Micron HBM Sales Surge, Palantir’s Stock Keeps Climbing
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Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovelow in San Francisco.

This is Bloomberg Tech. Coming up, Micron's high-bandwidth memory business fuels a sales surge. More on its earnings results next. Plus, how young startup Expo, backed by Ultimata Capital, developed an AI tool that does better than experienced hackers. And we dive into Palantir's 300% stock rally since October. This as defence tech comes increasingly into focus. Meanwhile, in focus are the big benchmarks today, the S&P 500 indexes.

inching in on its record high, all as the market focuses in on the Federal Reserve. Will we see more rate cuts? Could we have three as soon as this year, as we see economic data come in mixed today, Ed? We're looking at a five-tenths of a percent push higher, actually, on the NASDAQ 100. Feeling of a risk on attitude, particularly towards certain chip makers you're looking at.

Yeah, Micron, America's biggest maker of memory chips, posted a really strong forecast for the current period. The stock opened up almost 2% higher. It's now down 1%. And we can get into the reasons why real quick. Nvidia, which has had a sort of tepid morning, is now back

continuing to hold at a fresh all-time high. In Micron, let's get into Bloomberg Intelligence analysis with Jake Silverman. And Jake, I'm looking through the transcripts of the call. The forecast shows demand in the AI context, but I think pricing, Jake, is a really key conversation here. Yeah, absolutely. So AI is...

particularly strong tailwind for pricing, but you have to keep in mind that the consumer market is still particularly important for Micron, both as we think of smartphones, but also PCs and other SSD products and DRAM products. So we're going to have to see some of those seasonal tailwinds, smartphone, PC upgrades, and those will be beneficial for pricing, but also structural limitations in terms of capacity.

Capacity, basically, for many of these companies, it's been a supply issue rather than a demand issue, Jake. We've also seen a demand issue with the shares. You'll see they've outperformed about 50% over the course of year to date. Was it just that so much was already priced into the market here? How high have expectations been?

Yeah, I mean, expectations have gotten pretty high. I think as we've seen spot prices and contract prices increase over the recent weeks and months, that built into some of those expectations. Again, a high bandwidth memory is something that continues to be considered fairly important for sentiment in Micron. But it's also a fairly small percentage of the company's overall revenue. So there's just...

pretty high expectations across multiple facets of the business. And so they're going to need to continue to gain share in high bandwidth memory. They're going to need to continue to execute in that regard, but also across their other AI products while also managing the rest of their business, which again, drives a lot of that pricing strength.

Right. The executives on the call were pretty clear, right, Jake? The story is simple. Data center growth sequentially and year on year, and that will continue to outperform. And some of the other businesses not as strong. But in the background, they're investing in and building out capacity. Just try and help our audience understand how difficult it is to produce HBM and what the bottleneck is right now for Micron and its customers.

Yeah, so HBM is a little bit more complex, actually maybe fairly more complex when we think about actually producing relative to other memory products, especially in DRAM. So it's stacked HBM, so they've talked about 12 high stack, 8 high stack.

So that gives you the dimensions of how high these DRAM stacks can go. And as you increase the height, it increases the complexity. And so the Micron and peers like SK Hynix are able to charge a premium. And so yield is a very important topic of conversation when we bring up complexity. And so their ability to execute in terms of both improving the capacity but also improving the yield drives their ability to increase their share and also increase their gross margin.

Bloomberg Intelligence Analyst Jake Silverman, on all things Micron, we appreciate it. Let's keep talking AI and the broader tech market. Jay Jacobs, BlackRock US Head of Equity, ETS is here. And I'm looking in astonishment at really the enthusiasm around the iShares AI innovation and tech active ETF. Interestingly, Micron's not in there, but the top holdings are NVIDIA and their Broadcom. How much do investors want to be in on the chip, the infrastructure names, but broaden it out, Pat?

Well, the portfolio manager for this fund, Tony Kim, is really looking across the value chain for opportunities in artificial intelligence. But right now, where he sees some of the biggest opportunity is in those infrastructure and hardware names. If you look at where the money is being spent on AI today, the

almost a quarter of a trillion dollars being spent by the mega-gap tech names. It's being concentrated in semiconductor names and data centers and all the support compute that's going around that. And so our fund is very much tilted towards that exposure right now. Tilted towards NVIDIA, which is at a record high as well. I'm just going to see where Broadcom stands today, but it too has been very close to record highs throughout.

It is at a record high today. How much more juice is there to go on that infrastructure play? How much can you continue to sweat it in ETFs? It's still early. I mean, if we look at the next several years, we're expecting about $7 trillion to be spent on AI CapEx. So we have a long way to go. There's a lot of dollars to come into the space. I still think we're in the early innings. Over time, the exposure will evolve, though. While this is kind of the build-out stage of building all that infrastructure, the next stage is going to be much more about adoption of AI and who's commercializing these AI products.

Jay, your thesis or a part of it is this over concentration in mega caps, the fixation with the Mag7. There's an interesting side debate, which is whether we should rethink the composition of the Mag7, Broadcom perhaps making the strongest case on fundamentals about joining or participating in that group. All of that to say, like, what should we do if that's the case? If we have over concentration, where else do you look?

Well, Wall Street always loves a good acronym for these things and maybe it's time for a new one. Look, I think it's really about looking beyond just concentrated mega cap tech names. Yes, they're important players in the AI space, but they don't encapsulate all of it. We've looked across 20,000 different financial advisor portfolios and we found 95% of the AI exposure in their portfolios is coming from mega cap tech names. So people are very overweight mega cap tech, just largely a function of how the S&P 500 is today.

but very underweight, the broader kind of long tail of artificial intelligence names in digital infrastructure, in data, in compute, etc. So we really think it's about kind of reducing large cap tech because there's a lot of concentration there and broadening it out across the value chain with a fund like BAI. What about those non-tech sectors that are most impacted by AI or transformed by AI? Where do you want to look?

Well, I think one of the more interesting areas is where there's a lot of data that hasn't been fully harnessed by artificial intelligence. And you have to look at the healthcare sector as being just prime for using all that information around patient data, around hospital management, around the development of new drugs, around protein research. There's just so much data that frankly has been underutilized. And if you can apply artificial intelligence to it, you can get more efficient, you can reduce the cost of drug development, you can improve

performance, improve outcomes for patients, which really would make this sector a very attractive one from an artificial intelligence perspective. - I go back to BAI, I go back to the innovation and tech active ETF here. Most of the top holdings are US companies. You have to get to number 15 to get a Japanese company and then there's a sprinkling of the Japanese coming in. Is it still US exceptionalism here?

It is. It's a function of where we're seeing the best public market opportunities in artificial intelligence. It is being led by the United States. We have some of the lowest costs of capital. We have some of the most innovative companies. We have a vibrant startup community that's kind of fueling IPOs in this space as well. It is a global trend, and we do have global exposure, but right now the U.S. is very much leading. And what about the investors who are piling in? Just get us up to speed. It's what, about...

2 billion that's been coming in of late from client assets. Where are they coming from? - Yeah, so we've brought in $2 billion over the last nine months. Now one of the major things that happened is BlackRock's target allocation model, ETF models, has allocated to AI. Our model portfolio managers, like Michael Gates,

have looked at the landscape and said, we want to reduce large cap tech exposure and reduce some of our just tech sector exposure and replace it with artificial intelligence because this is a high conviction theme that we believe in over the long run. And so they've been shifting their exposures to get more pure play in the AI theme.

Jay, humor me, Federal Reserve Chair Powell posed many questions on the impact of AI, labor markets, and the future of the economy, and Fed policy, like it was difficult for him to answer. But do you think about it in those terms? You basically say, I look at the economy of the United States and the world, and I try and calculate how structurally things might change going forward.

Yeah, I think this is an important area to look at where AI can augment work, right? How can it make us more efficient? Can we accelerate productivity, especially in the context of aging populations around the world? So if you look at developed markets, in many cases, the growth of the labor market is slowing. And so you really almost need AI and that productivity growth to maintain strong GDP growth across these developed economies. So I think in many ways,

AI is going to be an incredible tool to boost productivity and frankly a tool that developed markets need to lead in. This is why we're seeing AI at the crux of geopolitics because people, policymakers see it as such an accelerant towards our economy over the long run.

Throughout the show and in the day actually, we're going to be talking about Palantir. And it makes me think about not just software, but this kind of broader American effort to re-industrialize the country in a number of sectors, defense, artificial intelligence, data centers. Is there some kind of big picture effect that you're trying to jump onto on this re-industrialization, the manufacturing of stuff here in America?

Well, this is really at the intersection of several themes. We've looked at five megaforces around the world that are kind of changing the long-term trajectory of economies. And one of them is aging populations, which you mentioned. One of them is artificial intelligence. And the third one is really geopolitical fragmentation. All of these are combining to bring in certain themes like

infrastructure, how when we see that we want to build more in the United States, we have to have better roads, better highways, better waterways, better power to accelerate that. How do we have the best technology in the world through artificial intelligence and leaning into that segment? So really, yes, all of these things are kind of colliding here to really lead some of the best economic opportunities in the United States.

Jay Jacobs of BlackRock, it's great to have you back on Bloomberg Tech. Thank you very much. Now coming up, China gives approval for more M&A among its tech giants. It's a big story we're watching and that's next. This is Bloomberg Tech. Remember when a single technology glitch could bring an entire workday to a standstill? I'm Mark Banfield, Chief Commercial Officer at TeamViewer. Today, most technical issues are recurring. If you know the patterns, these issues can be remediated before they impact your business.

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It's time now for Talking Tech. First up, a growing number of Chinese AI startups are looking to list in Hong Kong. That could include Rikonova Technologies. It's a firm specializing in visual perception. According to sources, the company, which is backed by Intel Capital, Greenland Holdings, is looking to raise about $100 million from the listing that could happen later this year. In more listing news, in fact, digital payments provider Pine Labs has filed to go public in India. The company, whose shareholders include PayPal,

will seek to raise as much as 26 billion rupees, that's around $303 million. Indian capital markets, of course, are seeing a resurgence in listings, fueled in part by the government's push to digitize the economy.

And the President and CEO of Tokyo Electron, while shrugging off concerns about rising competition from China, he spoke exclusively with Bloomberg's Sherry Ahn in Tokyo. I think it's possible to maintain the difference in technology between China and our company. I'm sure that Chinese vendors are trying to catch up with us, but we must be faster, we can be faster than them in technology innovation, and that's how we can maintain or increase the difference.

We are the SPE manufacturer, but we are not chip makers. So for us, it is key to work with the world-leading chip manufacturer to develop the best in the world process and best in the world equipment. You can watch the full interview on Bloomberg Tech Asia. Catch the premiere. It's tomorrow at 8.30pm Eastern Time, 8.30am in Hong Kong. Ed.

Staying in Asia, Xiaomi says they've received more than 200,000 pre-orders for its first electric SUV, the YU7, in just three minutes. For more, Bloomberg's Peter Elstrom joins us. And on the live feed during the presentation, I noticed there were several million people tuned in on X. What do we know about this new SUV and the appetite here for Xiaomi?

Yeah, the excitement around Xiaomi and its electric vehicles is quite something. The founder, Lei Jun, just did this presentation in Beijing a little while ago, and he talked about this new SUV. It's going to be priced around $35,000 at the low end. It'll go up to about $46,000. And he took aim directly at Tesla. Tesla's Model Y is the best-selling SUV in China right now, and he's going directly after them. He wants to be able to compete with them on price and on features.

And so far, they've been gaining a lot of ground. Now, Xiaomi, of course, is best known for its smartphones. They began by competing against Apple with their smartphones. They did a lot of innovative things with that company. Lei Jun kind of modeled himself after Steve Jobs for a while, even with black turtlenecks.

But now they've been diversifying into a number of different areas, including appliances, even luggage. When I visited them in Beijing, they had all sorts of goods out there. But this move into cars has really been something different. The stock has taken off. The shares are really soaring. They've tripled over the past year, in fact. And I think you're seeing this now reflected in the strong demand for their new SUV.

I mean, extraordinary. 200,000 in three minutes. You've got 289,000 in one hour. Peter, there was a worry about almost innovation happening too quickly and a crash that happened with the S7. Is that sort of being shrugged off?

Right. Yeah, you're referring there was a there was a crash in China with a Xiaomi car where it led to a fatality. They did put a they hit the pause button on some of their sales at that point to look at the technology within the car. But now they they're moving forward. They introduced this new vehicle. They feel like they put them that behind them. And now they're you know, they're they're seeing strong customer demand for these cars as we're talking a little bit about

before. They look very much like Porsches. You can get effectively a Porsche-looking car. It's an EV for $35,000. Chinese consumers like that offer. I find policy in China on tech companies so interesting. It's either restrictive, right? Think about the video games industry in the last couple of years, now allowing M&A. Are you able to summarize, Peter, what the Chinese government's attitude is towards the tech sector overall?

Well, that's a big ask, Ed, but I'll do what I can anyways. Yeah, I mean, certainly what you saw in the 20-teens in particular was a growing domination by a couple of the biggest technology companies there, especially Alibaba and Tencent.

They put tons of money into startups, they had scores, probably hundreds of companies that they invested in, and they had these ecosystems that they kind of controlled. And that really lasted during the boom years after Alibaba went public and showed that you can make a lot of money on some of these Chinese tech stocks in particular. We had this big crackdown, the Jack Ma crackdown, after he spoke out against regulators, the Ant Group IPO was pulled, and after that, essentially all this M&A stopped.

There was no more consolidation. In fact, the companies had to roll back a lot of the plants that they had. Alibaba sold off a bunch of its assets too. And now what we're seeing, partly because the Chinese economy is a little bit rocky at this point, they need more support from the private sector. They've given more support to the tech companies in particular. They've seen some new breakthroughs too, like DeepSeek and AI.

Huawei has made a lot of progress in different areas too. So now Alibaba and Tencent are able to go back to doing some M&A. They're beginning to do a little bit. It's nothing like the scale that they did in the past, but they are able to make some acquisitions. Bloomberg's Peter Elstrom answering the difficult question. Thank you very much.

After receiving a tepid response from investors when it went public back in March, Corweave's stock has had a meteoric rise of around 300%. That's propelled the company's CEO into the ranks for the world's richest with some unusual speed. Bloomberg's Dylan Sloan joins us and has the profile. This is like key tech wealth coverage, right? A slow start on the IPO, but things change. And now a key figurehead has emerged.

a pretty healthy net wealth. Exactly, yes. Just like you were saying, kind of in some ways mirroring sort of the trajectory of the IPO market more generally over the course of the year. So when this company debuted in mid-March, they were initially seeking to raise at about a $35 billion valuation, ended up...

completing the offering at about a $23 billion valuation, so well below that. Actually, the CEO, Mike Entrader, came on Bloomberg television and told us that without a big order from NVIDIA, one of their largest investors, the deal might not even have closed. So the stock traded pretty flat for about two months after then, but it's off, again, as you said, about 300% since then, and that's generated some really significant wealth gains, not just for the CEO, but for other co-founders and early investors too. I know he's now the 311th richest person. He's ahead of Robert

I think of Magnetar and some of the other key companies that backed them early. What's interesting is he managed to go out there and start to convince the market of the business model that perhaps got misunderstood or underappreciated when the IPO came out. Yeah, absolutely. And, you know, the stock really started ticking up after they reported their first quarter earnings. They beat estimates there.

NVIDIA also disclosed that they'd increase the size of their stake and it's really been all up from there. It's gotten a lot of retail interest too, so generated some sort of meme stocky comparisons from some commentators. But for Intrader specifically, his net worth right now standing at about $10.3 billion. And it's not just the size of that, but it's the speed as well. For the Bloomberg Billionaires Index, all the billionaires we track, the average time it takes for someone to go from a $5 billion to a $10 billion net worth is just about three years and four months.

and Trader did it in 12 trading days. So far faster than the average person. - Now do Circle founder, Jeremy Allaire. I'm sure you're on that one too. Dylan Sloan, appreciate your time. Thank you. Now let's talk about a US district judge who has just ruled that Anthropix use of millions of books without payment to train its models, and it's legal under copyright law. Falling under the fair use doctrine, a move that could actually kind of cripple a rights holder's ability to monetize on AI.

Let's get Bloomberg Opinion's Dave Lee's take here. It's a fascinating read. And you go into the intricacies of how Anthropic, first of all, did it. And they did it, perhaps, with a mixture of pirated book copies. But then they actually started buying physical books, taking out the spine and copying them into the computer. Yeah, so they went out and they acquired pirated copies of more than 7 million books to train into their models.

After a short while, they thought, "Maybe there's a better way to do this." They bought the physical used copies from distributors of used books and started chopping off the spines, cutting down the pages, and ingesting those into their research library, as they called it, which was then used to train the large language model. They were sued by three authors whose books were in both the pirated

copies, but also the physical copies as well. They said, "Look, the fact that you're doing this to create a model and we get no compensation for that shouldn't be considered fair use," which is this carve out in copyright law

that says if what you do is sufficiently transformative and doesn't harm the commercial prospects of the original work, then you're fine to use it in some degree. And the judge in this case, and it's one of a number of AI cases like this currently active, the judge in this case said, yes, he thinks this is fair use in this instance. Not the pirated one, though, Ed. Not the pirated one, yes, it does.

I think the main response at the time was that an appeal is likely. But really interesting what you said. It's not the only thing happening in isolation. People were trying to get the read-through to others, like Meta, for example, and kind of work out what happens next. Because on the face of it, it's good for generative AI, but the companies are going to struggle to navigate this.

Yes, I mean, look, it really hinges on if it is fair use, then companies are free to ingest all this information without paying anybody and do what they want with it. And of course, the AI industry is incredibly keen on that. And look, many, many respected commentators on copyright law think that is the case as well. The danger is, is that AI is unlike anything we've seen before in terms of

finding knowledge and reading new information. And what if, and this is the sort of doomsday scenario from publishers, what if people stop buying books because they can just get the information they need from AI? And also, where is the incentive for people to write new books if when they do write it, they just get sucked up into the machine and they don't see any sort of commercial benefit that is able to sustain the practice of doing the hard work of writing a book?

Dave Lee of Bloomberg Opinion, another great column. Thank you very much. Welcome back to Bloomberg Tech. Some breaking news. I've just reported with Bloomberg's Dana Hull that Omid Afshar, who is a key lieutenant and has been a key lieutenant of Elon Musk at Tesla, has left the company in recent days. This is somebody that was in charge of

manufacturing and sales for North America and Europe. And what sources are telling us is that he has left. He's also no longer in the directory at Tesla. There's a lot that we don't know, Caro. I've emailed Elon Musk to ask him what's going on and why Omid left the company. You'll remember we've done some reporting on him in the past and asked about some reports

reporting that he's been involved in about internal audits, internal reviews. But it's one of many recent departures from Tesla's and the market was paying attention with a move lower. And look, Afshar had a tough job, right? It was last year he was promoted into the office of the CEO and he was overseeing some really significant areas of sales and manufacturing in some pain point areas for Tesla, largely because...

perhaps a political backlash to one Elon Musk. Right. Well, he'd been in the office of the CEO for quite a while. He was kind of like Elon Musk's chief of staff, so to speak. But then he got more responsibility and he was very key on Austin, getting Austin set up. You know, I am interested to know what happened, but it's one of several departures in recent months of people that are kind of longstanding and held senior roles in a period of time where Elon was elsewhere.

He's elsewhere politically and also the sales focus has gone elsewhere. When I'm thinking about today's extraordinary numbers around Xiaomi's latest SUV going straight for the Tesla buyer, this is really a difficult moment for Elon. No wonder he's come back as CEO.

Right. So, you know, like the big picture is that Tesla in the future is focused on robo taxi and they had a successful launch of a small reduced service in Austin and Optimus. But the reality is the bed and butter is still selling cars. And in the first six months of this year, lots of data in all markets that Musk's association with the administration was hurting sales, but also like competition with hybrids, increased competition from other model providers and other manufacturers.

name brands in Europe, for example. But in Omid Afshar's case, and again, to recap, sources are telling us he's left the company. He was someone so close to Elon Musk with a lot of responsibility. It's one in a chain of high-profile executives. For example, Milan Kovacs, who was leading the Optimist program, also left that we reported recently. When we get more

we'll keep an eye on it. I'm also looking at Palantir. This is a stock that since October is up 300 percent, year to date up 90 percent, one of the best performers. There is its performance as a company in quarterly earnings, but this kind of macro and geopolitical environment that we're in right now, Caro, that speaks to the core of this story. And right now, this emphasis on defense technology, that's what we're hearing about on a weekly basis, right? It is because of

the geopolitics that we currently confront, escalating US-China rivalry to conflicts in Europe and the Middle East, geopolitical pressures, Ed, they are driving a new wave of defense innovation. Let's talk about what that means to the markets for your tech investments. Ted Mortensen is with us, managing director at Baird. You yourself have a rich history in defense from an active service perspective, Ted, but I'm interested as to therefore what the active innovation play is. How do you invest into this moment?

It's kind of fragmented right now, but Palantir is obviously the purest play. And if you look at the latest conflicts coming out of Israel and Iran, and also Ukraine and Russia, these advanced technologies that are being used are giving both Israel and Ukraine a heads up as it relates to their adversaries. That's number one.

Just recently with NATO increasing their budgets up to 5% GDP, the defense spend as well as the U.S. with the big, beautiful bill is straight up.

So you're going to see this pivot to Gen. A.I. being embedded in all weapons systems. And, you know, right now, Gen. A.I. is a national security discussion. If you look at Palantir, they're the first mover. And I think there's a few issues on the reason why it's up. They signed Israel. They signed the Ukraine. They signed NATO.

Post-Doge also, they are a solution to all the federal agency problems, also in DOD expanding. So they're one of the purest production-ready Gen AI solutions where they can aggregate, I wish I had it when I flew, all this unbelievable intel data on a translation layer that you can see at real time. Pat?

Like the Mag 7 in many ways, it's a very concentrated defense tech play. I mean, we're up at a record high for Palantir. It's been an extraordinary up and to the right move for the stock. Where else, if you're looking for diversification, can you go?

You can go. Recently we just had a report on AeroEnvironment AVAV. They just bought a real stunning private company called Blue Halo, which gets AeroEnvironment away from their switchblade devices on the drone side. But what Blue Halo gives them is an entry into cybersecurity, satellite and high energy weapons.

That's another play. Unfortunately, from the private perspective, I know, Ed, you've talked about Andrel in other shows. Andrel is a private company that is almost a case study in how the U.S. military is re-architecting their defense budgets. These are high ROIC devices.

that really go against the traditional spend of billion dollar programs that are under budget. They're very effective and they're really changing the rules of the game. - Ted, what you just said, traditional spend. When I look at companies like Palantir and how they behave, they do behave like traditional primes, big contract manufacturers to the government because they basically say, I serve the US and its allies only. How does that help them?

It helps them, I think if you look at the traditional primes like Lockheed or Raytheon, for example, they're known for hardware. They're not known for Gen AI software. This is why Palantir is being brought in as kind of a pseudo prime in almost all these new next generation defense contracts. They are the software layer. The other aspect of this, when you look at the spend,

you look at what drone technology and I think in the future when you really look at this on Andrew all I would not be surprised if you have no cell drones flying on each wing and a of an f-35 that changes the rules in the game and when we talk about boots on the ground I mean you talk about Tesla early with optimus I I think you're gonna see machines on the ground in the next five to 10 years and that's a paradigm shift from from the defense budget standpoint right

Ted Mortensen of Baird, great conversation. Thank you very much. I want to stick with defense tech. Amid the conflicting assessments from Washington about the effectiveness of the U.S. strikes on Iran, let's dig into the supply chain resilience of the U.S. government aimed to modernize U.S. commercial and government data with its ARC software streaming defense acquisitions for customers, includes the U.S. Army, Navy. Let's get to Tara Murphy-Dotty, Govini CEO,

There's anywhere we could take this right, but let's just start with the basics. The U.S. government and its military industrial complex or the defense industrial base, how modern is it in the scheme of everything, Ted, we just discussed on the show?

It's getting more modern, I would say. The reality is that today the defense industrial base is still quite traditional. And you can look at the recent strikes on Iran as a perfect example of that.

Yes, we know that fifth generation fighters escorted B-2 bombers to Iran to drop the bombs. Maybe those were F-35s, but there were likely some F-22s in there as well. Those F-22 jets and the B-2 bombers were operationally deployed first in 1997. So a lot of American military capability is actually quite old.

Quite old, and I'm looking at what the DOD $961 billion budget for the fiscal year starting October 1st actually looks like. I mean, I'm sure you've read through the 75-page procurement request at the moment, but almost $5 billion is going to be spent on B-21 self-bomber production. There's going to be 37,000 missiles. There's going to be 24 Air Force F-35s. Tara, when you go through that 75-page report, is there enough of the new tech that we're talking about, the supply chain that you're analysing?

There's definitely still not enough. This is one of the major imperatives for U.S. national security right now, is the need for modernizing these weapons systems and platforms, these major capabilities. And this is what so much of the defense tech industry, the companies that you were just referring to, Govini, Palantir, Andrel, have been clamoring for in Washington, D.C., which is

The department is spending huge amounts of money trying to sustain these legacy platforms. More than 70% of the entire cost of a jet, for example, or a submarine is spent during its sustainment phase. The United States needs modern capabilities not just to effectively fight war, but in order to be able to afford the wars that we need to deter and win.

You just said you are going to the administration, you're going into government lobbying saying this needs to change. Just talk to us with the data with which you're able to provide. I'm sort of fascinated with what ARC is doing, Govini's defense acquisition software platform. What does it tell you? What does it show?

It shows quite a bit. So defense acquisition software is really designed to replace the incredibly manual processes that the department uses today to manage the lifecycle of these weapon systems and platform. So cradle to grave, how you design these systems through their sustainment and their modernization, managing parts and managing suppliers.

Today, somewhat unbelievably, the United States DOD does that primarily in spreadsheets. A lot of people are involved in what are very slow processes. And software, and especially AI-driven software like Arc is, can really accelerate those processes.

The other really important piece of ARC is the integrated data set that exists in the software. And this is Gavini's proprietary data set, which gives DoD visibility into these global supply chains down to the part level, down to raw materials and microelectronics. And this is essential in order to come up with the modern kinds of systems that we need and make them resilient and available for the warfighter.

Really quick, we just have 30 seconds. On the other side of the table, is this government and this Pentagon better on the procurement side?

It's trying to be. So we've seen executive orders on defense acquisition. We've seen calls to enforce the Federal Acquisition Streamlining Act, which mandates that government agencies buy commercial first, especially software, instead of taking on failed IT development projects. What we need to see now is will those policy decisions, will that guidance be implemented? If implementation can happen, we will see tremendously positive results.

Tara Murphy, Dr. Lee, we thank you of Govini. Fascinating on all things defense procurement. Meanwhile, coming up, we're going to talk to the CEO behind an AI hacking tool. His lead investor is going to join us, too, about the proactive defense against cyber attacks. This is Bloomberg Tech.

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A one-year-old startup has developed an AI tool that is better at identifying many software vulnerabilities than experienced hackers. The startup, called Expo, has recently closed a $75 million funding round led by Altimeter Capital. Expo's founder and CEO, Uha Dambour, is with us. And Altimeter partner, Apoorv Agrawal, is also with us as well. Uha, I start with you. Why is it so important that you, the AI version of a hacker,

is at the top of HackerOne's US leaderboard. - Thank you very much for having us. So it's the first time ever that a machine and not a human is at the top of the HackerOne leaderboard for the US. HackerOne is a platform that connects hackers with companies who want their systems to be tested. And they maintain leaderboards

ranking the hackers according to whose bugs have been accepted by the customers of HackerOne. And currently, the top in the US is our AI. Apurv, what's so interesting is that you are like the AI guy among many, but really you're driving the portfolio allocations for AI over at Altimeter. I'm thinking some of the OpenAI investments that you made, some of the others. I mean,

We see such pedigree coming from a man who helped develop GitHub Copilot. Is that what attracted you to Expo or is it the fact of what it can achieve? You know, before we even met, we'd been studying the space and very simply cyber attacks are on the rise. Software is more vulnerable, a lot more engineers, a lot more code developed with AI. And by the way, these models are trained on open source software, which is more vulnerable.

That's on one side. And then I met Uhey, which our first meeting felt like the fifth meeting because of his ambition to build the cybersecurity platform in the age of AI.

CISOs, CIOs want less, not more. They're fatigued in alerts right now. And, you know, who has vision to build ExPow, help you find vulnerabilities, fix them automatically, and ultimately building the cybersecurity platform is a big one. It's probably the most important business being built right now, not because it'll be a great opportunity, but because it must be built. If we don't build it, the bad guys have the technology, and we've got to put it in the hands of the good guys in the free world.

- Thank you for joining us on the show. I've been trying to think about what this represents, right? The swarm is always on. It represents what an army of humans could do 24/7 to identify the vulnerability. But the question is what happens next for your company? And I'm assuming that you're trying to engineer towards the swarm also reacting, putting into place fixes when those vulnerabilities are identified.

That's right. So even today, the AI is already identifying vulnerabilities at some of the top companies in the country. Companies like Palo Alto Networks, AT&T, Disney, Sony, and the list goes on and on.

Now, of course, it finds these vulnerabilities, but they need to be fixed as well. We're very lucky that all these companies that we've been working with have been extremely proactive, immediately fixing the problems as they were pointed out. It's a natural evolution, but eventually an AI will be able to do some of the fixes as well. Apoorv, I know you as an operator. You're pretty handy with software.

What are you going to do to help this company grow and scale as a commercial entity? What do they need to focus on to convince the marketplace that an AI swarm is a better solution than a human team of hackers? Ed, we are fighting against time. Time is our biggest competition, really. If you had three weeks ahead of the bad guys,

you're saving three weeks worth of vulnerabilities. And cyber tends to be a game of cat and mouse. Sometimes you've got the offensive teams ahead and other times you've got the defensive teams ahead. And so the number one thing we're focused on is speed. That's why we're here today. That's why we're educating the world about what we're doing. We work with a lot of companies, as Uwe mentioned, helping them secure their perimeter before the bad guys get in.

What's so interesting is, of course, when Ed calls you an operator, you came from Palantir, you're leading the charge when you're looking at the AI investment opportunities. When we think about open AI investment, when we also think about clean, when you think about this moment, because you're also exposed to Android, SpaceX, is this the moment for defense tech, whether it comes in a cyber capacity, whether it comes in a hard tech capacity?

Look, I think at the highest abstraction, AI is having great impact across fields. This is defense, cybersecurity, customer service, software engineering. These are large industries that are going through reinvention.

And ultimately it's raising the ceiling for performance of the best professionals in cybersecurity, like what we are doing at XPOW, and raising the floor for all the mundane tasks. In the case of XPOW, for example, you've got to do reconnaissance, you've got to do scanning and exploitation and report building. A part of that is just mundane work. But also the best hackers in the world now better off with XPOW in your toolkit rather than without.

Right. You are going from this point, rate limited by compute and tokens. Just explain the pathway for your company and the bottlenecks that you might face. So currently, we have no problems with the amount of compute. It's actually not that intensive and we can easily serve the customers that we're currently working with.

We are, however, very much focused on working with the top companies that have the biggest need for better security, financial services, healthcare, those types of industries. All right, that was Adpo of Agrawal, partner at Ultimata Capital, and Orha Damor, CEO and founder of Exo. Thank you both very much.

Salesforce is developing an AI product that can handle tasks like customer service without human supervision. CEO Mark Benioff says the tools reach 93% accuracy. He spoke with Bloomberg's Emily Chang. Take a listen.

You founded the company now 25 years ago. So you've seen the rise of mobile and social and the cloud and now AI. How has the CEO job changed for you? Well, the CEO job is really changing fast, you know, because it used to be I felt very alone at the top. But now, like, I just finished writing the business plan for this year. And I always do that with someone else. Like, I take one of our executives and

And for the last three years, I've also have found a new partner in AI. So I have an AI partner, I have a human partner, and it's the three of us who are writing the plan together. So it's a little less lonely at the top of AI. - You said you won't hire any more coders at Salesforce. And you've said,

Today's CEOs will be the last to manage all human workforces. What does this mean for businesses? Digital labor is going to be everything from AI agents to robots. And I do think, you know, to your point, you know, CEOs have to make sure their values are in the right place and that values bring value. Could an agent replace you one day? I hope so. You hope so. I mean, of course, I'm partially kidding. You know that. But we're becoming more automated.

You can see Emily Chang's full conversation with Salesforce CEO Mark Benioff. It's On The Circuit airing tonight at 8 p.m. Eastern. Now that does it for this edition of Bloomberg Tech. What a whirlwind from your breaking scoop at Tesla. Just remind us.

A couple of days of testimony, and now we have breaking news from Tesla that Omid Ashar has basically been fired by Elon Musk. Recap that story and all the others on the podcast. You know where to find it, the Bloomberg Tech Pod, on the Terminal, as well as online on Apple, Spotify, and on iHeart. From New York City and San Francisco, this is Bloomberg Tech.

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