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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, this is Bloomberg Technology coming up.
Four of the magnificent seven are set to report earnings this week. The giants make up nearly 20% weighting in the S&P 500. So what's priced in? Plus, IBM plans to invest $150 billion in the US over the next five years with quantum and mainframes made in America.
and we will be joined by the CEO of Palo Alto Networks as he announces a new deal to leverage the AI security opportunity. But first, we have Meta, Microsoft come Wednesday. We then have Apple, Amazon. What is priced in? Where have investors and analysts already started to think about the pull forward
for their fiscal quarter they report because of tariffs and what of the macroeconomic environment going into the full year earnings expectations? Ryan Vlastellican can dig in because Ryan, what's so interesting about these numbers are the fact that many analysts just in the lack of clarity haven't been really able to downgrade their expectations.
Yeah, absolutely. We're starting to see this in some names, especially for 2026. But for the moment, people are sort of holding firm with their expectations. We really do not know what to expect out of results this quarter. We really do not know what any company is going to say about really anything about the economic environment, about their outlooks for the rest of the year. That makes it extremely difficult for analysts to know how to sort of peg their expectations, their estimates. And in turn, that means that valuations right now are sort of upturned.
in the air. We really do not know what fair value looks like because it is hard to evaluate these companies on a price to earnings basis if there is so much uncertainty about the earnings.
I mean, look, we're looking currently at analysts being very slow to cut profit estimates on the 12-month earnings projections for a meta, for example. But Ryan, meta is going to feel the effects of Chinese companies like Timu, like Shian, no longer advertising with them. Potentially, we're going to see a downdraft there. And also, they've got hardware that they have to import from China. Are we going to get any signal of what that does to the bottom line?
Yeah, I mean, I think these kinds of questions are really what is paramount for investors right now. Obviously, these companies have their own sort of individual impacts related to tariffs and so forth. A company like Meta, which is so heavily reliant on online advertising, it's not going to be as direct for them as it will be for a company like Apple, which is hardware-based. So, I mean, obviously, we're going to see different kinds of impacts, different levels of impact. But I think overall, there's still so much uncertainty about
what the economy is gonna look like not even a year from now but even a few quarters from now or a couple months from now so again any kinda clarity investors will get will be certainly welcome but it's hard to know how any company can even be you know too confident about anything right now alphabet beat last week and all of these stocks soared
the previous week as well. Ryan Vlasdelica pushes us forward. We thank you. Now, President Trump's tariff announcements, they've roiled Washington to Wall Street for nearly a month now. And Chinese retail apps, we just mentioned them, Timu Xin, they've already started actually passing on the new import taxes onto U.S. consumers, onto you and me, by hiking up prices. Now, China thus far has denied having any trade talks with the United States, though President Trump is still hopeful China will make a deal eventually.
They want to make a deal, obviously. Right now, they're not doing business with us. You know, people talk about going cold turkey with China, meaning just forget about it. We were losing hundreds of billions of dollars a year with China, and now they're not doing any business with us, you know, because, not because of them, because of me. Because at 145%, you can't do business. But something's going to happen that's going to be positive.
Bloomberg's Mike Shepard standing by. And look, we are still doing business with China. Many a consumer is still buying from Timu and Xi, but they're paying the price for it.
Well, you're right, Cara. And we are seeing now what economists have been warning about for some time in relation to the president's tariff policy. And that is that consumers would bear the increased costs and economic pain of those import levies. We are seeing that the prices are being passed along now by Timu and by Xi'an. At Xi'an, for instance, some goods
the prices have gone up by as much as 300%. And keep in mind, Carol, it's not just here in the US where the pain is being felt by consumers. The retaliatory programs by some other trading partners, including Canada, including China, including the EU, have increased costs on goods from the US into those countries. And we saw Tesla over the weekend
urging consumers to try to tap the pre-tariff inventory before prices went up and before it became too late to avoid those increases. So there is a ripple effect and corollary effect, not just here in the U.S., but elsewhere around the world, Carol.
Extraordinary reporting, Dan. They just highlight, you mentioned Tesla having to pass on costs. We've also got here import tariffs. We're going on Timu's shopping cart. They look at some of the most popular things that people buy on Timu. Apparently, it's a 14-in-1 power strip with a surge protection and one-touch control. Who knew that's the most popular item? But basically, it's doubling in price because of tariffs, Mike. And when we think of an Amazon, for example, Bloomberg Intelligence thinks Amazon has about 70% of its products.
either offered by Amazon or third-party sellers coming from China. This is going to have a long-term tail.
This is going to have a long tail, and it's not really just going to be sticker shock, Cara. It's going to be supply shock, potentially. We've heard from a number of economists and experts out there, including the chief economist at Apollo, who warned that we could be seeing a COVID-like shock. Remember, this is a crucial time of year. You and I were just trying to get through the end of the school year, maybe, for our children, but we are...
are all looking ahead. If you're a retailer, you're thinking ahead to Christmas, to back to school, because now is when that inventory is actually planned, it's purchased, and it's already shipped. It's usually in the water.
by April to get here in time for back to school and for the holidays. So there will be a ripple effect. And we've already seen a drop in cargo shipments from the world's second largest economy to the U.S. in the wake of these tariffs. So there is going to be a lot of pain felt along the supply chain. It's not just going to be consumers at the end, like you and me, looking at prices in our Timu shopping cart or even on the grocery store or
other retailers' shelves, it's going to be in a lot of different places. And yet, many hold out hopes for a deal, but China pushing back once again that no negotiations are happening. Well, that's right. And Scott Besson is indicating that, hey, you know, the ball is in China's court. We really want talks to get underway. And the president indicated even at the end of last week, during a time when Chinese officials were here in Washington for the World Bank and IMF meetings,
where maybe there was some contact between the two sides, but it was informal. And if it even took place, and for the Chinese, they really want something much higher level. They want something launched formally. They would like to be speaking regularly with Scott Besson and other officials of his port to be able to get all of those key points for them, not just tariffs, remember, but all the U.S. export restrictions on advanced technology that we've been talking about so much.
particularly in the semiconductor space. Mike Sheppard, thank you so much for joining me. While coming up, IBM, it plans to invest $150 billion in the US over the next five years. Why? This is Bloomberg Technology.
IBM just erasing its earlier gains as the market turns a little bit lower. It just announced plans to invest $150 billion in the United States over the next five years. The latest company, of course, that follows the likes of Apple or Eli Lilly, pledging to increase spending in the country following President Trump's election and his tariff threat.
Let's bring in Brody Ford. And starting on IBM, it seems to be about made in America, the mainframe, quantum compute. How much of an acceleration in spending home in the U.S. space is this?
That is the big question. It's the one that is so hard to answer looking at a lot of these announcements, right? IBM says we're going to spend $30 billion in R&D in the U.S. We look that they've reported about $33 billion in R&D over the last five years. I believe most of that's in the U.S., so it's hard to say. Is this an acceleration? Is this them, you know, putting a pretty bow on spending they were going to do anyway? This is the big question when we see these announcements from companies like Apple or Nvidia saying,
What's clear is that as tariffs hit, companies feel a lot of pressure to say, hey, actually, we have capabilities in the U.S. In upstate New York, we can build your mainframes too. And so I think that's what we're seeing from IBM today. Arvind Krishna, the CEO, saying IBM remains the epicenter of the world's most advanced computing and AI capabilities. Now, I want to get to AI capabilities because of an interesting story you've been reporting on. For over in the U.K., Nscale, which seems to be a startup,
that is once again a Bitcoin miner turned compute offerer trying to raise money. And they're talking about a deal with ByteDance. Yeah, Nscale is kind of like a core weave where they are focused on building these AI-specific data centers. And so they've been fundraising, looking for a billion or two in debt, telling everybody, hey, we have this deal with ByteDance. We're about to sign the paper. It's going to be worth $2 billion. We're going to give them all these great GPUs.
ByteDance told us that's overstating things. We don't have that much business with them. And so these situations are hard, right? Because GPUs are a pretty geopolitically sensitive thing. Maybe ByteDance doesn't want it out there. Maybe Nscale is overstating things. I mean, it's an interesting instance that shows us how much the financing around AI data centers has become very interesting in the last year.
And of course, they're rather home to NVIDIA chips. Brody Ford breaks that down. We thank you. And let's talk more about NVIDIA chips and competition to them. Because over in China, Huawei, apparently the company is set to test a new AI processor that it hopes can rival those of NVIDIA. Now, it's all according to reports from the Wall Street Journal. NVIDIA trading lower, as you can see on the day, now accelerating losses.
talks about this, about what's happening over at Intel. But first, Ian, what is the long-term picture of Huawei trying to help China become more self-sufficient here? Yeah, I think what we have to do is, because it's very difficult to get a clear picture of what is going on there and the capabilities of those chips.
What is important to do is to take it back to what Nvidia has said, which is, look, if we're not allowed to do business there, if we are restricted from exporting chips to China, they will find a way to do their own over time. It's just a matter of time. And I think this report is another example of efforts being made out there to do that. Are they competitive with what Nvidia can do? Probably not at this point.
Are they going to be wonderful? Are they going to be good enough, though, is really the key question. And the answer is we'll see. But they're probably another step on a path towards that. Well, Ian, there's a more local competitor who hasn't been much of a competitor to NVIDIA of late, and that's Intel. Lit Bhutan, you've written a great tech daily report really on how he's trying to nuance culture over at Intel. How has it gone down?
Yeah, I mean, he really didn't give any of the concrete answers that Wall Street wanted in terms of when are the new products going to arrive, when are you going to have outside customers for your factories. What he did focus on and what he did give a very specific on was like Intel's culture is not in a good position, and these are some of the shocking things that we're seeing going on. And frankly, it was pretty brutal. That clearly is something that he believes needs to be fixed, but as we know,
fixing a company culture and getting everybody moving in the right direction is important, takes time. And what is arguably more important is that you're getting them moving in the right direction towards products, towards customer relationships that will turn this company around. We have seen the response to the earnings in King. Tech in Depth, the newsletter out today. Go read it. Thanks so much.
Possibility surrounds us in digital innovation, evolving markets and disruptive ideas. And while promises can inspire dreams, proof is the catalyst for transformation.
At EY Consulting, technology unlocks value. It's data that sharpens your competitive edge, and it's our deep sector insights that can navigate a pathway to real outcomes. This is high-value transformation that drives real change and challenges competitors to keep up. With EY Consulting, it's about proof, not promises. 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
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. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge. But here's the best part. You
You can build with confidence, knowing that Microsoft's security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on your craft. 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.
Now a shake-up is underway for Apple's AI and machine learning divisions. The company has begun to break up what have been a pretty unified approach. For more, Bloomberg's Mark Gurman has more. You've been writing over the weekend about one particular executive they lured away from Google in 2018, and now he's getting some things pulled away from him.
That's right. So here's the story with Apple AI. Siri launched in 2011, and by 2015, 2016, a little bit after that, they really fell behind. Google Assistant came online. You had a lot of competitors, including Alexa from Amazon, and it felt like Apple had squandered a three-, four-year lead.
And at the time, Apple felt that part of that is because the AI work at Apple was scattered across the company, right? They worked in silos across different divisions, hardware, software services. So they hired John Gianandrea, who was running AI and search at Google at the time in 2018. They believed putting everything in his group would skyrocket their approach to AI and make them a true player in artificial intelligence and machine learning.
So far, it hasn't worked out. You saw how far they've fallen behind compared to Chatsubiti, Google Gemini, Copilot. So now what they're trying is breaking it up, going back to their roots, going back to that Apple functional organization and taking pieces of the AI group and re-scattering them around the company. And that started a few weeks ago with Siri. They moved Siri from their AI division to their software engineering division, which makes sense to some extent because Siri is, well, software.
And now what they're doing is they're taking the robotics division, which was also in the AI organization, and moving that to hardware engineering. Robotics, that is a hardware play at heart, and so it makes sense to put that in the hardware engineering division. So we'll see how that works out. But to me, and to many people at Apple, it feels like they're preparing for a world without a true AI chief, a world where Apple is back to being completely functionally organized.
And Mark, a world where they're about to report earnings this week, they're trying to tackle China's supply chain, move it more to India. Just brace us for what we expect on Thursday. I think that Apple, this is going to be one of the more interesting Apple earnings results presentations in a while, not because of the numbers that they're going to share, not because of the data they're going to give in the prepared remarks, but because they have a lot more questions they're going to have to answer than usual.
Things when it comes to AI, of course, is going to be big on the minds of analysts on the call, but also tariffs, also dealing with the Trump administration, dealing with innovation questions. So that's going to be a really important earnings call to listen to, not because of what they're going to come out and say, but because of what they're going to be asked and how they're going to respond. So I'm actually very much looking forward to that. And everyone should stay tuned for our coverage there. Well, we're excited for your reporting on it.
Mark Gurman, we appreciate all things Apple. And now, meanwhile, in other AI news, enterprise AI platform Writer is launching a new adaptive reasoning model that it says is cheaper, faster than competing LLMs. It features a one million token context window to create more comprehensive responses. May Hibib, Writer CEO, joins us for now. And tell me about the new model and what makes it different. Oh, hi, Caroline. So good to see you.
Well, that's the headline. Palmyra X5 is out, and it is the first enterprise-grade, enterprise-ready model built for agentic AI. So you got it. This is an LLM with performance on par with other frontier models, but it's radically 3x faster, and it's four times cheaper. And as of today, it's available on AWS Bedrock. Okay, so tell us about how you get that sort of cost efficiency. You're offering what?
60 cents per 1 million input tokens. You're doing $6 per million output tokens. How do you get to that price point, May? So it's really important for folks to understand what's required to get enterprise-grade agentic AI. When we launched our AI HQ a few weeks ago, we had 100 plus pre-built agents built for the enterprise. And folks were asking me, how
are you getting this kind of efficiency and accuracy with really complex workflows, agents at a Uber, at a Franklin Templeton, things that were capable of taking multiple systems, data from third party and internal research, and able to generate really complex work. We are able to take that full
million token prompt and process that context window in 22 seconds, firing off multi-turn function calls in 300 milliseconds, all while getting this price efficiency. It is a combination of
breakthroughs, both algorithmic and data. We train this model on about a million dollars of GPUs, so also incredibly efficient on the training, and we pass that on. How is this occurring, May? Is this the new deep-seek trend that we're seeing, that you just do more and more with less? It's more about turning to open source? I mean, how have you managed to be so efficient?
Yeah, I mean, we deep-seeked before deep-seek. So this is a 100% synthetic data-based approach, which has the IP friendliness that the enterprise really requires. Algorithmically, we are doing a very interesting set of techniques around a hybrid attention mechanism, blending linear and other approaches.
And we're doing a mixture of experts set of techniques. So we're only activating the most relevant subnetworks. And it's resulting in much lower latency, much more efficiency.
You talked about some of the very well-known companies that you currently serve. But to get these sort of investors and the vanguards of this world to be coming on board, how are you making yourself known? I mean, are you having to offer this sort of price efficiency? Is that how you rise above the noise? Because it just feels like there are so many offerings, enterprise-suited offerings out there right now.
It's absolutely so noisy. But what we're seeing is folks who don't have results are understanding that they can't build everything themselves. So in addition to enterprise-grade frontier LLMs, we've got an end-to-end platform for building, activating, supervising these agents. And that's how we stand out, Caroline. That entire package is what results in the incredible ROI. Forrester just reported 333% ROI.
on implementing Rider for building and using agents. And it's one of the highest that they've ever seen. So you're right, right? It's incredibly noisy for these enterprises, but CEOs are seeing that their CEOs are demanding results. And I think this is AI's COVID moment.
And COVID, you had this explosion of collaboration tools 'cause folks had to do it. And I think we're going into the kind of economic uncertainty that just demands results and RIDER is providing that. - Okay, so really interesting. You think that in this potential downturn from a global GDP perspective, people are gonna be more drawn to your products, not less?
Oh, 100%. I mean, we're AI software that builds software, and we're already seeing it in our customer base. Executives, CEOs who say, look, before you ask for more headcount, before you ask for more software, I want to see that AI couldn't do it better.
So what about, therefore, your opportunities as we get more nervousness, more economic uncertainty? I know that prior to all of this, you were getting other tech startups coming to you saying, look, I can't keep on doing this. My expenses are too high. Would you mind buying me? Are there still the M&A opportunities out there for you right now?
We're trying to grow organically as fast as possible, Caroline. We can't keep up with the demand. I'm with you from our London office. We're almost 100 people here, more than 400 globally, trying to be 800 globally as soon as possible. Folks really need results, and they're coming to us to be able to really bring AI, especially agentic AI, to the business. Neha Veev, it's always great catching up with you. Thanks for joining us from London. ♪
Palo Alto Networks manages to fight the narrative of a downward draft in the markets. We're up a quarter percent. And look, we're seeing the cybersecurity leader announce its intent to acquire Protect AI. It's expanding the company's capabilities in security, basically, combating new threat
I mean, an explosion in artificial intelligence. All of this as we get this year's RSA conference underway. Joining us now, Nikesh Arora, Parallel Alto Network CEO. You've got a lot to announce, new security platform, but let's just go to the new announcement in terms of M&A. Are you going to give us an amount that you paid? I was hearing about up to $650 million. Yeah.
We're not going to talk about what we paid, Caroline. Nice to see you. Look, we're again at a technology inflection point. We're all talking about AI. You had people talking about AI earlier. And every time you have a technology inflection point, it becomes very important that we are able to come forth and provide solutions to our customers so they can securely deploy technology. And in that context,
We're very assertively and aggressively working on both a build and buy strategy to build perhaps what will be the most important thing over the next few years, which is a platform that allows you to deploy AI securely. Okay, so let's talk about build versus buy. And why was this asset, Protect AI, so necessary to go inorganic at this moment?
If you look at what's going on in AI, you were on before people talk about LLMs, people talking about deploying AI-based applications, people trying to figure out how to deploy infrastructure, whether it's on-prem or in the public cloud, which chipset to use, which model to use. All these are very important technological decisions which are going to underpin the platforms of the future.
When you put them together and you deploy them, you have to make sure that you're looking at the security aspect of every one of these things. Protect.ai, after an extensive look around the market, we found was working on some very interesting topics, which are complementary to what we've been building. We've been building a great runtime platform to protect our customers as they deploy AI. Protect.ai was working on something similar, where they were looking at all the models in the world, scanning them to make sure there wasn't bad stuff lurking in
them. So the combination of the two, which we will integrate into one platform, actually allows us to be more comprehensive and we will offer our customers. I just want to get your bird's eye perspective here, Nikesh, because no one can push us forward as much as you can in many ways to the future of agentic AI. And the fact that where are we to ultimately be protecting ourselves? There's demand for traditional, basically firewall endpoint products of security. How does that shift if you're going from a user level to an agent level in this moment?
Well, I think that's going to be the buzzword for RSA, Caroline. People are going to talk a lot about how do you make agents work. I think it's still unclear. There's a lot of innovation being put out in the market, whether it's the A2A model, there's an MCP model, there's all wonderful buzzwords we create in our industry.
As agentic, I've said before, to me, agentic AI becomes real when you start giving AI arms and legs, whether robotic arms and robotic legs or real arms and legs in terms of replacing human beings. I think that's where the question becomes, can I rely on AI to accomplish the task without supervision?
That's where things will get very interesting and very hairy in certain cases. There, it becomes important not only to make sure that the agent you're giving autonomy to is something that you're very comfortable will act within the guardrails that you put out there for that agent, and then you got to make sure nobody can take over your agent and hijack it in a way that can make them do things you don't want them to do. I think that's going to be the next frontier of cybersecurity.
as we get AI deployed in multiple places, how do we give autonomous control to these agents? How do we give them agency effectively? And I can't wait for that world to happen, but it's going to be a whole new set of opportunities that will open up for us. There are a lot of names trying to make the most of this opportunity. A lot of them are the hyperscalers. A lot of them in many ways become your competitors as they add their own security offerings. Where do you sit in this whole frenemy environment?
Well, you know what's been fascinating, Caroline? Logically, the cloud provider should have been our competitors in cloud security. They should have been our competitors in endpoint security, but they're not. They're focused on making sure technology gets deployed as quickly as possible, which is good perhaps for their business, for all of their customers. Our job is to make sure that we stay in lockstep with them and work with our customers to make sure they can deploy technology in a secure fashion. Let's be fair.
If our customers have comfort that when they deploy AI, when they give autonomous control to AI to do repetitive tasks or interesting tasks, it can be done securely. The moment we can provide the underpinning of trust, the underpinning of reliability, the fact that if you deploy with Palo Alto Networks,
networks, there is a very high probability that it's going to be much safer than anything else. I think that's where the winning combination happens. So I don't see this as sort of a competitor environment for now with the hyperscalers. I see it as an opportunity for us to work together and make sure we accelerate the adoption of this technology as opposed to have our customers be confused which way to go. I mean, you used to work at Google. You host your products on Google Cloud. How do you feel about their big splashy deal for Wiz?
Look, it'll be interesting to watch. I have lots of conversations with people at Google about it, and we don't intend to change how we deploy our products. We buy infrastructure from them, and sometimes we see them in the market. Our hope is that our customers will understand that you want an unbiased product that can operate effectively on every cloud provider as opposed to something that is beholden to a particular cloud provider. We still need to solve for everybody else out there, so I think that's our goal.
ethos, we want to be independent, we want to be somebody that can deliver the same level and capability of security across every platform there is out there, so our customers don't have to spend time trying to integrate all this stuff together, which is our entire philosophy around platformization.
I love following what you're doing in terms of platform offerings, products, what you're doing in terms of, well, the latest M&A, but I also love following you on social. And perhaps whether you wanted to or not, you were involved in the AI debate about whether we were going to get as much CapEx spend, whether infrastructure is reality versus hype. Where do you stand on it right now, Nikesh?
I think if you look around you, everybody is getting ready for a very large adoption of AI scenario because you see tens of billions of dollars being committed by people in terms of building infrastructure. I think that's right. I think we may get the timing right.
not perfect, you know, you may build too much before it's all consumed, but I think it's headed in the right direction. I think short term in this 12 to 24 month time frame, you could see that a lot of the investment that's going is going towards innovation. I say make a smarter model, make robotics work, so you need a lot
you need a lot of compute to get to a place where these models become extremely useful. Once you get to a point where these models are extremely useful, the question becomes, how do I deploy them in my business? How do I, as a regular company, regular customer, deploy these things effectively, securely? I think that could take a little longer than people think because everybody's experimenting and we're not all experts yet. This is something that came about.
out less than 24 months ago. So we all have to get our muscle, understand how this affects our business. How do I build robotic things that can do stuff for me around my enterprise? How do I build AI agents that can do stuff for me around my enterprise? Do I build or do I buy from somebody? So all that stuff will take a little longer to pan out, but
When it happens, we're going to need all that capacity that's being built. And unfortunately, you can't wait to build capacity. You have to build it ahead of demand. So I think it's the right direction. The timing's still to be figured out. Well, thanks for sharing your expertise across all the subjects and the deal news. Mikesh Arora, go enjoy RSA. We thank you, Palo Alto Network's CEO.
Now, next up, talking tech. First up, I'm talking about UAE data center developer, Kazna. Well, it's planning a major expansion into Saudi Arabia. Now, the company is looking to take 25% of the market share. It's already identified two locations for its data centers, directly competing with smaller local and specialized firms.
plus German defense startup, ARX Robotics. It's raised $35 million in its latest VC funding round, and it's the second time in the past year that the company aims to expand in the United Kingdom. ARX Robotics declined to share its new valuation.
And Alphabet, after its earnings, is now set to be offering about $4 billion in U.S. high-grade corporate debt today. According to sources, the company is said to be looking to sell the bonds in as many as four parts and could mark the company's first bond sale just a way back in 2020. Now, coming up, we'll talk to the managing partners of FPV about finding product-led AI startups for their latest fund. Meanwhile,
Well, there's some news out on Sony. Could they be spinning out their semiconductor part of the business? The shares have actually risen on the back of the news that as the company tries to get more focused, of course, it's all about PlayStation and gaming, but they're also trying to be selling off some of the assets that don't mean quite so much to the core business anymore, semiconductors being one of them. This is Bloomberg Technology.
Possibility surrounds us in digital innovation, evolving markets and disruptive ideas. And while promises can inspire dreams, proof is the catalyst for transformation.
At EY Consulting, technology unlocks value. It's data that sharpens your competitive edge, and it's our deep sector insights that can navigate a pathway to real outcomes. This is high-value transformation that drives real change and challenges competitors to keep up. With EY Consulting, it's about proof, not promises. 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. Below
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. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge. But here's the best part.
You can build with confidence, knowing that Microsoft's security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on your craft. 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.
Elon Musk's XAI. Well, it's in talks to raise roughly $20 billion in funding for its newly combined AI and social media business. According to sources, the deal would value the company at over $120 billion, according to one of the people briefed on the matter. Now, if completed, it'll be the second largest startup funding round of all time behind, guess who? OpenAI in their $40 billion financing earlier this year, according to data from PitchBook.
Now, we've got so much news when it comes to VC, and there's more fundraising news from a fund perspective. The venture firm FPV has raised $525 million to fund target product-driven startups. FPV's co-founders have backed companies such as Canva and Flexport. I'm pleased to welcome to the show Pega, Ibrahim, and Wesley Chan. Join us now. Congratulations on the funding round, guys. Thank you. We're excited. So tell me, Pega, first and foremost, how hard, how easy was it to get the LPs excited in this current environment?
I mean, you know, you have, last time around we raised, I think when we announced it was the 75 basis points that the Fed just raised. So we're used to this and our investors are back really long-term founders and that's what we're focused on. So it wasn't, the environment's tough and we're privileged to have raised, but you know, we had just exceptional blue chip founders who are really investing for the long-term. So they're not as distracted by the short-term stuff. I mean, Wesley, we think about,
how much Canva, for example, has managed to be an iconic company that you found not on the west coast of America, not in the US at all, but over in Australia. How do you find teams like that? How do you replicate the success? Yes, so our founders are amazing product-driven founders, right? So they see other amazing product-driven founders. That's the secret. Like I spent over 15 years at Google, of which 10 of them, I helped build the ad system, launched Google Analytics, I helped launch
Google Voice, I helped bring Android and help them grow. It's one of those things that when you've worked on these products that hundreds, if not billions of people use worldwide, you have a reputation for building great products that founders gravitate towards. And so I got the opportunity to meet the Canva founders more than a decade ago. They were very excited about some of the product work that I did. I helped them build and prioritize some of their features. And they said, let's work together.
And that's what I love doing is spending time with founders that want to build products that change the world, that do better whether there's a recession or not a recession, and that just stand the test of time. And so that's what we do here at FPV. And it's about kind of being the operators alongside them. People come to your experience from Google, your experience from Cisco, your experience from Morgan Stanley and the technology area there, Pegah. And I'm interested as to what advice you're giving to founders right now when...
none of us really have any idea where the clarity is on this. No, look, so one thing is clear, and everyone's like, what's happening to the market? And one thing that's clear, it's going to be whiplash. I mean, we're going to have a few years of up and down, but we both started out during the tech bubble burst, and I was CIO at Morgan Stanley during the financial crisis. You can't go up and down.
to the right all the time. And if you're really building for the long term, you shouldn't get, you have to go with the waves, but you can't really be building for the next year or the next two years. And for the founders that are really looking for those 10 year plus horizons, it's actually a great time because you have to focus.
You can't get as much distraction. You don't have as much competition because not everyone can raise. So if you're a mission-driven founder who's really focused on really changing the future, this is actually a great time to just stay laser-focused on those big missions. And if you're not a mission-driven founder, look, it's going to be hard if you're depending on the hype and the short-term stuff.
It might not, the hype might not last on certain things. And so that's what we say. Stay focused if you have a really big vision and, you know, work with the times. I mean, you have been the anti-hype apostles in many ways, just saying cut through that noise. But Wesley, a lot of LPs at this moment thought there'd be a little bit of hype around exits, around IPOs, but that's not happening. No. How are you helping your current, your previous fund grow?
bets be able to give liquidity to their talent? How are you helping them sort of march through this? Well, one of the wonderful things about the LPs we found is that they're long-term thinkers, right? Like we have blue chip LPs. Most of them are charitable endowments and foundations that think, you know, decades, if not like 50 years out into the future. And they know in investing us that we're not placing the bet for today. We're doing it for 10 years in the future. That's the liquidity time horizon for venture capital.
So, we're not worried about if things exit tomorrow or if things exit next year. Obviously our LPs would like it, but we worry about if things are going to be big in 10 years, right? They have the option to exit, but if they hold on, they add more value. And our LPs are okay with it because they're such long-term thinkers and they have deep pools of capital. We want to return money to them, but we want to do it at the right time and we want to do it when things are great. And so, the companies that survived the recessions, the companies that survived the market turmoil, whether it's tariffs or whether it's crazy world war or whatever else, they
are left and they are the winners and then they have these wonderful exits. Google in 2004 was dot-com crash, right? And then like they exited and they became a big market winner. I know. And I worked on the IPO. It was like it reopened the market and everyone was freaking out that it was never going to come back and they reopened it and then you got...
several years later after the financial crisis, Workday, Salesforce, all these guys. So there was great companies built during these times. And I think it takes longer to exit, but that's one of the benefits we have. Like, is it 10 years? Is it 12 years? It doesn't matter for compounding companies. Obviously, it's harder for your growth. I mean, everyone thought CoreView would reopen the market, and that was a very idiosyncratic kind of a bet.
But then ultimately the markets moved away from them. What reopens us next time? What are we currently seeing value accrue to that's the right thing to have value accrue to, Pekka?
Look, I think when the markets open, I mean, I don't know if I can predict the future, but I can tell you markets like a bit of stability. So it might not be for a bit if we're not kind of knowing what's happening. I think now we have the tariff shock that will smooth out. Then people that have been ready for a while will start saying, okay, we're coming back in maybe. But I think nobody wants to go when the tides are like, you know, going up and down at the same time. But I think people will have to eventually, it becomes normal.
Maybe this whiplash is actually normalized and then people don't care. I mean, Wesley, Lynn, you're looking for 10 years' time. You're looking at perhaps private market valuations be impacted slightly by public markets. But what is the 10-year bet? What is currently interesting now?
that's going to be incredibly interesting in 10 years time that people aren't thinking about. So we have a lot of healthcare AI bets, right? And that sounds sort of crazy because a lot of people are running away from healthcare in the last couple of years. But we have companies that are really using AI or using machine learning to figure out the next generation of drugs. And then we have a company that has figured out how to do clinical trials in half the time and half the price using AI to
find better patients, and then they are taking drugs out the market themselves because they have this cost to manage. These are massive 10 year bets. The founders are amazing and mission driven and they're able to raise capital and hopefully they'll be around when everybody else is getting washed away by the hurricane. - I think the healthcare bet, and I would say also, you know at the first craze of AI everyone gets excited about
It feels like not incremental tech, and I think the really exciting stuff, there's no, it's kind of like the cloud times. If you're building a company and you're not building on AWS, you're like crazy. So of course you should be using AI, but I think it's are you working on the big problems and are you working on not the incremental things, but the really big things that just weren't possible, and that's the things that happen with biotech and some of those things. It's just things that just weren't possible because now you can do it.
Peggy, we've got 30 seconds. Are they going to be built in the West Coast? Are they going to be built globally? Where are you going to find these founders? I mean, we're going to go everywhere, wherever great founders are, and hopefully they come looking for us too. But I think there's no denying that the West Coast has a lot of the current
talent in AI, but I think we're going to go everywhere. - Taga, Evrahimi, we're pleased that you came here, along with Wesley Chan. Great to have the co-founders and managing partners of FPV in the studio today. We appreciate it.
Deliveroo shares over in the UK absolutely surging today, most on record, up 18%. And this is after the British delivery firm disclosed an acquisition offer from DoorDash, which would value Deliveroo at $3.6 billion. Bloomberg's Henry Wren has more. As we can see, Deliveroo has currently been a phenomenal day's trade, up 16% is where it closed the market.
But it's well off the highs of where it used to trade. I think it had a $7 billion market cap at one point, Henry. Why would we see DoorDash want to be buying in?
Yes, so we really think that the deal, the offer from DoorDash is something that's a long time in the making because according to press reports as early as 2022, there have already been interest from DoorDash to merge with Deliveroo. Also DoorDash have this international expansion ambition already because in 2022 it made a deal to buy a Finnish food delivery company called Volt.
at that time so it has demonstrated its ambition to expand overseas. Also in 2024 there was a change on the DeLiveroo side because there was an expiry of a dual class shear structure at that time so which means that
CEO and founder Will Hsu no longer held the dominant voting power which paved the way for consolidations or further mergers down the road. So we think that actually it's not very surprising and it's something a long time in the making. Long time in the making. Shares have
bounce today but not up to the highs of the full extent of the offer, Henry. And I'm interested as to whether there's any concern around the consolidation. We're seeing any industry writ large right now because Process Group has been making bids for other delivery hero, for example. Yeah, indeed. So...
For European food delivery stocks, whether we're talking about Just Eat or Deliveroo or Delivery Hero, it's very clear on their share price chart that they have been well off their heights about three years ago. The reason is pretty clear because those companies, they pumped huge investor-led cash at that time during the pandemic days and the orders numbers were high. But now,
As we come out of the pandemic, people dine more into restaurants. So that peak is no longer there. And those companies have to pivot to profitability. And that's why we're seeing lower and lower growth. For example, for Deliveroo, it's only reporting about 7% order growth this quarter.
And that's the exact reason why we're seeing more consolidations here. You mentioned about the process offer for Just Eat and this deal that we are looking at as well because these companies, they need more deals to ease up the competition. I have to leave it there. We thank you, Henry Ren. That does it for this edition of Bloomberg Technology.
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