himself pro-innovation, pro-technology. But what do you make of the way he's going about it?

So, as you say, I think the administration has been really transparent about what their goals are in terms of innovation and competition. And it's interesting to see them approaching it in a variety of different ways. Some are focused on trying to promote U.S. industry. Some are focused on trying to protect U.S. industry. But you're seeing this across trade. I think you're going to see it in the AI action plan that the administration is going to be working on soon.

We are hoping that quantum competitiveness will be part of what the White House is focused on. So I think you're going to be seeing this in a number of areas. Your whole role is advancing enterprise software companies' leadership on global policy. So how much are they having their voices heard when we see the latest impact on Digital Services Act, but then also what's happening with China and the impact that has on an Apple, for example?

So, you know, you raise the Digital Services Act. It's true that that's an act that has more of a focus on social media companies, for example, rather than enterprise software. There are...

but there are so many impacts that the Trump administration can have. I think including many in a positive way on enterprise software. Some of the issues that are front of mind are not ones that are going to be impacted by enterprise. So for example, speech issues, you know, there's a lot that's happening that's really positive from AI enterprise and AI software that's not going to be impacted by those. But on the other hand, I think the administration has a real opportunity to lead

in terms of digital trade. I think they have a real opportunity to lead in terms of AI adoption. And there's so much focus and attention to building the large LLM models, and of course that's important. But what we really need to have the broadest positive economic impact is AI adoption across a wide range of industries. And that is something that I think there's real potential for the administration to take the lead on.

And companies have been trying to think of Microsoft and really focusing in on the consumer applications with the Mustafa Suleiman hire, for example, and proportion of him. Victoria, what is it then that the companies that you're talking with and that companies currently are trying to navigate and maybe be politicking, as we see with Tim Cook, what do they really want? Is it clarity or is it actually that they do want change here?

So, let's talk about AI and what's happening in AI regulation. And I would say, you know, speaking for enterprise software, I think there are, at a broad level, there are three things that we want.

We are pro-regulation. We think it makes sense to have regulation. What we don't want is bad regulation. And what I would characterize as bad regulation is regulation that's unworkable, regulation that is addressing the wrong issues. So I think that's important. Second, there needs to be clarity. One of the

hindrances to innovation we have right now is there's so much churn in the system. Is regulation coming? Is it not? Who will it apply to? Who will it want? And that is an enormous drag on a company's ability to innovate and plan forward. And then the third thing that we need is consistency. The thing that is even worse than lack of clarity is inconsistency across different laws being passed by the U.S. states, different laws being passed by other countries that are in conflict for one another. And that is

even more of a problem if you are a small company that is going to have even more difficulty dealing with those. So no bad regulation, clarity and consistency are three things that are critical if we are going to continue to move forward. Victoria, you mentioned the small players. A lot of the headlines come from the big tech giants, but what do some of the policies that you're thinking about, how would that affect perhaps some of the smaller technology companies? Would it only benefit the large incumbents?

No, I think actually in many cases the biggest positive impact will be on the smaller companies. So they won't be held down by, for example, unworkable or inconsistent regulation. I mean, there's so much happening in the AI policy space. But here are two things that I would emphasize, and I think these will have an impact on all companies, including and perhaps in particular small companies.

One is at the federal level. So in terms of what's happening here in Washington, D.C., a focus on promoting AI adoption is something that we're expecting to see. And there's been support for that in the past, but we're expecting a lot more activity this year, coming year, on AI adoption.

But the second thing I would say is that any company that wants to understand what is happening in AI regulation right now has to be looking at what is happening in the states. There is a--the US states, there's a tremendous amount of activity there. We're very focused there. You had Colorado pass the first comprehensive AI law last year, but now you have Texas, Connecticut, Virginia, California, they all want to be next.

and that the states are going to move legislation and regulation. So when you talk about all companies, but in particular small companies, trying to deal with this, the regulation that's coming and trying to deal with inconsistencies that we may see there, if that comes to pass, that is going to be a big drag on innovation.

Great points. Victoria Espinel from the Business Software Alliance. Thanks so much for joining us. Coming up, Steve Jang of Kindred Ventures joins us to discuss how AI policies are impacting investment opportunities. This is really in an early stage company focus. This is Bloomberg Technology. ♪

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On today's VC Spotlight, we take a look at the shifting AI landscape as players like DeepSeek demonstrate potentially cheaper approaches. And as the Trump administration focuses on US competitiveness in the sector. Steve Zhang from Kindred Ventures is here for more. Steve, there's a lot of signaling of support, but help us understand what you're seeing from your perch at the cap table. Is this all talk or is this actually trickling through to some of the companies that you're seeing?

Yeah, I think the big question right now in the industry overall is open source versus closed source. And this is the overarching theme, not only in model pre-training and availability, but it's also a huge issue across the planet. So there's this inevitable movement that's happening where sovereign AI is a consistent theme in Asia, Middle East, EU, and the U.S.,

And China sits separately from a lot of the East Asian countries, which are a little bit more aligned and open to U.S. models. So I think this overall trend that we're seeing right now is trickling down into who can use these models and applications in industries, in different sectors that are important and critical to each country and region.

What do you make of who is advising the president when it comes to AI policy? David Sachs, obviously, being the AI czar along with crypto. He is a fan of open source. Do you think we could see potential action on that front where it can benefit some of those open source players here in the U.S.? Yeah, and I think regulation in AI especially is a double-edged sword.

you want to promote open source to compete with closed source models. And the reason why is competition breeds progress. And that trickles down to consumers, to businesses that use these models. So that's good overall for everyone. But by the same token, there's also an issue with putting some guardrails around that so that there's some safety and alignment

for national interests, for industry, mission critical industry interests like healthcare, transportation, defense and things like that. And so it's a double-edged sword for now and I think David Sachs and his team have a good handle on that balance and are weighing that. But I think that we want to promote open source models. We want to promote developer access to these models. But we also want to have some level of safety when it comes to these mission critical industries.

Are you okay with, therefore, people accessing deep-seeks, R1 model, for example? Where do you think we are in the geopolitics of it all?

Yeah, and I think there's a lot of political bluster and fear that's kind of coursing around media. But really what it comes down to is DeepSeek is an open source model from China that you can download today. The weights are exposed so you can change the weights. You can remove all the censorship, quote unquote, alignment aspects of that. And you can host it on U.S. data centers.

Perplexity, one of our portfolio companies, was the first company to do that and to provide APIs to developers that are a safer version of DeepSeek that doesn't have these issues. Northlink is another company out of the UK that is offering within 30 minutes for you to download and deploy your own DeepSeek version of the model

on AWS, GCP and Azure within 30 minutes. So open source can be problematic if it's coming from a country or a region that you don't identify with. But the good thing about open source, the strength of it is that you can download it and you can modify it and make it safe for your own purposes. Another one of your portfolio companies was Humane AI. And we talk a lot about the models, the algorithms. But what

What went wrong here? This was kind of one of the few consumer kind of applications you can feel and touch. What went wrong from your perspective? Yeah. Look, I think hardware is hard, and it's hard for many reasons that we well understand today. One is that it's capital intensive. Number two, you're dependent upon a lot of the software development that happens in real time while you're developing a much slower, longer cycle hardware and operating system roadmap. So really big ideas, really...

you know, game-changing, sea-change platforms to compete with Apple, to compete with Samsung, to compete with the existing operating systems requires a long journey, requires a lot of capital. And these things are hard. And these are the moonshot bets that venture capital is built for and we embrace. So we want to see more companies. We want to see more founders take those moonshot bets and go for it. Kenan Ventures Managing Partner. It's great to have you. Steve Jang.

An embrace of open source AI models, while it's helping fuel interest in AI cloud platforms such as Lambda. The company's just raised $480 million in its Series D funding round for investors such as Nvidia and ARK Invest. Pleased to say the CEO, Stephen Balavan, joins us now. $480 million, you're building out infrastructure, you're offering software tools. So how do you spend this money?

Well, Caroline, thank you so much for having me. I mean, we're going to be spending this to continue to build out our infrastructure. As a company, we've got over a billion dollars of NVIDIA-powered systems deployed in our data centers across the world. We've invested over $100 million in our cloud platform.

We're going to continue to invest in those two areas, but we've started to expand above the stack. So we've got an amazing AI-powered software platform that allows us to host all the open models. We've got hosted DeepSeq. We've got hosted LAMA, uncensored DeepSeq fine tunes that remove some of the censorship and sort of make it more aligned towards Western values. And really what we've done is, you know, it

also hosted that as part of what we call Lambda Chat, which is our hosted open source models. It's an AI chat assistant. Anyone can go to lambda.chat and basically get access to R1. Okay, so help bring us and our audience clarity on where we are in terms of capacity, overcapacity, undercapacity, when it comes to data centers, when it comes to compute, because you've got Microsoft, some analysts at TD. Karen, really, we're getting the market wondering about this once again.

Yeah, so this is the largest technological revolution we've seen in our lifetime and it is completely fundamentally reshaping the way humans interact with computers. And so it's a really big deal. It's replacing all the traditional software that's been developed over the last 50 years and replacing it with a hybrid sort of human and neural software hybrid. And that is a big deal. We're going to continue to see massive investments.

a couple hundred megawatts of data center contracts being pulled out. Roughly speaking, to put that into context for the viewership, it's between four and five billion dollars of, let's say, equipment capex that you're looking at. And that is not really as significant if you look at every single one of these companies looking at 80 billion, 53 billion, all these hundreds of billions of dollars that are being invested over the next couple of years, every year. I don't think it's as significant of a story.

Steven, this is a really big check for you guys, but it is getting harder to raise as a late stage startup. Even when you are in the hottest sector in town, how is that affecting your roadmap? Do you see going public as the next step or partnering up with a different company, a larger incumbent player down the line?

We are building a long-lived iconic company that is going to be here for the next hundred years. That's our goal at Lambda. And what we're trying to do is really focus in on building a strong fundamental business. So last year we shipped over $400 million of top-line revenue. We are profitable. That is to say we have a positive operating cash flow, positive EBITDA. And so I think...

It's just back to basics. All that matters is you build a heavy business. In the short term, the market is a voting machine. In the long term, it's a weighing machine. So build a heavy business and just focus on delighting the customer. It's pretty simple.

Let's talk about talent because there are some concerns that cuts at the National Science Foundation could have broader implications on the pool that tech giants and also startups like yourself draw from. Jan LeCun mentioning on a post on social media this weekend that he was pretty concerned about it. What are your thoughts there? Well, I think it's really good for us as a country to continue to welcome in the best and the brightest people from all around the world.

I think that as a company, you exist within the environment that's set up for you, the rules and frameworks that are set up for you by your sovereign entity around you. And so, you know, we're just like every other company in the world, going to be folks face-to-face with like whatever the reality ends up being. From your perspective, what does the landscape of compute look like in five years' time? I think that what we're going to see is with these models today, it is just starting to crack open

what I call one-shotting a pretty difficult computer programming problem. If you flashback maybe just two years ago, you could generate a very basic application. It would have some bugs in it. You'd have to debug it as a software engineer. Today,

I can ask it to generate a full video game. I can ask it to generate, for example, the LambdaChat iOS application. And it generates it in one shot with no errors. And so to me, it's applying that to every piece of software in the world.

We thank you for coming on, Lambda CEO Stephen Badawan, on a big fundraise. Now that does it for this edition of Bloomberg Technology. You do not want to forget to check out our podcast. You can find it on the Terminal as well as online on Apple, Spotify and iHeart. From New York, from San Francisco, this is Bloomberg.

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